Commons Sitting of 20 March 1989

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
Oral Answers to Questions
  WALES

    Roads Strategy
    Mr. Wigley: To ask the Secretary of State for Wales what discussions he has had with local authorities in Wales on the implementation of his roads strategy, "Roads for Wales: The 1990s and beyond"; and if he will make a statement.
    The Minister of State, Welsh Office (Mr. Wyn Roberts): There were 160 written responses to the "Roads for Wales: The 1990s and beyond" consultation document, including responses from county, district, town and community councils. Those have been considered in drawing up the new edition of "Roads in Wales" which will be published shortly after Easter.
    Mr. Wigley: Does the Minister recall that shortly before Christmas a deputation from Gwynedd visited him to talk about the need for the construction of a bypass on the A487 for the villages of Llanllyfni and Penygroes? Does he recall that at that time he said that he hoped to have further information early this year and that the bypass might then be included in any strategy for roads in the 1990s? Will he confirm that he has had further representations from Gwynedd county council on the matter and that further priority will be given to the construction of the bypass?
    Mr. Roberts: I well recall the meeting to which the hon. Gentleman refers. There is no doubt that the A487 in Gwynedd is an important route for north-south traffic. As the hon. Gentleman knows, improvements for the section between Caernarfon and Bangor are programmed. The case for improving the route at Porthmadog and northwards through Penygroes and Llanllyfni to Caernarfon is under consideration.
    Sir Anthony Meyer: Is my hon. Friend satisfied that highway authorities, especially Clwyd county council, are taking full advantage of the magnificent achievements of the Welsh Office in building trunk roads by providing proper connections from those trunk roads to coastal areas such as Rhyl?
    Mr. Roberts: My hon. Friend is right that that is a matter for Clwyd county council. There is no doubt that the investment of some £500 million in the A55 will be of great benefit to towns along the north Wales coast, but the matter of linking those towns with the A55 will be
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    examined in the context of the initiative that my right hon. Friend has asked me to consider in connection with the development of the A55.
    Mr. Murphy: Has the Minister of State any plans to improve the heads of the valleys road? Does he not agree that an upgrading of that road would be a great shot in the arm for our valley communities and a major factor in attracting jobs to the part of Wales where they are most needed?
    Mr. Roberts: The heads of the valleys road is indeed a fine road, although I am aware that a number of accidents along that road recently have caused concern to right hon. and hon. Members. We are looking at all the roads in Wales which are the responsibility of the Welsh Office, and also at county roads. Where improvement is justified, we shall, of course, seek to progress that improvement.

    Training Grant Scheme
    Mr. Coleman: To ask the Secretary of State for Wales what representations he has received concerning the local education authority training grant scheme in Wales; and if he will make a statement.
    Mr. Wyn Roberts: I have recently received a number of representations on behalf of voluntary youth organisations expressing concern that unpaid voluntary sector youth workers do not come within the scope of the local education authority training grant scheme. Similar representations have been made in the past in respect of careers officers, nursery nurses, and other groups whose training costs are not supported under the scheme. Representations have also been received from school governors about the disruption caused by teachers' absences from the classroom to attend training courses.
    Mr. Coleman: Will the hon. Gentleman clarify the Welsh Office's position in respect of whether LEA training grants can be applied to voluntary organisations, such as the Boys Brigade, the Scout Association and the Girl Guides Association for the valuable training of their voluntary workers? If the answer is no, will he undertake to revise the Welsh Office circular on that matter so as to permit the necessary financing to be made available to those important organisations?
    Mr. Roberts: Those training grants are paid under the Education (Training Grants) Regulations 1987, which define eligible youth and community workers as:
    "Youth and community workers employed by a Local Education Authority or a voluntary organisation."
    Both we and the Department of Education and Science have always interpreted that as meaning that only paid workers are eligible and that volunteers are not. We have, however, encouraged LEAs to make their own provision from their own resources.
    Mr. Morgan: Does the Minister agree that that is part of the pattern of general retreat from the provision of training in Wales and goes along with the decision of the engineering industry training board to close its Cardiff office? We need to be assured that the Minister was consulted about that, as well as about the privatisation of the skill centres. Does he agree that with the prospect of Bosch and Toyota coming to south Wales serious damage will be caused if the Government do not adopt the attitude that real training for real skills can lead to real jobs?
    Mr. Roberts: I was astonished to see the hon. Gentleman's remarks in the Western Mail this morning and I am even more appalled to hear him repeat them in the Chamber. There is no such thing as a retreat from training under this Government. At this very moment, we are seeking to expand training facilities for people in Wales.
    Mr. Morgan: Tell that to the Germans.
    Mr. Roberts: We do indeed tell it to the Germans, as well as to all other inward investors in Wales.
    The hon. Gentleman does not seem to realise that the change in the training board means no more than the removal of administrative jobs from Cardiff to Bristol and that all the training field workers will remain in place as they now are.
    Mr. Ian Bruce: Will my hon. Friend clarify the situation regarding grant because many Scout associations in Wales and the rest of Britain are concerned about the apparent change in the grants system for the training of adult leaders? For a number of years an excellent scheme has operated which has been virtually the only support that voluntary organisations have had in obtaining grants to train leaders. Those leaders give up their time voluntarily, but they have expenses to meet as a result of the courses. Can my hon. Friend clarify whether in the past the Government have given the money or whether it has come from local resources?
    Mr. Roberts: I can indeed clarify the position. Either we can increase the resources earmarked for the grants, which local authorities would not like us to do or we can reduce, the support for those already within the scope of the scheme, which hon. Members would not like. I repeat that local authorities are free to fund training courses from their own resources for those outside the scheme.

    Housing
    Mr. Anderson: To ask the Secretary of State for Wales what is his policy regarding the provision of housing by Welsh local authorities.
    The Secretary of State for Wales (Mr. Peter Walker): Local authorities assess housing needs and forecast that they will spend £236 million on housing this year. I hope that they will also assess the many advantages to Wales of the new housing provisions, including 100 per cent. mandatory grants for home improvements which will be available to those on low incomes.
    Mr. Anderson: The Secretary of State will be aware that his right hon. Friend the Secretary of State for the Environment has referred to a time when local authorities, or what he calls "facilitators", will cease to build homes. Will the Minister given an undertaking that Welsh local authorities will still be able to build for general need? Given the enhanced and welcome role of housing associations, does the right hon. Gentleman see a need for the Welsh Office to provide a framework for continuing consultation between Welsh local authorities and the housing associations operating in the Principality?
    Mr. Walker: First, I believe that a great deal of consultation will take place. I can only reflect on the figures for the total public sector housing programme, including the housing associations and the new towns,
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    which shows that the forecast spend for this year is £286 million compared with £131 million for the last year of the Labour Government.
    Mr. Gwilym Jones: Is my right hon. Friend aware of the groups of council tenants in Cardiff who are considering breaking away from their landlord, the city council? Will he assure me that every facility will be provided to tenants' organisations and Welsh housing associations to ensure that, if they so wish, they can take full advantage of the new freedoms under the Housing Act 1988?
    Mr. Walker: Obviously any such move would have to be considered carefully by all those involved. The provisions of the Housing Act 1988 are clear and available to all concerned.
    Mr. Ieuan Wyn Jones: I am sure that the Secretary of State will recall being reported in the Western Mail recently as saying that he would be announcing more help for people to become owner-occupiers, presumably through incentives for people buying council houses. He will be aware that many long-standing tenants are not proceeding with their purchases and are awaiting details of his announcement. Will the Secretary of State tell the people of Wales what is the status of his announcement and when he will make a statement?
    Mr. Walker: I have made it clear that anyone wishing to proceed under the present scheme will not be disadvantaged. When the present scheme was introduced, it was bitterly opposed by the Labour party, and possibly by Plaid Cymru as well, but I am glad to say that many people in Wales in local authorities under the control of different political parties have been able to enjoy owner-occupation as they could not have done if the Opposition's views had prevailed.

    Second Homes
    Mr. Alan W. Williams: To ask the Secretary of State for Wales what representations he has received seeking the launch of a campaign regarding arson against second homes and English-owned property in Wales.
    Mr. Peter Walker: Over the past year I have received eight letters from the public and outside organisations.
    Mr. Williams: Did the Secretary of State notice that during January and February there were no arson attacks even though those are normally the peak months for the arson campaign? There were no attacks until after the Pontypridd by-election, but the arson campaign was resumed within hours of the declaration of the result. Does the right hon. Gentleman recognise that Meibion Glyndwr has an acute sensitivity to the political diary of the Welsh nationalist party? I remind him that at the outset of the winter, in September 1988, 40 estate agents' properties were daubed with slogans and the hon. Member for Caernarfon (Mr. Wigley) backed those incidents. Will the Secretary of State therefore treat any requests from the nationalist party for talks about the arsonists' campaign with extreme scepticism in view of the nationalists' duplicitous behaviour?
    Mr. Ieuan Wyn Jones: On a point of order, Mr. Speaker. An allegation has been made against a colleague

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    of mine. Those were totally scurrilous comments. Will you ask the hon. Member for Carmarthen (Mr. Williams) to withdraw them?
    Mr. Speaker: No. Every hon. Member must take responsibility for what he says in this Chamber.
    Mr. Walker: In so far as such arson campaigns exist, I would not want to accuse any person or organisation of being involved unless I had evidence of that. I welcome the proclamation from all party leaders in Wales condemning such acts of violence.
    I hope that we shall all place what is happening in perspective. The incidents over the weekend received a great deal of publicity in certain newspapers. Six devices were involved, none of which caused any serious damage, but they resulted in serious publicity. A person or persons telephoned the media to say that devices would be placed in certain estate agents. Such calls focus media attention on the acts and the people involved have gained considerable media coverage. All of that is against the wishes of the people of Wales. It is a great disadvantage being an English Secretary of State for Wales when it was rumoured in a newspaper today that the person who called the media had an English voice. Only someone hostile to Wales would do such a thing.
    Mr. Nicholas Bennett: Will my right hon. Friend join me in paying tribute to the bomb squad officers who successfully defused a bomb in my constituency on Saturday, which had been placed in the main high street where it could have killed and maimed people? Does my right hon. Friend agree that the vicious and nasty terrorist campaign is damaging the image of Wales in the United Kingdom and throughout the world? Does he also agree that we must do all that we can to catch the perpetrators as soon as possible'?
    Mr. Walker: Yes, but the incidents must be put into perspective. The devices used at the weekend basically comprised a quartz battery operating ignition by a flash bulb connected to a bottle of petrol. The main motive of the person or persons responsible is publicity. I hope that those responsible will be quickly apprehended by the police.
    Mr. Wigley: Will the House accept that, as a Member representing a constituency in which a napalm bomb was placed only a couple of weeks ago, in the village of Llanberis, I repudiate the small-minded remarks of the hon. Member for Carmarthen (Mr. Williams) and his poisoned chalice? I re-emphasise that all parties in Wales condemn without reservation the arson campaign which took place before, during and after the Pontypridd by-election, and which is worsening now. Will the Secretary of State confirm his support for all-party unity on an issue which should not be used for party political purposes? Will he also clarify his remarks in Llandudno on 7 March, when he suggested that only two people might be active in the campaign and that they might not even live in Wales?
    Mr. Walker: Obviously, as the persons concerned have not been apprehended, I do not know the number involved or their identity. However, I know that the devices are similar, as are the voices of those concerned, and that the main motive is always publicity. The hon. Member speaks of napalm bombs and a worsening situation, but I do not
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    agree that the planting of five devices of the kind that I have described in order to secure a great deal of publicity should be interpreted as a great national campaign. That is the reality of the scene.

    Immunopathology Consultants
    Dr. Marek: To ask the Secretary of State for Wales if he will give (a) the number and (b) the locations of consultants in immunopathology in Wales.
    Mr. Wyn Roberts: There are no consultants in Wales whose main specialty is immunopathology. There are a number of consultant pathologists who have an interest in immunopathology but information on them is not held centrally.
    Dr. Marek: Does the Minister acknowledge that there are people in Wales suffering from immuno-deficiencies but that they are not well served? What plans does he have to improve the service?
    Mr. Roberts: Perhaps I should confirm to the hon. Gentleman that while there is no consultant in Wales whose main specialty is immunopathology, none has been asked for by any of the authorities. I believe that the hon. Gentleman is referring to the AIDS problem, and I can tell him that about £2·5 million has been spent on AIDS-related programmes in Wales since 1985–86. We plan to spend about £1·7 million supporting such activities in the coming year.

    Secondary Pupils (Costs)
    Mr. Knox: To ask the Secretary of State for Wales how much was spent per pupil in secondary schools in Wales in the most recent year for which figures are available; and what was the comparable figure for 1978–79, at constant prices.
    Mr. Wyn Roberts: In 1986–87, expenditure per pupil in secondary schools in Wales was £1,320. The equivalent constant price figure for 1978–79 was £1,053.
    Mr. Knox: Will my hon. Friend confirm that the 1986–87 figure represents an increase of 25 per cent. in real terms? Does he agree that even more could be spent in real terms if surplus school places could be eliminated?
    Mr. Roberts: My hon. Friend is right to say that the figure represents an increase of, to be precise, 25·3 per cent in real terms. That is a substantial increase by any standard. There has been a fall in pupil numbers of 14·3 per cent., and that fall is due to continue until 1991. Currently there are about 63,000 surplus places in secondary schools in Wales. If they could be removed, the money could be spent on improving education still further.
    Mr. Alan Williams: Does the Minister realise that the figures that he has given the House for increased expenditure per pupil are fraudulently deceptive because of the very reduction in pupil numbers of which he spoke? The capital cost of the whole education system is spread over a smaller number of pupils, which accounts for most of the increase. On the basis of the figures that the Minister has just given, the increase over 10 years is 11 per cent. or just over 1 per cent. per year. Does he regard that as something to be proud of?
    Mr. Roberts: I do not accept the hon. Gentleman's analysis. There has been a substantial increase in spending on education. In the middle of his supplementary, the hon. Gentleman suddenly switched to capital expenditure. In the coming year we shall be providing some £53 million in capital spending on education. That is 11 per cent. above this year's level, and comes on top of a 10 per cent. increase the previous year and an increase of 19 per cent. the year before.

    Severn Crossing
    Mr. Stern: To ask the Secretary of State for Wales what assessment he has made of the potential benefits to the Welsh economy of the southern link to the second Severn crossing; and if he will make a statement.
    Mr. Wyn Roberts: Enhanced road communications across the Severn estuary will reinforce the current improvement in economic performance in south Wales, which is resulting in reduced unemployment, a rising trend in investment, record levels of factory letting by the Welsh Development Agency and accelerating industrial and commercial development.
    Mr. Stern: I thank my hon. Friend for that reply, which will be welcomed throughout the country. Does he agree that the same benefits are liklely to accrue to the southern end of the southern link, which will be in my constituency? Does he also agree that the increased development that will take place at both ends of the southern link removes the last shred of potential justification for any major road across a possible Severn barrage?
    Mr. Roberts: I tend to agree with my hon. Friend that any barrage proposal would be for the far distant future, and I understand that the costs have in any event increased substantially. As for economic benefits deriving from the second crossing, I am sure that the shortened road communications will bring those benefits to both sides of the Severn.
    Mr. Roy Hughes: Does the Minister appreciate that proposals are well firmed up to knock off no less than £200 million of debt from the Humber bridge? In the case of the Erskine bridge in Scotland, the debt has simply been forgotten. Why do the Government propose to double the tolls on our Severn bridge? [HON. MEMBERS: "Because England lost yesterday."] Is that not a case of racial discrimination? When will Welsh Office Ministers stand up for Wales?
    Mr. Roberts: We are implementing the Severn Bridge Tolls Act 1965. I believe that Labour was in power at that time, so it was a Labour Government who imposed tolls on the Severn bridge for a 40-year period. The hon. Gentleman will be aware that we have been criticised by the Comptroller and Auditor-General, and that my right hon. Friend the Secretary of State for Transport has therefore proposed to increase the tolls. An inquiry is currently taking place.

    Labour Statistics
    Mr. Roy Hughes: To ask the Secretary of State for Wales what are the latest unadjusted figures for
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    unemployment in (a) Newport, (b) Gwent and (c) Wales; and if he will give the equivalent figures for 1979 on the most nearly comparable basis.
    Mr. Peter Walker: On 9 February 1989 the numbers of unemployed claimants in Newport district, in Gwent, and in Wales, were 5,953, 18,099 and 112,044 respectively. Unadjusted figures for 1979 are not available on a basis which enables a valid comparison to be made.
    Mr. Hughes: Does the Secretary of State appreciate that Newport, with all its advantages, has 12 per cent. male unemployment? The figure in the county of Gwent is 13·8 per cent. Are not those figures horrific? There is much hidden unemployment besides. Does the Secretary of State accept that such great problems cannot be concealed by figures relating to part-time, low-paid jobs for women?
    Mr. Walker: First, I am grateful to the hon. Gentleman for putting that question down for every Welsh Question Time. I hope that he will continue to do so for the rest of this Parliament.
    Unemployment in Wales has fallen by well over 50,000 in the past two years. Regional assistance offers in 1988, most of which are still to be put into operation, will provide 32,000 new jobs. Inward investment in 1988 reached all-time records of more than £1 billion, with 13,700 jobs. The Welsh Development Agency's factory-building programme also reached an all-time record level. I am delighted at the Government's record in bringing down unemployment.
    Mr. Raffan: Will my right hon. Friend join me in welcoming the fact that unemployment in Delyn has been halved during the last two years and that, with the most recent job announcements, it is set to be halved again, thanks in large part to the Government's designation of the Delyn enterprise zone, which the Opposition opposed?
    Mr. Walker: Yes. The position is exactly the same in north Wales, mid-Wales and south Wales. I am glad to say that in recent months the decline in unemployment in the valleys has been faster than anywhere else.
    Mrs. Clywd: Can the Minister explain why the profit-making utility services department of the Welsh Development Agency at Hirwaun is to be shut and why its functions are expensively to be transferred to statutory authorities, making 70 people redundant in one of the worst unemployment black spots in Britain?
    Mr. Walker: Yes—because, in the interests of the hon. Lady's constituents, it is right that all the substantial resources of the WDA, which is spending £130 million this year, should be efficiently and well administered. I much prefer money to go into new factories and new factory building rather than that an inefficient administrative set-up should be allowed to continue.
    Sir Anthony Meyer: What is the position on unfilled vacancies?
    Mr. Walker: Surveys have shown that the number of unfilled vacancies is three times the number registered at jobcentres. At the moment there are 38,000 unfilled vacancies in Wales. I hope that urgent action will be taken to fill those vacancies.
    Mr. Rowlands: Despite what the Secretary of State has said, are there not some worrying signs? For example,

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    Rover has laid off people and Hotpoint employees are on a shorter working week. Both are attributed to the rise in interest rates. Does it not mean that for the Chancellor's policy to work, workers in Wales will have to be put out of work again?
    Mr. Walker: During the last month there has been a drop of 2,600 in the unemployment figures, despite problems of the type described by the hon. Gentleman. If those problems had not existed, the fall in unemployment would have been very much greater. The fall is substantial. The hon. Gentleman's remarks about training were designed to put off the Japanese and the Germans. Four administrative jobs were to go to Bristol. I am glad to say, however, that inward investment will continue to come to Wales on a considerable scale.
    Mr. Barry Jones: On the issue of interest rates, the right hon. Gentleman again is wriggling. I commend to him the excellent report by the 15 boroughs and district councils of the valleys in south Wales on unemployment and economic development. It is a superb document. I urge the right hon. Gentleman to meet the valley councils. He will find that his initiative will be subjected to informed and reasonable criticism. I challenge him to meet the valley councils. Does he recollect that, according to his valleys initiative document, during the three years that it may be in operation 25,000 to 30,000 jobs will be created in the valley communities? Will he give me the basis for that large figure?
    Mr. Walker: I shall send the hon. Gentleman the details of that analysis. It is a minor factor when compared with the whole range of valley initiatives. As for meeting the valley councils, they have seen more of me as Secretary of State for Wales on a whole range of individual negotiations than they saw of most other Secretaries of State for Wales when there was a Labour Government. I have arranged for the Welsh Office and each valley local authority to have discussions at regular intervals on the valleys initiative.

    Housing for Wales
    Mr. Murphy: To ask the Secretary of State for Wales when he next intends to meet the chairman of Housing for Wales; and what he expects to discuss.
    Mr. Peter Walker: I expect to meet the chairman at the official launch of Housing for Wales on 3 April. I expect to discuss the undoubted success that will attend this new body.
    Mr. Murphy: Why is the chairman of Housing for Wales also the vice-chairman of the Land Authority for Wales, and why is the chairman of the Land Authority for Wales also the chairman of the Cardiff Bay development corporation? Can we expect to see even more failed Conservative parliamentary candidates running our public affairs in Wales and introducing unpopular Thatcherism into our country by the back door?
    Mr. Walker; I know of no political views of any description which are held by the chairman of the housing development corporation. I am surprised at the hon. Gentleman's remark. The chief executive is a former Welsh Office civil servant. The chairman of the Cardiff Bay development corporation was appointed before I was
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    appointed to my present job. The one thing that I cannot be accused of is making party-political appointments as Secretary of State for Wales.
    Mr. Coleman: Does the Secretary of State recall the answer that his ministerial colleague gave during the previous Welsh Question Time about homelessness in Wales? Will he discuss homelessness with the chairman? Will he discuss the possibility of using council house sales receipts to deal with the growing problem of homelessness?
    Mr. Walker: Quite a few council house sales receipts have been used to that end. Under a Labour Government, there were hardly any such receipts.
    Mr. Livsey: When the Secretary of State meets the chairman of Housing for Wales, will he tell him of the housing crisis in rural Wales? What will he do about forming a housing strategy for rural Wales involving affordable houses for rent and affordable starter homes?
    Mr. Walker: I am glad to say that, before I have met the chairman, the Housing Corporation has decided to spend quite a lot of important resources on that problem.

    Deeside Waterfront Project
    Mr. Raffan: To ask the Secretary of State for Wales if he will make a statement on the involvement of the Welsh Development Agency in the proposed Deeside waterfront project.
    Mr. Peter Walker: The Welsh Development Agency is assisting the local authorities concerned in the area to evaluate the impact of the project.
    Mr. Raffan: Is my right hon. Friend aware of the serious concern in north Wales that Tarmac and Clwyd county council have persistently misrepresented the Welsh Development Agency as being in support of the Deeside waterfront project when the agency's stance is one of neutrality? As the area can support only one large out-of-town retail centre and, currently, three such schemes are being proposed locally, will my right hon. Friend ensure that there is a public inquiry on the Deeside project, especially now that the Secretary of State for the Environment is insisting on a public inquiry on the Chester scheme?
    Mr. Walker: My hon. Friend will understand that I have to wait to see what decisions are made and then decide what actions to take. It would be wrong of me to comment on any potential planning applications. I can confirm that, as with all local authorities, the Welsh Development Agency's role is to assist in the evaluation of a project. That is the task that it is carrying out.
    Mr. Barry Jones: May I emphasise that Alyn and Deeside district council, Clwyd county council and Cheshire county council support the scheme? They are supported wholeheartedly by Connah's Quay, Shotton, Queensferry, Sealand, Saltney, Buckley and Hawarden town councils, and others, myself included. Does the right hon. Gentleman remember that, in 1980, 8,000 steel jobs were lost at Shotton? The travel-to-work area still has 9,000 or more people out of work. The project is earmarked to be developed on derelict land which is the

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    site of our old blast furnaces at Shotton steelworks. I urge the right hon. Gentleman to hear every side of this important matter.
    Mr. Walker: The hon. Gentleman is quite correct—I must hear every side on this important matter. The hon. Gentleman realises that I cannot comment on this potential application, but I promise that I shall consider all points of view very carefully.

    Tinplate Plants
    Mr. Gareth Wardell: To ask the Secretary of State for Wales what initiatives he is taking to replace the manufacturing jobs to be lost in the tinplate plants at Velindre, Trostre and Ebbw Vale.
    Mr. Peter Walker: At two of the sites mentiond in the question there will be a number of off-setting jobs provided by British Steel. The total number of net job losses is expected to be 700, concentrated at Velindre.
    The company has assured me that it is making every effort to see that workers are redeployed and it is confident that it will be able to redeploy many workers to other plants and is hopeful that, subject to the closure agreement, early retirement and favourable terms can be offered to a substantial number of those affected by this rationalisation.
    Tomorrow announcements will be made by the Swansea Bay partnership whose co-ordination of efforts will be of considerable importance. A meeting took place with the local district council and the Welsh Development Agency last Friday. British Steel has made it clear to me that it will assist in seeing that the site is used for new purposes; that it will be involved in job counselling schemes; and that it will be making every effort to assist in encouraging job opportunities in the locality.
    Mr. Wardell: Does the Secretary of State agree that it is sad that the only centre of the tinplate industry in the United Kingdom is being decimated in that way? Is it not a sign of Britain's continuing long-term decline in manufacturing employment? Does he accept that at Velindre, where the most job losses will take place, the missing link of the M4, which is an important factor in attracting investment to that site, will not be completed until the end of 1994, according to his plans? Will he look again at the matter and make sure that the link is completed earlier?
    Mr. Walker: On the latter question, we shall be publishing the programme for roads with the appropriate priorities after Easter. However, the hon. Gentleman knows that it is not a matter of getting rid of the tinplate industry, it is a matter of rationalisation which will direct a considerable amount of additional investment to other locations in Wales and ensure their effectiveness. The steel industry in Wales is currently in a very strong and powerful position.

  THE ARTS

    London International Opera Festival
    Mr. Harry Greenway: To ask the Minister for the Arts if he has any plans to attend the London international opera festival.
    The Minister for the Arts (Mr. Richard Luce): I welcome the aims of the London international opera festival. I will be giving a reception for Pavilion Opera at Lancaster house on Thursday 18 May, which is to be followed by a performance.
    Mr. Greenway: Does my right hon. Friend agree that the London international opera festival does an excellent job in encouraging young composers, singers and audiences to participate in opera? Could not that example be emulated in other parts of the country? Will my right hon. Friend give his Oscar to that body which would be a much worthier recipient than some other recipients of Oscars yesterday?
    Mr. Luce: I agree with my hon. Friend that the opera festival which takes place in May and June places particular emphasis on young people, young composers, singers and audiences. It is very valuable because it is a good investment for the future.
    Mr. Tony Banks: I am glad to hear the Minister welcoming the opera festival. Precisely what funding is being provided for the festival by the Office of Arts and Libraries? May I have an invitation to the reception?
    Mr. Luce: I take careful note of the hon. Gentleman's last request. In regard to money, the hon. Gentleman knows that direct funding for the performing arts is not provided by the Office of Arts and Libraries, but by the Arts Council. A number of opera companies such as the English National Opera, Kent Opera and Opera North receive direct funding from the Arts Council which decides what support it gives to such organisations.

    EC (Artistic Dimension)
    Sir David Price: To ask the Minister for the Arts what steps he is taking to seek to ensure that the European Community has an artistic dimension in the formulation of its policies.
    Mr. Luce: I regularly attend the meetings of European Community Ministers responsible for cultural affairs. I will be in Santiago de Compostela for an informal meeting of Ministers under the Spanish presidency at the end of this month, when we expect to discuss audiovisual, library and book matters.
    Sir David Price: My question went a little wider. Given that an important element of the common European heritage is artistic and cultural, and given that the Community now accepts a social dimension in its formulation of policy, does it not make sense to air a cultural and artistic dimension, and is it not time that my right hon. Friend took an initiative in that direction?
    Mr. Luce: I accept what my hon. Friend says, except that cultural co-operation goes beyond the boundaries of the Community. I do not think that it makes sense to draw a line at the Community, although I am in favour of a measure of co-operation within the Community. Of course, this does not come within the area of competence of the treaty of Rome or the Single European Act, but that has not stopped Ministers of the European Community indulging in multilateral co-operation, and I agree with that.
    Mr. Buchan: Does the Minister agree that it might be helpful in carrying out his communitaire responsibilities in relation to the city of culture—Glasgow—if he will tell us how much Government money he intends to offer? So far, it has been very little.
    Mr. Luce: I admire very much the fact that since the decision was taken to give the status of cultural city of Europe to Glasgow in 1990, it has taken full advantage of it. It is attracting a large number of tourists and others to enjoy the arts in Glasgow. I believe that next year the cultural city will be a great success. With that in mind, although I made it plain at the beginning that there would be no central Government support for it, I am glad that I have been able to provide £500,000 to help in that process.

    Books and Titles
    Mr. Jessel: To ask the Minister for the Arts how many (a) books and (b) titles were held in libraries in England and Wales (i) now and (ii) in 1979.
    Mr. Luce: In 1986–87—the latest year for which full statistics are available—English library authorities held 115·6 million books compared with 110 million in 1979–80. That is an increase in books per head of population from 2·37 to 2·45.
    Details of titles held by libraries are not kept centrally. Welsh library authorities are the responsibility of my right hon. Friend the Secretary of State for Wales.
    Mr. Jessel: In view of the significant increase in the number of books, will my right hon. Friend comment on the whingeing, whining and falsehoods put about by the Library Campaign, the leaflets of which pretend that there has been a 4 per cent. drop in the stock of books, that issues have dropped by 7 per cent. and that libraries intend to force people to pay?
    Mr. Luce: My hon. Friend is right. The Library Campaign has dented its credibility by such extraordinary distortions in the launch of its campaign. There was a 9 per cent. increase in real terms in expenditure on libraries between 1979 and 1986–87. Book stocks increased from 110 million to over 115 million in the same period and service points have increased from 14,000 to just under 18,000. Also, there has not been a staff cut as the Library Campaign suggests but a marginal staff increase.
    Mr. Fisher: Does the Minister accept that there has been a net loss of over 200 libraries under this Government and that book fund spending is down considerably? If there is a distortion of figures, as the Minister accused the Library Campaign, he also is distorting and giving extremely partial figures.
    On the subject of libraries, will the Minister join me in congratulating Mr. Holmes a Court in coming to the aid of the British Theatre Association library? We welcome his generosity but we deplore the Minister's failure to act. How much longer can he go on ducking his responsibilities and hoping that the private sector will bail him out of his refusal to act on important national issues such as this?
    Mr. Luce: It is astonishing that the hon. Gentleman and Opposition Members find it impossible to welcome support for the arts when it comes from the private sector. In their judgment it always has to come from the taxpayer. To suggest that the funding should have come from
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    another source is rather silly. The hon. Gentleman should welcome wholeheartedly and without hesitation the remarkable support that Mr. Holmes a Court has now announced. I am glad that the executive committee of the British Theatre Association library has accepted his offer to provide premises for the association in central London. The premises will enable the library to continue its operations with a firm financial base, underwritten by Mr. Holmes a Court. I should like to pay tribute to his generosity. I am contributing £25,000 to the transitional costs of the association.

    Southern Arts Association
    Mr. Andrew Smith: To ask the Minister for the Arts when he next intends to meet the chairman of the Southern Arts Association to discuss the funding and structure of the arts in his region.
    Mr. Luce: I have no plans to do so.
    Mr. Smith: Will the Minister join me in congratulating the Southern Arts Association and the other regional associations on their role in fostering community arts? In the light of that, will he assure the House that the Wilding inquiry will not be permitted to undermine the autonomy of the associations or to weaken their links with local authorities in a further act of centralisation for which, sadly the Government have become known?
    Mr. Luce: I welcome the role played by the regional arts associations. There has been a substantial shift of resources to them in the past few years, to such an extent that today they handle about £30 million of taxpayers' money. It is for them to decide precisely how they disburse that money. The important point about the Wilding inquiry is to examine the relationship between the regional arts associations, the Arts Council and central Government, to seek greater accountability, to examine the coherence of funding policy and to see whether the structure and procedures can be improved. The inquiry will also study administration and that is needed in view of all the changes that have taken place. There is a principle of arm's-length policy in the allocation of funds. Decisions about artistic freedom and merit are for the Arts Council and the regional arts associations.
    Sir David Price: Does my right hon. Friend accept that local authorities of all political persuasions in the Southern Arts Association area are strongly behind that association's work, but that there is a strong feeling that the Arts Council is not giving the Southern Arts Association a fair share of the money allocated to regional arts associations? It is important to resolve the issue reasonably soon, otherwise the initiative about which he has spoken may go a bit sour in the south of England.
    Mr. Luce: I take my hon. Friend's point. The Arts Council has devised a new formula for disbursing money between the regional arts associations. The Southern Arts Association has received an 11·4 per cent. increase in resources to recognise the fact that it has been relatively underfunded over the years.

    Welsh Arts Council
    Mrs. Clwyd: To ask the Minister for the Arts when he next intends to meet the chairman of the Welsh Arts Council to discuss the funding and structure of the arts in his region.
    Dr. Marek: To ask the Minister for the Arts when he next intends to meet the chairman of the Welsh Arts Council to discuss the funding and structure of the arts in his region.
    Mr. Luce: I have no plans to do so.
    Mrs. Clwyd: Can the Minister give us an assurance that whatever the results of the Wilding inquiry, both the Welsh Arts Council and the Scottish Arts Council will remain autonomous?
    Mr. Luce: There are no proposals to change the position of the Welsh Arts Council which, incidentally, under the formula for disbursing funds, receives relatively more per capita than the English regions.
    Dr. Marek: Has the Minister consulted the Welsh Arts Council about a picture gallery in north Wales? Will he take a grip of the spending at Bodelwyddan by Clwyd county council? There are many of us who want to see a proper arts gallery there, but money must be spent wisely and properly.
    Mr. Luce: That is largely a matter for the county council, but if the hon. Gentleman is referring to the national portrait gallery at Bodelwyddan, I hope that the House will welcome the extension of a national body to north Wales.

  CIVIL SERVICE

    Agencies
    Mr. Butler: To ask the Minister for the Civil Service whether any further Civil Service agencies have been announced.
    Mr. Thurnham: To ask the Minister for the Civil Service if he will make a statement on progress towards the establishment of the new agencies.
    The Minister of State, Privy Council Office (Mr. Richard Luce): Since I last reported to the House on 1 February, my right hon. Friend the Chancellor of the Exchequer has announced that he has concluded that the Central Office of Information should become an agency. In addition last week my hon. Friend the Parliamentary Under-Secretary of State for Defence Procurement announced the decision to set up the four main non-nuclear research establishments, covering 12,500 staff, as a single organisation with the intention that they should become a next steps agency by April 1991. I strongly welcome both those announcements which illustrate the importance that the Government attach to the next steps initiative.
    Mr. Butler: Will the agencies benefit from an infusion of new talent? Will they be able to advertise for their chief executives from outside the Civil Service?
    Mr. Luce: As my hon. Friend's question is about next steps, I hope that he will allow me to congratulate him on his own next step—his marriage later this week.
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    In many cases, the best way to fill top posts will be by competition, open to both external and internal candidates. My hon. Friend may be interested to know that the chief executive designate for the defence research agency will be recruited by open competition.
    Mr. Thurnham: In the search for new talent, will my right hon. Friend confirm that he is doing all in his power to encourage the agencies to move to areas of high unemployment out of London whenever possible? How many more agencies does he expect to be able to announce this year?
    Mr. Luce: Yes, I confirm that it is the Government's policy to seek ways in which we can encourage Departments to move to other parts of the country. Indeed, only today I announced that the occupational health service, which is part of the Cabinet Office, is planning to move its headquarters to Edinburgh in the autumn, bringing cost and operational advantages, and involving co-location with the Scottish regional office of the occupational health service. As my right hon. Friend the Paymaster General has already disclosed to the House, no fewer than 34,000 jobs are being reviewed for possible relocation elsewhere, outside the south-east.
    Mr. Skinner: Can the Minister tell us whether a new agancy has been set up, such as a Ministry for looking after the Christmas mail? Is it true that the Secretary of State for Transport resigned, sending his resignation three months ago, but that it got mixed up in the Christmas mail? [Interruption.]
    Mr. Morgan: Will the Minister explain whether the creation of an agency alters the status of the members of staff of the agency, and especially that of the most senior member of staff? Does that person become the accounting officer instead of that role being fulfilled by the permanent secretary of the Department, and if so, does that mean that Opposition Members can have access to the chief accounting officer of the agency, which they would not have to a civil servant? At the moment, hon. Members have access to, for example, the heads of the Welsh Arts Council, the Welsh Development Agency and the Wales tourist board, but not to the head of the National Health Service or to the permanent secretary of the Welsh Office. What will be the status of the head of an agency?
    Mr. Luce: I am glad to answer a serious question—[Interruption.] I am prepared to answer a serious question. On the question of the positions of the chief executives of the agencies, the system of the accountability of Ministers remains the same, but there will have been—there is under this system—delegation of responsibility to chief executives. It is perfectly possible—not only because they are accounting officers—for the Select Committees to summon them to give evidence. The hon. Gentleman was right to ask his question about hon. Members. Access will be open to Members of Parliament. The operational duties of the chief executives will be their responsibility, not that of the Secretary of State. Hon. Members will be free to write direct and to take up issues direct with the chief executives.

    Bridge Scheme
    Mr. Jack: To ask the Minister for the Civil Service what has been the uptake of the bridge scheme; and if he will make a statement.
    Mr. Luce: I launched the bridge scheme with my right hon. and noble Friend the Secretary of State for Trade and Industry on 1 March. The scheme aims to encourage secondment and exchanges between Government and business, and I hope businesses as well as Government Departments and other areas of the public sector will take full advantage of the opportunities available.
    Mr. Jack: May I congratulate my right hon. Friend on the excellence of the advertising of the bridge scheme? Will he confirm that its success will be ensured if the right example comes from the top? How many people are currently on secondment at the Cabinet Office?
    Mr. Luce: I am grateful to my hon. Friend. If the scheme is to succeed in encouraging secondment both ways, it is important that people at the top of industry, as well as in the Civil Service, should encourage the process. Between 1977 and 1987, secondment quadrupled, which is a considerable improvement. I confirm that 24 people are on secondment at the Cabinet Office—10 out and 14 in. There are 1,600 staff in post in the Cabinet Office, and at grade 7 and above 64 per cent. are on loan from other Government Departments.
    Mr. Tony Banks: is that what the Americans call the "revolving door" with which John Tower had so many difficulties? What safeguards are in place to ensure that cosy relationships do not develop between senior civil servants, Ministers and defence and other suppliers to the Government through contracts?
    Mr. Luce: I am surprised that the hon. Gentleman does not welcome the idea of more exchanges between civil servants and the private sector. Surely it is healthy for both the Civil Service and the private sector to learn how the Government work and for the Civil Service to learn how commerce and industry work. I think that the Civil Service will welcome a breath of fresh air from the outside.

    Morale
    Mr. Soames: To ask the Minister for the Civil Service if he will make a statement on morale in the Civil Service.
    Mr. Luce: Like other employers, the Government attach great importance to ensuring that the levels of morale are maintained and improved.
    Mr. Soames: Is my right hon. Friend aware that morale in Civil Service offices in my constituency is extremely high, particularly in the DSS, because the civil servants do an exceptionally good job? Does my right hon. Friend agree that we are now moving towards a time when regional pay would make an enormous difference to the performance of civil servants and Government agencies? Will my right hon. Friend see what he can do to achieve that laudable aim as quickly as he can?
    Mr. Luce: I am grateful to my hon. Friend for paying a tribute to the work of the DSS in Crawley. I include also the excellent work done by the 900 or so staff in the office of my right hon. Friend the Paymaster General. It is now
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    very much the consistent policy of the Government, in terms of flexible pay, pay additions, performance bonuses and so on, to take into account the requirements of a particular area or a particular skill that may be in short supply. I agree with my hon. Friend that that policy should do a lot to help recruitment and retention in the Civil Service.
    Dr. Marek: Is the Minister aware that one of the ways in which morale could be improved is to put into operation the recommendations in the consultation paper "Service to the Public"? That paper clearly implies extra staffing in social security offices, especially in London. What representations will he make to the relevant Secretary of State?
    Mr. Luce: I am glad that the hon. Gentleman referred to the paper about the quality of services. It was placed in the Library of the House of Commons. Everything has been done under our training schemes to encourage civil servants to provide the best quality service, given the resources that they have. I am certainly glad that, in that paper, there are signs of the kind of job that is being done by a number of Ministries to improve the quality of their services. Staff numbers are for my right hon. Friends the Secretaries of State.
    Mr. Holt: Does my right hon. Friend agree that performance often goes with morale? In that case, the morale of DSS officers in Blackpool must be at an all-time low. Performance in relation to the general public is abysmal. Is it not time that a management audit was carried out to ensure that attendance and mobility allowance departments are given a thorough shaking, up from top to bottom?
    Mr. Luce: I am concerned to hear what my hon. Friend says. I will certainly draw that point to the attention of my right hon. Friend the Secretary of State for Social Security so that he can give my hon. Friend a full reply.

    Civil Service College
    Mr. Dalyell: To ask the Minister for the Civil Service if the Civil Service college has any plans to include rain forest issues in its general training programmes on environmental awareness.
    Mr. Luce: As part of its general programme of raising awareness of issues of public interest, the college is holding a briefing session for senior civil servants on the greenhouse effect on 22 March, in collaboration with the Committee for the Public Understanding of Science.
    Mr. Dalyell: Added to a session on the greenhouse effect, which one welcomes, could there be a similar seminar at the college on issues—climatological and otherwise—arising from the botanical and biological holocaust that is taking place in the rain forests of the world? Given world weather patterns, it could affect us in a most severe way.
    Mr. Luce: I admire the hon. Gentleman for the persistence with which he pursues this important matter. I should point out that training at the Civil Service college is principally geared to training for better management. Clearly, if there are opportunities such as the one that I have demonstrated to bring in wider environmental issues, the college will take them.

Lockerbie Air Crash
3.33 pm
Mr. D. N. Campbell-Savours: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 20 for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
"the handling of the Lockerbie incident by the Secretary of State for Transport."
The matter is important, as the country and Parliament want to know the truth about what has happened. On 18 November last year, a warning was issued by the United States Federal Aviation Administration, alerting the authorities to the activities of terrorists who were likely to use a new type of bomb which could be concealed in a radio cassette player. That information was also raised at the Wiesbaden conference, following upon which the British Airports Authority was also alerted.
On 19 December, two days before the Lockerbie disaster, the Department of Transport received additional vital information concerning details of the radio cassette player, which included colour photographs, information about the wiring of the bomb, X-ray identification characteristics, and details of the arrangements for packing Semtex explosives within the cassette player. That information was not relayed to the airlines until after the disaster took place.
The Secretary of State, in a desperate attempt to hide his blunder, now says that the information was unimportant. He indicated his lack of concern at the time by posting this vital new information to the appropriate authorities by second-class mail, far too late, while adding the utterly irresponsible suggestion that suspicious packages should be placed in the holds of aircraft. My hon. Friend the shadow Secretary of State for Transport has said that the Secretary of State for Transport could have given a full explanation on 10 January, yet he has singularly failed to do so. Indeed, he deliberately tried to block further questions in Parliament by telling an hon. Friend on 10 January:
"I am not prepared to go further than my earlier remarks about warnings being subject to the assessment process."—[Official Report, 10 January 1989, Vol. 144, c. 708.]
This was a blatant attempt to hide the truth from Parliament by refusing to be drawn on the vital issue of his Department's failure to communicate. [HON. MEMBERS: "Order."] The public want to know why he refused in January to comment on details of the radio cassette bomb, when the German authorities were perfectly prepared to comment on details of the same device in Wiesbaden at the beginning of November. Hiding behind the police inquiry is no answer.
This matter is urgent because the Secretary of State insists on refusing to comment on it in the Chamber, while at the same time he makes statements to Lobby correspondents, who, last Wednesday, were told by him that the police were allegedly doing a brilliant job and that the whereabouts of the terrorists who had planted the Lockerbie bomb were known. His denial of this allegation, which he leaked with his ambiguous and misleading statement, "The only person I saw on the relevant dates were three journalists on the record," is quite outrageous.
Mr. Speaker: Order. The hon. Member has had his time.
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The hon. Member for Workington (Mr. Campbell-Savours) asks leave to move the Adjournment of the House under Standing Order 20 for the purpose of discussing a specific and important matter that he believes should have urgent consideration, namely,
"The handling of the Lockerbie incident by the Secretary of State for Transport."
As the House knows, under Standing Order 20, I have to take into account the requirements of the order and to announce my decision without giving reasons to the House. I have listened with care to what the hon. Member has said, but, as he knows, my sole duty in considering his application is to decide whether it should be given priority over the business already set down for this evening or for tomorrow. I regret that the matter that he has raised does not meet the requirements of the Standing Order, and I therefore cannot submit his application to the House.
Mr. John Prescott: On a point of order, Mr. Speaker. Can you say whether the Government have indicated whether they are prepared to make a statement, before the Easter recess, on the early bomb warnings prior to the Lockerbie tragedy, in view of the statement, made today by the Daily Record editor, that "Mr. Channon", despite his denial, was the source of information that claimed that the arrest of the terrorists responsible was imminent? Will you make it clear, Mr. Speaker, that this House will not tolerate the denial of a debate on the importance of airport security before the Easter recess, as such denial will only feed the view that a cover-up is now being conducted by the Government?
Several Hon. Members: On a point of order, Mr. Speaker.
Mr. Speaker: Are they all on the same matter?
Hon. Members: Yes.
Mr. Speaker: Very well.
Mr. Richard Holt: On a point of order, Mr. Speaker. During the course of the diatribe by the hon. Member for Workington (Mr. Campbell-Savours), he accused my right hon. Friend of telling a lie to the House of Commons. He may have wrapped it up in parliamentary language of a sort, but that is what he said, and it should be withdrawn. You heard him, Mr. Speaker.
Mr. Speaker: I did not hear it, and if hon. Members wrap comment up in a certain way, I cannot interpret it. [Interruption.] Well, we are all honourable Members in this House.
Dame Elaine Kellett-Bowman: On a point of order, Mr. Speaker. Unlike most Opposition Members or those on this side of the House, my husband and I were actually present at Heathrow that evening, and we know very well that security was extremely tight. I very much hope that if there is a statement I shall have an opportunity——
Mr. Speaker: Order. Whether the Government come forward with a statement or volunteer a debate, or whether the Opposition gives time for a debate, is not a matter for me.
Mr. Alan Williams: On a point of order, Mr. Speaker. There is here a matter that is directly for you, Mr. Speaker, because the country is beginning to

733
wonder what on earth is happening when the House of Commons cannot get statements or answers on matters of clear and immediate public interest. I know that it is not customary procedure to refer to the fact that private notice questions have been asked or have not been asked, but if the Government are refusing to do that which they constitutionally should and that which the public is entitled to expect—to come to the House and explain themselves—we as a House look to you and the private notice question procedure to ensure that they do.
Mr. Speaker: Yes, but the right hon. Gentleman knows perfectly well that, in considering these difficult decisions, I must take into account the requirements of the Standing Order. It is not for the Chair to get involved in party political controversy. There are other methods of debating this matter.
Mr. Tony Favell: Further to that point of order, Mr. Speaker. What is most important is that the perpetrators of this appalling crime are brought to justice. This sort of interference from Opposition Members, who are nakedly trying to advance their ambition and chances of becoming deputy leader of the Labour party, does no good whatever.
Mr. Speaker: I do not think that we can take the matter any further.
Mr. Matthew Taylor: Further to that point of order, Mr. Speaker. Surely it is unacceptable for the House to learn through the drip, drip, drip of media leaks and briefings what happened in this serious incident. Is there no way that you can bring the Secretary of State to the House to answer to the public, as is his duty?
Mr. Speaker: I am well aware of the concern about this matter, but there are other ways of achieving a debate or statement, which do not go through the Chair.
Mr. Alan Williams: Further to that point of order, Mr. Speaker. You made a perfectly legitimate point when you said that you must stand aside from the party wrangling within the House. No one would challenge that. However, if you look at the quotations over the weekend in relation to Lockerbie and what has happened in the past few days, you will see that Tory Members as well as Labour Members have been asking for the statement that we have been denied, or for a private notice question on the subject. It is not a matter of party wrangling, but of general national concern on both sides.
Mr. Speaker: The right hon. Gentleman knows that we do not discuss the criteria for private notice questions in the Chamber.
Mr. Alan Williams: Well, accept a private notice question.
Mr. Speaker: Order. The right hon. Gentleman knows perfectly well, because he has indications of this, that there are other ways of raising this matter, and he should take them.
Mr. Tony Marlow: Further to that point of order, Mr. Speaker. It would appear that
734
there is a certain amount of arguing with the referee, which is not a very attractive situation. Can some of us on this side of the House express our gratitude to you in preserving the dignity of the House from the charm school of the hon. Member for Kingston upon Hull, East (Mr. Prescott) and his carrion ratbag as they seek to gorge themselves yet further on the blood of Lockerbie? This was an American aircraft exchanging cargo with another American aircraft. It was an American responsibility which tragically fell out of the skies in Britain. We want to seek the people who committed this atrocity and bring them to justice. I am sure that that is the overwhelming desire of my right hon. Friend. We are disgusted at the disgraceful behaviour of the Opposition in seeking to dredge into the entrails——
Mr. Speaker: Order. These points of order are also getting out of hand.
Mr. Frank Dobson: Further to that point of order, Mr. Speaker——
Mr. Speaker: I cannot say any more.
Mr. Dobson: Mr. Speaker, on several occasions you have rightly said that you prefer important statements by Ministers to be made in this House rather than in other places, whether the Parliamentary Press Gallery or at unattributable briefings. Throughout the whole history of the sad business of Lockerbie, my hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott) has asked the Secretary of State time and again to come to the House to make a statement. We have been told in various ways, "No that would be inappropriate," "There is nothing to say," "It would be a threat to the security arrangements," "It would upset our relations with the West German intelligence service," and so on. Then, later the same day, the Secretary of State, who will not come to the House, rushes to the newspapers and tells them everything that we have been asking him to come to speak about in the House.
Under the rules of procedure, if a Minister will not make a statement, a way of bringing him to the House is to get him to answer a private notice question, provided that you will authorise it, Mr. Speaker. I shall not discuss what private notice questions have been sought or refused, but it would make Labour Members happier if, when they were refused, my hon. Friend was the first to know. On two recent occasions the press have rung to tell him, from whatever source I know not, that his private notice question application has been refused.
Several Hon. Members rose——
Mr. Speaker: Order. I am not having any more of this. We cannot have a debate on the matter now, and certainly not on private notice questions. I say to the House that I have an extremely difficult decision to make every day as to whether to grant private notice questions. In doing so, I must take many factors into account. As I have already said to the House, I must give no reasons for my decision but must simply stick to the criteria set down in the Standing Order. I invite the House to study those criteria; then it can make its judgment. Whether there is to be a statement or a debate is not a matter for the Chair.

Water Bill (Money Resolution)
3.45 pm
Mr. Dafydd Wigley: On a different point of order, Mr. Speaker. When the business of the House was announced on Thursday last week no reference was made to the fact that we would be asked to debate later tonight the Water Bill money resolution. I understand that money resolutions are normally appended to other substantive matters that come before the House. No statement was made on Friday and no notification has been given to the parties at any stage since last Thursday that this matter would be forthcoming.
I ask for your guidance, Mr. Speaker, as to what defence we have when the first that we hear of substantive matters of significance to the Water Bill is when we pick up our Order Papers. Is that in order?
Mr. Speaker: I understand that the money resolution arises from amendments to be made to the Bill. That is a question to be asked during the debate later this evening.
Mr. Wigley: I am sorry, Mr. Speaker, but I have a further point of order. No doubt the money resolution is a matter that arises from amendments to the Bill, but the Bill is being debated tomorrow and on Wednesday and there will be time then to debate the substance of the money resolution. When we went away last week we were not under the impression—nor were we given any indication or guidance—that the Water Bill would be considered tonight, whether on this amendment or on anything else. We are in an impossible situation, because all our papers are lined up to be here tomorrow and not today.
Mr. Speaker: That is in order, and it has frequently been done. I believe that those are matters that the hon. Gentleman must argue tonight; if he objects, he must vote against the money resolution.

Orders of the Day
  WAYS AND MEANS
  Order read for resuming adjourned debate on Question [14 March].

  AMENDMENT OF THE LAW
  Motion made, and the Question proposed,
  That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance; but this Resolution does not extend to the making of any amendment with respect to value added tax so as to provide—

  (a) for zero-rating or exempting any supply;

  (b) for refunding any amount of tax, otherwise than in a case where the amount has been paid by reason of a mistake;

  (c) for varying the rate of that tax otherwise than in relation to all supplies and importations; or

  (d) for relief other than relief applying to goods of whatever description or services of whatever description—[Mr. Lawson.]

  Question again proposed.

  Budget Resolutions and Economic Situation
  [Relevant documents: European Community document No. 8887/88, Annual Economic Report 1988–89 and the unnumbered document, "Annual Economic Report 1988–89" (final version as adopted by the Council).]
  3.47 pm
  The Secretary of State for Employment (Mr. Norman Fowler): One of the central achievements of the Budget has been to tackle some of the outstanding barriers to employment that still remain in this country. Employment is already at an all-time record with more people in employment now—more than 26 million—than at any stage in our history. Unemployment has fallen at a record rate since the 1987 election and has fallen by more than 1 million since then. However, my right hon. Friend's Budget recognises the potential for further improvement. It sets out ways that new employment can be created and, above all, it sets out those proposals at a time when the labour market is changing rapidly.
  Perhaps the Budget measure that gives some of us on this side of the House most cause for satisfaction is the abolition of the pensioners' earnings rule, because that removes a major disincentive to people who want—it is their choice—to work beyond the statutory retirement age. It means that men between 65 and 69 and women between 60 and 64 will no longer be faced with the loss of pension income if they remain in employment. We previously raised the earnings limit, but that still meant that anyone earning more than £75 a week had the disincentive of a reduced pension if they remained in employment.
  The abolition of the earnings rule means that there is substantially more choice for men and women in their sixties. If they choose to work on—whether full-time or part-time—it will not affect their pension entitlement; while, of course, if the man or woman does not draw his or her pension at all, he or she builds up an increased pension. In other words, the Budget achieves an increase in flexibility and choice for the older worker. That recognises the changing nature of the British labour market.

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  I am probably the first Employment Secretary in 20 years to come to a Budget debate to say that, now, our priority is to increase the supply of labour to meet the rising demand that we will face in the years ahead. In the next seven to eight years we will face, for the first time, a relative shortage of new school leavers coming to the labour market—there will be a drop of a quarter by the mid-1990s. That is in stark contrast to the position in the 1970s and most of the 1980s, when our central concern was to find jobs for young people. That position is now changing radically, and for the better.
  In the past two years, unemployment among young people has fallen substantially. The United Kingdom now has a lower unemployment rate for the under-25s than any other major European Community country, with the exception of Germany. Today, the prospects for well-qualified young people have never been better, but we must recognise that the supply of new school leavers will not be sufficient to keep up with demand in the manufacturing and service industries or in the public services, such as the Health Service.
  One of the aims of policy, therefore, must be to look at new sources of recruitment. One course is to attract back married women, and a range of employers are currently pursuing that policy. A less obvious but vital course is the recruitment and retainment of older workers.
  Mr. Paddy Ashdown: I am sure that the right hon. Gentleman is aware of the woefully low level of over-16s who go on to further education in Britain. I am sure that the right hon. Gentleman agrees that there is a need to raise that percentage towards the levels enjoyed in Germany and Japan—60 per cent. and 90 per cent. respectively. Will he give an undertaking to the House that no deficiency in the labour market will stop the Government seeking to raise the numbers who go on to further education and to better qualifications?
  Mr. Fowler: Yes, Sir. I will give such a commitment, as it is entirely correct. We want people aged between 16 and 18 to be as well educated and as well trained as possible. The fact that there will be fewer young people coming on to the labour market underlines the importance of that, but it is a question not just of education, but of training. The whole aim and purpose of policy must be to improve the professional standards of all people not only young people.
  The abolition of the earnings rule takes a giant step towards more choice for older workers. As a nation, we have not sufficiently valued the contribution that older workers can make. At a time when people are living longer, we have become preoccupied with earlier and earlier retirement. I believe that debate should be about maximum flexibility and about maximum choice for people.
  Mr. Ron Leighton: The Secretary of State mentioned the need to attract married women back into the labour market. Can he tell us why the Budget did not abolish the tax on women using workplace nurseries? Was that not a mistake?
  Mr. Fowler: I do not think so. We are witnessing the unprecedented development of the exact measures to attract women back to the labour market. A whole range of employers are undertaking developments that are not
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  only right—of course, they get tax relief on them—but in their own interests. I can hardly think of a time when there has been more development in such measures.
  Mr. Christopher Hawkins: On the last available figures, GDP per head has been rising at about 2·6 per cent. per annum. The Treasury is forecasting that the economy will grow in the coming year by only about 2·5 per cent. The labour force is rising. If output rises by 2·5 per cent. and productivity goes up by more than 2·5 per cent., it is impossible for unemployment to go on falling, even without increasing the labour force as the Government are suggesting. Would my right hon. Friend please comment on that?
  Mr. Fowler: I will comment on that at some length at the relevant stage in my speech.
  The second major change in the Budget concerns national insurance. That proposal will bring gains to nearly 19 million workers at an annual cost of about £2·8 billion. Every employee with a weekly income of £115 or more will gain £3 a week. Everyone with a weekly income of more than £75 will gain between £1·50 and £3 a week. The change will particularly benefit those on half average earnings, where the national insurance charge is of crucial importance.
  Just as important is the fundamental change which my right hon. Friend the Chancellor of the Exchequer has introduced to the system of national insurance. In 1985, the Government introduced lower rate contributions for the lower-paid. That was a welcome step, but a major problem remained. When an individual crossed the lower earnings limit of national insurance, he had to pay 5 per cent. on all his earnings. If he earned £1 more than the lower earnings limit of £43, he lost £2·15 through national insurance. Not surprisingly, many people were deterred by that cliff-edge effect from crossing the lower earnings limit. Among other things, they were excluded from a range of national insurance benefits.
  The changes introduced by my right hon. Friend the Chancellor means that those earning below £43 a week will continue to pay nothing. Those with earnings above the lower earnings limit will pay 2 per cent. on the first £43 —that is, 86p—and 9 per cent. on the rest, up to the upper earnings limit of £325. The 86p earns entitlement— I must stress this—to contributory benefits including the basic retirement pension.
  In summary, those changes will remove a disincentive for employees to increase the hours that they work. They will also generally increase incentives for people on low incomes. They should contribute to employment where growth has already been so remarkable.
  The 1988 labour force survey, published last week, shows that there has been a real and dramatic improvement in employment in this country. It shows that there are now 1 million more people in employment than in 1979. It shows that, in the year to September 1988, total employment increased by more than 730,000 and that 85 per cent. of those new jobs were full-time posts. It also shows that self-employment has increased by 1·1 million since 1979 and by 125,000 in the year to September 1988. It shows that, over the past two years, we have had the fastest employment growth since 1945.
  Mr. Win Griffiths: Despite those impressive figures, will the Secretary of State accept that in the standard planning regions in the United Kingdom of

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  Wales, the west midlands, the north-west, the north, Yorkshire and Humberside, Scotland and Northern Ireland, there are still 800,000 fewer jobs than in 1979 despite this economic miracle? Virtually all the jobs have been created south of a line between the Severn and the Wash, and most of them are part-time.
  Mr. Fowler: That is not true of the growth in employment or of the fall in the rate of unemployment. The rate of unemployment has come down fastest in many of the areas to which the hon. Gentleman referred including the west midlands, Wales, the north and north-west.
  Mr. Michael Meacher: Will the Secretary of State give way?
  Mr. Tony Marlow: Will my right hon. Friend give way?
  Mr. Fowler: I want to continue for a moment.
  The labour force survey shows that there is absolutely no truth in the suggestion that unemployment has not been falling at the rate shown by the monthly unemployment count. On the contrary, it shows that, in the 12 months to June 1988, unemployment fell by 500,000 on the international definition of unemployment used in the labour force survey and on the figures recorded by the unemployment count.
  Furthermore, the survey confirms that unemployment fell because of the record number of new jobs created. In the 12 months to June 1988, employment increased by 870,000, more than matching the fall of 540,000 in the number unemployed. In other words, more than enough jobs were created to bring about a fall in unemployment and to provide employment for a 300,000 increase in the labour force. Those are the facts about Britain's employment position.
  Only the hon. Member for Oldham, West (Mr. Meacher) seeks to contradict that improvement. He is on record as saying that the labour force survey would show unemployment at 2·6 million in the spring of 1988. He is on record as saying that both in the House and outside it as well. The hon. Gentleman is wrong to the tune of 200,000. Last Thursday, the hon. Gentleman made another prediction:
  "Unemployment has fallen as far as it can go with current Government policies."
  With the hon. Gentleman's record, that prediction must be the best news that the unemployed have had for a very long time.
  Mr. Marlow: Would it be true to say that one of the reasons that unemployment has dropped so dramatically over the last couple of years or so is the large amount of inward investment we have had into this country— particularly from Japan and countries like that? Would my right hon. Friend confirm that one thing that would put off the Japanese and other people wishing to invest in our productive and successful economy would be the institution by him or somebody else of some airy-fairy concept like a Ministry of Innovation or, alternatively, a system of picking winners, whereby my right hon. Friend would take more tax from some companies so that he could expend his largesse on various political operations that he thought might be beneficial?
  Mr. Fowler: I am sure that my hon. Friend is entirely right. We do not even need to consider the hypothetical situation. We can see what happened in respect of inward investment at Dundee, where the threat of industrial action, and the rest, deterred valuable inward investment. Worst of all, the hon. Member for Oldham, West, who leads for the Opposition on employment, did not at any stage have the courage to condemn the action that was taken at Dundee. That is the condemnation of the Labour party.
  Mr. Meacher: Is the Secretary of State really bragging about the fact that unemployment is still over 2 million and still twice as high as it was in 1979? Is he aware that the latest labour force survey figure shows also that, in the period following the end of March 1988, which is the half-year for which figures are available, jobs increased at only half the rate of the year before, showing that the jobs boom is clearly over and that unemployment is clearly bottoming out? Is the right hon. Gentleman aware also that vacancies have fallen by 39,000 net over the past year, which is a trend normally associated with rising unemployment? Is he satisfied that adult male unemployment is still twice as high as the European average?
  Mr. Fowler: I am not bragging about the employment or unemployment situation. I am saying that the hon. Gentleman not only got his predictions wrong but self-evidently wrong, and that if he had any courage at all, he would get up and apologise to the House and to the country for his inaccurate statements about the fall of unemployment. The fact remains that unemployment has come down, but that the hon. Gentleman has sought month after month to fiddle the unemployment figures upwards. His claims have now been shown to be entirely bogus, which comes as no surprise to those of us who have known the hon. Gentleman over the years.
  Dame Elaine Kellett-Bowman: Will my right hon. Friend commiserate with the 1,000 workers in Liverpool who have lost their jobs because of the Luddite tactics of the antiquated unions there?
  Mr. Fowler: My hon. Friend is right. The part of the Transport and General Workers Union in that dispute needs to be examined, and people need to learn what is going on.
  Let me take up what the hon. Member for Oldham, West has just said about vacancies. The significant point about unfilled vacancies is how the number has kept up. On Thursday, the hon. Gentleman issued a press release in which he talked about the alarming fall in vacancies. He said that vacancies had fallen by 1,000 in jobcentres over the past month, and if he wants to deny that we have it on record. There are now nearly 230,000 vacancies in jobcentres alone, which means that in the economy generally there are probably between 600,000 and 700,000.
  Mr. Richard Holt rose——
  Mr. Fowler: I would like to make progress.
  In such circumstances, it is entirely right for the Chancellor to remove barriers that stand in the way of those jobs being taken up, and to take away obstacles that prevent new jobs from being created.
  Mr. Holt rose——
  Mr. Fowler: I would like to make progress, if my hon. Friend will forgive me.
  My right hon. Friend has done that by ending the pensioners' earnings rule for men and women in their sixties. He has done it by reforming the national insurance system, which I should have thought would be welcomed by hon. Members on both sides of the House. He has also done it by increasing corporation——
  Mr. Holt: I am sorry that my right hon. Friend does not wish to hear the good news from Teesside that I would like to give him. The latest newsletter from the Teesside chamber of commerce shows that 28 per cent. of firms anticipate taking on new labour in the next few months, and that the vacancies advertised in the newspapers in that location are running into pages and pages. Last Friday, there were five pages of vacancies.
  One reason why the number of vacancies registered with the jobcentres is not as high as it was may be that jobcentres are no longer a source of labour. Jobs are being advertised in newspapers, as has been the case historically, and in Teesside they are booming.
  Mr. Fowler: I am grateful to my hon. Friend, and I apologise for not having given way to him earlier. It was unforgivable of me not to allow him to give news of that kind. I should like, however, to make a few minutes' progress with my speech before giving way to any more hon. Members on either side of the House.
  By increasing the corporation tax threshold for small companies, my right hon. Friend has reduced the corporation tax burden for 20,000 small companies. He has simplified the tax regime for small business men and raised the compulsory threshold for VAT. By any standards those are significant measures, but of course other barriers to employment exist.
  At the same time as making those reforms, it is right for us to consider other measures to improve employment levels. As my right hon. Friend said in his Budget speech:
  "The task of business and industry is to control their pay and other costs. The more successfully they do so, the less costly in terms of output and employment the necessary adjustment will be."—[Official Report, 14 March 1989; Vol. 149, c. 245.]
  As the House knows, we have been reviewing the closed shop, particularly the pre-entry closed shop. The effect of the closed shop is to limit employment opportunities and to reduce the supply of labour. At the same time, it limits the employer's freedom to decide whom to employ and whom not to employ, and the employee's freedom to decide whether or not to join a trade union in the first place.
  As part of the review, I commissioned a special survey of the extent of the closed shop, which shows that the number of jobs covered by the closed shop has fallen from a peak of 5 million in 1978 to just over 2·5 million today. Nevertheless, the survey found that one worker in 10 said that the most important reason for union membership was that
  "it was a condition of having the job."
  The survey also shows that 1·3 million jobs are the subject of a pre-entry closed shop. To get the job, one needs a union card. That is substantially more than previous estimates and, in effect means that there are still 1·3 million jobs which are closed to anyone who is not already a member of a trade union. We have already taken action against the post-entry closed shop whereby the employer may take on a non-unionist, so long as such a
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  recruit joins the union shortly after starting the job. In such a case, the victim of the post-entry closed shop can go to an industrial tribunal with a claim for unfair dismissal.
  As I said in my December statement, I believe that the time has now come to act against the pre-entry closed shop. I am publishing today for consultation a Green Paper which for the first time gives a similar remedy to anyone who is excluded from a job because of the pre-entry closed shop.
  At the same time, we need to recognise that bad industrial relations can also provide a major obstacle to employment growth. Strikes export jobs to our competititors. In the 1970s, this country lost on average 13 million working days a year because of strikes. At this time 10 years ago, we were in the immediate aftermath of the winter of discontent which did so much damage to the reputation of this country.
  Working days lost through strikes are now down to about 3·75 million a year. The number of working days lost in January of this year was the lowest in any month since August 1940, but although the position has improved, there are still areas where I believe that action should be taken.
  We are particularly concerned with secondary industrial action. Although the 1980 Act took important action in this area, the position remains that as the law stands at present immunity can apply to organising certain forms of secondary action. The Government's view is that there is no good reason why employers who are not party to a dispute should be at risk of having industrial action organised against them.
  For example, secondary action can deter employers from starting up for the first time in this country—in a situation where secondary action is threatened among workers in the new firm's customers or suppliers with the aim of forcing the new enterprise to accept certain terms and conditions. Indeed, exactly that sort of threat was made at Dundee, when the American Ford company planned to establish a new factory. Dundee, above all, shows the link between industrial relations and jobs.
  Mr. John Townend: I welcome the news about the closed shop, but will my right hon. Friend deal as soon as possible with that relic of the corporate state, the national dock labour scheme, as a result of which the container terminal in Hull remains shut, jobs are being lost and trade is going to other ports?
  Mr. Fowler: My hon. Friend will not be surprised to learn—if he is, I apologise for it—that my right hon. Friend the Prime Minister gave an exact reply to his question on 19 January. I have nothing to add to what my right hon. Friend said then. My announcement today will enable the reform of industrial relations to go forward. There will be a step-by-step reform of industrial relations law. I am glad that my hon. Friend welcomes the proposals.
  A range of measures is being taken to tackle barriers and obstacles to employment, but the Budget goes beyond that. It also gives opportunities for employment itself to be more attractive. It gives employees further opportunities to participate in the success of their firm. It recognises the impact that successful employee participation schemes can have on staff commitment and the business performance of the company. The experience of many leading British companies bears this out. So the Budget includes

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  important new proposals on employee share ownership, profit-related pay, and pensions, including personal pensions.
  In all these areas, the Budget builds on the substantial progress that has already been made. More than 1·75 million employees have already benefited from approved employee share scheme. They have received shares or options for shares worth some £4 billion. The tax relief on profit-related pay, which came into effect only 18 months ago, already covers more than 120,000 employees and profit-related pay worth more than £100 million. In this Budget, my right hon. Friend the Chancellor has proposed significant improvements which will give further encouragement to those important developmemnts.
  First, increased benefits will be available under employee share schemes. The limits will be raised so that firms will be able to give staff more shares free of tax. Secondly, the Budget proposes a new tax relief which is specially designed to help companies that set up employee share ownership plans. My right hon. Friend also proposes to increase the maximum of profit-related pay which can attract tax relief.
  For the individual worker, the new personal pensions and money purchase pension schemes are making it substantially easier for employees to move from firm to firm and take their pension entitlement with them. That is a substantial advance in the rights of working people.
  Personal pensions have been a major success story. One million people have already taken advantage of the new opportunities that have been available since last July. Money purchase schemes can be used to contract out of the state earnings-related pension scheme. Already, more than 8,000 schemes have been established, including some industrywide schemes, such as those in engineering, construction and the footwear industry.
  The Budget changes will allow greater flexibility in pension provision. They will improve the arrangements for personal pensions and make very significant increases in the contribution limits for people over 35 who, as a result, will be able to make better provision for their retirement. They will make it easier and more attractive for employees to pay additional voluntary contributions to secure better benefits, simplify the rules for occupational pension schemes, and reduce the administrative burden on employers.
  All in all, the Budget proposals offer employers a range of important opportunities to increase employee participation in the prosperity of their firms. They will give a further impetus to developments which have already proved successful, effective and popular with employers and employees alike.
  There are other issues that affect workers' and staff commitment. At the beginning of this debate on Wednesday, the shadow Chancellor, the right hon. and learned Member for Monklands, East (Mr. Smith), referred to the importance of investment in training. I agree about its importance. That is why the Government are investing £3 billion in training for young people and the long-term unemployed—£3 billion made possible by the Chancellor's policies. It is also why we are setting up training and enterprise councils around the country—to achieve more training by employers and more training generally, geared to the needs of the local labour markets.
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  It is because of the crucial importance that we attach to training that I published two White Papers last year proposing important changes in our arrangements.
  On training, we are entitled to say to the Opposition, "We hear the words, but we remember the action." We remember that, when the employment training programme for the long-term unemployed was launched, it was bitterly opposed by the Labour party conference. We remember that, although—to his credit—the Leader of the Opposition backed the programme, the Trades Union Congress rejected his advice. We remember that the shadow spokesman on employment, to his great discredit, took the easy way and campaigned against a training programme for the long-term unemployed.
  Mr. Meacher: If the right hon. Gentleman is so pleased with his employment training scheme, will he explain why, after six months, only 50 per cent. of the target number of places have been filled and why a large number of companies, including McAlpine, which has close associations with the Tory party, refuse to have anything to do with it?
  Mr. Fowler: I thought for a moment that the hon. Gentleman might have been getting to the Dispatch Box to deny that he has been campaigning against employment training. His intervention establishes and underlines what I was saying. I shall answer the hon. Gentleman directly. At the moment, we are getting about 40,000 entries to the programme each month. There are now about 170,000 people on employment training. Therefore, given that employment training has been going for only six months, the programme is off to an extremely good start by any standard. The new job training scheme, which the hon. Member for Oldham, West also tried to sabotage, attracted only 30,000 people after 12 months. After six months, 170,000 people are on employment training.
  What I find so distasteful about the hon. Gentleman's attitude is that it entirely confirms what I said. Although the Leader of the Opposition had the guts to get up and back employment training, I cannot say the same for the Labour party spokesman on employment.
  A whole range of companies is involved in employment training, including IBM, Sainsbury, Laing and many other major companies. McAlpine occupied a special position in Yorkshire. The hon. Gentleman's only contribution to training in the past 12 months has been to try to prevent training in Britain. We shall not take lectures about training from the shadow Chancellor at least until he gets rid of the Opposition spokesman on employment, and that can only be a matter of time. I notice that we shall not have the pleasure of hearing the Opposition spokesman on employment reply to the debate. Obviously, he is on the substitutes' bench in these matters.
  The Budget builds on the policies which have made possible the record growth in jobs and the record fall in unemployment in Britain. Since the last general election, unemployment has fallen by more than 1 million. Over the last year, the rate of unemployment has fallen faster in this country than in any other major industrialised country. Unemployment in Britain is now well below the European Community average, and below the figures for France, Belgium, the Netherlands, Spain, Italy and Ireland.
  Contrary to what the hon. Member for Oldham, West suggested, the 1988 labour force survey published last week has confirmed the record of rapidly falling

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  unemployment which the monthly unemployment count has shown for the last 31 months. It also confirmed that unemployment has fallen, because record numbers of new jobs have been created.
  At the last general election, the Labour party promised to reduce unemployment by 1 million within two years. Part of its plan for achieving that was to extend early retirement to 160,000 people in Britain, and a whole range of similar measures. However, since the election this Government have reduced unemployment by more than 1 million in less than two years, and our policies have reduced unemployment by creating real jobs—more than 1·75 million new jobs between March 1987 and September 1988 and a total of more than 2·5 million since 1983.
  The truth is that the Opposition have nothing to offer except a return to a high taxation, low incentive and a low-growth economy. My right hon. Friend's Budget is a budget for investment, for continued employment growth and for a strong economy. I commend it to the House.
  4.24 pm
  Mr. John Garrett: I regret that about half an hour before the debate we, or rather I, learnt of the indisposition of my hon. Friend the Member for Dagenham (Mr. Gould). I am sure that we all wish him a speedy recovery.
  Our view is that once again the Budget has failed to provide for a fair society and a strong economy. It does nothing to strengthen our economy. The 1988 Budget gave tax breaks to the rich when any economic scribbler knew that resources should have been spent on the supply side—education, research and development and training. The overheating caused by boosting demand and neglecting supply has led to savage increases in mortgage interest rates and we all know from our advice surgeries how much suffering that has caused to our constituents. This version of the Barber-boom is over and we have to ask two basic questions: first, when will interest rates come down and, secondly, when will the balance of payments improve?
  The Budget insults the low paid. After last year's giveaway to the rich, the decent thing would have been to have given something to the poor this year. However, analysis shows that for those earning under £100 a week the gain is only £1 and for the ordinary working family it is just £3. That should be compared with last year when a person on £100,000 a year was given an extra £260 a week —more than the average family will receive in a year from the 1989 Budget.
  Many tax dodges still exist to be exploited by those who can afford accountants. The Government's latest contribution to the condition of the, low paid has been to attack the wages councils, so the poorly paid will lose the only defence that they have had in past years.
  The Government tell us that Budgets are to increase incentives. Is it efficient to discourage women from going to work by failing to end the tax on workplace nurseries? Is it efficient to increase loopholes for the rich by tax relief on private health schemes or to throw money around to encourage share ownership simply to ensure that privatisation works? The Budget shows that the economy and the Chancellor have grave problems. Despite having accumulated a Budget surplus of £14 billion over the past year when the Chancellor forecast £3 billion originally, he has been unable to reduce the burden of taxation or to begin investing in the supply-side measures that Britain
  746
  needs. He should have begun the supply-side revival by targeting expenditure on training, research and development and our deteriorating infrastructure. Not to do so is folly, not prudence.
  Mr. Andrew MacKay: Will the hon. Gentleman give way?
  Mr. Garrett: Not for a minute.
  Those long-term problems are the outcome of 10 years of Government economic mismanagement. Our problems are coming home to roost in the appalling balance of payments deficit—a deficit that the Chancellor admits is here to stay as far ahead as we can see because balance of payments deficits of over £10 billion a year are forecast in the Red Book over the planning period. The deficit is the product of 10 years of under-investment in the productive strength of the British economy. In those 10 years manufacturing investment has never returned to the 1979 level. It has been 10 years of a growing trade deficit in almost every sector of British industry.
  Mr. Andrew MacKay rose——
  Mr. Garrett: I will give way to the hon. Gentleman in my own time, not his.
  Let us look at some of the most noticeable loopholes in the Budget. Let us look at those affecting corporate management, such as personal equity plans. That pet scheme of the Government flopped last year. Now, in their passion to make it work, they have created an even bigger tax loophole. Before now, only new money could be used to invest in PEPs to gain from the tax breaks that were offered. Now, privatisation shares taken up outside PEP schemes can be transferred into them, tax free. Tax-free privatisation is now the Government's policy.
  Mr. Andrew MacKay: The hon. Gentleman has just criticised my right hon. Friend the Chancellor for not further reducing the tax burden. This seems a suitable opportunity for him to tell us what the basic level of taxation would be under a future Labour Government. Would it be above or below 25 per cent? That is not clear at the moment.
  Mr. Garrett: I do not need to take instruction from any hon. Member on that. I am here to discuss the Budget and that is what I intend to do. My duty is to examine the Budget in terms of its effect on industry and the economy.
  Another corporate issue is company cars. Understandably, the Chancellor has reduced the tax benefits accruing from having a company car. That seems fair enough, but he has failed to distinguish between those for whom cars are essential for work and those for whom a company car is a tax perk. The health visitor. for example, has been hit as hard as the company director.
  We now have a simpler system for the assessment of the earnings of directors. Directors will now pay tax on the amount that they receive in the tax year, rather than the amount they earn or accrue in the tax year. Clearly, that can be exploited, giving company directors the ability to minimise tax bills by choosing when they receive income.
  I want to consider the effect of the Budget on industry and the economy generally. Instead of strengthening the trading industries of Britain—the industries that must capture new markets abroad and defend markets at home —the Government's high interest rate strategy hits investment, building up yet further problems for the

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  future. It is no wonder that we find the Chancellor's trade forcasts incredible. In his Autumn Statement, five months ago, he forecast that in 1989 exports would grow by 7 per cent. and imports by 5 per cent. The export forecast has now been reduced to 5·5 per cent. and the import forecast has been revised up to 5·5 per cent. as well. Even so, the Chancellor is assuming that the growth of exports will have to accelerate from 0·5 per cent., which it is today, to 5·5 per cent. and that imports will have to fall from a rate of growth of 13 per cent. to 5·5 per cent., while he keeps interest rates up and the pound high.
  The Government's failure over the past decade has led to a massive increase in the percentage of products in the domestic market that are imported. I shall give a few examples. In 1978, 18 per cent. of colour televisions were imported. From January to September 1988, the figure was 40 per cent. For telephone receivers, the figure has increased from 2 per cent. to 41 per cent. and for buses and coaches, from 3 per cent. to 38 per cent. In my own constituency, 4,000 to 5,000 people are still employed in the footwear industry. There is great concern that imports of footwear have risen from 30 per cent. to 47 per cent. The Government boast that investment is booming, but as investment in manufacturing is down on 1979, the main growth areas have been investment in distribution and the financial sector—aiding the financing and distribution of imports.
  Growth in the past year has been fuelled by a massive consumer boom, irresponsibly stoked up by the Government. The boom has been paid for by growing personal debt. The ratio of debt to income in Britain is now the highest in the western world, threatening the future of individual families and the future stability of the economy. In the past year, the amount of mortgage lending would have bought all new housing stock twice over.
  The Chancellor has admitted that inflation will rise to over 8 per cent. before falling back towards the end of the year. That fall will be caused not by any slackening in the rate of price increases, but because year-on-year comparisons will be with the high inflation months in the second half of 1988.
  Mr. Tim Yeo: Will the hon. Gentleman give way?
  Mr. Garrett: No, although I know that this is a debate.
  Mr. Frank Dobson: My hon. Friend should ignore the hon. Member for Suffolk, South (Mr. Yeo). He is a ratbag. He is a person who interrupts.
  Mr. Garrett: I do not care whether the hon. Gentleman is a ratbag or not. That is my hon. Friend's opinion. The hon. Gentleman may be a good husband and father, for all I know.
  There are substantial and mysterious anomalies in the Red Book. I was trying to draft some questions for the Chancellor on those when I was hauled in here, protesting, half an hour ago. These questions really are my questions and I am trying to get at the truth of the matter. The Red Book tells us that underlying inflation is continuing to fall. Yet if I look at table 3·9 on page 34 of the Red Book, which deals with the increase in output prices over the previous year, I see that in 1987 the increase was 4¼ per cent. In 1988 it
  748
  was forecast at 4¾ per cent. and for 1989 the forecast is 5½ per cent. However, the Chancellor forecast a fall in inflation, as measured by the retail price index in 1989. The only way that that can be achieved is if he is right in his assumption that interest rates will stop rising, that is, unless he tries to fiddle the RPI by taking mortgage interest out of it.
  Mr. Yeo: I know how difficult it must be for the hon. Gentleman to know his party's policy on income tax, so I shall not ask him any questions about that, but he may like to recall a historical fact. Can he tell the House the lowest rate of inflation achieved by the previous Labour Government?
  Mr. Garrett: As I recall, when the Labour Government left office inflation was 7 per cent.—and it was falling. But what is the point of discussing that when we are talking about the Chancellor's forecast? I am simply saying that the Chancellor's forecasts of inflation do not gel or make sense. If output prices have risen by 5 per cent. on the year before, how does he expect the cost of living to fall as he forecasts?
  Mr. Ashdown: Perhaps I can assist the hon. Gentleman on this point.
  Mr. Garrett: I thank the hon. Gentleman but I do not need any assistance with my speech and if he catches your eye, Madam Deputy Speaker, the hon. Gentleman can make his own speech later.
  When reading the newspapers over the weekend, I noted that the Americans are planning to push up interest rates, which will inevitably lead to a round of interest rate increases throughout the world in which we shall have to take the lead, as at the moment. With the forecast balance of payments deficit running at well over £10 billion into the future, the pound will not be sustainable at its present level without further interest rate increases. Think of the personal misery that interest rate increases cause. Think of the mortgage foreclosures and of the people I have mentioned who come to my surgery in tears because they cannot continue to maintain their mortgage interest repayments.
  In recent years we have had a novel development in economic policy—the repayment of the national debt. According to the Government, that is a new triumph, and I am willing to believe them up to a point. However, the Government also say that it represents the repayment of the debt that Labour incurred in its years of government. When one considers it, it is, in fact, the Tory debt that has been run up in the past eight years. It is the bill for unemployment.
  The biggest mystery is why, when the Government forecast a repayment of £3 billion for 1988–89, they repaid £14 billion. We can piece together some of the answers. There was, for example, a £2 billion overrun on privatisation receipts and a £1·5 billion shortfall on fixed investment by the Government. There was also excess revenue from income tax, national insurance contributions and VAT because the Government could not control inflation. Receipts were increased by the Government's own inflation. I am sorry to have to say that those figures also include a £0·3 billion saving on transport spending —which is a matter of some resonance given recent news.
  The Chancellor's Budget shows no recognition of the hard landing forecast in his predictions for British industry. The Budget and the public expenditure

  749
  programme that preceded it do not help the reconstruction of industry and do not provide the training, the education or the infrastructure that our economy must have in order to be efficient and competitive. Worse still, the Budget does nothing for our new underclass, such as the homeless young people whom one can see sleeping in cardboard boxes across the river at Waterloo on any night of the week; the confused who have been discharged from mental institutions; single parents or for the great grey army of the unemployed. The Budget combines incompetence with inhumanity.
  Several Hon. Members rose——
  Madam Deputy Speaker (Miss Betty Boothroyd): Order. Before I call other hon. Members, I must tell the House that Mr. Speaker has determined that, because of the number of hon. Members who wish to speak, there should be a 10-minute limit on speeches between the hours of 7 pm and 9 pm.
  4.38 pm
  Mr. Edward Heath: I was somewhat taken aback by the abrupt end of the hilarity promoted by the hon. Member for Norwich, South (Mr. Garrett).
  I shall concentrate on two main points. Before I do so, I agree with the praise by my right hon. Friend the Secretary of State for Employment for the measures which the Chancellor of the Exchequer has taken in respect of the benefit system and, in particular, of the abolition of the earnings rule. I utter just one word of caution. I am not convinced that, although desirable, the abolition of the earnings rule will lead to a great increase in production or employment. Those who were affected by the earnings rule usually found ways and means of achieving their ends without necessarily having the rule abolished or falling into trouble. But its abolition is a sound measure, and one which we have wanted for a long time. I hope that it leads to a solution of the problem.
  My one reservation about my right hon. Friend's speech concerns his comments about training. I shall say much more about that point later on. He mentioned that we had the utmost difficulty in finding jobs for young people in the 1970s. I ask him to take further advice from his Department on that point. As we had 580,000 unemployed when we left office in 1974, there was no problem about finding jobs for young people—they were all in jobs. It was only in limited areas where we had any serious degree of unemployment.
  I now refer to the two points on which I wish to concentrate, although fairly briefly. First, this Government have now been in power for a decade. The debate is an opportunity to look at matters over the decade, in the light of the Chancellor of the Exchequer's Budget. On this occasion, the Chancellor of the Exchequer has proved himself to be a wise man. He is not a far-seeing man, that we must know—[Interruption.] He will agree that, in his previous Budget, he did not foresee that his surplus would be four or five times that which he calculated. He is not a well-informed Chancellor. The reason for that is that the Prime Minister's campaign against the worthless bureaucracy has so affected the statistical department of the Treasury that it often does not know what is going on.
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  But the Chancellor is wise. The reason I say that is that he has got himself and the country into a position in which he does not know what to do. He has therefore very wisely decided to do nothing. It may be for that that we should be grateful.
  As the Chancellor knows, he is my favourite one-club golfer. On the last occasion, he made a splendid drive from the tee. Enormous reductions in taxation were widely hailed. He now finds himself in a bunker, and he is discovering how difficult it is to get out of a bunker with the wooden club with which he drove off. All I ask is that he should now reconsider his bag of clubs and perhaps embrace a few more.
  Why did I say that I want to examine matters over the past decade? It is because we have been through a decade which has not been altogether different from the decades since the second world war. The sooner we recognise that, the better. It is true that, at the beginning of this decade, the depression was lengthened because of the measures taken by the Government at the time, in particular by imposing a drastic increase in indirect taxation and allowing the pound to rise to heights which put our businesses out of practice. Our exports were seriously damaged, and they have never been able to recover. Since then, we have had the upward graph and now, undoubtedly on the Chancellor's calculations, we are at the top of that graph and are on the downward slope again. Nobody challenges that.
  I accept that we have gone through that process yet again. It is the fourth time that that has happened in my time in the House of Commons. Quite honestly, I am getting rather bored with it. Every time, it has happened to a greater and worse degree.
  We have heard the employment figures. Increases in the number of people employed are welcome, but there are still more than 2 million unemployed. On the basis of the statistical adjustment that is made at the end of the month, according to the season, the figure is just under 2 million, but the number of people who do not actually have jobs is over 2 million. [Interruption.] Well, that is the figure, which is seasonally adjusted. I have not forgotten completely my days as Minister of Labour. The problem is that, for the first time when we have been at the top of the cycle, we still have more than 2 million people without jobs—a large number of them young people. That is the first factor.
  Secondly, borrowers now have to face interest rates higher than at any time in the past 45 years when we have been at the top of the cycle. Indeed, interest rates are higher than they have ever been. Thirdly, the adverse balance of trade is of a scale that we have never had at this point of the cycle. All these things constitute an appalling aspect of the development of the cycle in this decade, compared with the previous four and a half decades. [Interruption.] Was there a sedentary interruption?
  Dame Elaine Kellett-Bowman: I was just pointing out that my right hon. Friend seems to look on the gloomy side. Never in his day, or in any other day, did we have such a massive improvement in the Budget surplus.
  Mr. Heath: I am coming to that. The Chancellor's problem is that he did not expect this surplus, and he does not know what to do with it. He and the Prime Minister regard the rate of inflation as abominably high, so he has said that he is going to use the surplus to repay the national

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  debt. One has to ask oneself what will happen when the national debt has been repaid. What guarantee does the Chancellor have that the funds will not be used for consumption? One cannot automatically assume that they will be used by corporations for further investment.
  The Chancellor may very well find that, with the pressures of high interest rates, those people who now find themselves with cash instead of investments will start spending the cash. That would defeat his purpose, and preventing it must be one of his problems. Indeed, can he prevent it at all? I do not think so. That is another aspect of his having got himself deep into the bunker.
  This is the situation in which we find ourselves after a decade. Parliament and the country ought to be asking how we can get out of this situation, which has occurred four times in the last 40 years, and achieve a stabilised system in which we are not forced to expand the economy and then to wreck that economy automatically.
  I am not ignoring the personal harm, anxiety and agony caused by the measures that are taken in these circumstances. I am, thinking, for instance, of high interest rates. I sometimes feel that those, both in the City and in Whitehall, who have to deal with policy of this kind are dealing with something which, to them, has no relationship at all to human beings; that the level at which interest rates have to be pitched is a pure intellectual exercise to get a certain answer as to money circulation, and that that is only a guide as to which particular monetary definition may be adopted at a given time—they can change it as they go along.
  People come to our advice bureaux. Indeed, a lady from outside my constituency wrote to me the other day saying:
  "It was such a happy time when we got our mortgage as first buyers. We did what the Government told us to do. Now it is agony. I can see no future except suicide. The only thing that stops me is my two children."
  It is appalling that people should get to that stage, which is brought about by those who regard as a purely intellectual exercise the level at which interest rates should be set. It behoves us all to look at that.
  Several factors have kept us in this state. First, at the beginning of this decade, the market dogma adopted wiped out any question of regional aid. The market was going to put everything right. If the market preferred the south, it would move to the south and everything would be put right. We know that that was nonsense. Even if we wanted the market to move to the south, we did not make it possible for it to do so. We did not provide housing, roads, railways or anything. [Interruption.] Look at the state of the railway lines. Do I need to comment on that? I shall be accused of interfering with justice if I comment on railway lines. We did not make it possible for those in regional development to move to the south. We continued with long unemployment, and we have suffered the results politically in Scotland, the north-east and over a large part of the country. The Government should bear that in mind.
  We were scorned when we said that ways could be found of choosing the infrastructure in which investment could be placed without increasing inflation. Ministers are constantly pulling out figures, saying that we are spending whatever percentage it is more than last time or more than under the Labour Government in 1979, The latter is of no interest to me or the great majority of British people. The former is not relevant to the problem. The question is: is
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  what we are doing satisfactory to deal with the problem which faces the country today? The plain answer is no, even in the south.
  My colleagues from the south know that many motorways are unfinished, even in the south. There is the M2 in my constituency, the M20, the M25 and the M27, and in the west country there are none. Our motorways are inadequate, as are all our transport facilities. Our airports are overcrowded. Look at the mess at Heathrow. The Labour Government are largely to blame for that, because they cancelled the plans to build a great new airport on the east coast.
  What happens to business men who want to travel to improve their business? I travel a reasonable amount and what am I told? It all depends on whether there is a "slot". That is the latest jargon. The other day at Dusseldorf and Cologne I was told, "You can't get back. We are an hour and a half late. There is not a slot at Heathrow." Life now depends on slots. This is not the higher quality of life of which the Prime Minister spoke at Scarborough on Saturday afternoon.
  Housing demands are not being met, again because it was said that the market would do all that was necessary. One sees the conditions in which many of our fellow citizens have to live. The young cannot find anywhere to live; they have families, and they still cannot find anywhere to live. Housing is another major problem that has not been dealt with.
  We have not dealt with education. We have bashed it on every possible occasion. We have bashed the teachers just to bash a handful of loony Labour councils in London which do silly things. That has not produced results.
  Mr. Brian Sedgemore: Steady on, old man.
  Mr. Heath: I am using modest language.
  The other night I heard my right hon. Friend the Prime Minister on television say that we must find a new means of dealing with education and that there used to be guilds. They are out of date, yet she compared the new arrangements with the guilds. I find that difficult. I know that we have been looking back the whole time. We looked back to Marshall and the 19th century to give us our economics. He was not entirely satisfactory, so we looked back to Adam Smith and the 18th century for more economics. He has not proved foolproof, so now we are looking back to the guilds for our training arrangements. [Laughter.] I am prepared to acknowledge my vested interests. I am a member of Goldsmiths Company and the Honourable Artillery Company. I do not regard those companies as having responsibility for training. Moreover, the guilds were the most protectionist organisations which Europe has ever seen. My right hon. Friend runs all the risks of abolishing the closed shop in every conceivable circumstance, yet creates guilds which will be extremely protectionist and will not produce the education that we want.
  We shall never deal with the problems until we have a training system for industry which is embodied in the whole education system—and we must face that. There has always been a Department of Employment which has fought the Department of Education and Science about that. It argues that what happens after pupils leave school has nothing to do with education but is entirely to do with labour. I may even have said that myself. I certainly do not

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  say that now, because I have seen the experiments and they have all failed. In 1970–74. we made a further attempt with training agencies. Three or four were successful, but the rest were not. I have come firmly to the conclusion that we shall never have a successful industry until training is embodied as part of our complete education system.
  That applies equally to management. It is natural for some of my hon. Friends always to shout when a trade union is mentioned—to bash the unions. Unions are not entirely to blame. Today we should encourage enterprising unions which recognise the modern world. They may be expelled from the Trades Union Congress, but they are certainly getting on with the job of training and they are facing the modern world. They should be encouraged, not damned.
  I regret to say that many of our management are not interested in management as such. They are interested in finance and the quickest way of getting their money. That is not the same as management. That is horrifying in the context of 1992, especially when one goes around the country asking people what preparations they have made. An employer wrote to me recently, "God help us when we get to 1992." I replied, "Would it not be more appropriate and effective if we helped ourselves?" Alas, that is not helping. Management training is just as important as employee training.
  Such training will affect the Chancellor of the Exchequer. If we are to have some overall technical education system for industry and management as part of our education system, the Treasury will have additional burdens put on it. I believe that we have reached that point and that it is necessary.
  If we compare ourselves with the two successful countries in the post-war world, the Federal Republic of Germany and Japan, we see enormous contrasts. We have only to ask ourselves the simple question: why are we not doing as they are doing?
  Mr. Nicholas Budgen: Because we are not like that.
  Mr. Heath: I think that my hon. Friend would be more accurate if he said that we were not like them. That is the real point. They were both defeated in war. Japan was bombed with atom bombs and Germany was almost entirely destroyed, yet here are we unable to compete with them or to emulate what they have done.
  Mr. Marlow: My right hon. Friend, sadly, is in one of his Cassandra-like moods. He is telling us about everything that he finds wrong. I wonder whether he could do us and perhaps himself a favour by telling us some of the things that the Government have done which have been successful and of which he approves.
  Mr. Heath: I approve of the abolition of the earnings rule. I said that earlier. I fully approve of that.
  Mr. Budgen: Will my right hon. Friend give way?
  Mr. Heath: I do not think so.
  Mr. Budgen rose——
  Mr. Heath: Very well, then.
  Mr. Budgen: My right hon. Friend appears to believe that our society should be the same as one sees in both Japan and in West Germany. He goes on to say that the main purpose of education should be materialistic and
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  devoted to earning more money in later life. Was that the sort of view that was behind his devotion to music when he was at Oxford? Does he believe that our society would wish to be the same as that in Japan or West Germany?
  Mr. Heath: I wish that we had as many opera houses and top-class operas as the Germans. I wish, too. that we were devoting as much to education as the Japanese. I cannot criticise them on those grounds.
  I shall quote one or two figures. We have heard about the fixed capital formation, and all I would say is, whatever good we may have done, do not let us think of it as being the answer to everything or that it compares with what other countries have done. We must look at it from the point of view that we are the lowest in the Community league. The latest figures for the whole of 1987 show that we are down to 17·3 per cent. of GDP.
  The Chancellor of the Exchequer (Mr. Nigel Lawson)indicated dissent.
  Mr. Heath: The Chancellor shakes his head, but that information comes from my best statistical advisers—[Interruption.] We were down to 17·3 and everyone was higher than we were.
  Mr. John Garrett: That is right.
  Mr. Heath: That has been confirmed by the spokesman for the Opposition, who has his own source of information.
  We then come to the question of the prime lending rate, which affects the whole of our industry and our citizens. Last week, we were 14 per cent., West Germany 7 per cent. and Japan 3·38 per cent. Why can we not have an economy run with similar figures? [Interruption.] There is no answer to that.
  Then there is the rate of consumer price inflation.
  Mr. Ian Gow: Will my right hon. Friend give way?
  Mr. Heath: No, I shall not at the moment.
  The latest figures, in 1988, showed that the United Kingdom had a rate of inflation of 6·8 per cent. and my right hon. Friend the Chancellor has said that that will go up to 8 per cent. West Germany is 1·6 per cent. and Japan is 0·9 per cent., with very low interest rates. On the question of trade, if we take the current balances as a percentage of GDP, we have a deficit of 3·26 per cent., West Germany has a plus of 3·09 per cent. and Japan has a plus of 2·76 per cent.—[Interruption.]
  Hon. Members: Give way.
  Mr. Heath: I shall gladly give way to the Chancellor.
  Mr. Gow rose——
  Mr. Heath: I have thought a great many things about my hon. Friend, but I never thought that he was Chancellor.
  Mr. Gow: My right hon. Friend accused my right hon. Friend the Chancellor of a lack of compassion in having put up the interest rates. Does my right hon. Friend believe that he showed more compassion by failing to abate inflation or that my right hon. Friend the Chancellor is showing true compassion by trying to abate inflation?
  Mr. Heath: I did not accuse the Chancellor of a lack of compassion. I said that those who so constantly deal in interest rates as a solution to economic problems do it from a purely intellectual approach, without realising the human consequences, and I stick absolutely by that view.
  We did not have to deal with interest rates of that kind, and I believe that we were—[Interruption.] The Chancellor was one of the advisers. We were dealing with the problems of infrastructure and of housing on an infinitely bigger scale than the Government have been doing in the past 10 years. However, it will all be in the memoirs.
  The question is why, after 45 years, we cannot do the same as those industrial countries. We must address ourselves to that. It means that, instead of going on a purely monetary dogma, a balance must be struck between those matters which emphasise inflation, those which require a reduction of interest rates, a lower pound to get a better balance on trade——
  Mr. Lawson indicated dissent.
  Mr. Heath: The Chancellor always shakes his head about this. He knows that it is right, but he is not allowed to do it. He knows that the pound is too high for our exporters. He knows that it is far too high for our exports to Europe.
  Sir William Clark: Who is stopping him?
  Mr. Heath: I never mention names in public.
  If we are to give our exporters a chance, the pound must be dealt with. It is always a question of keeping the balance.
  Mr. Neil Hamilton: My right hon. Friend made great play of exchange rates stopping us exporting, but is he aware that in the past two years the yen has appreciated against the dollar by virtually 100 per cent., yet the Japanese trade surplus is increasing? Does that not show that there is not necessarily a connection between the two?
  Mr. Heath: I am not saying that there is a necessary connection, but our business men recognise that they lose many exports because of the rate of the pound. If we consider Germany from Erhard's time onwards, it is true that he was able step by step to improve the value of the deutschmark and at the same time encourage the exporters to increase their exports. That is right, but that has not happened here.
  I am asking the Chancellor and the Government to strike a balance between the different factors involved and gradually to adjust them—with such a crisis, they have not much time—so that exports can be increased and the adverse balance of trade reduced. They could, therefore, do more for the infrastructure and for housing and, above all, they could start thinking about an overall education system for technology and management that is not improvised from Government to Government but becomes part of our internal education system in exactly the same way as it did in Germany in the 19th century and as it is in Japan at the end of the 20th century. That can be the only answer. We must face the facts and not just engage in inter-party squabbles about whose figures were right and whose went up the most. We must look at the real basis of the situation and then start dealing with it.
  5.7 pm
  Mr. Paddy Ashdown: It is a pleasure to follow the right hon. Member for Old Bexley and Sidcup (Mr. Heath), who said so much with which I would agree, little with which I would disagree and some of which I shall mention later. I hope, nevertheless, that he will understand if I say that the pleasure of his speeches comes not just from listening to them but from their visual impact. We have a unique advantage that is denied to those who read the right hon. Gentleman's speeches afterwards—that of watching the miserable, downcast, scowling looks on the faces of all those on the Treasury Bench as the right hon. Gentleman's speech proceeds. At no stage did I see anything other than a deep scowl from the Chancellor. I look forward to the coming of television to the House so that the rest of the British public can enjoy the spectacle.
  I am sure that I speak for many other hon. Members in wishing the hon. Member for Dagenham (Mr. Gould) an early recovery. That is no reflection on the speech made by the hon. Member for Norwich, South (Mr. Garrett), but we always look forward to the speeches of the hon. Member for Dagenham and we always listen attentively. We shall miss him in this debate.
  This Budget has been described as "the boring Budget" and no doubt that is an apt description, but the apparent torpor of the Budget should not be allowed to hide the basic realities of the situation in which the British economy finds itself. The realities which should be addressed by the Budget include a structural trade deficit, declining competitiveness, an unacceptable rate of unemployment and rising underlying inflation. Nor should this boring Budget be allowed to hide the injustices contained in the Government's strategy, which have been touched upon by the right hon. Member for Old Bexley and Sidcup.
  This was certainly not a Budget for the low paid as more of them will now pay tax. It was not a Budget for those on benefit, nor was it a Budget for families. Those who have seen child benefit effectively cut again will recognise that only too powerfully.
  The changes to the pensioners' earnings rule and to national insurance contributions are welcome—the Secretary of State for Employment touched upon them —but they do not go far enough. It was depressing to read recent newspaper reports of the Chancellor saying that he had finished reforming and cutting national insurance contributions. Much more could be done in that regard to relieve the poverty trap and make a substantial contribution towards the proper integration of the tax and benefit system.
  Despite a boring Budget, we still have a gambling Chancellor who is prepared to gamble our long-term prospects to leave himself enough room for tax cuts in the run-up to the next general election. It is perfectly clear that that is the purpose of the Budget. As the right hon. Member for Old Bexley and Sidcup said, the Chancellor is prepared to gamble with the quality of our life, preferring to satisfy a narrow materalism today rather than to prepare Britain for tomorrow.
  I believe that it was the Chief Secretary who said last week that living standards were the final arbiter of economic performance, and no doubt they rightly have a part to play. The rapid rises in domestic consumption are clearly a key ingredient in the Government's electoral calculations, but the Government will soon have to change their tune because the notion that there is more to life than

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  personal material acquisition is not an attractive one to a growing number of people. Many of those who have done best out of Treasury policies now realise that they have to look for something more from Ministers and they are looking for policies which will bring our people together rather than sadly and tragically divide them. They are looking for policies which will correct the dog-eared, down-at-heel nature of public Britain and provide a base for the public goods and services which are essential to the enjoyment of our future prosperity. They are looking for policies which invest in the future because they know that today's tax cuts and consumption become tomorrow's debt burden and trade deficit.
  Mr. John Townend: How can the right hon. Gentleman talk about tomorrow's debt burden when we have a Budget surplus of some £14 billion?
  Mr. Ashdown: The hon. Gentleman fails to recognise what has happened since last year. The tax cuts and the increase in consumption, which was deliberately encouraged by the Government, have plunged many families into debt. The reason is perfectly clear. The hon. Gentleman will have had a stream of leaflets coming through his door from one bank after another, all saying exactly the same thing—"For goodness sake, don't worry —extend yourself; we will offer you as much credit as you like." That is the reality facing people today.
  Mr. Tim Janman rose——
  Mr. Ashdown: No, I shall not give way as I need to make some progress. The hon. Member for High Peak (Mr. Hawkins) has failed to recognise the way in which the 1988 Budget inflated the burden of debt and the burden of public consumption in Britain.
  The Government are now hemmed in on the one hand by last year's folly and on the other by their own inflexible ideology. After the rhetoric is stripped away we find an economy that is peculiarly vulnerable and weak. It gives me no pleasure to remind the House of our fundamental economic condition, just as my hon. Friend the Member for Berwick-upon-Tweed (Mr. Beith) did after the 1988 Budget. The Government's refusal to face up to our trade deficit demands that we press the matter vigorously.
  The right hon. Member for Old Bexley and Sidcup was right to say that we should look at the whole picture. It is clear that since 1979 the growth of manufacturing output has been the slowest for any similar period since the war. Import penetration has soared and our share of world trade has continued to decline, at times dramatically. Net investment in manufacturing has also fallen. The record under the present Government compares unfavourably with any similar period under their predecessors in the 1960s and the 1970s, never mind with the level of achievement for which we need to aim if we are to compete effectively in the world markets of the 1990s.
  The astonishing fact is that the economic problems now facing the Government look remarkably familiar to anyone who remembers the 1950s and 1960s. We are faced with wage rises that are too high, a quality of goods that is too low, under-investment in people and underachievement in world markets. All those old familiar symptoms of the British disease remain unconquered. The major, age-old weaknesses of the British economy are revealed as having remained uncorrected by the so-called "Thatcher miracle". In some cases they have got far worse.
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  Those deficiencies are now covered in the gloss of spurious economic theory and dismissed as irrelevant or as a blip. They are rationalised away by this most intellectually agile of Chancellors and by the flexible use of forecasting, but hon. Members should study the Red Book. The fulfilment of the Chancellor's strategy and cosy predictions requires a trust in his forecasting skill which, in view of his record, amounts to little less than a mystical act of faith. This is a complacency that home-owners and businesses are paying for every day in higher interest rates and rising prices.
  To fulfil the Red Book predictions, we are required to believe in a dramatic fall in the growth rate of non-oil imports from 14·5 per cent. to 4·5 per cent. At the same time, we are required to believe that the growth of non-oil exports will rise from 3 per cent. to 7·5 per cent. at a time when demand is falling. Even this ambitious target, incidentally, would still leave the United Kingdom with a declining share of world trade.
  I wonder whether the Treasury is, even yet, ready to acknowledge the seriousness of the balance of payments problem. For a time, we were told that it did not matter, and the propaganda fed to us was that such things correct themselves in the modern world. Now all the evidence points to a massive, long-term structural problem which is being reflected in the record deficits.
  I wish Ministers had listened more to the 1985 report from the Select Committee in the other place under Lord Aldington, which looked at these long-term problems of overseas trade. I recall that the Chancellor used some fairly unpleasant and sometimes hysterical comments to damage and dismiss that report. It is a matter of record, however, that their Lordships' forecasts have fared a good deal better than those of the Chancellor.
  Mr. Marlow: The right hon. Gentleman is saying that he is much gloomier than my right hon. Friend the Chancellor. He implies that demand is still too high and that he wants to spend more on services. Therefore, he must want to increase Government expenditure. What does the right hon. Gentleman think of the Budget judgment? Does he feel that my right hon. Friend has been too generous in cutting national insurance or does he feel that taxes should be higher? Would he like Government expenditure to be higher? What would he have done? Will he let the House know because he is inconsistent at the moment?
  Mr. Ashdown: Clearly the hon. Gentleman has not listened to the submissions which my party has made. We have made a perfectly clear statement about this. The Government are doing much to increase inflation by raising utility prices. We believe that that money could be used much more effectively in different ways. To give the hon. Member for Northampton, North (Mr. Marlow) a straight answer, there is a case for selective and careful investment, as the right hon. Member for Old Bexley and Sidcup said, which would require expenditure but whose inflationary impact would be minimal in comparison with the utility price rises which have stimulated inflation.
  The question now is how long will the exchange dealers be persuaded by short-term, hot, high interest rates to ignore the long-term underlying weaknesses in the economy? As the trade deficit mounts inexorably, month after month, how long will short-term high interest rates maintain confidence on the foreign exchanges? As

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  numerous commentators have pointed out, there must be a real danger of a sterling crisis at some point in the not too distant future with all the attendant inflationary problems and a crisis of confidence.
  In the Red Book we are told that interest rates rise only because of the behaviour of narrow money. Everyone knows that that is nonsense. Interest rates rise when the markets are alerted to our real economic state by the trade figures and also when the Government and the Chancellor feel under pressure.
  In the 1950s and 1960s, we had stop-go Tory Chancellors. In the 1970s, Tony Barber was the cut-and-run Chancellor. We now have the handout-and-hike Chancellor who hands out tax cuts one year and hikes up interest rates the next.
  Our balance of payments deficit will more than likely grow even larger than the Government have suggested. In a recent editorial the Financial Times stated:
  "It is easy to envisage a current account deficit not far short of £20 billion, in both this year and next."
  However, the Government lack the policy instruments or the political will to tackle those problems.
  Mr. Janman: Will the right hon. Gentleman give way?
  Mr. Ashdown: I hope that the hon. Gentleman will forgive me. I have given way many times and I would like to get on. I will not give way.
  The Chancellor wants to fiddle the figures by removing mortgage interest rates from the retail price index. He will be remembered as the Chancellor of dearer mortgages and cheaper cigarettes. The manipulation of the RPI through the Chancellor's new policy on excise duties, amounting to a 0·4 per cent. reduction in the RPI brought about by what amounts to a tax cut of more than £1 billion in those duties, will cut little ice, but it will undermine the Health Service.
  Inflation is predicted to be 8 per cent. That is already higher than in any of our major competitor countries in the European monetary system, or in the United States or Japan. Despite all the apparent emphasis on defeating inflation, there are abundant signs of yet more complacency. Last November the Government announced a new policy of "bearing down on inflation". Since then, they have been responsible for its inexorable rise.
  The Red Book states:
  "It is the Government's policy not to accommodate inflationary impulses."
  Instead, the are busy adding to them by deliberately raising utility prices to fatten the calves for privatisation. That is policy-making gone crazy. The value of our money has halved since the Conservative party came to office. Under the Tories, prices have risen by 100 per cent. Over the same period, prices have risen by 68 per cent. in the United States, by 30 per cent. in West Germany and by 25 per cent. in Japan. We have an extra zero on inflation, but it is a zero at the wrong end of the number. It is 100 per cent.
  The Chancellor has claimed that inflation is the judge and jury of economic policy. If that is so, he stands in the dock, with the verdict passed, awaiting sentence.
  Mr. Janman: Will the right hon. Gentleman give way?
  Madam Deputy Speaker: Order. The right hon. Gentleman has made it clear that he wants to make progress and is not giving way.
  Mr. Ashdown: The Chancellor has refused to take advantage of closer European economic and monetary integration. That should be a central question facing our economic policy. The Chancellor has indicated his support of our membership of the EMS. He should have the courage of his convictions and battle it out with the Prime Minister. Membership of the EMS would be a far more effective discipline against inflation than any of the monetary routes down which he now seeks to take us.
  The British economic problem can be summed up partly in terms of inflation and of the crippling use of high interest rates to keep the currency buoyant. However, we must also consider the impact of the Government's long-term and systematic starvation of the supply side of our economy. The Conservatives now preside over what is becoming a second-class industrial nation which is in danger of drifting down even further to third class status. If we are not careful and are not prepared to act quickly, the opportunities of oil and of world growth may disappear for the foreseeable future.
  The forecast figures in the Budget are an admission of the defeat of the supply side miracle of the Prime Minister's years even as we approach 1992 and the single market. The Department of Trade and Industry's slogan was "Europe Open for Business". It might have been better as "Britain Open for Imports".
  This year we needed a Budget for industry. If we are to have the right products and services of the highest quality marketed effectively across the world, the Government must work with industry and commerce, not against it. It takes something to provoke the Confederation of British Industry into talking about the "locust years". That something was the disastrous state of our supply-side policies. That is why my hon. Friends and I recommended a package of careful and prudent investment in Britain's future.
  It is about time that the Government realised that a supply-side agenda that consists only of cutting taxes and bashing the unions has run its course. The new supply-side agenda for Britain must concentrate on training, regional policy, research and development, involvement and shared communication in British companies, improving stan-dards of quality and safety and developing the new technologies. Taken together, those require a new approach from the Government, which the Conservatives seem incapable of realising.
  We are lagging way behind our competitor nations in training. To match France and Japan, we should be training an extra 50,000 skilled engineers a year. To match Germany, we should be training 80,000. Far too many companies in Britain are currently looking to move their operations elsewhere in Europe because the skills that they need are not available in sufficient numbers in this country. Human talent is our value-added asset and by this standard Britain is still going backwards in comparison with the rest of the world. A supply-side strategy is required to fill that vacuum.
  There must be a change which will make the care of our environment a Government priority. We all understand that the Prime Minister's new enthusiasm for the planet should be given time to show itself in action. However, the Budget was the fairest test of that. Do the Government

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  mean what they say about the green agenda? Do they understand what they are saying? Are they prepared to put their money where their mouths are?
  The Budget contained only one gesture towards environmental issues, that with regard to unleaded petrol. True to form, it was quickly swallowed by the oil companies. Apart from that, there was nothing. There were no incentives for improvements in waste and pollution controls. No investment in environmental protection, but there were cuts in the energy efficiency office and in insulation grants. There was no investment in relevant research and there was opposition to Community initiatives which would apply energy audits to domestic property.
  The Government are brilliant at telling other people what to do, but hopeless at accepting their responsibilities for the environment. An environmental Government would have produced an environmental Budget.
  However much Conservative Members might delude themselves, and no matter whether some people have benefited from previous tax cuts, the Thatcher years will not be remembered with affection by the British people in years to come. Those years represent years of under-investment in public transport and years of running down the staff in the public services. They represent years of hostility towards research which led to a brain drain from Britain which the New York Times described last year as the greatest movement of intellectual capital into the United States since the Jewish intellectuals left Germany in the 1930s.
  That is what is happening as a result of research cuts in Britain today. At best, it may be said that a certain shabbiness in public goods might be endured for the benefit of some. More likely, people will look back in wonder at our collective failure in the 1980s to take advantage of the unique, oil-led opportunities that we had to build a more sustainable industrial base. They will wonder why it was that obvious, massive public support for investment in health, education and the basic infrastructure was ignored at great cost to industry, to the public and to the future. They will dismiss a Budget that fiddled at the edges of the issues and failed to tackle those that really mattered.
  We on these Benches believe in the virtues of competition and in the power of the market. However, we fear that, by refusing to play their part on the supply side, this hands-off Tory Government are turning what should be an economy of invention, excellence and quality into a low-wage and low-skill economy that has a tin-tray industrial base.
  Sustainable growth in the future depends on investment in the future now. Excellence in the economy depends upon the excellence of our people. The Budget reveals that the Chancellor has not learnt that lesson after six years. They have been correctly described as the "locust years" —the years in which we failed to invest in the future, to heal the divisions in our country, and to take the steps necessary to protect our environment.
  5.31 pm
  Mr. William Hague: I wish to speak briefly on the Budget, as my first and modest contribution to the proceedings of the House. Before I do so, I pay tribute to my predecessor as Member for
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  Richmond, Sir Leon Brittan, and will say a few words about the constituency that he represented so well. I am fortunate to be able to do both with uninhibited pleasure.
  Most new Members elected at by-elections speak of a predecessor who was distinguished but is sadly deceased, but I am delighted that my predecessor, who made such a major contribution to the House and who was so highly regarded by his constituents, is very much alive and well and is by all accounts doing an extremely good job as a European Commissioner. There is no doubt that he will be sorely missed in Richmond—a constituency that he served with extreme thoroughness and attention to detail. Even when he was Home Secretary, he never missed a weekend surgery and never failed to involve himself in as many aspects as possible of life in north Yorkshire. He set the highest standards of service to his constituency, and I will be doing well if I can live up to them.
  All I can say is that, over the coming months, I shall try to be inspired by Sir Leon's example, rather than being intimidated by it. It would be all too easy for the new Member of Parliament for Richmond to be intimidated by the past. I number among my constituents not only Sir Leon Brittan but his predecessor Sir Timothy Kitson and my noble Friend Lord Tranmire, the former S r Robin Turton, who sat in this House for 45 years for Thirsk and Malton, part of which is now included in my constituency.
  Those former Members will be very valuable sources of advice. Some might observe that they will also he rather varied sources of advice. However, the fact that they remain deeply rooted in the area says something about the strong attachment of Members of Parliament to Richmond and its surrounding area, because of both the natural appeal of its countryside and the independent character of its people.
  It is almost unnecessary for me to tell the House about my constituency, because many right hon. and hon. Members are already surprisingly familiar with it. I am one of the few Members of Parliament, along with those representing constituencies in the east end of London, who has a regular television series about his constituency. Also, many right hon. and hon. Members have spent more time in my constituency in the past few months than I have spent in the House. Right hon. and hon. Members could be forgiven for believing that the right hon. Members for Plymouth, Devonport (Dr. Owen) and for Yeovil (Mr. Ashdown) had taken up permanent residence in my constituency. They certainly provided a valuable off-season boost to the local tourist trade. They will always be welcomed back, though perhaps they are the only two tourists in the whole nation who I hope will spend less money on their next visits than they did on their last.
  I hope that all those who visited Richmond during the by-election had an opportunity to enjoy the diverse nature of the region. Although always associated with the magnificent hillside town of Richmond itself and with the splendid dales to the west of it, my constituency embraces a rich breadth of physical geography and human activity —from the hill farmers in the dales and on the edges of the moors, to the lowland arable farmers around Northallerton and Thirsk; from the 20 industrial estates that have brought a growing sense of enterprise and availability of employment to the area, to the commuters in the north-east who work on Teesside and to the large number of people who come to the area to retire. Richmond's variety defies simple description.

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  In addition, my constituency has a huge military presence. The area is proud to host one of the country's largest Army garrisons at Catterick, and now we also have a major air defence base at RAF Leeming. That variety, and the popularity of north Yorkshire as a place to live, means that behind the idyllic image are mounting stresses and strains, both economic and social. Much has been said about the plight of the inner cities in the 1980s, but I fear that much will have to be said in the 1990s about the strains of rural life.
  Although my constituency, like the rest of the country, has grown more prosperous in the past 10 years, and although unemployment has fallen by 40 per cent. over the past three years, one must not overlook the depressed incomes of the farming community, the shortage of housing for local people—ironically coinciding with housing development on a scale that threatens traditional village life—the tendency for younger people to move elsewhere, and the appalling and increasing pollution of some of the nation's most beautiful rivers. Those are not the subjects of today's debate. Nevertheless, I hope to help ensure that they will not go unnoticed or unaddressed in the House.
  My constituents are interested in all those matters, but they are interested also in the Budget—despite all the efforts of the media to convince us that it was boring. Like me, my constituents approve of the Budget because of its most obvious characteristic—that my right hon. Friend the Chancellor of the Exchequer used what room for manoeuvre he had to help those people whose efforts were most unfairly penalised by the existing tax structure. I strongly welcome the changes my right hon. Friend made to national insurance contributions and his abolition of the hated pensioners' earnings rule. I believe that right hon. and hon. Members in all parts of the House believe that the Chancellor did the right thing in the circumstances, and they should have the good grace to say so.
  Much of the debate about the economic situation has been taken up with discussing the direction of and the explanations for inflation, interest rates and the public sector surplus. However, that debate has been concerned mainly with the short term—with this year and next year. When I look at the economic background to the Budget, what I find interesting are some of the other economic indicators whose improvement has been strong and marked over a sufficiently long period to become an established trend.
  Today, companies' real rate of return is at its highest since the 1960s. Investment has risen twice as fast as consumption for the past seven years. Labour productivity has risen faster in the 1980s even than in the 1960s. That should bring home to us the fact that, whatever the arguments about last year's or this year's forecast, the fundamental indicators of the economy's future performance and output are better than they have been within the political lifetime of most right hon. and hon. Members, and within the entire lifetime of some of them.
  Maintaining that progress requires lower levels of inflation and of short-term interest rates—otherwise, the increased confidence that is at the centre of all those improvements will disappear. However, no one has argued convincingly that there is a better policy for bringing
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  inflation down than that which the Chancellor is pursuing. Most criticism has been of the "We wouldn't have started from here" variety, but it is incumbent on those who would do the Chancellor's job for him to say what they would do if they had to start from here.
  Nevertheless, it must be recognised that we face over the next year inflation at a higher level than we would have wished. Some people are less able than others to cope with that inflation, and some are particularly worried about it. Foremost among them are elderly people who are wholly or largely dependent on their basic state pension. The Government have done a great deal to help many pensioners in several ways. The abolition of the earnings rule will help many who are still able to earn, and lower inflation over the lifetime of the Government has helped those with savings.
  Last autumn's announcement of an additional increase this year for the oldest pensioners will help those in that category. Huge numbers, however, still depend heavily on the basic state pension. In the coming year, they face a pension increase indexed to, but lagging behind, RPI inflation—which may in any case understate the inflation that they experience, as their own expenditure is disproportionately weighted towards some large items such as household rates and basic utilities, the cost of which for most people is rising faster than the retail price index.
  I hope that in the coming year the Government will have the pensioner in the forefront of their collective mind and, as far as the economy permits, will feel able by some means to help still more pensioners by doing somewhat more than simply indexing their basic pensions to the RPI. If they can do that, they will avoid much dissatisfaction and some genuine hardship.
  That is the point that I wanted to make—within the context of strong and whole-hearted support for the economic and budgetary policies of Her Maesty's Government. I thank the House for its indulgence, and hope that there will be many more occasions, Madam Deputy Speaker, on which I may try to catch your eye.
  5.40 pm
  Mr. Robert Sheldon: The hon. Member for Richmond, Yorks (Mr. Hague) spoke about his predecessor, Sir Leon Brittan, who is continuing to play a prominent role in public life. He spoke well of Sir Leon; he spoke also of other distinguished former Members of the House whom some of us had forgotten were still his constituents. I urge the hon. Gentleman to remember that when he comes to seek their advice he will be dealing with a two-edged sword, and that he accepts only advice that, after consideration, he considers worth pursuing. He spoke with clarity, and his interesting speech was well received by the House.
  Of late there has been a tradition of rather more controversial maiden speeches than we used to hear—a tradition that has extended to the toleration of such speeches. The hon. Member for Richmond, Yorks returned to an earlier and, I think, more acceptable tradition, and perhaps because of that he won greater acceptance today. I am sure that he will come to enjoy the rough and tumble of the House, and I hope that his first contribution will provide an easy entry into it.
  The most depressing part of the Red Book is the forecast for the balance of payments deficit. The whole

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  year is expected to produce yet another devastating £14 billion. That is more serious than any previous balance of payments crisis. We do not now have the large number of manufacturing industries that provided us in the past with the capacity to turn from home trade to export. The main example was the motor car industry, but there have been many others. In my constituency there were many small to medium-sized companies, paying well above the national average, with unemployment below the national average. We lost one third of those skilled firms between 1979 and 1981. They had the capacity to produce for export if they found that the home market was not able to take their goods, but that has now changed considerably.
  I have been asked—as, perhaps, have other hon. Members—what is the relationship between the £14 billion public sector debt repayment and the £14 billion balance of payments deficit. The unknowledgeable assumed that there was a strong connection; others, with a little more understanding, realised that the two had no relationship. Some, with even greater understanding, recognised that there was after all a close relationship between the two: it is the £14 billion deficit that makes it impossible to spend the £14 billion debt repayment sum. The Chancellor of the Exchequer, with money to spend, is unable to spend it because of the external problems that he faces.
  The Chancellor can justifiably be criticised for his failure to deal with the economy's long-term prospects. He can fairly be censured for failing to deal not only with the balance of payments but with the problems of manufacturing industry, and the lost advantages of North sea oil, which we are unlikely to regain because we are once more on a level field, with our advantages lost.
  The Chancellor can also be censured for his failure to control the short term. It is more than six months since fears of a credit explosion—frequently expressed—were finally confirmed. Two years ago, on 10 February 1987, the Financial Times was able to say that more was required of the Chancellor than high interest rates, that monetary policy had flitted from one rationale to another in the past few years like a bee in search of honey, and the task was not helped by continuing to trivialise a major deviation from the Chancellor's own target for the economy. It also said:
  "The Department of Trade and Industry said that outstanding consumer credit from finance houses, retailers and credit card companies, totalled £23·7 billion in December 1986."
  That was over two years ago; there is nothing new in it. What is new is the failure to react to it. This was not a blip, and the action that the Chancellor took was inadequate and slow in its effects.
  The right hon. Member for Yeovil (Mr. Ashdown) talked about stop-go. At least in the days of stop-go we could he sure of the results. They would be dramatic and immediate: purchase tax or VAT increases, a raising of the tobacco duties, increases in taxes on alcohol, petrol prices raised, spending on roads cut. We can see from the state of the roads today that cuts have been made in good times as well as bad, although North sea oil has been abundant.
  All those announcements about tobacco, alcohol and petrol took effect at 6 pm on the day of the Chancellor's statement. The result was a highly visible and dramatic appreciation of the change in our economic fortunes. After a few weeks, patterns of spending changed and the economy promptly slowed down. On this occasion, we
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  talked about measures in the autumn. The months went past—we had Christmas and the new year, and now we are in March—and still we have not seen any such effect.
  I was once a frequent critic of sudden changes, mainly because of the damage done to our manufacturing industry, which took the brunt of such measures. The present position is different. With the decline of our manufacturing base, the burden of immediate measures would be carried rather more by importers and retailers. There was therefore a strong case for action in the autumn. The Chancellor, however, ruled it out, to the disadvantage of industry and house buyers and ensuring that our economic problems would outlast the year. Failing to administer the short sharp shock was, I believe, a tactical error of the worst kind—waiting for something to turn up —and we shall have to live with the consequences.
  Of even greater importance than the tactical failure, however, has been the Chancellor's failure to plan for the long term. He had the opportunity to use the breathing space with which North sea oil provided our balance of payments to help industry and promote training, and to equip the nation to deal with the major problems lying ahead. With the startling growth of world populations, we are destined to be just one of a number of smaller countries. Many more have populations in excess of 100 million, and industrialisation is on the increase elsewhere.
  In 1979, with the prospect of the cornucopia of North sea oil, our position appeared enviable and compared favourably, if not with that of Germany and Japan, certainly with that of France and Italy. We were the only country in that group with self-sufficiency in oil. We even had an exportable surplus. Our position could hardly have seemed more attractive, but oil in itself is not enough: only if it can be used sensibly is it a real and lasting benefit. Iran and Iraq have used their advantage disgracefully, Mexico has wasted it, and Britain has squandered it. Meanwhile, Japan and Germany strode on without it.
  On the other hand, France and Italy almost seem to have benefited from not possessing this valuable mineral. Those two countries have manufacturing sectors that are highly successful, whereas we have turned, traditionally, to our financial sector that produced rewards that were directly contrary, in a number of cases, to the interests of our productive industries.
  The high pound that the City smiles benevolently upon and that the Bank of England believes is crucial to our economic well-being is the deadly affliction of those companies that manufacture. The truth is that, in the long term, manufacturing growth is so much more important than North sea oil. This oil produces so many billion pounds a year which, for a given output, even if its price remained high, would not increase with time. If, however, manufacturing industry is nurtured and encouraged, it grows at a compound rate that leads to an accelerating level of prosperity. That cannot be found in any other kind of industry. Furthermore, that prosperity is enjoyed by all employees and in all the different regions of the country.
  Manufacturing industry, however, has been hit very badly. The fact is that 13 per cent. interest rates and an over-valued exchange rate is the recipe that brought about the disasters of 1979 to 1981. The position is not quite so bad now; there was a 17 per cent. interest rate then. That ruined the domestic market, and a $2·40 pound ruined the export market. We hear nonsense about there being no problems with an over-valued exchange rate. If we are

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  interested in the commercial future of our country but rule out price—the dominant factor in selling our goods—we are being absurd. Price is crucial.
  Mr. Janman: Throughout the lifetime of the last Labour Government output per person in manufacturing industry increased by 5·8 per cent. Between 1987 and the fourth quarter of 1988, it increased by 10·8 per cent.—nearly double what happened throughout the period when the last Labour Government were in office.
  Mr. Sheldon: Interventions of that kind are pretty useless. The hon. Gentleman should not make such an intervention in a serious debate. He should understand that we are considering imports and exports. Manufacturing exports have declined; manufacturing imports have increased. That has led to our country's prospects being put in serious jeopardy. If our prices are higher than they ought to be, we shall sell fewer of our goods.
  That has happened in my constituency. One third of the medium-sized firms in my constituency have disappeared. Companies in Germany, Japan and all over the world closed their doors to our exports. We could not live with 17 per cent. interest rates and a $2·40 pound. I fear that a number of them will not be very comfortable with a 13 per cent. interest rate and a $1·70 pound. It is a ruinous combination. The Chancellor of the Exchequer ought to be ashamed of presiding over it.
  As for European monetary union, just by chance I happened to speak with three directors of the German Bundesbank. They had the same message. They want European monetary union so that bankers will be able to control the monetary aggregates. That is similar to what the Chancellor of the Exchequer wanted in 1977. He wanted a law to be enacted that would give power to the Bank of England to decide the levels of monetary stability. The Minister of State, Treasury at that time, my right hon. Friend the Member for Llanelli (Mr. Davies), replied to the debate. The Chancellor of the Exchequer wanted legislation that would enable the bankers to do even more than the Bundesbank allows.
  We nationalised the Bank of England in 1945. We were determined that bankers ought to be subordinated to democratic direction, which means Government direction. Of all the privatisation measures announced by the Government, no mention has been made of denationalis-ing the Bank of England, and for a very good reason. The Treasury sometimes takes a different view of economic policy from the Bank of England. The relations between the two are sensitive, as they should be. However, when the Chancellor of the Exchequer decides on the policy, it is the Governor of the Bank of England who has to implement much of it, and it is the Treasury that decides. At one time, the Treasury had an inadequate knowledge of the markets and of the operations of the Bank of England. Its knowledge has improved greatly in recent years. The eyes and ears of the Bank of England are always important, but they do no play quite the same role as they did a decade or more ago.
  Those who see dangers in European monetary union are not anti-Europe; nor are they pro or anti any other kind of grouping. However, we feel strongly about the dangers of domination by bankers. In a more integrated
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  Europe there is a threat that, in the absence of political agreement, the power of the central bank might become dominant. Irrespective of whether there ever was a bankers' ramp in the pre-war years, the control of our economic policy cannot be left in the hands of those who are unaccountable and who, moreover, have been known to display certain prejudices that are not identical to those that might be expressed on either side of the Chamber. More than all that is the question of economic power. Bankers cannot be given that kind of authority.
  Those who say that it works well in Germany should not assume that a transplant is always successful. The institutions of different countries owe so much to coventions, history and social relationships that they cannot readily be transferred from one country to another —still less from one country to a supranational authority. Those who say that we should have our own representative on the board of the central bank—a supra-European Bundesbank—must accept the reality that that person would be a banker, too, and, like those he joined, would rapidly come to the view that all the important economic decisions are best taken by bankers.
  It is for that reason that, however fast one may wish to move towards greater integration in Europe, the transfer of economic power cannot precede common political agreement and common political power. There are no short cuts. Those who seek an easy way into economic and political integration within the Community are wrong on a number of matters, but on this matter I believe that they are dangerously wrong. There has been so little reference in the Budget debates to that important question that I thought it right to include something about it.
  The right hon. Member for Old Bexley and Sidcup (Mr. Heath) said that the Chancellor of the Exchequer is a wise man; he does not know what to do, so the best thing is to do nothing. I am a little less charitable. Another back-handed compliment is that I believe that the Chancellor is a clever man. He has succeeded in pleasing his party for six years, but I believe that he has failed in his long-term economic policy.
  5.57 pm
  Mr. Julian Amery: I, too, congratulate my hon. Friend the Member for Richmond, Yorks (Mr. Hague) on his good maiden speech. It is traditional for a maiden speaker to refer to his constituency. My hon. Friend brought his constituency into the Chamber. I could see the hills, the dales and the valleys. For a few minutes in this otherwise rather dry debate, I enjoyed the pleasures of Richmond. I was also touched by his advocacy of the importance of looking after senior citizens, one of whom I now am. I hope that we shall hear more from him in the years to come.
  As the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) recognised, the Chancellor of the Exchequer's room for manoeuvre is limited. The fight has to be against inflation. Like all literate and numerate commentators, he recognised that fact. There may come a day when a Budget could reflect what my right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath) advocated. It sounded to me rather like the Yellow Books that Keynes wrote for Lloyd George when prices were falling, but the time is not yet. Had we had a Budget that reflected those views, I suspect that there would have been a run on the pound of a pretty sensational dimension.

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  We have to recognise, like it or not and whatever the causes, that the fight against inflation must take priority. That is intellectually understood, but we in this country do not have a gut feeling about inflation in the way that the Germans and others have. That is natural, and the markets know it. Our rhetoric on this subject is therefore suspect. The markets want to know where the beef is. Determination to keep up interest rates until inflation has been tamed is the most important proof, and the key. My right hon. Friend the Chancellor has said it loud and clear, and his commitment and that of my right hon. Friend the Prime Minister is the best gauge that it will be the answer.
  There is, perhaps, a longer haul ahead of us than some observers think. I think that we might find the situation at the end of the year more uncomfortable than we expect. Monetarist high priests such as Friedman have always made it clear that the consequences of their policy would take quite a long time to come through. We may find that that is the case. The question is whether we can do more to meet the problem of inflation.
  I should like to ask a question which rather follows on what the right hon. Member for Ashton-under-Lyne has just said. Since the general election, my right hon. and hon. Friends have taken credit for past privatisations, brought forward the privatisation of water and electricity, and talked about the railways and coal as possible targets. As the right hon. Gentleman said, there is an important omission. It is curious that nobody has talked about restoring to the Bank of England the independence which it had before 1948. It did not have complete independence. Like the Archbishop of Canterbury and the Lord Chief Justice, the Governor of the Bank of England was appointed by the Government of the day but, once appointed, he was very much his own man. The same is true of the Federal Reserve Bank in the United States and the Bundesbank in Germany. Would not a return to that arrangement be a strong guarantee that no British Government would return to an inflationary path?
  My right hon. Friend the Chancellor of the Exchequer has broad shoulders as well as breadth in other respects, and on him rests a heavy responsibility for both fiscal and monetary policy. It is a great burden, even for him. Is there a case for separating the two? Fiscal policy—taxation and the rest—is political in character. But it could be argued that monetary policy is professional. If we commit ourselves to what my right hon. Friend the Prime Minister calls honest money, there cannot be much difference of opinion about what it is. Should we go back to it? Should we try to institutionalise our counter-inflationary policies by giving the Bank of England greater independence?
  I ask those questions in the context of our fight against inflation, as they are the only things that I can think of which might add to the clear commitment of my right hon. Friends the Chancellor and the Prime Minister. Long as I hope to see them reign, they cannot be eternal—much as we might like that. I do not use the word "we" in any facetious sense. Ought we not to be thinking about the longer term?
  Is it possible that greater independence allowed to the Bank of England might help us in the international sphere? It is inevitable, and right, that we will have a lot of discussion about a possible European currency, a possible European reserve bank or a possible European central bank. The Delors committee reports in June. I do not think that decisions will be taken at once. The matter is bound to be controversial, but I wonder whether it is
  770
  possible that the depoliticising, if I my use that horrible word, of our monetary policy, by moving responsibility for it from the Treasury to the Bank of England, would help co-ordinate monetary policy in Europe.
  There is a school of thought, which I rather favour although I am not sure that I am right, that we ought to make the European currency unit, the ECU, legal tender in parallel with our own currency. Such a move would involve considerable professional problems. If it were adopted in all Community countries, it would call for consideration at a very professional level.
  Would such a change help to depoliticise the Bank of England in a wider context? We have meetings of the Group of Five or Seven—would it help in deliberations with the other banks concerned? It would certainly align us with the two giants—the Federal Reserve Bank and the Bundesbank.
  In the old days, the Bank of England had a great reputation. It was enhanced, if anything, in 1931 when we went off the gold standard. The general view of pundits in the City was that the heavens would fall in. But not at all —they did not even dip. The Bank of England went on to create the sterling area; and sterling became a reserve currency which, within two or three years, was accepted by all countries in the world. I shall not go into the details of what the Bank did, but what it did was little short of a miracle by the standards of those days. No other bank in Europe has that experience. Even the Federal Reserve Bank, which inherited a currency, has never created a new one. It was quite extraordinary.
  Mr. Robert Sheldon: It was Winston Churchill who brought Britain back on to the gold standard as a result of the Bank's involvement. The right hon. Gentleman is saying that the Bank just corrected its previous mistake, which was a grave error that led to some of the country's many problems during the early 1930s.
  Mr. Amery: I would be happy to discuss with the right hon. Gentleman whether Churchill was right to make the pound look the dollar in the face. I am talking about 1931 when we were forced, rightly, to go off the gold standard and the Bank of England picked up the consequences which many people thought would lead to world collapse. That did not happen. The skill of the Bank of England made a currency, which was backed not by gold but by the reserves of the other members of the sterling area, a world currency which was accepted and, until the 1960s, remained a world currency. No other bank in Europe, and not even the Federal Reserve Bank, has the same experience. Do we still have the expertise to do that? Maybe some of the expertise has been hived off to the Treasury. My right hon. Friend the Chief Secretary to the Treasury will have that in mind.
  Could any Government happily delegate control of monetary policy? I can see that it would be awkward to surrender such control—it would be awkward for my right hon. Friend the Chief Secretary and for my right hon. Friends the Chancellor and the Prime Minister. I am asking questions, not making proposals. The return of inflation, which we thought we had got under control, suggests that the time has come to ask these questions. If I am right, the time has also come to ask the Government to consider them seriously.
  6.9 pm
  Mr. Brian Sedgemore: I was fascinated by the suggestions of the right hon. Member for Brighton, Pavilion (Mr. Amery) that monetary policy could be cured by some administrative changes and that one of those changes should be that the Bank of England should be given an independence which it has not had since it was nationalised. As he began his argument, I thought that he would suggest that we should return to the gold standard at the same time. After all, it was only 10 years ago that Sir William Rees-Mogg, the smutty man in charge of the Broadcasting Standards Council, wrote a pamphlet saying that all our economic ills could be cured by a return to God and the gold standard. I am not sure that doing things by hunch, by guess and by God is the right way to deal with economic problems and I shall not follow the right hon. Member for Pavilion down the line of historical fantasy.
  There is broad agreement in the country, if not in the House, that the 1989 Budget is the price that we have to pay for the 1988 Budget. That price includes listening to the Chancellor's words about lower economic growth, wage restraints, a balance of payments crisis, high inflation and more unemployment. Although the responsibility for the current mess, muddle and moronity in economic affairs lies entirely with the Chancellor of the Exchequer, I felt sorry for him as he delivered his Budget. As the blood drained from his face and his eyebrows drooped, I thought about the excrutiating pain he must be suffering—that haughty, ebullient, cocky, arrogant Chancellor, forced at the Dispatch Box to disport himself in such a diffident fashion, and produce such a demeaning, piddling little Budget which has made him the object of political scorn and economic contempt. As he sat down, I was reminded of the words of President Lyndon Baines Johnson, when he listened to a speech by Richard Nixon. He turned to the press corps and said:
  "Boys, I may not know much, but I know chicken shit from chicken salad."
  The Chancellor began his speech by talking about the enterprise culture and telling us about the Thatcher economic revolution of the past 10 years. Recently I have spent a great deal of time examining the Thatcher economic revolution of the past 10 years and comparing our economic performance with the country's economic performance during the 10 years preceding 1979. The results are quite interesting. Those who salivate at the thought of the Thatcher revolution claim that it has brought about a sea-change in our economic performance, but my analysis shows that the Thatcher revolution is an illusion, a mirage, and a will-o'-the-wisp that belongs to the media world of make believe.
  The theory of the Thatcher revolution was to have been monetarist. In practice, it has been a mish mash of monetarism and crypto-Keynesianism. At first the neo-monetarism theorists of the revolution told us that they would control inflation by controlling M3. When the evidence confounded the theorists, they turned to M1, and when that did not work they turned progressively to a variety of monetary indicators—M0, M2, M4, M5, PSL1, PSL2 and DCE. In the 1989 Budget the Chancellor has gone back to M0. Needless to say, none of those monetary indicators did what was claimed of them and Mo will not
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  do what was claimed for it. In theoretical terms, the revolution has turned out to be Grecian tragedy and only the Chancellor's pride prevents him from admitting that.
  According to conventional media wisdom, high levels of economic growth in the 10 Thatcher years have brought about the enterprise culture, better management and more hard work. According to conventional media wisdom, low economic growth is a thing of the past. Alan Budd, a Thatcher apologist and professor of economics, and director of the centre for economic forecasting at the London Business school, argued in volume 2, No. 2 of the "Contemporary Record":
  "The Conservatives could look back to 10 years prior to 1979 when GDP had grown at an average rate of 2·2 per cent … Since the second quarter of 1981; GDP growth has averaged 3·4 per cent. a year."
  Even the most stupid member of the stupid party can see the trick. Thatcher did not come to power during the second quarter of 1981; the Conservative Government were elected in 1979. The average rate of growth in GDP since 1979 is 1·8 per cent. rather than 3·4 per cent. and is less than in the 10 years preceding 1979. Professor Budd also ignored entirely the contribution of oil and gas production on the United Kingdom continental shelf to economic growth since 1981. The figures show that without oil and gas production virtually all the economic growth would have been wiped out.
  In 1983, oil and gas production accounted for 6 per cent. of gross national product—twice the rate of economic growth for that year. On average, in the years 1982–87—the only reason I stop at 1987 is that I cannot obtain any figures for 1988—oil and gas production more than accounted for all the economic growth in Britain. We should remember that prior to 1979 there was virtually no oil and gas production in the United Kingdom.
  So what kind of revolution is it? After 10 years there has been no growth other than that from a God-given source, and not even Thatcher can claim that she is God. Even sanctification will probably have to await her death. After 10 years we have just surpassed the level of manufacturing output that existed at the beginning of 1979. As North sea oil and gas revenues and production diminish, and a balance of payments crisis of super proportions hits us, the Thatcher revolution will be seen by the public and by history as little more than a chimera.
  I read incessantly that one of the major characteristics of the enterprise culture and the Thatcher revolution is low taxation. It is said that Thatcher lets the people spend more of their own money, that the Tories are the party of low inflation and that Labour is the party of high taxation. I hate to say it, but it is a whopping great lie. The truth is the reverse. Thatcher takes more money from people and lets them spend less than Labour did. The statistics show that the Tories are the party of high taxation. [Interruption.] I hear the laughter of the hon. Member for Bridlington (Mr. Townend) who accompanied me to Tokyo. Apologists of the Thatcher revolution, of whom he is one, talk only about income tax and avoid all mention of VAT, national insurance, royalties and rates because the figures show that, after a difficult start, the Labour Government brought down taxation as a proportion of GDP. Whereas Labour took only 33·9 per cent. of gross domestic product in taxation in 1978–79, in the current tax year the Conservative Government are taking some 37·4 per cent. of GDP in taxes. In every year that the Conservatives have been in power, they have taken a

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  higher proportion of GDP in taxes than Labour took in 1978–79. In 1984–85 the Conservative Government took as much as 39·1 per cent. in taxes. I remind the hon. Member for Bridlington that that is our money.
  Mr. John Townend: Will the hon. Gentleman be good enough to explain why he and his colleagues systematically vote against every tax reduction that the Government propose? In view of the fact that this year there is a Budget surplus of almost £14 billion, if he were in power, would the hon. Gentleman reduce taxes—a measure that I would support—and which taxes would he reduce?
  Mr. Sedgemore: I will set out my taxation policy at the end of my speech if I have time. It is incorrect to say that we have opposed every tax reduction that the Government have made. It does not help an argument in the House for somebody to stand up and make a cheap debating point on the wrong premise. When I studied logic at university I learnt that if one moves from false premises to using false logic, one invariably reaches false conclusions. I invite the hon. Gentleman to study Aristotelian syllogisms and he might be able to make a reasonable intervention.
  I was talking about the high proportion of taxation that the Conservative Government have taken in respect of GDP. The figures show that in every year in which the Government have been in office they have taken away a higher percentage of the gross earnings of a married couple with two children when the husband is on average earnings and where child benefit is treated as negative income tax. In 1978–79 only 35·1 per cent. of the average family's earnings was taken in tax, but in the current year, 1988–89, the Government are taking away 37–3 per cent. I am not sure how the hon. Member for Bridlington will justify that.
  Moreover, it is much worse than that. John Hills of the London School of Economics has just shown in a pamphlet produced by the Child Poverty Action Group called "Changing Tax" that the Government's cuts in direct taxes have been paid for entirely by cuts in the generosity of benefits. That is another way of saying that the poor are subsidising the rich. According to Hills—I do not think that anybody has challenged his figures—the bottom half of the population has lost £6–5 billion through the failure to uprate benefits since 1978–79 and £5·6 billion of that has gone to the top 10 per cent. of income earners. In other words, the Government have used the benefits and tax systems to target relief on the rich. What sort of miracle is that of which any Government can be proud?
  I shall deal now with the national debt and Government borrowing. Inherent in the idea of the enterprise culture —I read it again and again—is the notion that the Government have achieved a miracle by more than balancing the budget and by replacing the public sector borrowing requirement with the public sector debt repayment. That miracle may appeal to the daughter of a Grantham grocer, but if one examines the historical data one can see that it is a miracle that is rather commonplace. If one examines the definition of a miracle, one will see that it cannot be a miracle if it is commonplace.
  In 1969–70 Labour had a budget surplus or a PSDR of £1 billion when Roy Jenkins, now Lord Jenkins, was Chancellor of the Exchequer. Budget surpluses or a PSDR also existed in 1947–48 and 1948–49 when times were hard. When the Chancellor said in a speech last year
  "For the first time for at least half a century we have a Government in this country that are engaged in repaying the national debt"
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  he was not telling the truth.
  In that respect, he reminds me of Bernard Shaw's "Major Barbara" of whom it was said:
  "He knows nothing and he thinks he knows everything. That points clearly to a political career."
  I sometimes wonder who carries out the Chancellor's high level statistical research. It could be that one of the major problems of the British economy is that miss Pamella Bordes has a Treasury pass too. Somebody who does not understand the way in which this place works is producing the Chancellor's statistics.
  The miracle of the PSDR palls even more when we realise that Socialist Governments in Sweden, Denmark, Finland, Norway and Australia have budget surpluses. When the country desperately needs investment in infrastructure, education, science and industry if it is to remain competitive, why do we want to repay the national debt, particularly as it is now at historically low levels in relation to GDP? As my right hon. Friend the Member for Islwyn (Mr. Kinnock) said, it is our surplus and it should be used to meet our needs.
  I shall now deal with savings and investment in the Thatcher revolution. In the enterprise culture and as part of the Thatcher revolution, we are encouraged to save, or at least so we are told. Again, the facts show that the reverse is true. The enterprise culture and the Thatcher revolution have encouraged people to spend, spend, spend and borrow, borrow, borrow. The statistics show that they have well and truly created a loads of money consumerist mentality in which nobody saves at all.
  If we define borrowing as negative saving, which is what the Government do, the figures show that when Labour was in power between 1975 and 1979 the personal sector savings ratio averaged 11 per cent. The latest figures show that it is down to just over 1 per cent. The decline in savings—savings are essential to investment unless it is assumed that all our investment is to be done by foreigners —seems to be terminal.
  The Thatcher revolution in investment seems to have been still-born in one crucial area of the economy. Surely it is a very small miracle that has left manufacturing investment in 1988 still below the 1979 levels. In 1979 at 1985 prices, £10,136 million was invested in manufacturing. By 1982 that figure had plummeted to £6,360 million. In 1988, at £10,013 million it was still lower than in 1979.
  Let us turn to the one big area that always brings a smile to the faces of Conservative Members, the ability of the Government to control inflation relative to everybody else. It is axiomatic to everybody who believes in the theory of the Thatcher revolution that Britain has low inflation. Again, as my right hon. Friend the Member for Islwyn said, the figures suggest that the Chancellor is Mr. Inflation himself. The man who promised us zero inflation now has a rate of inflation of 7·5 per cent., which is the highest of all the major industrial countries. It is higher than in America, Canada, Japan, Germany, France and Italy and 50 per cent. higher than the EEC average.
  Before any hon. Member stands up and asks, "What happened under the Labour Government?" I can provide them with all the figures for the past 20 years. Every hon. Member knows that 7·5 per cent. inflation is historically high bearing in mind that it is Government-induced and owes nothing to oil price increases or a rise in commodity prices. It is fair to say—I want to be fair—that inflation blipped in 1986 at 3·4 per cent. However, as the figures show, it has never looked like reaching zero. In 1980 under

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  this Government it was as high as 18 per cent. In fact, that was the average for 1980 but in 1980 on a year-on-year basis it touched 22 per cent. I am puzzled, as are all my hon. Friends, as to how the Chancellor is to reach zero inflation when he is pushing inflation up. He is pushing up mortgage interest relief and the cost of borrowing. He is supporting the privatisation of the water and electricity industries, the former of which is already pushing prices up by 43 per cent. and the latter of which will push up prices by 10 per cent. per annum.
  On that subject, I believe that the Chancellor, like President Nixon, is such a conformer in duplicity that he now lends himself to what Lawrence Peter called the Nixon political principle: if two wrongs do not make a right, try three.
  The Chancellor denies that this will be his last Budget. We do not know. I doubt it because the Chancellor, as we all know, wants to go to the City of London. The feelers have been put out by the Treasury and the advertisements have been placed. The entire Government progaganda machine has gone into action. I can inform the House privately that he has not had a single offer from the City of London. In practice, the City, like the country, cannot afford a clapped-out second-rate Chancellor whose luck has run out. To paraphrase a comment made by Adlai Stevenson about Nixon—and I apologise for the constant comparisons between the Chancellor and Nixon—the Budget shows that the Chancellor is the kind of politician who would cut down a redwood tree and then mount the stump for a speech on conservation. It is a bad Budget by a bad Chancellor, so I hope that all hon. Members will oppose it.
  6.30 pm
  Sir William Clark: The hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore), with his usual panache, has made a speech, as always, that is offensive to the Minister about whom he is speaking. That is a pity because some of his points could be debated. He accused my hon. Friend the Member for Bridlington (Mr. Townend) of making a cheap debating point. That was priceless coming from the hon. Gentleman—definitely a case of the pot calling the kettle black.
  Like other hon. Members, I enjoyed the speech of my hon. Friend the Member for Richmond, Yorks (Mr. Hague). I could not help reflecting how different it was from the speech of my right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath). My right hon. Friend's speech was well received by the Opposition, but he should sometimes make himself say something kind and good about the Government and our economic performance. His gratuitous insult to my right hon. Friend the Chancellor was inexcusable. When he was talking about exchange rates and interest rates, he said that my right hon. Friend the Chancellor wanted to bring them down, but was stopped. That reflects on the integrity of my right hon. Friend the Chancellor. Exchange rates and interest rates are an extremely important matter of principle for my right hon. Friend. Knowing him as I do, I am convinced that if he had been stopped from bringing them down, he would not be Chancellor today. He would never put forward policies with which he did not agree, so
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  I am sure that my right hon. Friend the Member for Old Bexley and Sidcup will, on reflection, regret having made that remark.
  In 1979, the Conservative party made the following two pledges, among others—first, to reduce the standard rate of tax to 25 pence in the pound and, secondly, to abolish the earnings rule for pensioners. I am sure that my hon. Friends will join me in congratulating my right hon. Friend on being the Chancellor who has fulfilled both those pledges. Others of my hon. Friends have already said that the Budget will help the lower paid through the readjustment of national insurance contributions, but none of my hon. Friends has mentioned the help that my right hon. Friend the Chancellor has given to charity. It is a great step forward and should be commended. I am delighted that my right hon. Friend has not touched life assurance funds—the only long-term savings that we have in this country—as I believe that it would have been a mistake to make any changes in that respect.
  The Opposition always sell Britain short, as did the hon. Member for Hackney, South and Shoreditch. Every speech from the Opposition denigrates the economy. The Opposition make three points—first, the overseas deficit, secondly, high interest rates and, thirdly, inflation. On the overseas deficit, I wonder how many of our imports are capital goods, how many are commodities and how many are consumer durables. I do not know how the Central Statistical Office works out such figures. One reads in various financial papers and journals that the CSO's margin of error is considerable. Consequently, when we talk of a deficit of, say, £14 billion, that figure may not be accurate and the deficit may be only £10 billion. The journals that I have read maintain that the estimated deficit has been exaggerated. The Treasury should, perhaps, spend some time dealing with that. Even if we take the figure of £14 billion, however, we should not continue to say that there is gloom and doom around the corner. One difference between this deficit and that of the Labour Government is that we have gold and dollar reserves of £29 billion to cover the deficit, so we can easily sustain it even if we do not want it to continue.
  I know that Labour Members do not like us to mention the financial position of the last Labour Administration. The Labour party asks for more public expenditure, but it conveniently forgets that when Labour was in office, especially after the meeting with the International Monetary Fund, the Labour Government cut expenditure across the board, including education, roads and the National Health Service. We all want to debate the economy, but hon. Members should not run down the economy and imply that there is a catastrophe around the corner.
  With hindsight—I emphasise that word—all hon. Members would agree that in 1988 the reduction in interest rates was too lax, although one must remember that it was preceded by the stock market crash and all the economic pundits were saying that there might be a recession around the corner. My right hon. Friend the Chancellor thought that he should boost consumption and he did so by reducing interest rates. Having seen that a world recession did not occur, some have criticised his taking remedial action. In my view, however, he should not be criticised but congratulated. This Chancellor is not afraid to take unpopular measures, rather than trying to buy votes. If economic policy deviates, action must be taken. It is all

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  very well for the Opposition to criticise my right hon. Friend. The only time the last Labour Government took action was when the IMF told them to do so.
  Mr. Hawkins: I would go further and say that not only did a recession not occur, but that it did not occur because of the measures taken by Britain and the rest of the Group of 7. It is easy for people to say that my right hon. Friend the Chancellor over-reacted and that there was not a world recession, but there could have been one, as there had been after every other stock market crash in history. It was the actions of Britain and the rest of the Group of 7 that stopped the recession from coming this time.
  Sir William Clark: I am grateful to my hon. Friend for making the point rather better than I could.
  As my right hon. Friend the Member for Brighton, Pavilion (Mr. Amery) said in his excellent speech, it is obvious that the first priority is the control of inflation. That has meant that interest rates have risen, but that is a temporary and not a permanent measure and in the months to come the 13 per cent. base rate will come down.
  My right hon. Friend the Chancellor has cut consumer demand. When one considers house prices and trade and retail sales, one sees that his policy is having an effect. In effect, my right hon. Friend has told people, "If you want to spend, borrowing will be expensive." Consequently, expenditure has been cut. However, that does not affect the person who does not want to borrow for his spending. I therefore welcome the Budget measures on personal equity plans, workers' share option schemes and pensions.
  As my right hon. Friend the Chancellor will enjoy an even greater surplus in the coming year, I should like him to repay some of the national debt in his next Budget. However, I have slight reservations about repaying too much of the national debt because some day there may be a profligate Government and it would be far too easy for them just to spend, spend, spend. I therefore offer that caveat to my right hon. Friend.
  The rate of savings causes me some concern as it has reduced from about 14 per cent. of disposable income to about 4 or 5 per cent. although we do not know the exact figures. Again, I do not know whether the Central Statistical Office has got its sums right, but the trend is clear. In the next Budget we should give a definite boost to savings. My right hon. Friend has done so much this month for which we thank him, but next year I should like contractual savings to be allowed as a charge against one's taxable income. That would give a great boost to savings.
  In 1979 there were 2·75 million shareholders in this country. Today, through the Government's economic policy and privatisation, we have more than 9 million shareholders—9 million capitalists. We should build on that, so that more and more of our fellow countrymen have something to conserve. Between now and his next Budget, next March, I should like my right hon. Friend the Chancellor to concentrate on seeing how we can increase the savings of this country and create more and more capitalists.
  6.42 pm
  Mr. Denzil Davies: As has been said, it is now more than 10 years since the Prime Minister's first Government introduced their first Budget, and, almost 10 years later, all that the Chancellor of the Exchequer had to
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  show last Tuesday for the Government's policies and efforts was a truly dismal and, in some senses, truly horrendous set of economic statistics and forecasts.
  The Government, who have made the elimination of inflation the cornerstone of their policies, have had to admit that inflation will now rise to over 8 per cent. As has been pointed out, that is by far the highest rate among all the major western industrial countries. Indeed, over the past 10 years, inflation in Britain—under this Government —has been higher than that of most of our industrial competitors in the western world. Does the Chancellor, the Chief Secretary or the Prime Minister ever ask why all those other countries can apparently do so much better than Britain is doing under their Administration''
  The deficit on the current account of the balance of payments is appalling. It is £14·5 billion this year and is forecast to be £14·5 billion next year, according to the Red Book. Again, that is by far the worst deficit of all the western industrial nations. Again, does the Chancellor or the Prime Minister ever ask why all those other countries, except possibly the United States—why all our competitors and trading partners in the EEC—can do so much better than Britain is doing under their Administration?
  On the balance of payments, is it not surprising and worrying that, according to the Red Book, despite high interest rates and despite there now being an apparent reduction and a fall in growth next year to 2·5 per cent., next year the balance of payments will stay the same as it is this year—that is £14·5 billion—and that the deficit on manufactured goods will increase to £15·5 billion?
  There may be many reasons for that—it may be our old friends the leads and the lags—but I suspect that one reason is that Britain's manufacturing capacity has so shrunk over the past 10 years that we are not producing the capital and consumer goods that industry and individuals have little option but to purchase, because they cannot do without them, whatever the cost. If that is the case—and I suspect that it may be—the future for this country, for our balance of payments deficit and for our industrial base is truly bleak and appalling.
  Our interest rates are the highest in the western world and I believe that the Government—this will be shown in the next few years—have failed to arrest or reverse Britain's relative industrial decline when compared with the other trading nations of the EEC.
  All that is despite the fact that, over at least eight of the past 10 years—the first two years were more difficult—the Government have had the benefit of the most favourable economic climate of any British Government since the war. During the 1980s, most Governments in the western industrial world recognised the dangers of inflation and, because they all did so, the measures to combat it were politically easier to carry out than they had been in the 1960s and 1970s. As the Red Book clearly shows, over the past 10 years, from 1980 to now, commodity prices, especially of oil, food and industrial materials, have fallen substantially and steadily in real terms. However, they are now beginning to rise again.
  As has been said, on top of those international advantages, the Government have had the enormous domestic benefit of a boost to their revenues and to the balance of payments through the oil surplus and the oil revenues from the North sea. Yet after 10 years of the most

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  favourable industrial and economic climate, we were presented with dismal and appalling figures in last Tuesday's Budget.
  When the Government came to power in 1979, they knew what they wanted to do and they knew what had caused Britain's economic ills. The radical Right, like the Ayatollah, had no doubts. Their targets were clear and simple. Some of us remember the rhetoric. The targets were the trade unions, the over-sized public sector, high public expenditure, the dreadful public sector borrowing requirement, high income tax and the appalling lack of monetary discipline and control.
  The trade unions were the first to fall. Their power was broken; especially, their power over collective bargaining in manufacturing industry has diminished. However, despite that, in the past 10 years rises in wages and earnings have consistently exceeded the rate of inflation. I accept that some of the difference and excess obviously comes from increased productivity, but not all of it. Despite the fact that the power of collective bargaining has been broken, much of that excess does not come from productivity.
  Next came the over-sized public sector, which was diminished by privatisation. High public expenditure was cut, perhaps not by as much as some Conservative Members would have liked, but it was cut. The dreaded PSBR was eliminated, destroyed, slain and turned into a surplus, albeit a surplus that cannot be used. Despite all that, inflation is apparently going up to 8 per cent., the balance of payments is horrendous, and interest rates are crippling. All the bogeys have been shot down.
  There were also high rates of income tax. Reduce them, so the rhetoric went, and British management would be galvanised and the supply side of the economy would supply. Income tax is now down to 25 per cent. and 40 per cent., but it has done nothing for Britain's supply side. It has worked wonders for the supply side of our competitors. The supply of BMWs and European imports has gone up considerably, but tax cuts have done nothing to the supply side of British manufacturing industry.
  Since 1985, manufacturing imports have risen by 200 per cent. in value, and exports have risen by only 30 per cent. Next year, the deficit on manufactured goods will be £15·5 billion. Our share of world trade in manufactures has fallen consistently over the past 10 years. That deficit in manufactured goods is not a deficit with the sweatshops of Asia. Most of it is a deficit with other EEC countries —countries that pay higher wages and have a better provision of public expenditure. Many of them have a higher rate of income tax than we have. So much for the supply side.
  Let us examine monetarism—the ark of the covenant, the reincarnation of everything that the Prime Minister learned in that little corner shop in Grantham. Rhetoric was high early in 1980, but, since then, there has been little monetary control—certainly not under this Chancellor. This Chancellor set up one monetary target, missed it, changed it, and then set up another. So it went on and on. Hon. Members heard tonight how it is called money GDP. It is about the worst target that could be chosen. One target after another has been missed. The Chancellor has
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  zig-zagged between monetary flags like a giant slalomist. The only difference is that the game is to hit them and not to miss them, but he has missed them almost every time.
  There is now no strategy left. The medium-term financial strategy is a joke and nobody believes it. There was an attempt to use an exchange rate strategy but, for whatever reason, it did not last long. All we have left are high exchange rates and the hope that, somehow, high interest rates will be able to free the Chancellor from the restraints on domestic inflation and foreign exchange markets. When the miracle has been achieved, a year before the election, the unearned surplus—it has not been earned, it has not been produced, and that is why it cannot be spent—will somehow or another be redistributed to a grateful electorate. I do not think that that will work.
  The tragedy of the past 10 years is that much could have been achieved, but much damage has been done. It is a tragedy for which the British public will pay for a long time.
  6.53 pm
  Mr. Terence L. Higgins: Since the Chancellor made his Budget statement, hon. Members have heard several remarkable speeches. I am sorry that I was unable to be in the Chamber for the opening speeches this afternoon, as I was attending the funeral of a greatly respected constituent who was tragically killed in the Purley rail crash.
  The Chancellor's Budget has been described as prudent and cautious. That is what it is, and it is appropriate in the present circumstances. Within the restraints of the present economy, he has got his priorities right. It is a Budget for pensioners. I was delighted that the Chancellor took the step of abolishing the earnings rule. Its abolition is long overdue. Against the background of changes in the demography of our country, in which the work force will clearly diminish in size as a proportion of the total population, that step is entirely appropriate. Taxes or other restrictions which are abolished rarely stage a comeback. However, if we merely change limits or increase allowances, all too often in a subsequent year we find that the improved position deteriorates. Therefore, the abolition of the earnings rule is welcome. On top of that, the Chancellor has made other changes to help pensioners. For example, he has reduced the limit at which extra help becomes available, from 80 to 75.
  I shall refer to two other points in relation to specific taxation measures. The first is unleaded petrol. I certainly welcome that change, which is already having a perceivable effect. In his Budget speech, the Chancellor made an important point. He said that people have the impression that, if they switch to unleaded petrol, they cannot switch back to leaded petrol. We in this country are not in the same situation as that which obtains in the United States, where cars which are converted or designed to take unleaded petrol cannot be used with leaded petrol. There is no reason why people should worry about using unleaded petrol when their cars are converted simply because they fear that they may not be able to get unleaded petrol at a given time. It is important that some newpapers, particularly the Daily Mail, which has been campaigning on the issue, should get that point across. The change which the Chancellor has made will greatly increase the incentive to improve the environment.

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  The other point is the exclusion of any increase in the price of drink and tobacco. Hon. Members understand what the impact on the RPI would have been if the Chancellor had increased those duties. However, there is a case for taking tobacco out of the retail prices index. It is a cost of living index, not a cost of dying index. It is quite absurd for the Chancellor to be inhibited from taking that action simply because of the effect that it would have on the RPI and the likely consequences of wage settlements.
  It has been suggested that the Budget is cautious and prudent because last year's Budget was a misjudgment. I simply do not believe that to have been the case. In the light of the stock exchange crash, along with many other Finance Ministers, the Chancellor took measures to stimulate the economy by monetary means. Of course, that had the desired effect. As was pointed out, a world recession was avoided. The timing of these matters is difficult, but. on the fiscal side, it is quite extraordinary for Opposition Members to say that the overall tax reductions last year were too big, when the outcome of the year was a massive surplus of unprecedented proportions. I am not clear whether they thought that we should have had fewer tax reductions last year and an even greater surplus this year.
  My constituents are somewhat puzzled by the surplus, if only because they have never seen anything of its size before and are a little worried about why it has not been distributed. Some points need to be made about that. If greater taxation reductions or further increases in expenditure had been made, it would have inevitably put more purchasing power in consumers' pockets, when, quite clearly, the Chancellor's intention is to exert downward pressure on inflation rather than stimulate the economy. It is important to stress that the surplus has arisen not because of increases in tax rates or cuts in public expenditure but despite reductions in tax rates and increases in public expenditure. Therefore, it is not a case of the surplus being accumulated in some adverse way. It has occurred despite improvements in tax and spending.
  As I understand it, Madam Deputy Speaker, I am subject to the 10-minute limit, so I shall make a passing reference——
  Madam Deputy Speaker: Order. The right hon. Gentleman may speak until 10 minutes past seven.
  Mr. Higgins: I shall try not to take that long, Madam Deputy Speaker. Having thrown away my notes for the part of the speech that I thought I should be unable to deliver, I shall make no effort to recover them.
  The surplus is, in part, the product of the proceeds of asset sales. The Treasury and Civil Service Select Committee has been inclined to argue that those proceeds should be treated as a means of funding the public sector borrowing requirement, rather than as a means of reducing public expenditure, or as revenue. Now that we do not have a public sector borrowing requirement, we need to rethink the position, because the proceeds of asset sales increase the overall surplus. To some extent, the cash raised by the issue of shares in privatised companies is being used to pay off Government borrowing in another form.
  Even if I am allowed to speak rather longer than I expected, I think these matters are rather technical to be dealt with on the Floor of the House. However, I hope
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  very much that the Treasury and Civil Service Select Committee will be able, having taken evidence, to elucidate these matters in a subsequent report.
  The Chancellor's fiscal stance is a tighter one than we have had previously, reinforcing his overall stance on interest rate policy. It is very difficult to think of ways of using the surplus, in terms of extra Government expenditure or tax cuts, that would not increase the inflationary pressure. If there are any such means, we shall no doubt hear suggestions about them, but they are difficult to find. That is the reason for the policy of repaying the national debt. In many ways, the consequences are favourable—for example, the shape of the yield curve, longer-term interest rates having been driven down, with benefit to manufacturing industry and commerce.
  The Chancellor says that he proposes to return eventually to a balanced budget. It looks as though we shall by that time have paid about £30 billion of the national debt, resulting in a saving of about £3 billion in interest payments. The question is whether this can be used in a non-inflationary way. It is important to stress that, had that commitment remained, there would have been a transfer from one group of people to another—mostly domestic, but perhaps some overseas. Those resources may now be put to use, allowing for some variation, depending on whether the people receiving the new resources have a propensity for saving greater than that of those who were getting the interest payments. The result will be increased, genuine choice—and that is welcome.
  The unexpected, extremely large surplus raises matters that can be dealt with in economic theory, but we in this country have not had any practical experience of a surplus on this scale. One aspect of the matter that creates very serious problems is the Government's statistics. I hope that the Chancellor will soon announce the improvements that he proposes to make in that regard.
  In addition, the evidence that the Treasury Committee received from the head of the Government's statistical service was extraordinary, in that it seemed seriously to underestimate the impact of inadequate statistics on markets. However, I shall leave that on one side.
  I hope that we shall see some improvement in forecasting models. My right hon. Friend the Chancellor has always been very sceptical about forecasting models. Normally, a balance of payments surplus would be forecast if there were a fiscal surplus. However, with a fiscal surplus on a massive scale, we had the reality of a massive balance of payments deficit. That raises some very serious questions about the model and about the way in which such forecasting should be revised and reformed. Perhaps we shall have to take into account the impact of the overall borrowing—Government, private and cor-porate—rather than simply Government borrowing.
  Finally, when he made his Autumn Statement the Chancellor was on something of a tightrope. He was using interest rates to try to get the economy back on course, following a period, as he rightly pointed out, of a very rapid inflation rate, overall, of some 4·5 per cent. per year —a rate which, clearly, could not be sustained indefinitely. The danger for a Chancellor on a tightrope is that, on one side, he can fall off into a recession, whereas, on the other side, he can fall off into a situation in which confidence is shaken internationally, the exchange rate collapses, and we get inflation. I believe that the Chancellor is still on that tightrope and that he will remain there until the situation

  783
  eases. Having said that, however, I must say that the combination of interest rates and fiscal measures reinforces the overall anti-inflationary stance, and for that reason, as well as for the reason that I gave earlier—the benefit of the specific tax change for pensioners—I welcome the Budget very much indeed.
  Several Hon. Members rose——
  Mr. Deputy Speaker (Sir Paul Dean): I remind the House that the 10-minute limit on speeches is in operation.
  7.6 pm
  Mr. Alex Salmond: The hon. Member for Staffordshire, Moorlands (Mr. Knox) began this debate by thanking the Leader of the Opposition—I am sure that he was speaking for all Conservative Members—for saving the timing of the Chancellor's Budget speech. It was indeed a generous and highly unusual gesture by the Leader of the Opposition. Most Leaders of the Opposition on acquiring that role have as their ambition to serve as Prime Minister; the present Leader of the Opposition seems to content himself with serving the Prime Minister. Most Leaders of the Opposition see it as their role to create procedural difficulties for the Government; this Leader of the Opposition sees it as his role to solve the procedural problems of the Government. At any rate, he has committed a political blunder that will haunt him for many years to come in Scotland.
  My hon. Friend the Member for Glasgow, Govan (Mr. Sillars) had the best of last Tuesday. He was lucky enough to miss the Budget speech, which was well worth missing. If last year's Budget speech contained the sins of commission, this year's was about the sins of omission. Never has a Chancellor with so much available given so little to so few, and kept the unhealthy concentration on those who have been so favoured by his past largesse.
  I wonder if the right hon. Gentleman appreciates the nausea that is felt by many Opposition Members when they see that, with so much to do, no fewer than nine paragraphs of the Budget speech are devoted to the attempted resuscitation of his pet scheme for personal equity plans. The real task is to rebalance the economy, to unfasten the straitjacket in which the Chancellor's past mistakes have put him.
  First, there is the task of rebalancing the economy between rich and poor. Like many other Scottish Members, I faced my constituents this weekend—people who have received their poll tax demands. The reality is of people on tiny incomes qualifying for tiny rebates of poll tax, and, in some cases, no rebate. Young people earning £60 a week will face the full blast of the poll tax on 1 April. On Saturday I spoke to a constituent in Turriff, who faced a doubling of the rates bill. He did not qualify for any rebate whatsoever, although he had been sent a very helpful note to the effect that he could always apply for family credit. To a family in receipt of only £6,000 or £7,000 a year, what comfort is it to tell them that the limit for personal equity plans has been increased to £2,400? Such people get nothing but the crumbs from the table of this Chancellor's largesse.
  I say to Labour Members that it is a very dangerous tendency—the hon. Member for Hackney, South and
  784
  Shoreditch (Mr. Sedgemore) illustrated it tonight—to try to outflank the Conservatives as a tax-cutting party. Let me mention something from today's Evening Standard. I am not claiming that the Evening Standard has the best interests of the Labour party at heart, but it was very interesting that even that newspaper was attempting today to remind the Labour party that it should be the party which represents the poor and the under-privileged. Our position on this side of the House should be that fair taxes are a just return for fair public expenditure.
  The second rebalancing of the economy should be between north and south, between Scotland and England. The Chancellor of the Exchequer has been engaged in Treasury sabotage of regional policy. If we are to believe his public statements, not content with sabotaging regional policy within the United Kingdom, his ambition is to sabotage regional policy throughout the European Community. The Treasury has been conducting a fight with the European Commission over the past few years —one which it has unfortunately won—to spend less in the regions of the United Kingdom by not obeying the rules of additionality.
  The Chancellor and the Treasury ignore the massive "regional policies" which are implicit within the United Kingdom economy, for example, in mortgage interest tax relief. Thirty per cent. of the United Kingdom population are in the south of England but obtain 50 per cent. of the mortgage interest tax relief—tax relief which is spiralling, with the Chancellor's high interest rates policy, to a level this year of some £6 billion. That is additional regional spending in the south of England of £1,000 million a year —approximately equal to the entire regional development grant budget for the rest of the United Kingdom.
  Then we have regional policy in the defence procurement budget. A parliamentary answer to me on 22 February revealed that, of the defence procurement budget of £10,000 million, no less than 62 per cent. was spent in the south-east and south-west of England. That is a "regional policy" which dwarfs the official regional policy of the United Kingdom.
  We have a regional policy in transport spending. British Rail's announcement that it will contemplate an additional £500 million, perhaps even £1,000 million, of spending in taking the Chunnel underground towards the coast is a massive regional preference for that area. It matters not whether that is funded by the public or the private sector. If it is funded by the public sector, it will come from the burden of taxation on all of us. If it is funded by the private sector, it will come from the charges levied on that transport and paid by the whole country for its communications with Europe.
  The Budget should have entailed a massive expenditure and investment programme on the infrastructure of the north of England, Wales and Scotland. That spending would not have been inflationary. It would have had a low import component and would have prepared those areas for the challenges of the European market and 1992.
  Today in Scotland we debated Scottish enterprise in the Scottish Grand Committee. It was an arid and sterile debate because, even in Scottish Committees which are not packed by English Tory Members, there is no decision-making power at the end of a debate. The debate was also misdirected because we were debating the supply side of the Scottish economy. Obviously, that is important

  785
  and improvements could be made, but the debate was out of focus. The basic economic problems of Scotland lie in a deficiency of demand.
  The real level of unemployment in Scotland is some 400,000, or 15 per cent. of the total work force. There is little capacity constraint within the Scottish economy and no real inflationary pressure. We know that total revenue over total expenditure is running at some £2,000 million, yet, in the face of deficient demand, we have interest rates, as a by-product of policies which are being pursued in the interest of overheating elsewhere in the economy, at 13 per cent. Moreover, there is no increase in public spending which is necessary to meet the problems of the Scottish economy.
  Not only do we have an inappropriate monetary policy as a by-product of inflationary pressure in the south-east, but that policy hits the Scottish economy harder than many other areas. The Scottish economy relies heavily on investment expenditure, capital goods, exports and construction expenditure, so high interest rates are particularly damaging to Scottish industry.
  The Government often claim consistency in their economic policies. It is true that interest rates have been consistently high, although the underlying reason for that has been changing substantially over the past 10 years. At the outset of their term of office, we had high interest rates because the then Chancellor of the Exchequer was in hot pursuit of sterling M3. Eventually that was given up as being immeasurable. Some years ago, the present Chancellor hyped interest rates to stabilise the currency and latterly we have had high interest rates to stop the so-called "overheating" in the economy. That phrase has a bitter irony for the regions of England and Scotland and Wales, whose economies are still just coming out of the deep freeze.
  The Chancellor's Budget, and his management of the economy, are biased towards the south of England where he has concentrated power, income and wealth, and which just happens to hold the friends, supporters and voters of the Conservative party.
  7.15 pm
  Mr. David Davis (Boothferry): I do not intend to follow the hon. Member for Banff and Buchan (Mr. Salmond) down his antiquated route, as expenditure per head in Scotland is second only to public expenditure in Northern Ireland, with all the troubles that the Province has. His analysis falls on that alone.
  Mr. Salmond: Will the hon. Gentleman give way?
  Mr. Davis: No, with all due respect, I cannot give way as I have only 10 minutes.
  This is a Budget for the future, not the past. In cutting the national debt the Chancellor of the Exchequer is cutting tomorrow's taxes and enhancing tomorrow's prospects. It is a Budget for the poor. In reforming national insurance, amending the age allowance and abolishing the earnings rule, the Chancellor is allowing some of the least well-off the chance of significantly improving their lot.
  In the past 10 years we have built and developed a successful enterprise strategy. From listening to my right hon. Friend the Secretary of State for Employment, I have some hope that the Budget is the first stage of a new strategy for enhancing the enterprise culture's impact on
  786
  the poorest. Our first duty to the poorest is to maintain the impetus for prosperity that we have developed in the past 10 years. Prosperity increases job opportunities-—500,000 in the past 18 months—enhances earnings, which are up 25 per cent. in the past 10 years, and allows the nation to pay for the welfare benefits of the least well-off among us. Therefore, there is an overwhelming need to maintain policies that promote prosperity. The first of those policies is to reduce the tax burden on the nation. I am a little disappointed that we did not see a further reduction in income tax, but things cannot he perfect all the time.
  Having assured that prosperity, we can turn our minds to ensuring that the combination of taxes and welfare benefits creates the sort of nation that we seek. We want to see a nation of self-reliant people, free from the heavy hand of government. We have achieved that for the vast majority of the population but, I fear, not yet for the very poor. Some of them face high rates of tax combined with benefit withdrawal. The worst case that I can find involves a 97 per cent. marginal rate of taxation and benefit withdrawal. That is higher than the highest rate of taxation on any earnings under any Government of any persuasion.
  While 97 per cent. is a rare occurrence, half a million of our people face a tax and withdrawal rate of 70 per cent. or more, which is worse than the old, top-rate taxes. Such a situation creates not just a dependency culture, but a despondency culture. Why on earth, then, do a Conservative Government, of all Governments, tolerate what is both economic idiocy and economic injustice?
  The reason unfortunately is a Gordian knot of logic that at first sight allows no answer. The paradox is that in reducing the marginal rate of withdrawal, we drag more and more people into the welfare net. In doing so, costs are dramatically increased, which in turn pushes up taxes, which depresses incentives, and thereby destroys the very enterprise culture that we are trying to create. Targeting, tax cuts and prosperity go hand in hand. Targeting and welfare incentives are logical opposites.
  The effect of reduced withdrawal rates is best demonstrated by example. My right hon. Friend the Chief Secretary will not need this particular example, but I shall give it anyway. To understand we must imagine a family —say two parents and two young children—on about £100 a week, who receive £40 a week in benefit. With a withdrawal rate of 80 per cent.—which is about the present rate—80p is lost for every pound of extra earnings. Their benefits drop to nothing when their earnings climb to £150. That is close to reality for many families. With a withdrawal rate of 40 per cent., their benefits drop to nothing at £200 and of 25 per cent. at £260. My right hon. Friend the Chief Secretary will realise immediately that I am leaving out the taxation component. If I added that to my last calculation, the level would be £400.
  If we consider the effects of the withdrawal rate on the number of people who receive benefits, the current withdrawal rate leads to all families with incomes of £150 or less being on benefit. If the rate was 40 per cent., all families on incomes under £200 would be on benefit, which is between 3 million and 5 million more households. That is a significant cost increase of more than £5 billion. A 25 per cent. withdrawal rate would take us up to having the majority of the households on benefit, and, if we took tax into account, the vast majority.
  That is the paradox. Targeting creates a poverty trap, but not targeting incurs massive costs and sucks a massive

  787
  number of people into dependence on the state. The question is whether the problem can be unpicked. The key that will unlock the problem is time and earnings growth. Already the Government operate welfare benefits and their qualifying income level in line with inflation. Since average earnings have grown by about 2 per cent. per annum above inflation during the past 10 years because of the Government's policies, qualifying levels for support should become a smaller and smaller fraction of average earnings. Thus the gap between the welfare benefit level and average earnings increases.
  To illustrate this, I shall return to our example. Dropping the withdrawal rate to 40 per cent. would mean that benefit would be paid up to earnings of £200 a week —that is £50 more than today. However, in 10 years time the average wage will be significantly more than £50 higher. As a result, a 40 per cent. withdrawal rate then would bring slightly more people into the net than 80 per cent. does now. Therefore, over 10 years it should be possible gradually to reduce the withdrawal rates from 80 per cent. to 40 per cent. as real incomes grow.
  The income improvement arising from our incentive policies creates the leeway to improve the withdrawal rate, to combine incentives and targeting. The strategy must be seen as a whole to be understood. I would say to my right hon. Friend the Chief Secretary that most of it is already Government policy. It requires four parts—first, to continue the downward pressure on basic rates to maintain the initiative and drive that underpins growth in earnings, which is the key to the economy; secondly, to maintain basic levels of benefit at constant levels in real terms, which is Government policy; thirdly, gradually to increase tax thresholds with the aim of ensuring that people and families who receive welfare benefits do not incur tax at all, which is why I used the non-taxed numbers; and, fourthly, to increase the earnings level at which zero benefit is paid by the same percentage as wages each year; which is to say that the taper should be lifted by the same percentage as wages each year—say about 2 per cent. above inflation.
  Over a period of 10 years or so that would force down the marginal rates significantly without increasing the proportion of GDP that goes into welfare payments—in fact, it would probably reduce it. What would happen is that the balance of targeting and incentives would reach a rational basis that has not been seen in this country for 25 years.
  Churchill once described the ideal modern state as one having
  "a net beneath which no man may fall and a ladder up which any man might climb."
  We have spent the past 10 years repairing the net and rebuilding the ladder. In the next 10 years, it would be an honourable objective to lower the rung at which that ladder starts.
  7.24 pm
  Mrs. Alice Mahon: I am grateful for a chance to speak briefly and to follow, though not immediately, the excellent speech of my hon. Friend the Member for Hackney, South and Shoreditch (Mr. Sedgemore). I believe that he paid a great service to the House and to the people of this country when he exposed the gigantic con
  788
  trick of the so-called Thatcher miracle. It is a sham, and my hon. Friend eloquently exposed the Chancellor as wearing no clothes, which was not a pretty sight.
  The truth is that by every major economic indicator the Government's policies have failed. Unemployment is still at more than twice the 1979 level. As my constituency reels under the hundreds of redundancies since Christmas, I can understand why the Secretary of State would not allow me to intervene. When I give the figures, the House will also understand. The trade deficit is still more than £14 billion and rising, and we have the highest interest rates and inflation of any of the major industrialised nations.
  British industry did not invest enough in the early oil-rich 1980s and we are paying the price. My constituency is a good example of an area where imports have been sucked in to the detriment of the local economy. There was not one proposal in last week's Budget which would help manufacturing. In a constituency such as mine, one can see the situation becoming worse. Because no attempt has been made to bring down interest rates, there is a high pound, high water and energy charges and the Government have deliberately forced up rates by starving councils of rate support grant. This has led to a lower demand for goods, which has been graphically demonstrated in my constituency.
  Mr. Janman: Will the hon. Lady give way?
  Mrs. Mahon: No, the hon. Gentleman can make his own speech.
  Since Christmas, in Halifax and in the Calder Valley which covers the Calderdale council area, 850 jobs have been lost in manufacturing—in textiles, engineering, the food industry and bed manufacturing. This morning I heard of a further 34 redundancies in textiles at an excellent hosiery and knitwear firm with a good record —the Wolsey socks division of Courtauld. The textile industry is not noted for its militancy and certainly not for its high pay. The reward to the textile industry and to engineering has been a kick in the teeth from the Government.
  The hon. Member for Boothferry (Mr. Davis) spoke about increased prosperity and then shed crocodile tears for those caught in the poverty trap. That really made me sick. How can he pretend to care when he walks through the Lobby with a Government who have persistently cut benefits, held down wages and bashed the unions to the extent that they have over the years?
  West Yorkshire is the lower-paid capital of this country. On too many occasions in the House I have highlighted what is happening to the local economy in my constituency. Our once highly skilled manufacturing jobs have been replaced by the sweat-shop type of economy towards which the Government have been urging us. I have been heavily involved with the problems of home working, which is on the increase. The average pay for a home worker is 50p to 60p per hour, and average pay in many of the factories in my constituency—this is borne out by the Government's own figures—is less than £2 an hour.
  I still have many thousands of constituents employed in the textile industry, which is an area of grave concern to me. Had I not been limited to 10 minutes I should have liked to quote what captains of the textile industry are saying about the Government's policy. I could have quoted letters from mill owners in my constituency who are deeply concerned about water privatisation because

  789
  the textile maufacturing process uses a great deal of water. They have already seen unfair increases in energy costs, compared with their competitors, and they have seen the results in terms of imports. The Government have let them down badly.
  The right hon. Member for Old Bexley and Sidcup (Mr. Heath) highlighted the need for the Government to invest in real training. Whatever the Secretary of State for Employment may say about employment training, it has been an utter failure. A fortnight ago a young graduate, Michael Pickles, came to my surgery. He has been unemployed since last June. He has an extremely good degree and in desperation he went on employment training for three months, but in that time he has had just two weeks placement with a firm. For the rest of the time he has been kicking his heels. He told me that if I got the chance I should tell the Government that they are just wasting the taxpayers' money on a rubbish scheme that was no good for him and no good to anyone else.
  In 1988 a survey of the local economy of Halifax showed that we are moving towards a two-tier labour market with a widening gap between the professional and skilled occupations and those workers concentrated in low-status, low-skill and unskilled jobs. The latter groups are often part of the flexible work force. Such people need training. In Halifax we fought back and tried desperately to help. We were involved with the business in the community initiative, which used the combined resources of the local council and the local trade unions, with the help of excellent officers who guided us through it. The chamber of commerce sulked, however, and would not join the regeneration committee. We used the small amount of European money available to us to try to train people for the future, but what have the Government done for us in return? They have done absolutely nothing—we are the hole in the middle of the doughnut. The Government have kicked us in the teeth. In the early 1980s the Government took assisted-area status away from Halifax, followed by urban programme area status. Recently Calderdale has been told that no derelict land grant will be given for the only piece of flat land available for industrial development.
  We have been betrayed by the Government. They are not putting our area forward for objective 2 status for the EC structural fund. The Government have ignored our pleas and representations, although we have pointed out that thousands more jobs are about to be lost. Last week, with two officers of the council, I made representations to the Department of Trade and Industry to get objective 2 money from Europe. We were given the impression that the Department was doing all that it could to press our case, and the Minister told us that our case was being flagged up in Brussels. Unfortunately for the Minister, however, the new Commissioner—Bruce Millan—told us the truth. The Government have not represented Calderdale and they have not highlighted the new unemployment levels in the area. The Commissioner told us that the Government were doing absolutely nothing for us. I have written to the Chancellor of the Duchy of Lancaster to say that if his Department wants to help Calderdale, Halifax and the Calder valley to get that money, we should have assisted area status.
  I see nothing in the Budget to help manufacturing. When the oil runs out—the income from that oil is already sliding—I wonder how we shall pay our way. What is happening in my town is a sign of things to come. I know
  790
  why the Secretary of State for Employment would not allow me to intervene—since Christmas nearly 1,000 jobs have been lost in my constituency and it would be difficult to explain that away in the so-called boom economy.
  7.32 pm
  Mr. John Townend: The hon. Member for Halifax (Mrs. Mahon) comes from the west riding, but the story is different in east Yorkshire. I represent a constituency in the hinterland of Hull; anyone visiting Humberside today will see nothing but expansion and the development of the manufacturing industry, which is taking on more labour.
  The Budget tax changes, modest though they were, have been universally approved. I particularly support the radical reform of employers' national insurance contributions, which will remove some of the stupid anomalies that created the poverty trap in the previous system.
  I represent a constituency with an above average number of old people, so I particularly welcome the removal of the earnings rule. That is a particularly useful supply-side measure when one considers that in the next few years there will be a fall in the number of school leavers coming on to the market. In common with my right hon. Friend the Member for Worthing (Mr. Higgins) I also approve of the reduction in the age limit for the higher rate of age allowances.
  I am chairman of the Back-Bench small businesses committee and I naturally welcome the 50 per cent. increase in the band for small company corporation tax to £150,000. Mainly that will help medium-sized firms, not small firms. I am disappointed that my right hon. Friend the Chancellor was unable to accept the recommendations of our committee, which would have been of enormous help to small businesses that have just started. We suggested that the first £5,000 of taxable profit retained in a business should be tax-free. That would be particularly helpful to small businesses desperate for capital in the early years.
  Another suggestion that we made and which I commend to the Chancellor for next year's Budget is roll-over relief for inheritance tax on private businesses or shares in private businesses until the disposal of the business or the shares. There would be no loss of revenue in the long term and in the short term it would stop smaller businesses being bled of much-needed capital to pay the Revenue's inheritance tax.
  In formulating this year's Budget, the Chancellor faced a completely different situation from any faced by a Chancellor this century. He not only balanced the Budget, but had a surplus of almost £14 billion. That is a clear sign of the success of the Government's handling of public finances. In the coming year, based on no changes other than indexation, my right hon. Friend has a surplus of £15·5 billion. At one bound, he could have achived his stated ambition of reducing the standard rate to 20p—at a cost of some £7 billion—still leaving him a further £8·5 billion for further tax cuts.
  In this century we have not had a Chancellor as successful as my right hon. Friend the Member for Blaby (Mr. Lawson) at introducing tax reductions and tax reforms to help the supply side of the economy. Therefore, it must have been terribly frustrating for him to be unable

  791
  to use the enormous surplus to continue that policy. My right hon. Friend was unable to use that surplus because of the current economic situation.
  In the event, my right hon. Friend is repaying another £14 billion of the national debt. That means that in about three years he will have repaid one sixth of the debt which has accumulated in the past 200 years. I do not believe that we should overlook what is, without doubt, an enormous achievement. For many years, the Government and their predecessors have increased the burden that will be bestowed on our children and grandchildren. The one exception to that practice which was brought to the attention of the House was not a budgeted surplus but one achieved by accident at the end of the year. It is truly wonderful that, at last, we are reducing the burden on future generations.
  Let us consider our economic difficulties. As my hon. Friends have said, it is always easy to be wise after the event. It could be argued that pumping more money into the economy and reducing interest rates prevented a world economic collapse. It could also be argued that the growth in the world economy was so strong that those measures were unnecessary. There is no doubt, however, that our current problems stem from pumping too much money into the system and reducing interest rates. This monetarist Government were not monetarist enough, and they paid the price. Our monetarist stance was too lax even before the October crisis. Therefore, for two years the economy had been growing at an unsustainable rate. It is nonsense to blame the Budget of 1988. That Budget produced a £14 billion surplus, which was fiscally tight.
  The main culprit is monetary policy. To be fair to my right hon. Friend, he has only done what his critics on the Opposition Front Bench have demanded for years— reflated the economy and reduced unemployment. To combat inflation, the Chancellor had to suppress his natural desire to cut taxes in this Budget, and he had to introduce a prudent and cautious Budget. He had to convince everyone, not least the markets, that when he said that the Government's No. 1 priority was to reduce inflation he really meant it. That is the only justification for sacrificing more than £1 billion in revenue by not valorising excise duties.
  We required a Budget for the markets this year and I believe that my right hon. Friend the Chancellor has succeeded so far. The Budget was far more cautious than many people expected. I am sure that the Chancellor hopes, if he gets the right response from the markets, that he will not have to increase interest rates any further. We will have to see whether that happens. However, I am heartened by the fact that my right hon. Friend has made it clear that, if necessary, he will raise interest rates further.
  My right hon. Friend the Chancellor is faced with two significant problems—inflation and the balance of payments deficit. The Budget will undoubtedly help, but it will not solve those problems. The only way to reduce inflation is through further monetary policies. It is a tragedy that, when the Government managed to reduce inflation to 3·5 per cent., they did not continue their policy to get it down to zero. They traded off reflation to bring down unemployment. I hope that the Government have learnt a lesson and will not be diverted from their main aim in future.
  792
  I am worried whether targeting MO is sufficient. I am not certain whether we need to return to targeting broad money, despite all the problems that that would cause.
  A vital factor in reducing inflation relates to wage increases. All private employers should heed the Chancellor's warning that he will not let the exchange rate fall to accommodate real wage increases which are not covered by increases in productivity. The Government also have an important part to play because they are a major employer. Regardless of the political clout of this year's special interest groups, whether they be doctors, nurses or teachers, the Government should not allow themselves to be pressured into allowing wage increases much in excess of 6 per cent.
  I believe that the balance of payments deficit will right itself in due course because this deficit, unlike previous deficits, is mirrored by a private sector deficit and not a public sector one. As hon. Members have said, a considerable proportion of the deficit is made up of imports of capital goods. When they enter production, they should reduce imports and increase exports.
  In the short term, the Government should take a much tougher line with countries which have free access to our markets, but which make it difficult for us to export to them. For example, for 25 years Japan has discriminated against Scotch whisky and that discrimination will be removed only after 1 April. We have a significant deficit with South Korea, but it is virtually illegal to sell Scotch whisky there, other than in tourist hotels. That is not good enough, and retaliatory action must be taken. We believe in free trade in both directions. If we open access to our markets, we demand equal access for our exporters.
  Also, while we have this worrying balance of payments deficit, we should not increase overseas aid, however much the bleeding hearts brigade might plead. Indeed, we might do well to restrict it.
  We must all hope that "Lawson's luck" holds and that the British economy has a soft landing. The Budget has hopefully created the right environment. Backed by firm monetary control, inflation should fall and there should be a reduction in the balance of payments deficit. When that happens, I hope that the patience of the British people will be rewarded and that the Government will once more embark on their avowed policy of reducing taxation. We should have enough of a surplus then to bring the standard rate down to 20p in the pound and to make significant reductions in other areas. On that basis, I strongly support the Budget.
  7.43 pm
  Mr. Tony Worthington: We have heard much from Conservative Members about the importance of incentives and I support much of what has been said. It is particularly important that the less well-off should have incentives. They should have a sense of achievement and a sense of being able to surmount their own economic problems. However, the incentives issue becomes less important when we consider the more wealthy. There appears to be an area of diminishing returns. For many reasons many people who become wealthy cannot benefit or gain any more enjoyment from increased wealth. The wealthy often have the opportunity to set their own wages and incentives and use their own power. In many cases they cannot work much harder. It is ironic that the Prime Minister who claims that it is crucial

  793
  that the well-off should have large tax cuts does not take her own wages. It is clear that the Prime Minister, although she works extremely hard, realises that she cannot work any harder.
  The well-off often gain tremendous benefits from firms. They receive income which is more than a simple salary. In this Budget debate, we should be debating the Government's attitude towards different forms of taxation although I have not heard such a debate so far. Is it true, as we often hear, that the Government favour indirect taxation instead of direct taxation? If so, why? Is it true, as we often hear, that the Government favour regressive taxation rather progressive taxation? If so, why? It seems that there is a move towards more indirect and regressive taxation. That should be justified in this House.
  In 1978, income tax raised one third of all revenue. In 1988–89 it will raise only 24 per cent. In 1985, the poorest one fifth of the community paid 5·9 per cent. of their disposable income in VAT. The best-off one fifth paid only marginally more—7·3 per cent.—of their income. The bottom one fifth paid 29 per cent. of their disposable income in indirect taxation, but the top one fifth paid 21 per cent. There is a built-in unfairness there.
  We have heard today, as we have heard ad nauseam in the past, that we have a tax-cutting Government. If we consider the almost mythical married couple with two children on average income, we discover that in 1978–79 that family paid 35 per cent. of its income in taxation while in 1988–89 it paid 37 per cent. as a result of the shift towards indirect taxation.
  The position for the less well-off is worse than that because the role of benefits is neglected. In 1988–89 a wage earner with four children earning £75 a week, with cash benefits actually received about £123 a week. To increase his income from £123 to £140—an increase of £17—he would have to earn an extra £90 because of the loss of cash benefits. That represents a taxation loss of 80 per cent.
  We all welcome the minor changes in national insurance contributions, but that affects only a tiny part of the poverty trap. At the top end of the scale people are treated even more favourably than would appear from the way in which the Chancellor cut the tax rates to 40 per cent.
  People at the top end are looked after by their employers. It was pleasing to see the reduction in allowances relating to company cars, but that is a small part of what is happening at the moment. Recent surveys show that 84 per cent. of senior managers receive free medical insurance. Many receive life assurance policies, have their telephone bills paid for them or receive money to pay for their newspapers. According to the data, 30 per cent. have their golf club fees paid. Such benefits are not taken into account in the Budget.
  The Paymaster General (Mr. Peter Brooke)rose——
  Mr. Worthington: I cannot give way in a 10-minute speech.
  All of that is a form of middle class, welfare state subsidy that is not taken into account. Others receive share option schemes, and they do not pay the market price. They receive free meals from their companies, whereas a working person will receive only luncheon vouchers to the value of 75p per week before that benefit is taxed.
  What is to be done about that extremely unfair system? We all need incentives, and the greatest benefits should go
  794
  to those who are least well off. I believe in the importance of incentives to working people. I am much attracted to the scheme proposed, admittedly in embryo form, by my hon. Friend the Member for Birkenhead (Mr. Field), which seeks to re-examine the present system of tax allowances. In tonight's debate, we have heard from hon. Members who are hostile to any benefit being given to working-class people but who have urged the value of incentives for savings schemes, for example. If there is no such thing as a free lunch, there is no such thing as a free tax allowance. A free tax allowance is being paid for by someone else, who is often receiving a lower income than the person enjoying the tax allowance.
  At present, about 100 tax allowances are in existence. Major allowances include mortgage relief, while others include car allowances, tax-free pension schemes, business expansion schemes, and subsidies to invest in privatisation. They are all largely biased towards the better off. The value of that tax welfare rises with one's income. There has been a great growth in tax welfare, and one of the things that that has done is to drag poorer people into the tax net.
  The only way to end the drastic poverty trap, with people effectively paying 80 per cent. income tax, is to get rid of that panoply of tax allowances. If that is done, it will be possible to have a standard rate of income tax of around 12p to 15p in the pound. One could then have a progressive tax system based on fairness and linked with that rate of 12p to 15p in the pound. It would also be necessary to increase considerably child benefits, and to do more for pensioners.
  The unfair divide that currently exists between those at the top who are assumed to need incentives and those at the bottom who are clobbered massively for every increase in income that they receive is totally unsatisfactory. One of the ways of ending that, as was suggested by my hon. Friend the Member for Birkenhead, is by re-examining the current system of tax allowances, which probably costs the rest of us about £50 billion. We must then return to what is surely the only fair system of taxation—a system of progressive, not regressive, taxation, under which one pays according to one's ability to pay.
  7.53 pm
  Mr. Neil Hamilton: This has been an interesting debate because we have heard from both the old and the new. It included a contribution from the newest Member of this House, my hon. Friend the Member for Richmond, Yorks (Mr. Hague), whom I congratulate on the excellence of his maiden speech. He was preceded by the oldest Conservative Member of the House—with the exception of the Father of the House —my right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath).
  My hon. Friend the Member for Croydon, South (Sir W. Clark) commented that he wished that my right hon. Friend the Member for Old Bexley and Sidcup sometimes said something good about the Government and that he approved of what they are doing. However, that would amount to an act of apostasy on the part of my right hon. Friend the Member for Old Bexley and Sidcup, so it is not likely that he would do such a thing. To be more even-handed might also give his opinions a spurious credibility. I am delighted that when he speaks to the House he does so only to attack, because that can only diminish the strength of his message.

  795
  If we learned anything in the past year, the two lessons that have come home to us are that monetarism is still alive and well and that the inflation experienced in recent months is a reflection of a laxity in monetary policy, and how potentially dangerous it is to rig exchange rates by intervention in the foreign exchange markets—and how even more dangerous it would be to tie us up in a permanent, formalised system such as the European monetary system.
  I am delighted that in his opening remarks on the Budget my right hon. Friend the Chancellor of the Exchequer agreed, at least partially, with my view, when he said:
  "Inflation is a disease of money; and monetary policy is the cure."—[Official Report, 14 March 1989; Vol. 149, c. 293.]
  I am glad that my right hon. Friend gave that ringing endorsement of what I believe to be the underlying cause of the difficulties we have recently experienced. I endorse his comments that interest rates should stay as high as necessary for as long as necessary. I do not believe that we shall cure inflation unless we adhere to that policy.
  That is not a policy that commends itself to my right hon. Friend the Member for Old Bexley and Sidcup. He comes to the House only when he perceives that the Government are in some difficulty, and feasts upon perceived Government misfortune like a vampire given free run of a blood bank. However, where inflation is concerned, I dare say that we should to some extent listen to him, because he is one of the greatest experts on the causes of inflation—having himself presided over some of the worst bouts of it in living memory.
  On occasions, my right hon. Friend attacked the Chancellor for his excessive reliance, as my right hon. Friend the Member for Old Bexley and Sidcup sees it, on interest rates. He says that the Chancellor has only one golf club. In the period 1972–74, my right hon. Friend used every golf club apart from the right one, played most of the time in the rough, and ended up well and truly bunkered. It ill becomes him to pose now as the club professional. It is my right hon. Friend the Chancellor of the Exchequer who deserves that description.
  My right hon. Friend the Member for Old Bexley and Sidcup has the support of various bodies such as the CBI, which seems to spend all its time whining about matters that are beyond its control and ignoring those within its control, such as wage increases—which have a far greater influence upon the costs of manufacturing industry than interest rates. My right hon. Friend the Member for Old Bexley and Sidcup is supported also by Opposition Members, though the same applies to them as to him. When the Labour party comes to the House to accuse the Government over their record on inflation, that is the nearest thing that one can imagine to Satan rebuking sin.
  Several times during the debate Opposition Members have called for non-inflationary increases in Government spending. I should like to know what is a non-inflationary increase in Government spending, because unless one can achieve a 100 per cent. rate of return, any investment is likely to lead to an increase in total demand—and as excessive demand is the cause of inflation, such investment is likely to stoke the fires of inflation rather than dampen them.
  Another mistake that has been made in Opposition Members' speeches this evening is to say that last year's
  796
  Budget produced the upturn in inflation that we now have, and that the tax cuts it introduced must be held responsible. I do not understand the logic of that argument. Last year's tax cuts totalled £4 billion and there has been an increase in personal sector credit of £40 billion. It sems unlikely, to say the least, that £40 billion extra spending should result from a £4 billion increase in disposable income as a consequence of tax cuts. In an economy now approaching £450 billion, it is impossible to believe that last year's modest tax cuts were in any way responsible for the current inflation upturn.
  The problem is that credit has been allowed to expand too rapidly for too long. I agree with my hon. Friend the Member for Bridlington (Mr. Townend): we were satisfied, when we should not have been, with inflation continuing at 3, 4 or 5 per cent. We lost the momentum of our campaign to squeeze inflation out of the system. Bank credit has trebled in the five years between 1984 and 1989, and broad money has expanded at a rate of about 20 per cent. a year.
  I appreciate the problems relating to M3. World changes in the past eight years—freedom of capital movements and so forth—have made it a less reliable indicator than it was. I certainly do not think, however, that it is right to concentrate our attention on a narrow measure of money—M0—which has nothing to do with credit, when credit is the basis of our current problems. We need a new monetary measure which balances the different kinds of money that are held.
  Although inflation is unacceptably high, we should not overstate the recent increases. I am a zero-inflation man myself, and I should not like it to be thought that I am being soft on inflation, but we should recognise that earnings have risen by 9 per cent. in the past year and productivity by 4 or 5 per cent. The real level of inflation in the economy is still only about 4 to 5 per cent., although it is rising, which is worrying.
  We need a tight monetary policy, but I am sorry that we have such a tight fiscal policy. I believe that the supply side implications of our tax reductions have been the basis of the huge increase in prosperity at all income levels in the past 10 years, and we need to go further in that direction. I want Britain to become a tax haven, and taxation to cease to be a consideration in people's decisions about how hard to work or what jobs they do.
  For all the talk by Opposition Members about cuts in spending in the past 10 years, figures in the Red Book show that expenditure has not been cut as a proportion of GDP. It has started to decline only recently, and I look forward to further falls in the coming years. Table 2·5 shows that the proportion of our national income taken by taxation also has not declined much. When we came into office in 1979 it stood at 35 per cent. of GDP, while the figure for 1988–89 is 37·5 per cent. Of course Government spending is more honestly financed today as a result of the abolition of the public sector borrowing requirement, but I believe that 37·5 per cent. is far too much for the Government to take in taxation, and that significant reductions are needed.
  I recognise that market sentiment was probably against the Chancellor this year but I think that, although the markets had discounted it, there was room for a 1p cut in the basic rate of income tax, and I wish that the Chancellor had felt able to take such action. The problems that we have faced in the past year have been familiar to economic theorists and others for a long time. It is many years since

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  Professor Milton Friedman pointed out the dangers of a discretionary monetary policy. Along with my right hon. Friend the Member for Brighton, Pavilion (Mr. Amery), I hope that we may think again of establishing an entirely independent control of the money supply by privatising the Bank of England.
  In this as in many walks of life, it is politicians who cause the difficulties with which we must grapple. If their hands are kept off the levers, more often than not the market will ensure that the right solution emerges. That will remove the uncertainties and unpredictabilities inherent in the fickle nature of politicians' decisions.
  Limited though its effects may be, I welcome this year's Budget. I regret the necessity to tread water, and I look forward to further progress on tax reductions, particularly income tax reductions, in future years. In the long run, however, the country's prosperity will be assured only if the Government keep firm control of the money supply, inflation and their own expenditure, and reduce significantly the proportion of the national income that they take out of people's pockets.
  8.4 pm
  Mr. Pat Wall: This year, as last year, the Chancellor may have left excise duty on alcoholic beverages alone, but in economic terms the bacchanalian binge for the rich from last year's tax cuts have been succeeded by a Budget of relative sobriety. Even last year's celebrations were enjoyed by a very small section of the population—in the board rooms of banks and finance houses, in the large monopoly companies, by the stock exchange and property speculators and by other assorted rich spivs, by the 1 per cent. of the population who received more in tax cuts than the bottom 70 per cent. of taxpayers—some £1,880 million compared with £1,730 million. Those on more or less average incomes—in terms of prosperity, the medium band—found that their modest glass of wine soon turned sour during the year as inflation, interest rates, rents and mortgages rose for most families.
  As for the 6·6 million earning what by any civilised standards must be regarded as low wages, the most that they have received have been crumbs from the rich man's table, despite the cuts in national insurance payments in this year's Budget which, incidentally, has brought 150,000 people into the payment band for the first time. Any gains can be offset against the plight of those who have to survive on the workfare schemes, which the Government suggest are some kind of training programme, and those who lose the protection of wages councils. Millions of others—the unemployed, the sick, the disabled and many pensioners—have been excluded from any benefits conferred by last year's or this year's Budget.
  It is, indeed, surprising that at the height of what the Chancellor calls the first ever post-war boom this "reforming" Chancellor should find it necessary to eschew reforms. It is even more remarkable that a Chancellor who claims to be tax-cutting should increase the overall tax burden to 37·5 per cent., compared with 34 per cent. in 1978–79.
  The spectre that haunts the Conservative Benches above all else, however, is the balance of trade deficit, which the OECD estimates will rise from its present level of £14·4 billion to £15 billion in 1989 and £16·5 billion in 1990. On the basis of last month's figures projected for a year it could reach around £20 billion.
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  The Government claim particular credit for their period in office. Between 1980 and 1988 exports increased by one third, roughly in line with the performance with the rest of the manufacturing world. At the same time, however, imports increased by two thirds—twice the rate in the leading economies in the Group of 7 and the OECD countries.
  In the so-called first ever boom years since 1985, exports have increased by 12 per cent. and imports by 39 per cent. As my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) pointed out in a recent speech, in the past 12 months exports increased by only 0·5 per cent. while imports increased by 14 per cent.
  That presents a picture of grave deterioration. Between 1985 and 1988—excluding oil and energy products, which are declining in any event—manufacturing exports rose by 23 per cent., while imports rose by 48 per cent., but that is not the only deficit problem that the Government face. In the first nine months of 1988, the net outflow of direct investment amounted to £6·3 billion. To that has to be added £5·6 billion of portfolio investments abroad. If that is rounded up on a yearly basis, the deficit amounts to about £15 billion.
  Taken together, that deficit on trade and capital outflow abroad—about £30 billion—is 6 per cent. of gross domestic product. Sir Donald MacDougall said recently that a £10 billion surplus on the trade account is required to finance the current level of capital outflow. The Chancellor of the Exchequer dismisses that argument. He says that our fiscal reserves stand at £30 billion. That is a dangerous confidence trick to play on Britain's economic wellbeing. It rests on the fact that we attract foreign investment because of our current high interest rates. That has led to an over-valued pound. The result is that exports continue to lag behind imports.
  The Chancellor's confidence trick rests entirely on our ability to attract foreign investment. A lack of confidence in the pound could wipe out our entire capital reserves within a year. There would be a run on the pound, which would have a disastrous effect on Britain's economy, but not just a return to stop-go and stagnation. The IMF would have to intervene. There would be a reversal of the downturn in unemployment and working people's wages would have to be cut. The signs are already there, in the fall in the value of the pound both against the dollar and against the basket of world currencies.
  The Government boast about unit labour costs. In 1986, they rose by 4·8 per cent., compared with 3·1 per cent. in OECD countries. In 1987, the Government achieved a reduction in unit labour costs of 3·1 per cent. against an increase of 3·1 per cent. in OECD countries. In 1988, however, the increase in unit labour costs was 5·7 per cent. and it is still rising, compared with a rate of 3·3 per cent. in OECD countries. During that period, labour costs remained static in America but fell by 4 per cent. in Japan and by 2 per cent. in France. The British economy is not, therefore, competitive. It is not succeeding in world markets or against its major competitors, so any loss of confidence when the pound stands at an artificially high level will lead to a serious deterioration in Britain's economic outlook.
  The British economy is part of the world economy, which is dominated by the problems faced by the United States. The US budget deficit stands at $155 billion, its trade deficit has been reduced but is still about $130 billion, and there are enormous corporate debt problems.

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  Merger mania in America is not properly financed and these are problems facing US savings and loans banks, which are similar to those which face building societies in this country.
  Third-world debt creates great problems and it has been suggested that overseas aid should be cut. During 1988, the net outflow from the poorest countries in the world to the wealthiest industrial countries amounted to £46 billion. That has had political repercussions, with a swing to the Left in the Mexican general election and riots in Venezuela. The Government boast that capitalist policies are being followed in China, Russia and eastern Europe and are the way out of the problem, but the reality of the market economy is that millions of people are starving, the world is divided between north and south and in countries such as Britain there are millions of poor people, with a handful of very rich people growing ever richer at the expense of the poor.
  I am pleased that there have been demonstrations this week in support of a candidate in the Russian parliamentary elections. I refer to Boris Yeltsin in Moscow. Tens of thousands of people demonstrated in the streets, though not in favour of capitalism. Boris Yeltsin says that Russia needs a society where there are no perks for the bureaucrats and no privileges at the expense of ordinary people. He says that land is needed for the peasants and that factories should be controlled and owned by the workers. I believe that the British people, too, will see through their Government's flawed policy and will see the need for change in society. That change will be brought about only by a change of Government. Only in that way will a democratic society be created in which wealth is shared equally and fairly among all.
  8.14 pm
  Mr. Tim Janman: There have been some interesting speeches in the debate. My hon. Friend the Member for Richmond, Yorks (Mr. Hague) made an excellent maiden speech. He has much more common sense than my right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath) who has been a Member of this House for far longer than my hon. Friend the Member for Richmond, Yorks.
  The Budget is contained within a rather dull crown, albeit of necessity, but there are some shining jewels hidden within it. The changes to national insurance contributions, corporation tax, charitable donations direct from the payroll and petrol tax—which will act as a stimulant to motorists to change to lead-free petrol—are examples of those jewels. The most important, in the long term, and the most pleasing aspect of the Budget, is the fact that my right hon. Friend the Chancellor of the Exchequer is coming back on course to monetary policy.
  I was pleased to hear that there are to be targets for MO, and that they will be kept to, and that the annualised rate of growth of MO over the last six months was only 3 per cent. I echo what was said by my hon. Friend the Member for Tatton (Mr. Hamilton), that MO and its close monitoring and targeting are not enough. I hope that when he replies to the debate my right hon. Friend the Chancellor of the Exchequer will provide more detail about how much weight is to be placed on broader supplies of money. That is important. I accept, however, that in a
  800
  free economy—we now have the freest economy in Europe, with the exception of Switzerland—that is more of a challenge than it used to be.
  The changes to national insurance contributions are particularly to be welcomed. They will be good for people on low, below-average and average incomes. I am disappointed, however, that the tax-cutting momentum has not been continued in the Budget. If the Chancellor had taken another penny off the standard rate of income tax, I do not believe that a warning note would have been sounded by the money markets. Tax cuts are not inflationary. It cannot be inflationary to let people keep the money that they earn. Inflation has been caused by the irresponsibly low interest rates of a year or so ago and by too much meddling and interference with the exchange rate, particularly with reference to the deutschmark.
  I echo the comments of my hon. Friends the Members for Tatton and Bridlington (Mr. Townend). Not to reduce tax by 1p in the Budget only gives credence to the economic illiteracy of the Opposition. The 1988 Budget was excellent. It was certainly not inflationary. The figures that were given earlier by my hon. Friend the Member for Tatton prove that point excellently. The standard rate of tax should have been reduced by 1p to show our detractors that we do not intend to be blown off course and that we intend to move away from the "they will" society to which the Opposition wish to return.
  There are many small and medium-size companies in Thurrock and the corporation tax changes will enhance their profitability. That will enhance employment and job security in the area. It is a pity, perhaps, that local government taxes cannot also be related to profitability. Many small businesses, especially those in the retail sector, continue to face huge rate bills. The Government's reform of commercial rates will, I am afraid, fail in many cases to resolve this outstanding issue.
  The Budget is, to some extent, borne out of a climate of inflationary fear. That is good. We must never take our eye off the ball of inflation. The Opposition are hypocritical and confused on the subject and about the right level of taxation. In at least two speeches today, Opposition Members have called for tax cuts that would benefit people on lower incomes, but last year they trooped into the Lobby to vote against 2p off the standard rate of income tax. Any party which, when in government for five years, presided over an inflation rate of 15·5 per cent. is in no position to lecture the present Government about their record on inflation. Nevertheless, like many of my colleagues, I believe that 7·5 per cent. or 8 per cent. inflation is far too high. Our target should be not 5 per cent. or 4 per cent. but nil per cent.
  The economy is fundamentally sound. The statistics prove that. We need only take the example of output per person in manufacturing, or productivity. Anybody can make something. What is important is whether it is made cost effectively. Productivity is the key measure. The increase in productivity in manufacturing during the entire term of the previous Labour Government was 5·8 per cent. Just from 1987 to the fourth quarter of 1988, there has been an increase of 10·3 per cent.—nearly double what was witnessed under Labour.
  We have also built up huge overseas assets, second only to Japan, and a huge fiscal surplus, and public expenditure is going down in real terms. The state is taking a smaller proportion of gross national product. That is something which we have always been elected to achieve.

  801
  Nevertheless, public expenditure is increasing in real terms. There have been no cuts. Public expenditure continues to rise in crucial areas such as health and the fight against crime.
  My right hon. Friend the Chancellor is to be congratulated on a well balanced Budget. It is important that we do not lose the momentum to return to individuals more of the money that they earn so that they can be less dependent on the state. The Leader of the Opposition spoke of our record and said that the Government had created a "me, now" society. His alternative is a "they will" society in which individuals lose their sense of responsibility for themselves and turn to the great they, whether it he local government, central Government, social services or the Department of Social Security to take on their individual responsibilities in life.
  The Government have a duty to ensure that there is a safety net and that citizens do not fall below it, but they also have a duty to maximise the amount of money that people can keep and spend as they wish. Although the Budget is excellent in many other ways, we have lost an opportunity to keep our tax-cutting momentum going.
  8.23 pm
  Mr. Win Griffiths: We are debating a Budget that has been created in the shadow of storm clouds caused by all the miscalculations on which the Chancellor's last Budget was based.
  The Chancellor's forecasting record is such that, if he was an economic analyst or financial executive of a privatised Great Britain Ltd, he would have been sacked a good while ago. His inflation figures proved to be 100 per cent. out, his forecast for the balance of payments deficit was a quarter of what it has turned out to be, and the same is true of the Budget surplus. It is therefore extremely difficult to enter a debate with the Chancellor on the basis of his forecast this year for what is likely to happen in the coming financial year. We have to take his forecasts with a pinch of salt and hope that he has learnt something from all the mistakes of the last year.
  Will the Budget strengthen the economy and create jobs? We have to answer that question with a resounding no. The continuing underlying trend of weakening in the manufacturing sector will continue. During the past decade, Britain's share of world trade has decreased by more than 10 per cent. We have managed to convert a £3·7 billion surplus when Labour was last in power to a £16·4 billion deficit today—some economic miracle. Even allowing for invisibles, which we are often told we have to bear in mind when considering the whole economy, the deficit has doubled.
  Those figures show an appalling performance. The economy has been saved only by the Chancellor being absolutely resolute about pushing up interest rates time and again to bring hot money into the country. We must remember that it can just as easily leave. In the meantime, home owners and businesses, especially small and medium-size businesses, face the difficulty—and sometimes the misery—of coping with the extra costs that high interest rates involve. Those interest rates are the creation of the Chancellor alone as he tries to make up for some of the mistakes of last year's Budget. The Chancellor told us in his Budget statement that he will maintain high interest rates for as long as is necessary. No doubt he will increase them if he considers that necessary.
  802
  At the beginning of today's debate, the Secretary of State for Employment made great play of the Government's job creation record. His view was blinkered and short-sighted in terms of recent history. I intervened in his speech, but he was unwilling to accept the figures that I produced, which are based on answers given by his Department to questions about how the economy has developed.
  I shall remind the House of those rather stark figures. During the past decade, jobs have been created, but they have been created in the south-east, East Anglia, the south-west and the east midlands. In those areas, 580,000 jobs have been created for men and 433,000 jobs have been created for women. They are all full-time jobs. Just over 1 million jobs have been created in the area below a line drawn from the Severn to the Wash. However, in the west midlands, the north, the north-west, Yorkshire and Humberside, Wales and Scotland there are 650,000 fewer jobs for men and 149,000 fewer full-time jobs for women.
  Therefore, as a result of the economic miracle of the past decade, there are almost 800,000 fewer jobs north of the line from the Severn to the Wash. The only bright spot is the west midlands, where there are 8,000 extra full-time jobs for women. Therefore, the Government should not be proud of their record on jobs. By the Chancellor's own admission, the situation is unlikely to improve in the coming year. The squeeze which is meant to affect the southern part of the country is more than likely to affect the north and will mean that while the south gets a cold the north and the west will get influenza.
  We have to take the Chancellor's predictions with a pinch of salt because he was so wrong last year. He predicts that the growth in GDP will slow done from 4·5 per cent. in 1988 to 2·5 per cent. in 1989, and that domestic demand will slow down from 6·5 per cent. in 1988 to 2·5 per cent. in 1989. Yet at the same time he predicts no fall in the current account deficit or import penetration when the economy is supposedly slowing down. He predicts that the more sophisticated GDP deflator will be 5·5 per cent. in 1989–90. That must mean a decline in the rate of growth of earnings and profits which are moving well ahead of inflation at present. It would be interesting to know from the Minister exactly how the Government plan to achieve that target. It is very difficult to perceive that the economy, which is running away on the credit boom, will slow down without an extremely hard landing.
  Much has been said about the extension of PEP; and ESOPs. While ESOPs are to be welcomed, PEPs appear to be an attempt to bribe people to buy shares in water and electricity—a way in which the Government hope to get out of the hole which they have dug for themselves in attempting to privatise water and electricity, neither of which has been accepted by the public as a suitable industry for privatisation.
  After last year's Budget, the Chancellor was hailed as Wonderman, but within six months he has been described as Blunderman—a blunderman who, in his Budget speech last week, appeared to have no confidence in the ability of British business to increase its share of the domestic market or overseas market. If he had, he would be predicting a drop in import penetration into Britain. The Chancellor is so scared stiff of the credit-based consumer boom that he unleashed in his last Budget that for yet another year he has refused to index duties on alcohol and cigarettes, showing the scandalous disregard for the health of individuals that he showed for the health of the nation

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  in his Budgets in the past couple of years. If the Chancellor cared for the nation's health, he would never have ended up with a £14 billion Budget surplus this year or be planning a similar or bigger surplus next year.
  There are ways of spending the Budget surplus without stoking up inflation. For example, having got rid of the earnings rule for pensioners, the Chancellor might have struck an even bigger blow for the standing and the prosperity of pensioners by giving them back the £4 billion that was taken from them in the past decade. Such an investment in the state pension would not have unleashed the inflationary credit boom that we have experienced in the past year. A great deal could have been spent on infrastructure, the Health Service and education, and that would not have been inflationary. By its nature, such spending is used for products made in the home market, and that would have benefited British industry.
  8.37 pm
  Miss Ann Widdecombe: I have listened with increasing disbelief to the catalogue of whining, whingeing, moaning and groaning which has eminated from the Opposition, as I did last year. They really are very bad losers. They recognise the Government's achievements but try to find fault with them. One has to admire their ingenuity in managing to find fault where practically none exists.
  The hon. Member for Banff and Buchan (Mr. Salmond) said that people would regard with nausea the way in which the Government have continued to help the same friends they have helped in the past. That is true. We have consistently helped pensioners and we have done so again this year. The abolition of the earnings rule and the raising of the age allowance presumably are greeted with nausea by the electorate of Banff and Buchan, if we are to believe the hon. Gentleman. We have consistently aided charities and this year we have doubled the limit for charitable giving, yet we have been led to believe that that will be regarded with nausea. We have made the most significant contribution of any Government in the past decade to the financial independence of women, and this year we have helped them through assistance with savings schemes as women are often the savers in the family. Yet that is supposedly greeted with nausea.
  Once again we have helped the lower paid by raising the tax thresholds, and particularly by the reforms of national insurance contributions. We have also helped small businesses through corporation tax changes, so we have helped our friends as we have in the past. I cannot believe that pensioners, charities, women, the lower paid and small businesses regard the Budget in quite the same light as the hon. Member for Banff and Buchan does.
  The hon. Member went on to say that Government policies militate against those living in the north, particularly in Scotland, and favour those in the south. But his examples were rather peculiar. First, he quoted mortgage tax relief. I nearly did a double take because the level of relief is the same whether one lives in the north or south, but property prices are very much lower in the north. I should have thought that the system of mortgage tax relief would encourage the purchase of property in the
  804
  north and migration to the north. That is not a regional policy to be deplored if the hon. Member for Banff and Buchan wants to encourage investment in the north.
  To my utter amazement, having been involved in it recently, the hon. Gentleman then mentioned the Channel tunnel and its attendant rail link. He said that somehow that was of vast benefit to the south. He should try telling that to my constituents who fought hard not to have it. We are witnessing the devastation of the southern environment to bring prosperity to the north.
  We need a regional policy, but it must be a policy connected with regional pay which would finally enable those in the south to recruit as they deserve. It is a poor show for the hon. Member for Banff and Buchan to talk about regional discrimination when we discriminate heavily in favour of Scotland in terms of public expenditure. I am sorry that the hon. Member for Banff and Buchan is no longer in the Chamber to hear what I am saying.
  Another hon. Member who is no longer in the Chamber talked about inflation and what he called the balance of payments crisis and the iniquitous level of interest rates. He appeared to think that such things were indicative of general failure. It is a tribute to the achievements of the Government and of my right hon. Friend the Chancellor that we now get hysterical at the thought of an inflation rate of 8 per cent. Over the past five years the average rate of inflation has been 5 per cent. When the Opposition were in power it was 15 per cent. and they tolerated 20 per cent. or more. They did not appear to regard it with anything like the hysteria they are trying to work up over a mere 8 per cent.
  We are facing the problem of success. The Opposition do not understand that because they never have success and do not understand the problems associated with it. Yes, we have a balance of payments problem but it has not been brought about because exports have fallen. In fact, exports rose by 5 per cent. and are predicted to rise by another 7·5 per cent. We are facing the problems of a prosperous country whose inhabitants can afford to buy overseas. We are facing the problems of prosperity, not poverty. The Opposition know well how to address the problems of poverty and failure because they have had to cope with them for so long. They do not understand the problems of success and they cannot masquerade our outstanding achievements as Government failures.
  The Opposition fail to acknowledge that interest rates have been low for several years. Therefore, when they have to rise, it looks painful. Over the past 15 years, interest rates have been higher than they are now and they have seldom been as low as they have been in the past couple of years. Once again, we are suffering from the reputation we have built ourselves of being able to have low inflation, low interest rates and an extremely successful economy. The slightest blip is greeted by the Opposition as proof that somehow our policies are not working. Our economy has never been more buoyant and we have never had a greater boom.
  The only slight degree of sympathy I felt with anything said by Opposition Members was when the hon. Member for Bridgend (Mr. Griffiths) said that he wished the excise duty had been increased on drink and cigarettes. I sympathise and want to control the consumption of both those commodities. I am particularly alarmed at the increased incidence of uncontrolled drinking among the young and the increase in smoking among young girls.

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  However, we have to be practical. A few extra pence on the price of a packet of cigarettes or a bottle of whisky will not make any real difference to consumption. Somehow, if such commodities are a regular part of someone's life, people seem able to afford them regardless of what happens to taxation. We need a campaign of public information and health education, particularly among the young. We already have some such campaigns but I should like to see more. However, that is a matter for another debate.
  In summary, the Opposition cannot recognise the difference between success and failure. They do not recognise that we have looked after, yet again, those least able to look after themselves. They fail completely to recognise what we have done for the financial and social status of women and for our pensioners. That failure of recognition reflects only their total lack of morale. They know that they could not achieve what we will have achieved and that the electorate will never give them an opportunity to try.
  Mrs. Teresa Gorman rose——
  Mr. Deputy Speaker (Sir Paul Dean): Order. The wind-up speeches are expected at 9 o'clock so the hon. Member for Billericay (Mrs. Gorman) can have a little more than 10 minutes if she wishes.
  8.45 pm
  Mrs. Gorman: I, too, wish to congratulate my right hon. Friend the Chancellor and his predecessor on the amazing changes that they have brought about in our economy in the past 10 years. Those changes have restored people's incentive to go to work and to invest their money in creating new jobs. That is why I am doubly disappointed that the Budget did not do more to help women, who now form a most important part of the labour force. Almost half the people who go to work are women, and many of them have to carry out domestic duties as well. They need help with those duties if they are to fulfil both roles satisfactorily.
  The Budget did not give any tax advantages to women who employ domestic help. In fact, it threatens to make life more difficult for those who employ people at relatively low rates of pay in domestic and other jobs. In a nasty little piece on page 46 of the financial statement, we are told that the Government intend to give the Inland Revenue increased powers to chase up people paying fairly modest sums of money directly to others. It is well known that if one employs domestic help, or a part-time gardener or someone who occasionally cleans out the gutters or the drains and generally helps to support the structure of the family unit, one usually pays in cash and it is usually relatively small amounts of money. It seems, however, that the Inland Revenue intends to beef up its attack on such arrangements. One can imagine the spectacle of a tax inspector with his ear to the letter box listening for the noise of children and perhaps of a babyminder scolding them. He will knock on the door and burst in, waving his little plastic card and asking the babyminder how much she is earning. If it is more than £50 per week, he will demand to know whether the harassed mother is operating PAYE and national insurance deductions. If I were the mother, I would empty the baby's chamberpot over the inspector's head.
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  I wonder whether the new strictures will apply to gentlemen who keep mistresses, which is a favourite topic just now. Will gentlemen who support a woman full-time, wholly and singularly, be visited by the same tax inspectors and be asked whether they are paying national insurance and operating PAYE on the money that they spend in support of their mistresses? That is the kind of legislation that we can well do without. It is a nasty aspect of the growing authoritarianism that we are seeing in taxation legislation.
  The Inland Revenue seems to have the idea that those jobs will exist whether or not it spends its time chasing up employers, but I do not believe that they will. If we make it more difficult to employ a live-in cook, housekeeper, or whatever, fewer people will be employed in those roles. The hassle of operating the bureaucracy involved with those relatively modestly paid jobs puts people off If hon. Members do not believe me, they should go to their local supermarket. One has to pack one's own shopping because the supermarket does not think the hassle of tax and national insurance worth while for relatively modestly paid packers. If one goes to the cinema, one stumbles down the aisle because the cinema owner does not consider it worth paying relatively modest sums and then taking income tax and national insurance to have somebody with a torch to show people to their seats.
  Such jobs will not exist, and nor will people want to do them. When the Inland Revenue goes on the rampage after such groups of people, the people and the jobs usually disappear. A good example of that was when the Inland Revenue had a purge on people doing casual work in horticulture in Norfolk and Suffolk. The casual workers came now and again to carry out carrot topping, leek washing or strawberry picking. The Inland Revenue came with all its battalions to chase those people to find out whether they were paying tax and national insurance on their relatively modest incomes—which, over the year, did not amount to taxable pay, but which in the odd weeks when they were working went over the limit at which tax and national insurance began—and the result was that the crops rotted in the fields that year. The new imposition set out in the financial statement is likely to create a similar situation.
  Miss Widdecombe: Will my hon. Friend give way?
  Mrs. Gorman: No; I have only a short time.
  Such jobs will not exist and that will be a great pity for young people, many of whom come to cities and obtain jobs with accommodation attached by doing domestic work such as helping with children and the household. Such jobs will not exist for many older people who have part-time jobs helping with gardening, cutting grass, washing cars and cleaning out gutters and drains. Such odd jobs will no longer be a useful help to the family, but will disappear as a result of an authoritarian tradition making life more difficult.
  The penalty for being found to be paying somebody more than £50 a week without operating one of the schemes is to be increased from £250 to £3,000. That is enough to scare some people into thinking that they would rather do without the extra pair of hands.
  One of the proposals that I sent to the Chancellor, and which he ignored, along with most other people's, was that it was time we treated the family as a taxable unit—Mr. and Mrs. Average Taxpayer plc—and that jobs necessary

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  to help the family function, including domestic work, should be tax deductible. At present, if one has people to do jobs for one, one has to pay them out of taxed income. I pay £80 for domestic help, spread over two people in the course of a week. I have to pay that out of my taxed income. If I have to start keeping PAYE records and national insurance records, I shall not only have that extra work, but I shall have to earn the money to pay those wages. If I do not have help, my life will be made much more difficult. My right hon. Friend the Chancellor should either say that all those domestic jobs are tax deductible, which they are not at the moment, or he should concentrate on raising the base level at which tax starts to be paid.
  Before the last war, the starting point for income tax was the equivalent of around £30,000 in today's money. We have gradually drawn lower-paid people into the tax net, which has not helped them or those who need assistance. Women are needed in the labour market. We say increasingly that we want their skills and time, yet we are not willing to do much to help them by allowing them to offset the costs of the domestic help that they need. I do not advocate creches, and I do not believe that the taxpayer should be expected to pay, but if a mother goes out to work and puts her baby into a creche or pays for a babyminder or home help, she should be able to deduct that from the money that she earns in the same way as her husband does if he pays for a secretary. If a mother pays for a secretary, she is allowed to deduct that from her earnings as well.
  I hope that my right hon Friend the Chancellor will pay a great deal more attention in the next Budget to the special needs of women. They are wanted back in the labour force as well as being expected to continue their domestic role of supporting their husbands and families and creating comfortable and reasonably organised homes.
  8.55 pm
  Mr. Anthony Coombs: I welcome this cautious, sensible and responsible Budget, the effect of which will be to reduce inflation, improve currency stability and reassure the financial markets. My right hon. Friend is correct to emphasise further improvements in the supply side of the economy by ensuring that the lower rate bands for corporation tax for small businesses move from £100,000 to £150,000. He is also correct to reform the national insurance system and to improve the operation of the earnings rule, so that pensioners are not penalised for working to supplement their pensions.
  However, the Budget will be judged primarily by its success in reducing inflation to the targeted 4·5 per cent. in the second half of next year, thereby reducing retail expenditure, which takes 75 per cent. of our imports. The balance to be achieved is to reduce aggregate demand without damaging investment, which will fuel the 2·5 per cent. growth rate expected in the economy next year.
  The measures taken by my right hon. Friend will work more quickly and effectively than anticipated, for three reasons. First, we hear much about the savings ratio being only 1–3 per cent. of disposable income in the consumer sector, but historical trends show that, when there is higher price inflation, the savings ratio in the consumer sector has
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  been offset by a higher savings ratio in the public sector, which is now 3·3 per cent. of GDP against 1·5 per cent. in 1980, and in the industrial sector, where savings as a proportion of output are 12·1 per cent. against only 8·9 per cent. in 1980. The overall effect is that national savings, as a percentage of nominal GDP, are 23·1 per cent. Despite what we hear about the savings ratio in the consumer sector, it is the highest it has been since 1981.
  Consumer spending will come down for the simple reason that, as the FSBR shows, it has been boosted by high asset values as people have had confidence that house values are rising and so have maintained their consumer spending. Now that the property market is flat, and is declining in some areas, such as London, it will have a significant effect on consumption. It is important to ensure that that fall in aggregate demand does not have an adverse effect on industrial profits. That is why the Confederation of British Industry urged a reduction of corporation tax to 25 per cent.
  It should be remembered that, although there have been huge increases in productivity—ours has grown faster than that of any other industrialised country since 1980— although there was a large increase in output and exports last year and although manufacturing productivity is rising fast, a higher proportion of GDP—3·9 per cent.—goes in corporation tax, which is 2 per cent. in France, Germany and the United States. To that extent, I can see some justification for the CBI arguing for cuts in corporation tax, but I believe that until we can see how fast aggregate demand falls as a result of the increase in the savings ratios, such a policy would be premature and I believe that my right hon. Friend the Chancellor was right to resist it.
  I should like to make one plea in terms of improving the savings ratio over the longer term and to urge my right hon. Friend the Chancellor to consider better treatment for friendly societies which increase self-reliance, enterprise and charitable works among lower income groups. Although I am pleased that share ownership, personal pensions and employee share schemes have been boosted by tax exemptions rising to £4,800 per year for personal equity plans and £2,000 per year for employee share schemes, I should like to know why the tax exemptions for saving plans with friendly societies still remain at a £100-per-year annual premium level.
  I should like to know why the Revenue did not like the innovation of baby bonds that the friendly societies wanted to introduce recently, and I should also like to know why friendly societies, which represent 7 million people, were not allowed to widen their commercial activities as they wanted in the past few years. I understand that they made representations to the Chancellor and to the Economic Secretary in July and November last year, and I believe that they are worthy of consideration.
  9.1 pm
  Mr. Gordon Brown: Today's Budget debate has been distinguished by many excellent speeches, from a former Prime Minister and from three former Treasury Ministers, two from the Opposition and one who is the Chairman of the Select Committee on the Treasury and Civil Service.
  Perhaps most of all, the debate has been graced by a distinguished, memorable and much applauded maiden speech from the hon. Member for Richmond, Yorks (Mr.

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  Hague), the youngest Conservative Member. In making one theme of his speech the interests of the elderly and in putting the case of pensioners so eloquently when he closed his speech he, least of all, could be accused of self-interest, and he found an echo for his sentiments among hon. Members of all parties. I must tell him that when I arrived here as a young Member of Parliament I was described in The Times as being 58 years old and a Labour party veteran. The hon. Gentleman has come here with a great reputation, having given advice to the Prime Minister at the age of 16, and no doubt he has a great future ahead of him. I noticed from his curriculum vitae that he has been a former speech writer for the Foreign Secretary. I can only say that his speech shows that his humour and content have improved immeasurably over the years. We look forward to many distinguished speeches from him as he speaks up, as he did today, so eloquently on behalf of the needs of his constituents.
  This is a Budget at the end of which, by common consent, hon. Members of all parties have said that the biggest beneficiaries are not home owners struggling with high mortgage payments, not mothers facing price rises having witnessed the freezing of child benefit, not pensioners on basic pensions—despite the welcome changes in the earnings rules and the age additions—and not working mothers who have lost out because the Chancellor has refused to remove the tax on workplace nurseries. Despite the welcome changes in national insurance, most of all the beneficiaries are not the low paid because as a result of the combination of the tax and national insurance changes, sombody on £70 per week will receive only about 21p per week extra. As the Chancellor well knows, the biggest beneficiaries are those couples in BUPA, who have private medical insurance and who are over 60, who can receive tax benefits of up to £800 or £900 per year if they use the system properly when one small part of the Finance Bill is passed after we debate it later. The benefit will be £18 or £19 per week for a couple in BUPA, £3 per week for those paying national insurance through those reductions and, as the Chancellor well knows, only £1·50 per week for those earning less than £100 per week, and there will be nothing for many part-time workers. When the choice is between helping the low paid of this country and the rest, it is perfectly clear, as this Budget shows, that the Tories will not help the low paid; they will help those most well off most of the time.
  However, our complaint about the Budget goes deeper than that. The Budget is wrong because it reflects and exposes an economic strategy that is wrong. It is a Budget that does nothing to meet the problems of the present, such as the high interest rates and high mortgage rates that many families and many industries face. It is a Budget that has done nothing to meet the challenges that we must face in the future, such as the skills shortages, the technology bottlenecks, the regional imbalances and the problems that we face as we move towards 1992. Most of all, it is a Budget that will do nothing for the problems of the present and nothing to meet the challenges of the future because it is the Budget of a Chancellor who is imprisoned and haunted by the mistakes of his past.
  Before the Budget we had the highest inflation, the highest interest rates and the highest trade deficit of all our major competitors in Europe. After the Budget, with the Chancellor's new forecasts, we still have the highest inflation, the highest interest rates and the worst trade deficit of our major competitors in Europe. I shall tell
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  Conservative Members what the position in Europe really is. Inflation is at 3·3 per cent. in France; 2·6 per cent. in West Germany; and, outside Europe, it is 1–4 per cent. in Japan and 4·7 in America, but inflation will move to 8 per cent. in the next few weeks in Britain. Interest rates are 10·75 per cent. in America, less than 7 per cent. in West Germany and less than 5 per cent. in Japan, but they are 13 per cent. here—twice the level of the interest rates in both Japan and West Germany.
  We also have a trade deficit that is unparalleled in our history, yet this is the Chancellor who came to the House last March and told us at the end of the Budget debate that he was presiding over an economic miracle. He told us that our prospects had never been better and that we were experiencing an economic transformation, an industrial resurgence, a British renaissance and a miracle that he compared to that of Japan. Even in the past 10 years, the economic performance of Britain has been so unlike that of Japan that Japan has grown at twice the rate of Britain. Japan's rate of investment growth has been twice as high as ours; its growth in industrial production has been four times as high and its growth in manufacturing output has been five times as high. The great achievement of the past 10 years is not that we have managed to rival Japan or West Germany, but that having fallen below France, we have now fallen below Italy on almost every indicator.
  The Britain that the Chancellor tells us will enter the 1990s—[Interruption.] If the Chancellor does not think that that is true, I shall give way to him now— [Interruption.] Yes, the Chancellor will speak later and I hope that he will answer the point because the Common Market's own forecasts not only show that Italy has surpassed us in national income, in growth rate and in the growth of exports, but that over the next year and into 1991 the growth rate of our economy will be slower than that of almost every other economy in the European Community.
  Mr. Ian Taylor: Does the hon. Gentleman recognise that, in terms of investment, Britain's rate of growth is faster than that of any other member of the European Community and that this country in the 1980s compares extremely well with the position when the Labour party was in power in the 1970s?
  Mr. Brown: I shall have to give the hon. Gentleman my statistics because he fails to appreciate what hon. Members of other parties seem to know—that the real value of manufacturing investment is still below that of 1979 when this Government came to power. That is what the latest figures confirm. As for the share of investment in our national income, it is well known that it is lower in Britain than in almost any other European country, with the exception of countries such as Belgium, and I advise the hon. Gentleman that Japan has been investing 30 per cent. of its national income while we have reached the figure of 18 or 19 per cent.
  Not only have we the highest interest rates, the highest inflation and the worst trade deficit of our competitors now, but on the Common Market's predictions our growth rate over the next two years will be lower than that of France and Italy, lower than that of Belgium, the Netherlands and Eire and even lower than in Greece, Spain and Portugal. Those are the facts produced by the European Commission.

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  The hon. Member for Esher (Mr. Taylor) might also be interested in the facts on investment. For 1990 and in the run-up to 1992, it is expected that investment in Spain, Portugal and Greece will grow at roughly three times the rate of investment in the United Kingdom, at 10 per cent. in Portugal, 9 per cent. in Spain, but at about a third of that in Britain, according to the figures that the Chancellor has produced for Britain in his Budget statement.
  Our case against the Chancellor is not only that he engineered a consumer boom based on credit and tax cuts which, without a proper, sustained and adequate increase in investment, was bound to lead to the problems that have been created and was bound to be unsustainable, but that he has failed to learn from his mistakes. Having failed to learn from his mistakes, he now intends to repeat them, and nowhere is that more obvious than in his attitude to what is to happen to the Budget surplus.
  It is a surplus that he did not forecast. It is a surplus that he acquired by selling our national assets and by breaking the link between pensions and earnings. It is a surplus that he admits he cannot use now but which he is to use this year only to pay off the national debt. The worst thing about the surplus—the Chancellor made it absolutely clear in his Budget speech, and perhaps the Prime Minister made it even clearer when she spoke to the Conservative council on Saturday—is that, even when we know that we have 1 million schoolchildren in classrooms that were built before 1914—[Interruption] Many classrooms have been declared by the Audit Commission to be unsafe and should be closed down.
  Dame Elaine Kellett-Bowman: Two schools in my constituency are over 300 years old. One could not find more delightful schools than those.
  Mr. Brown: If the hon. Lady is satisfied with the condition of the schools in her constituency, that is one thing, but the implications in the report by the Audit Commission about the safety risk of old schools being kept open without investment in them are very clear. They worry many Opposition Members.
  It is not only schools that are affected. Two thirds of hospital wards were built in the days of voluntary and charity hospitals. Many of our roads have a life of less than 10 years without proper new investment. We know what must be spent to deal with the problems of pollution and the environment. Most of all, we know that if we do not invest in training and in the supply side of the economy in this decade, the money that we refuse to invest will have to be spent on unemployment and redundancies in the next decade.
  The worrying thing about the Chancellor's surplus is not only that most of the surplus will not be used for public investment now, but that he has absolutely no intention of later using it for proper investment in the economy. As we now know and as was made clear on page 7 of the Red Book, public spending fell in real terms last year. It was £300 million less on the railways alone, when people are concerned about safety. But the answer that the Chancellor gave in his Budget statement is clear. His first priority is not the reduction of the national debt, the reduction of pollution, congestion or the risk to safety on the roads or on the railways, or the reduction of the waiting lists for health services or housing; it is the
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  reduction of taxes for those people who are already wealthy. To discharge the Tory party's historic mission to the very rich of our country, the Chancellor is less interested in paying off the national debt. In future years he will be more interested in paying off his political debts to those who support the Conservative party.
  The 1989 Budget is an interlude between act I of the Chancellor's top rate tax cuts and act II. He is not a Chancellor who has learnt from his mistakes—he is merely giving himself a pause between them. Any other Government would make investment in this country the priority both now and in the future.
  Mr. John Redwood: How does the Labour party propose to contain the inflationary consequences of a major increase in capital investment demand for an over-pressed building industry on top of the large increases already proposed by the Government?
  Mr. Brown: I am grateful to the hon. Gentleman for that intervention. The House will remember his famous statement about this time last year, suggesting that £5 billion to £6 billion in additional public money might be spent. I will not take the hon. Gentleman's lectures on whether public spending is inflationary. The CBI has made it clear that the neglect of investment in this country, skill shortages, congestion and the overheating in the south-east are responsible for much of the inflation. That inflation was not created directly by the Chancellor. I refer to electricity and water price rises and everything else. The neglect of investment in our country is not the only issue in this debate. The issue is the Government's unfair and unjust policies.
  Even after the national insurance changes, 2·4 million of the lowest paid workers will get no benefit at all. Four million will receive anything between nothing and £1·51. For many of them, their national insurance gain will be taken away by losses in family credit and housing benefit. The "tax-cutting" Chancellor ends a Budget by actually putting another 160,000 of our low paid into income tax when, for the low-income people in this country, the share of the bottom 10 per cent. from the Budget gains is only 3 per cent., while for the top 20 per cent. it is about 30 per cent. this year alone. Last year, the Chancellor could give £3 billion to the rich, and give it in March. This year, he can give less than £1 billion to the poor, and give it only in October. With his colleague, he is to remove wage protection for millions of our workers under wages councils in the next few months. This Budget does not correct the errors of last year—it compounds them.
  Is it not typical of the Conservative party that, even when a Budget is advertised as a Budget for the low paid, the higher paid in the country do best out of it at the end of the day? It completes a decade when the gap between rich and poor has been growing at a faster rate than at any time since the war—the rich getting richer while many of our citizens are seeing their living standards fall in real terms. Slowly but surely, the two nations that the Government have created are drifting apart as a result of the Chancellor's policies.
  Just as the Budget does little for low-income Britain, it will do little for any part of Britain. The Chancellor still promises us zero inflation. In the next few weeks, we shall see rates rise by 8 per cent. and electricity charges rise by 6 per cent., making 15 per cent. over a year and a bit. We shall see water costs rise by anything from 10 per cent. to

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  30 per cent. We shall see gas prices rise, television licence fees rise, prescription costs rise, and new health charges introduced.
  By one measure in this Budget alone, we shall see bus fares increase again. What does the Chancellor say to that? I remind him of what he said in his Budget statement last March. When he spoke to the House on that Tuesday, with his usual modesty, he said:
  "it is a testimony to the soundness of our policies that the present strong and sustained upswing, unlike almost all of its predecessors, has not led to any resurgence of inflation."— [Official Report, 15 March 1988, Vol. 129, c. 994.]
  Yet our inflation is above the European average for the fourth year running, twice what it was at this time last year, and higher than when the right hon. Gentleman first proclaimed to the House that he would eliminate it. As he tells us in his Budget forecast, while France's inflation will be 3 per cent., Germany's less than 3 per cent., and Japan's 2 per cent., his great success will be to have brought inflation to 5·5 per cent.
  Every forecast that the Chancellor has made has gone wrong. His forecast about prices, the deficit, the money supply, savings—all were wrong. Even his prediction that this would be the first Budget to be televised was wrong, and how fortunate he is in that respect. Perhaps his worst forecast of all is that by staying on for a year as Chancellor after the Budget last March, when he finally goes to the City his market value will somehow be enhanced. One test of a successful Tory Budget was laid down by no less an authority than the Prime Minister herself a few years ago. She said:
  "The markets have already given their verdict. Already there has been a welcome fall in interest rates and mortgage rates."
  On top of price rises, home owners in this country are facing mortgage payments that have risen on average by £40 per month, by £50 for young home owners, and for home owners in the south-east they have risen by £70 since the Chancellor's last Budget. The Governor of the Bank of England, who wrote that celebrated letter to the Chancellor a few weeks ago, in a public speech only a few days ago said that the mortgage and credit card debts that we face in the 1980s remind him of the problems with Third-world debt in the 1970s.
  When the Governor talks about the further squeeze on household finances, no wonder the Prime Minister is no longer talking about a Chancellor who is brilliant and marvellous and wonderful; no wonder she now appears hardly able to bear to mention his name. A quarter of a million people are estimated to be in arrears, and 500,000 are having to turn to the citizens advice bureaux for advice about their mortgages. There have been 20,000 repossessions—a figure that the Governor of the Bank of England, in his speech, said would undoubtedly rise. Perhaps the one repossession with anything to offer the nation—the eviction of the Chancellor from 11 Downing street—cannot be expected immediately, not because he has been doing well but because his potential successors, the Secretary of State for the Environment and the Secretary of State for Energy, have been doing so badly.
  Let me tell the Chancellor something about the current thinking of his friend Sir Alan Walters. I understand that at a meeting at the Mansion house—about 300 people were charged £100 a time—Sir Alan gave his verdict on the Budget. I understand that he praised what he called the architect of Britain's economic revival—the Prime Minister. The Chancellor will be pleased to know that Sir
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  Alan welcomed the Budget too. But let me tell the Chancellor that Sir Alan praised the Budget not because interest rates would come down but because they would stay up, because he believed that recessions should not be avoided; they can be good for the economy. No doubt the Chancellor cannot wait to have the benefit of Sir Alan's full-time advice.
  What of the trade deficit? Predicted to be £4 billion last year, it was £11 billion by the time of the .Autumn Statement, and is now £15 billion. I suppose the good news is that it has stabilised; the bad news is that it has stabilised at £15 billion. The Chancellor still calls this a problem of success—freak figures caused by an investment boom. It is a second-grade problem, self-correcting, he tells us, but it is a problem big enough now for him to seek to doctor the statistics. All that is needed to convince us that a real problem exists is a multi-million-pound advertising campaign, led by Lord Young, telling us that it has been solved, or an announcement from 10 Downing Street that the Prime Minister is about to take personal charge.
  If the Chancellor does not think that the trade deficit is a problem, what of other Ministers? I have here a press release from the tourism Minister. Entitled "Your Country Needs You", it says:
  "Hopefully the British public will increasingly appreciate that holiday taking in the United Kingdom is not only a stimulating and enjoyable experience but will help our balance of payments as well.
  With the cumulative tourism deficit of nearly 1·8 billion, compared with £1 billion for the same period last year, perhaps the time has come to say to the British holidaymaker
  "Your country needs you."
  A problem not serious enough to delay the Chancellor is sufficiently worrying to the tourism Minister to prompt him to tell millions of holidaymakers that their country needs them—not in Majorca but in Margate, not in Benidorm but in Blackpool—with all the impact that that would have on his £15 billion deficit.
  Perhaps the Chancellor remembers what the Foreign Secretary, who was then Chancellor, said in the first Budget of this Government 10 years ago. No one supported the then Chancellor more strongly than the current Chancellor. No one was as great an advocate of his policies as the right hon. Member for Blaby (Mr. Lawson).What did the now Foreign Secretary tell us in that Budget speech? He said:
  "Progress internationally … will not cure the deep-seated weaknesses of own domestic economy. Nor will North Sea oil.
  He went on to say that North Sea oil
  "must not be allowed to conceal the grim truth about what has been happening to the balance of our own trade, particularly in manufactured goods." [Official Report, 12 June 1979; Vol. 968, c. 238.]
  A problem that the current Chancellor says is unimportant was one of the themes of the Budget of 1979. Should we now conceal what the present Foreign Secretary called the grim truth when we have a trade deficit of £15 billion—a £15 billion deficit in manufactured goods? The truth is that the Chancellor has no policy to sort out the problems of the trade deficit. The truth is that the trade deficit will be with us for many years to come if his policies continue. No industry is better off as a result of the high interest rates and the high exchange rate that the Chancellor is pursuing. No community is better protected. No family feels at the moment that it is doing better.
  But is it not the saddest of all commentary on this Government that Ministers could complete a National

  815
  Health Service review—could look at the needs of the service; could look at the 130,000 people on the waiting lists for hip joint and other orthopaedic operations; could look at the 70,000, mainly pensioners, on the waiting lists for cataract and other eye operations; could look at the shortage of nurses and doctors and at the huge repair bills we face—and decide that the first priority for this Budget, the consideration above all others, should be the needs of those who are already wealthy enough to afford private medical insurance in the first place?
  The death grant for pensioners has been abolished to save 18 million, housing benefit has been cut, eyesight test charges introduced, dental charges for pensioners introduced, the link with earnings not restored, but somehow £40 million is available to give private medical insurance tax relief to those who are already rich enough to afford such insurance. No wonder BUPA ran an advertising campaign last week. I understand that the Chancellor is well within his rights to complain to the Advertising Standards Authority, not because the photograph gives a false impression of him, but because the advertisement gives a false impression of who was the author of the Budget proposal. It is a proposal which the Chancellor did not originate, which he does not support, which he could barely mention when he made his Budget speech last Tuesday, and which he knows will cost a lot in 1990, and a lot more in the years to come. It is the policy not of the Second Lord of the Treasury but of the First Lord of the Treasury.
  Last year the Chancellor was overruled by the Prime Minister on the question of the exchange rate. Later he was overruled on interest rates. This year he has been overruled on the most controversial item—the £40 million for private medical insurance. Perhaps next year, on the morning of Budget day—in the interests of accountability, if for no other reason—the press should be invited to a photo opportunity in which the Prime Minister will take her Chancellor for a short walk in St. James's park. This proposal is the ultimate in redistribution. It is not the rich supporting the poor, but now the poor compelled to support the rich. The more one buys the more subsidy one receives: "The richer you are, the more you can get. If you are rich, you will be treated, while others have to wait." In fact, this tax relief is a unique and indefensible device whereby the queue is compelled to subsidise the queue jumper.
  We now know what the Prime Minister meant when she talked at the general election about private medical care. She wanted the doctor of her choice, the hospital of her choice, the time of her choice and the tax relief of her choice—not for our health care to be safe in her hands, but for her private health care to be save in ours. In a civilised society, the £40 milion going to those who do not need it should go to those who do. That is what the Labour party stands for and that is what the whole country supports.
  The only role that the Government are now enthusiastic about for public spending is that it should be used not to extend the rights of the many but to shower privileges on the few—business expansion subsidies from public funds to create top-rate tax shelters for owners of private rented property, PEP subsidies from public funds to create tax
  816
  shelters for those who already have considerable shares and BUPA-style subsidies from public funds to create tax shelters for owners of private medical policies.
  Does the Prime Minister not realise that no matter how many private schools, private hospitals and private roads she creates, there will still be a need in the public sector for decent schools, proper hospitals and adequately-funded community services for the vast majority of the people?
  After 10 years during which our growth rate has been half that of Japan, we have been manufacturing and producing less than Italy, our economy has invested less of our national income in ourselves than even Spain and Portugal, we are investing less of our national income in innovation than Taiwan and we are investing a smaller share of our national income in education and training than Korea. After 10 years, there is more and worse poverty throughout the country. Even in the past 12 months, housing benefit has been cut, child benefit frozen, new charges introduced, the poll tax imposed in Scotland and thousands of teenagers have been denied any help.
  In 10 years, to make a few individuals richer, the Prime Minister and her Ministers have been prepared to make all our communities poor. It is not just our Health Service, our roads and our railways that are unsafe in their hands; it is not just our environment, our water and even our food that is unsafe in their hands; it is not just our children's education that is unsafe in their hands; the whole government of this country is unsafe in their hands. A Budget that should have been preparing us for the challenges of the 1990s leaves us paying the price for the problems that the Chancellor created in the 1980s. We need a Budget for Britain—a Budget for fairness, efficiency and investment. For that, the people of this country will have to look to Labour.
  9.31 pm
  The Chancellor of the Exchequer (Mr. Nigel Lawson): I should like to begin by congratulating my hon. Friend the Member for Richmond, Yorks (Mr. Hague) on an outstanding maiden speech. It was no surprise to those of us who were present when, at the age of 16, he made that remarkable and precocious speech in the economic debate at the Conservative party conference of 1977. As he generously pointed out, he follows a distinguished predecessor at Richmond. I am sure that his future career will be equally distinguished and we greatly look forward to hearing him again.
  We do not greatly look forward to hearing again the sort of exhibition that we heard from the hon. Member for Dunfermline, East (Mr. Brown), who displayed a degree of economic illiteracy which even he has not plumbed before. He went on about the need for increased public expenditure from a surplus which, if his policies had been in operation, would never have existed in the first place. When asked, in the only intervention on his speech, by my hon. Friend the Member for Wokingham (Mr. Redwood) the clear and simple question of how much extra public expenditure he was advocating, he was wholly unable to answer. He confirmed by his speech that the Opposition have a complete policy vacuum. It was clear from the latter part of his remarks, as his side recognises, that he is living in a fantasy world entirely of his own.
  We also had a speech from the leader of the Social and Liberal Democrats. I am glad that he is in his place. He told us—I took this down—that "People want to be

  817
  brought together." It was, alas, a wasted plea, because the right hon. Member for Plymouth, Devonport (Dr. Owen) was not in the Chamber to hear it.
  We also had a thoughtful contribution from my right hon. Friend the Member for Brighton, Pavilion (Mr. Amery). My hon. Friend the Member for Croydon, South (Sir W. Clark), in a powerful speech, mentioned the further help that this Budget provides for charities and charitable giving. It is a striking fact that, over the past 10 years, giving to charity has more than doubled in real terms. That is not the hallmark of a selfish society.
  My hon. Friend the Member for Croydon, South also asked about the relative growth of imports of capital and consumer goods. I can tell him that, in each of the past two years, imports of capital goods have risen considerably faster than imports of consumer goods. This is, of course, closely related to the huge investment boom that we have been enjoying, to which I will turn later.
  My right hon. Friend the Member for Worthing (Mr. Higgins) also welcomed the Budget, as did many other of my hon. Friends, and he followed this up with a number of more or less technical questions about life the other side of the looking glass as it were, with a substantial public sector debt repayment in place of a substantial public sector borrowing requirement. I look forward to discussing these matters with the Select Committee which he chairs with such distinction.
  It is a remarkable fact that, after four days of debate on a Budget containing so many measures that the Finance Bill is likely to be the longest ever, all that the Opposition have found to criticise is the provision of tax relief for medical insurance premiums for the elderly. That was all that they were able to go on and on and on about—and that was, of course, something that had already been announced by my right hon. Friend the Secretary of State for Health, a couple of months ago, in the context of the Government's plans for the National Health Service. It accounts in 1990–91 for some £40 million out of total remissions of £3,500 million in that year.
  I shall not tonight detain the House with a list of all the many other measures in the 1989 Budget, but I do propose to draw attention to some of them.
  Foremost among them is the major reform and reduction of employees' national insurance contributions. This was supported by such unlikely bedfellows as the Institute of Directors and the TUC, and it will achieve two important objectives. First, it will either remove altogether or greatly reduce the present serious work disincentive of ultra-high marginal rates at particular points at the very lowest end of the earnings scale. Secondly, it will mean that, from October, some 15 million employees earning over £115 a week—which is well below half average earnings—will be £3 a week better off. This is a substantial measure by any standards, as its cost shows—some £2¾ billion in a full year.
  Then there is the abolition of the earnings rule for pensioners. This has been widely welcomed on all sides. It, too, is a reform which will remove not merely an injustice, but also a major work disincentive, at a time when, for demographic reasons, the demand for older workers to stay on beyond retirement age is likely to become steadily greater.
  Then there is the major reshaping of the tax relief for pensions, designed in particular to place for the first time a limit, albeit a generous one, on the amount of tax relief any pension can attract, and at the same time to encourage
  818
  still further the provision of personal pensions, which my right hon. Friend the Secretary of State for Employment spoke about in his speech at the opening of the debate today. The new pensions package will not only be more equitable, but it will also encourage both greater flexibility and greater personal responsibility in private provision for retirement.
  All this has to be seen in the context of the important further package of measures to encourage wider share ownership. It is clear from the response already that the new and improved rules for personal equity plans, in particular, will ensure their future success and the steadily growing importance of PEPs as a home for the savings of the people.
  Wider share ownership will, in time, reverse the steady drift to ever greater institutional ownership of British industry; it enables the people of the country to secure a direct stake in the success of British business; it provides the best form of worker participation; and it sounds the death knell of Socialism.
  But I would add just this. It is important that the growing public desire to own shares, and the further assistance provided in this Budget, are supported by the stock exchange as it moves to a paperless trading system. I call upon the stock exchange tonight to ensure that the needs of the small investor are fully met in the new system.
  Meanwhile, these Budget changes—and there are many others too: reforming the taxation of life assurance, simplifying the taxation of close companies, and reducing the burden of corporation taxes for smaller firms—add up to our eighth successive tax-cutting Budget.
  What a contrast with Labour, when Budget day was approached with dread and apprehension. The question that everyone was asking then was what tax was going to go up, would it be income tax or something else, and what new taxes would be introduced. Would it be capital transfer tax, the national insurance surcharge or what else? That was the question then.
  Moreover, we have achieved our eighth successive tax-cutting Budget while securing a massive improvement in the public finances, with a surplus, or debt repayment, this year of no less than £14 billion and a further £14 billion repayment in prospect for the year ahead. As a share of GDP, debt interest in the coming year is set to be at its lowest since 1915.
  So, unable to attack this year's Budget, the party opposite—we heard more about it tonight—has spent much of its time attacking last year's Budget. Well, I know the Opposition did not like it—they made that abundantly clear at the time—but they will have to grit their teeth and live with it because that Budget has happened and every one of the reforms and reductions it introduced remain on the statute book and will continue on the statute book. Nothing in it has been rescinded or reversed, nor will it be. As a result, the benefits of that Budget will continue to flow in the years that lie ahead.
  Mr. Thomas Graham: The Chancellor will know that, this week, one of the Scottish newspapers spoke about how many people were getting into serious debt because of the Chancellor's policies and were going to bankruptcy court to be declared bankrupt. They are probably taking the advice of the Prime Minister: when the letter comes through the door

  819
  they "bag it and bin it" as that is the only way they will win it. The Chancellor has introduced mad policies that have not helped the Scottish people.
  Mr. Lawson: I clearly should not have given way.
  I know there are some who seek to attribute to last year's Budget responsibility for the increase in inflation that subsequently emerged. That wholly misunderstands both the role of fiscal policy and the time lag between cause and effect in economic affairs. Let us just look at what the OECD, an international organisation frequently quoted by the Opposition, and which does assign a rather greater short-term importance to fiscal changes than I would do, has to say. After studying fiscal policy in all the major industrial nations comprising the G7, and making what it considers the proper cyclical adjustments, the OECD has concluded that the United Kingdom, in 1988, tightened its fiscal policy more than any other country, and has the tightest fiscal stance in the entire G7.
  The Opposition really cannot have it both ways. They cannot say at one and the same time that last year's Budget, which produced a surplus of £14 billion, was reckless, and that this year's Budget, which is set to achieve an identical surplus, is too cautious. No. The plain fact is that the temporary re-emergence of rising inflation has nothing whatever to do with last year's Budget. It has a great deal more to do with the worldwide loosening of monetary policy in the wake of the stock market crash of October 1987. That perhaps is why the rise in inflation is a worldwide phenomenon, and it is worth noting in this context that commodity prices too have been rising, with metal prices twice what they were two years ago.
  Meanwhile, the remedy, a sharp rise in interest rates to tighten monetary policy, has duly been applied. Yet despite the fact that the Opposition Front Bench dimly recognise the monetary nature of the inflationary threat —at least, that, I take it, accounts for the constant references of the right hon. and learned Member for Monklands, East (Mr. Smith) to the credit boom—despite that dim recognition, all they have to offer on this front is a call for lower interest rates and indeed a lower exchange rate. How they imagine lower interest rates would deter borrowing beggars belief. The truth is that what they put forward is an inflationists' charter, for the simple reason that the Labour party is the party of inflation, just as it is the party of high taxation—it always has been and always will be. [Interruption.] They do not like this. Let them just look once again at their record when they were last in power. Theirs was an inflation rate which averaged more than 15 per cent. for the whole of their term of office, so I am certainly not going to take any lessons from them about inflation.
  Ten years ago next week, this House debated a motion of no confidence in the then Labour Government, whose passage brought about the then Government's downfall. In that debate, in a desperate attempt to save himself, the then Prime Minister, the noble Lord Callaghan, pledged himself to do better in future in these terms:
  "There is a bold and ambitious target, to which we have set our hands, of working to get inflation below 5 per cent. in the next three years. That is the objective."—[Official Report, 28 March 1979; Vol. 965, c. 477]
  During the whole of the time that I have been Chancellor, a period slightly longer than the full term of the last Labour Government, inflation has indeed
  820
  averaged below 5 per cent.—Labour's "bold and ambitious target" which they never got within a million miles of achieving, nor would they have done, as the people of Britain well understood. Even now, when inflation has temporarily risen above that mark, its underlying level is well below the underlying level of inflation in the best month that Labour ever achieved.
  Nor has our success been secured at the price of slower economic growth. Nothing could be further from the truth. During the whole of my period as Chancellor so far, economic growth in Britain has been well over half as much again as what it was under Labour, which, as I have already pointed out, was a roughly comparable period of years.
  Indeed, it is worth looking, for an overall picture, at the amount by which the rate of inflation exceeded the rate of growth over the two periods. Under Labour, the rate of inflation exceeded the rate of growth by 13½ per cent. During my time as Chancellor, the difference has come down to 1½ per cent. That is a measure of the difference. Admittedly, economic growth is now set to slow down for a year or two, but the lower growth now projected over the next couple of years—1989 and 1990—is still higher than the average rate of growth under Labour. Labour certainly had many crises to grapple with. In fact, there was hardly a moment when they did not have a crisis. But I have to admit that one problem it never had to worry about was rapid economic growth. Indeed, during the 1970s Britain was the slowest growing economy of all the main European nations. During the 1980s we have had the fastest growing economy of all the main European nations.
  This transformation has seen unemployment fall by a million in less than two years since the last general election, and the number of people in work the highest in our history. There was a time when the Opposition professed to care about unemployment. It is quite clear from their lack of enthusiasm when unemployment comes down that they could not care a fig.
  Of course the dramatic improvement in the performance of the British economy has been based on an equally dramatic improvement in productivity. In 1980, the Brookings Institute in Washington produced a gloomy report on the British economy, which concluded with these words:
  "The studies in this volume indicate that Britain's malaise stems largely from its productivity problem, whose origins lie deep in the social system."
  It was not the social system which was at fault, but the Socialist system. With the jettisoning of the culture of Socialism in favour of the enterprise culture, we have seen Britain leap from the bottom of the manufacturing productivity growth league in the 1970s to the top in the 1980s.
  There has been a similar transformation in investment, about which Opposition Members prate so much. Nothing provides clearer evidence of the way in which the Labour party is completely out of touch with what is really happening in Britain today than its failure to comprehend the truth about investment. That was shown, once again, by the response made by the Leader of the Opposition to the Budget itself last Tuesday, when he said:
  "After 10 years … the proportion of total investment in GDP is lower than during any year under the last Labour Government."—[Official Report, 14 March 1989; Vol. 149, c. 313.]
  That is what he said. [HON. MEMBERS: "Hear, hear."] Opposition Members cheer. In fact, at almost 21¾ per

  821
  cent., the truth is that the proportion of total investment in GDP is higher than during any year under the last Labour Government. Those are the facts.
  Nor is that all. Business investment—public and private sector combined—is now at its highest proportion of GDP ever—the highest ever. Whereas under Labour total investment grew scarcely at all, and well below the growth of consumption, over the past seven years investment in this country has grown more than twice as fast as consumption—something that only Japan among the major nations even so much as approaches. And not only is investment in Britain at an all-time record high and growing fast. Its quality has improved immeasurably, as evidenced by the dramatic improvement in the return on capital.
  What about public sector investment, about which the hon. Member for Dunfermline, East waxed so lyrical, and with such hypocrisy? Take investment in the railways. Under Labour, a rise of only 8 per cent. in real terms. Under this Government, four times as much—up 32 per cent. Or major roads: under Labour, a cut of 41 per cent. —that is the truth; under this Government, up by 30 per cent. Or water: under Labour, a cut of 25 per cent.; under this Government, up by 50 per cent. Or hospitals: under Labour, a cut of 30 per cent.—a cut; under this Government, up 31 per cent. in real terms. And of course private sector investment is at its highest level ever—not merely in absolute terms, but as a share of GDP. So much for Labour's humbug, hypocrisy and sheer ignorance about investment.
  Mr. John Smith: I am grateful to the Chancellor for giving way at the point where he talks about humbug and hypocrisy. Why is it that poor old-age pensioners have to be put through invidious means tests as to income and capital for income support and housing benefit, while well-off people will be subjected to no test whatsoever and will be subsidised by the poor for private medical insurance? Why does the right hon. Gentleman defend that?
  Mr. Lawson: Here we are again—this complete obsession with tax relief for private medical insurance, and no answer at all about investment, which is at the heart of our economic success.
  I urge Opposition Members, if they really wish to understand what is happening in Britain today, to listen to the informed voice of the CBI. I refer to their chief economic adviser Professor McWilliams, who recently gave a lecture under the auspices of the CBI entitled "The Renaissance of British Management". Needless to say, it was barely reported, but I warmly commend it to the House—not least to the party opposite, whose need for economic education is palpable. Let me quote a few extracts.
  "United Kingdom growth in the 1980s can now be seen to have been faster"—
  [Interruption.] Oh no, they do not like anything about the success of the British economy. The cannot stand the success of the British economy. I will start again:
  "United Kingdom growth in the 1980s can now be seen to have been faster than in any other recent decade and the comparison with other countries now shows a fairly substantial outperformance by the United Kingdom in the latest decade, with the United Kingdom growing over a fifth faster than the average of the other economies."
  He went on:
  822
  "In the first half of the 1980s, the proportion of United Kingdom investment in plant and machinery devoted to computers rose from 10 per cent. to 20 per cent.—a rise on a much faster scale than anywhere else in the world."
  He continued, after this thorough study:
  "The United Kingdom has been an economic success.… and I believe that the success will continue."
  Mr. John Smith: The Chancellor, as he well knows, is responsible for everything in his Budget, whether he likes it or not. Will he please tell us the public policy justification for the absence of a means test for private medical insurance for the rich, and tell us why the rest of us should pay the Prime Minister's bills?
  Mr. Lawson: Is the—[HON. MEMBERS: "Answer."] Is the right hon. and learned Gentleman suggesting that tax relief should be subjected to a means test? Is he going to suggest that mortgage interest relief should be subjected to a means test? Is he? Is he? Answer that. Perhaps he can answer that.
  Mr. Smith: I asked a perfectly simple question. We have been lectured about the targeting of benefit. Why is this benefit not targeted? All the poor are targeted. Why are the Conservative party's clients not targeted?
  Mr. Lawson: Not only was the right hon. and learned Gentleman totally unable to answer my question, but he was also totally unable to distinguish between the remission of taxation and an increase in public expenditure. He was quite unable to understand the difference between them.
  Let me return to the Budget. It has above all been a prudent and cautious Budget. [Interruption.] Perhaps, Mr. Speaker—[Interruption.]
  Mr. Speaker: Order. Mr. Chancellor of the Exchequer.
  Mr. Lawson: They cannot take it, Mr. Speaker. That is the trouble—they cannot take it.
  It has above all been a prudent and cautious Budget —perhaps even more prudent and cautious than was strictly necessary, but economics is an inexact science at the best of times and that was clearly the right direction in which to err.
  It certainly appears to have struck terror into the Opposition. This could not have been made clearer than in the intervention by the Leader of the Opposition right at the end of the speech by my right hon. Friend the Chief Secretary last Wednesday. The Leader of the Opposition, with desperation manifest in his voice, said this:
  "The right hon. Gentleman has referred several times to the great virtue of using the Budget surplus to repay the national debt. Can he confirm that that will continue to be an objective of the Government, should they have surpluses, and that it will continue until the next general election and not be impeded by any desire that the Government may have to make a tax cut before the next general election?"—[Official Report, 15 March 1989; Vol. 149, c. 435.]
  Well, I have given the right hon. Gentleman's question the most careful consideration. It would not, of course, have occurred to me to think in terms of the next general election, but since the right hon. Gentleman has raised the matter, I have to inform him that I regret I cannot rule out the future use of the current surplus to reduce the burden of taxation. Indeed, it is the Government's policy to do just that.
  In short, this Budget is a Budget which, in the firm support it gives to the defeat of inflation by monetary policy, provides a solid base for further economic success,

  823
  including progress to a basic rate of income tax of 20p in the pound, in the years that lie ahead. Once again, I commend it to the House.
  Question put:—
  That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance; but this Resolution does not extend to the making of any amendment with respect to value added tax so as to provide—

  (a) for zero-rating or exempting any supply;

  (b) for refunding any amount of tax, otherwise than in a case where the amount has been paid by reason of a mistake;

  (c) for varying the rate of that tax otherwise than in relation to all supplies and importations; or

  (d) for relief other than relief applying to goods of whatever description or services of whatever description.

  The House divided: Ayes 341, Noes 222.

  Division No. 122]

  [10 pm

  AYES

  Adley, Robert

  Carlisle, Kenneth (Lincoln)

  Aitken, Jonathan

  Carrington, Matthew

  Alexander, Richard

  Carttiss, Michael

  Alison, Rt Hon Michael

  Cash, William

  Allason, Rupert

  Channon, Rt Hon Paul

  Amery, Rt Hon Julian

  Chapman, Sydney

  Amess, David

  Chope, Christopher

  Amos, Alan

  Churchill, Mr

  Arbuthnot, James

  Clark, Dr Michael (Rochford)

  Arnold, Jacques (Gravesham)

  Clark, Sir W. (Croydon S)

  Arnold, Tom (Hazel Grove)

  Clarke, Rt Hon K. (Rushcliffe)

  Ashby, David

  Colvin, Michael

  Aspinwall, Jack

  Conway, Derek

  Atkins, Robert

  Coombs, Anthony (Wyre F'rest)

  Atkinson, David

  Coombs, Simon (Swindon)

  Baker, Rt Hon K. (Mole Valley)

  Cope, Rt Hon John

  Baker, Nicholas (Dorset N)

  Cormack, Patrick

  Baldry, Tony

  Couchman, James

  Banks, Robert (Harrogate)

  Cran, James

  Batiste, Spencer

  Critchley, Julian

  Beaumont-Dark, Anthony

  Currie, Mrs Edwina

  Bellingham, Henry

  Curry, David

  Bendall, Vivian

  Davies, Q. (Stamf'd & Spald'g)

  Bennett, Nicholas (Pembroke)

  Davis, David (Boothferry)

  Benyon, W.

  Day, Stephen

  Bevan, David Gilroy

  Devlin, Tim

  Biffen, Rt Hon John

  Dicks, Terry

  Blackburn, Dr John G.

  Dorrell, Stephen

  Blaker, Rt Hon Sir Peter

  Douglas-Hamilton, Lord James

  Body, Sir Richard

  Dover, Den

  Bonsor, Sir Nicholas

  Dunn, Bob

  Boscawen, Hon Robert

  Dykes, Hugh

  Boswell, Tim

  Eggar, Tim

  Bottomley, Peter

  Evans, David (Welwyn Hatf'd)

  Bottomley, Mrs Virginia

  Fallon, Michael

  Bowden, A (Brighton K'pto'n)

  Favell, Tony

  Bowden, Gerald (Dulwich)

  Fenner, Dame Peggy

  Bowis, John

  Field, Barry (Isle of Wight)

  Boyson, Rt Hon Dr Sir Rhodes

  Fishburn, John Dudley

  Brandon-Bravo, Martin

  Fookes, Dame Janet

  Brazier, Julian

  Forman, Nigel

  Bright, Graham

  Forsyth, Michael (Stirling)

  Brooke, Rt Hon Peter

  Fowler, Rt Hon Norman

  Brown, Michael (Brigg & Cl't's)

  Fox, Sir Marcus

  Browne, John (Winchester)

  Franks, Cecil

  Bruce, Ian (Dorset South)

  Freeman, Roger

  Buchanan-Smith, Rt Hon Alick

  French, Douglas

  Budgen, Nicholas

  Fry, Peter

  Burns, Simon

  Gale, Roger

  Burt, Alistair

  Gardiner, George

  Butcher, John

  Gill, Christopher

  Butler, Chris

  Gilmour, Rt Hon Sir Ian

  Butterfill, John

  Glyn, Dr Alan

  Carlisle, John, (Luton N)

  Goodhart, Sir Philip

  824

  Goodson-Wickes, Dr Charles

  Luce, Rt Hon Richard

  Gorman, Mrs Teresa

  Lyell, Sir Nicholas

  Gorst, John

  McCrindle, Robert

  Gow, Ian

  MacKay, Andrew (E Berkshire)

  Grant, Sir Anthony (CambsSW)

  Maclean, David

  Greenway, Harry (Ealing N)

  McLoughlin, Patrick

  Greenway, John (Ryedale)

  McNair-Wilson, Sir Michael

  Gregory, Conal

  McNair-Wilson, P. (New Forest)

  Griffiths, Peter (Portsmouth N)

  Madel, David

  Ground, Patrick

  Major, Rt Hon John

  Grylls, Michael

  Malins, Humfrey

  Gummer, Rt Hon John Selwyn

  Mans, Keith

  Hague, William

  Maples, John

  Hamilton, Hon Archie (Epsom)

  Marland, Paul

  Hamilton, Neil (Tatton)

  Marlow, Tony

  Hampson, Dr Keith

  Marshall, John (Hendon S)

  Hanley, Jeremy

  Marshall, Michael (Arundel)

  Hannam, John

  Martin, David (Portsmouth S)

  Hargreaves, A. (B'ham H'll Gr')

  Mates, Michael

  Hargreaves, Ken (Hyndburn)

  Maude, Hon Francis

  Harris, David

  Mawhinney, Dr Brian

  Haselhurst, Alan

  Maxwell-Hyslop, Robin

  Hawkins, Christopher

  Mellor, David

  Hayes, Jerry

  Meyer, Sir Anthony

  Hayhoe, Rt Hon Sir Barney

  Miller, Sir Hal

  Hayward, Robert

  Mills, Iain

  Heath, Rt Hon Edward

  Miscampbell, Norman

  Heathcoat-Amory, David

  Mitchell, Andrew (Gedling)

  Heddle, John

  Mitchell, Sir David

  Heseltine, Rt Hon Michael

  Moate, Roger

  Hicks, Mrs Maureen (Wolv' NE)

  Molyneaux, Rt Hon James

  Higgins, Rt Hon Terence L.

  Monro, Sir Hector

  Hind, Kenneth

  Montgomery, Sir Fergus

  Hogg, Hon Douglas (Gr'th'm)

  Moore, Rt Hon John

  Holt, Richard

  Morris, M (N'hampton S)

  Hordern, Sir Peter

  Morrison, Sir Charles

  Howard, Michael

  Morrison, Rt Hon P (Chester)

  Howarth, Alan (Strat'd-on-A)

  Moss, Malcolm

  Howarth, G. (Cannock & B'wd)

  Moynihan, Hon Colin

  Howe, Rt Hon Sir Geoffrey

  Mudd, David

  Howell, Rt Hon David (G'dford)

  Neale, Gerrard

  Howell, Ralph (North Norfolk)

  Needham, Richard

  Hughes, Robert G. (Harrow W)

  Nelson, Anthony

  Hunt, David (Wirral W)

  Neubert, Michael

  Hunt, John (Ravensbourne)

  Nicholls, Patrick

  Hunter, Andrew

  Nicholson, David (Taunton)

  Hurd, Rt Hon Douglas

  Nicholson, Emma (Devon West)

  Irvine, Michael

  Norris, Steve

  Irving, Charles

  Onslow, Rt Hon Cranley

  Jack, Michael

  Oppenheim, Phillip

  Jackson, Robert

  Page, Richard

  Janman, Tim

  Paice, James

  Jessel, Toby

  Parkinson, Rt Hon Cecil

  Jones, Gwilym (Cardiff N)

  Patnick, Irvine

  Jones, Robert B (Herts W)

  Patten, Chris (Bath)

  Jopling, Rt Hon Michael

  Patten, John (Oxford W)

  Kellett-Bowman, Dame Elaine

  Pattie, Rt Hon Sir Geoffrey

  Key, Robert

  Pawsey, James

  Kilfedder, James

  Porter, Barry (Wirral S)

  King, Roger (B'ham N'thfield)

  Porter, David (Waveney)

  Kirkhope, Timothy

  Portillo, Michael

  Knapman, Roger

  Powell, William (Corby)

  Knight, Greg (Derby North)

  Price, Sir David

  Knight, Dame Jill (Edgbaston)

  Raffan, Keith

  Knowles, Michael

  Raison, Rt Hon Timothy

  Knox, David

  Rathbone, Tim

  Lamont, Rt Hon Norman

  Redwood, John

  Lang, Ian

  Renton, Tim

  Latham, Michael

  Rhodes James, Robert

  Lawrence, Ivan

  Riddick, Graham

  Lawson, Rt Hon Nigel

  Ridley, Rt Hon Nicholas

  Lee, John (Pendle)

  Ridsdale, Sir Julian

  Leigh, Edward (Gainsbor'gh)

  Rifkind, Rt Hon Malcolm

  Lennox-Boyd, Hon Mark

  Roberts, Wyn (Conwy)

  Lester, Jim (Broxtowe)

  Roe, Mrs Marion

  Lightbown, David

  Rossi, Sir Hugh

  Lilley, Peter

  Rost, Peter

  Lloyd, Sir Ian (Havant)

  Rowe, Andrew

  Lloyd, Peter (Fareham)

  Rumbold, Mrs Angela

  Lord, Michael

  Sackville, Hon Tom

  825

  Sainsbury, Hon Tim

  Thurnham, Peter

  Sayeed, Jonathan

  Townend, John (Bridlington)

  Scott, Nicholas

  Townsend, Cyril D. (B'heath)

  Shaw, David (Dover)

  Tracey, Richard

  Shaw, Sir Giles (Pudsey)

  Tredinnick, David

  Shaw, Sir Michael (Scarb')

  Trippier, David

  Shephard, Mrs G. (Norfolk SW)

  Trotter, Neville

  Shepherd, Colin (Hereford)

  Twinn, Dr Ian

  Shepherd, Richard (Aldridge)

  Vaughan, Sir Gerard

  Shersby, Michael

  Viggers, Peter

  Sims, Roger

  Waddington, Rt Hon David

  Skeet, Sir Trevor

  Wakeham, Rt Hon John

  Smith, Tim (Beaconsfield)

  Waldegrave, Hon William

  Soames, Hon Nicholas

  Walden, George

  Speller, Tony

  Walker, Rt Hon P. (W'cester)

  Spicer, Sir Jim (Dorset W)

  Waller, Gary

  Spicer, Michael (S Worcs)

  Walters, Sir Dennis

  Squire, Robin

  Ward, John

  Stanbrook, Ivor

  Wardle, Charles (Bexhill)

  Stanley, Rt Hon Sir John

  Warren, Kenneth

  Steen, Anthony

  Watts, John

  Stern, Michael

  Wells, Bowen

  Stevens, Lewis

  Wheeler, John

  Stewart, Allan (Eastwood)

  Whitney, Ray

  Stewart, Andy (Sherwood)

  Widdecombe, Ann

  Stokes, Sir John

  Wiggin, Jerry

  Stradling Thomas, Sir John

  Wilshire, David

  Sumberg, David

  Winterton, Mrs Ann

  Tapsell, Sir Peter

  Winterton, Nicholas

  Taylor, Ian (Esher)

  Wolfson, Mark

  Taylor, John M (Solihull)

  Wood, Timothy

  Taylor, Teddy (S'end E)

  Woodcock, Mike

  Tebbit, Rt Hon Norman

  Yeo, Tim

  Temple-Morris, Peter

  Young, Sir George (Acton)

  Thatcher, Rt Hon Margaret

  Thompson, D. (Calder Valley)

  Tellers for the Ayes:

  Thompson, Patrick (Norwich N)

  Mr. Tristan Garel-Jones and

  Thorne, Neil

  Mr. Tony Durant.

  Thornton, Malcolm

  NOES

  Abbott, Ms Diane

  Clwyd, Mrs Ann

  Adams, Allen (Paisley N)

  Coleman, Donald

  Alton, David

  Cook, Robin (Livingston)

  Anderson, Donald

  Corbett, Robin

  Archer, Rt Hon Peter

  Corbyn, Jeremy

  Armstrong, Hilary

  Cousins, Jim

  Ashdown, Rt Hon Paddy

  Crowther, Stan

  Banks, Tony (Newham NW)

  Cryer, Bob

  Barnes, Harry (Derbyshire NE)

  Cummings, John

  Barnes, Mrs Rosie (Greenwich)

  Cunlitfe, Lawrence

  Battle, John

  Dalyell, Tam

  Beckett, Margaret

  Darling, Alistair

  Beith, A. J.

  Davies, Rt Hon Denzil (Llanelli)

  Benn, Rt Hon Tony

  Davies, Ron (Caerphilly)

  Bennett, A. F. (D'nfn & R'dish)

  Davis, Terry (B'ham Hodge H'l)

  Bermingham, Gerald

  Dewar, Donald

  Bidwell, Sydney

  Dixon, Don

  Blair, Tony

  Dobson, Frank

  Blunkett, David

  Doran, Frank

  Boyes, Roland

  Douglas, Dick

  Bradley, Keith

  Dunnachie, Jimmy

  Bray, Dr Jeremy

  Dunwoody, Hon Mrs Gwyneth

  Brown, Gordon (D'mline E)

  Evans, John (St Helens N)

  Brown, Nicholas (Newcastle E)

  Ewing, Mrs Margaret (Moray)

  Brown, Ron (Edinburgh Leith)

  Fatchett, Derek

  Bruce, Malcolm (Gordon)

  Faulds, Andrew

  Buchan, Norman

  Fearn, Ronald

  Buckley, George J.

  Field, Frank (Birkenhead)

  Caborn, Richard

  Fields, Terry (L'pool B G'n)

  Callaghan, Jim

  Fisher, Mark

  Campbell, Menzies (Fife NE)

  Flannery, Martin

  Campbell, Ron (Blyth Valley)

  Flynn, Paul

  Campbell-Savours, D. N.

  Foot, Rt Hon Michael

  Carlile, Alex (Mont'g)

  Foster, Derek

  Cartwright, John

  Foulkes, George

  Clark, Dr David (S Shields)

  Fraser, John

  Clarke, Tom (Monklands W)

  Fyfe, Maria

  Clay, Bob

  Galbraith, Sam

  Clelland, David

  Galloway, George

  826

  Garrett, John (Norwich South)

  Mitchell, Austin (G't Grimsby)

  George, Bruce

  Moonie, Dr Lewis

  Gilbert, Rt Hon Dr John

  Morgan, Rhodri

  Godman, Dr Norman A.

  Morley, Elliott

  Golding, Mrs Llin

  Morris, Rt Hon A. (W'shawe)

  Gordon, Mildred

  Morris, Rt Hon J. (Aberavon)

  Graham, Thomas

  Mowlam, Marjorie

  Grant, Bernie (Tottenham)

  Mullin, Chris

  Griffiths, Nigel (Edinburgh S)

  Murphy, Paul

  Griffiths, Win (Bridgend)

  Nellist, Dave

  Grocott, Bruce

  Oakes, Rt Hon Gordon

  Hardy, Peter

  O'Brien, William

  Harman, Ms Harriet

  O'Neill, Martin

  Hattersley, Rt Hon Roy

  Orme, Rt Hon Stanley

  Haynes, Frank

  Owen, Rt Hon Dr David

  Healey, Rt Hon Denis

  Patchett, Terry

  Heffer, Eric S.

  Pendry, Tom

  Henderson, Doug

  Pike, Peter L.

  Hinchliffe, David

  Powell, Ray (Ogmore)

  Hogg, N. (C'nauld & Kilsyth)

  Prescott, John

  Holland, Stuart

  Primarolo, Dawn

  Home Robertson, John

  Quin, Ms Joyce

  Hood, Jimmy

  Radice, Giles

  Howarth, George (Knowsley N)

  Randall, Stuart

  Howell, Rt Hon D. (S'heath)

  Redmond, Martin

  Howells, Geraint

  Rees, Rt Hon Merlyn

  Howells, Dr. Kim (Pontypridd)

  Reid, Dr John

  Hoyle, Doug

  Richardson, Jo

  Hughes, John (Coventry NE)

  Roberts, Allan (Bootle)

  Hughes, Robert (Aberdeen N)

  Robertson, George

  Hughes, Roy (Newport E)

  Robinson, Geoffrey

  Hughes, Sean (Knowsley S)

  Rogers, Allan

  Hughes, Simon (Southwark)

  Ross, Ernie (Dundee W)

  Illsley, Eric

  Rowlands, Ted

  Ingram, Adam

  Ruddock, Joan

  Johnston, Sir Russell

  Salmond, Alex

  Jones, Barry (Alyn & Deeside)

  Sedgemore, Brian

  Jones, Ieuan (Ynys Môn)

  Sheerman, Barry

  Jones, Martyn (Clwyd S W)

  Sheldon, Rt Hon Robert

  Kennedy, Charles

  Shore, Rt Hon Peter

  Kirkwood, Archy

  Short, Clare

  Lamond, James

  Skinner, Dennis

  Leadbitter, Ted

  Smith, Andrew (Oxford E)

  Leighton, Ron

  Smith, C. (Isl'ton & F'bury)

  Lestor, Joan (Eccles)

  Smith, Rt Hon J. (Monk'ds E)

  Lewis, Terry

  Snape, Peter

  Litherland, Robert

  Soley, Clive

  Lloyd, Tony (Stretford)

  Spearing, Nigel

  Lofthouse, Geoffrey

  Steel, Rt Hon David

  Loyden, Eddie

  Steinberg, Gerry

  McAllion, John

  Stott, Roger

  McAvoy, Thomas

  Strang, Gavin

  McCartney, Ian

  Straw, Jack

  McFall, John

  Taylor, Mrs Ann (Dewsbury)

  McKay, Allen (Barnsley West)

  Thomas, Dr Dafydd Elis

  McKelvey, William

  Turner, Dennis

  McLeish, Henry

  Wall, Pat

  Maclennan, Robert

  Wallace, James

  McNamara, Kevin

  Warden, Gareth (Gower)

  McTaggart, Bob

  Wareing, Robert N.

  McWilliam, John

  Welsh, Andrew (Angus E)

  Madden, Max

  Welsh, Michael (Doncaster N)

  Mahon, Mrs Alice

  Wigley, Dafydd

  Marek, Dr John

  Williams, Rt Hon Alan

  Marshall, David (Shettleston)

  Williams, Alan W. (Carm'then)

  Marshall, Jim (Leicester S)

  Wilson, Brian

  Martin, Michael J. (Springburn)

  Winnick, David

  Martlew, Eric

  Worthington, Tony

  Maxton, John

  Wray, Jimmy

  Meacher, Michael

  Young, David (Bolton SE)

  Meale, Alan

  Michael, Alun

  Tellers for the Noes:

  Michie, Bill (Sheffield Heeley)

  Mr. Ken Eastham and

  Michie, Mrs Ray (Arg'l & Bute)

  Mr. Fred Cook.

  Question accordingly agreed to.
  Mr.Speaker: I am now required, under Standing Order No.50(3), to put successively without further debate the

  827
  Question on each of the ways and means motions. With the leave of the House, I will put together motions Nos. 2 to 50.

  2. HYDROCARBON OIL
  Resolved,
  That, as from 6 o'clock in the evening of 14th March 1989, the Hydrocarbon Oil Duties Act 1979 shall have effect with the amendments set out below.
  And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
  (1) In section 6——

  (a) in subsection (1), after "(2)" there shall be inserted ", (2A)", and

  (b) the following subsection shall be inserted after subsection (2)—

  "(2A) The rate of duty for petrol which—

  (a) has an anti-knock value below that specified as the minimum for 4 star petrol in the British Standard Specification BS 4040: 1988, and

  (b) is neither unleaded petrol (within the meaning of section 13A below) nor aviation gasoline,

  shall be £0·2122 a litre."
  (2) In section 13A, for "0–0202" there shall be substituted "0·0272".
  (3) In Part I of Schedule 3, in paragraph 10A, after the word "Amending" there shall be inserted the words "the description of petrol falling within subsection (2A) of section 6 of this Act or" and for the words "section 6 of this Act" there shall be substituted the words "that section".—[Mr. Lawson.]

  3. BEER (ORIGINAL GRAVITY)
  Resolved,
  That provision may be made amending section 3(5) of the Alcoholic Liquor Duties Act 1979.—[Mr. Lawson.]

  TABLE A

  RATES OF DUTY ON RIGID GOODS VEHICLES EXCEEDING 12 TONNES PLATED GROSS WHGHT GENERAL RATES

  Plated gross weight of vehicle

  Rate of duty

  (1)Exceeding

  (2)Not exceeding

  (3)Two axle vehicle

  (4)Three axle vehicle

  (5)Four or more axle vehicle

  tonnes

  tonnes

  £

  £

  £

  12

  13

  450

  340

  340

  13

  14

  630

  340

  340

  14

  15

  810

  340

  340

  15

  17

  1,230

  340

  340

  17

  19

  —

  600

  340

  19

  21

  —

  800

  340

  21

  23

  —

  1,100

  490

  23

  25

  —

  1,980

  760

  25

  27

  —

  —

  1,220

  27

  29

  —

  —

  1,790

  29

  30·49

  —

  —

  2,780

  4. PRODUCTION OF MADE-WINE
  Resolved,
  That section 55 of the Alcoholic Liquor Duties Act 1979 may be amended by provisions relating to the blending or other mixing of made-wines or of made-wines and wines.—[Mr. Lawson.]

  5. VEHICLES EXCISE DUTY (RATES)
  Resolved,
  That the Vehicles (Excise) Act 1971 ("the 1971 Act") and the Vehicles (Excise) Act (Northern Ireland) 1972 ("the 1972 Act") shall have effect, in relation to licences taken out after 14th March 1989, with the amendments set out below.
  And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
  (1) For the words—

  (a) "in the second column of" in paragraph 1 of Schedule 2 to the 1971 Act (rates of duty on hackney carriages), and

  (b) "in column 2 of' in paragraph 1 of Schedule 2 to the 1972 Act,

  there shall be substituted the words "in relation to its seating capacity in the Table in"; and for the Table in Part II of each of those Schedules there shall be substituted the Table set out below.

  RATES OF DUTY ON HACKNEY CARRIAGES

  Seating capacity

  Rate of duty

  £

  Under 9

  100

  9 to 16

  130

  17 to 35

  200

  36 to 60

  300

  Over 60

  450

  (2) In Part 11 of Schedule 4 to the 1971 Act for Tables A, A(l) and A(2) (rates for rigid goods vehicles having plated gross weight exceeding 12 tonnes) there shall be substituted the Tables set out below.

  829

  TABLE A(l)

  RATES OF DUTY ON RIGID GOODS VEHICLES EXCEEDING 12 TONNES PLATED GROSS WEIGHT

  RATES FOR FARMERS' GOODS VEHICLES

  Plated gross weight of vehicle

  Rate of duty

  (1) Exceeding

  (2) Not exceeding

  (3) Two axle vehicle

  (4) Three axle vehicle

  (5) Four or more axle vehicle

  tonnes

  tonnes

  £

  £

  £

  12

  13

  270

  205

  205

  13

  14

  380

  205

  205

  14

  15

  490

  205

  205

  15

  17

  740

  205

  205

  17

  19

  —

  360

  205

  19

  21

  —

  480

  205

  21

  23

  —

  660

  295

  23

  25

  —

  1,190

  460

  25

  27

  —

  —

  735

  27

  29

  —

  —

  1,075

  29

  30–49

  —

  —

  1,670

  TABLE A(2)

  RATES OF DUTY ON RIGID GOODS VEHICLES EXCEEDING 12 TONNES PLATED GROSS WEIGHT

  RATES FOR SHOWMEN'S GOODS VEHICLES

  Plated gross weight of vehicle

  Rate of duty

  (1) Exceeding

  (2) Not exceeding

  (3) Two axle vehicle

  (4) Three axle vehicle

  (5) Four or more axle vehicle

  tonnes

  tonnes

  £

  £

  £

  12

  13

  115

  90

  90

  13

  14

  160

  90

  90

  14

  15

  205

  90

  90

  15

  17

  310

  90

  90

  17

  19

  —

  150

  90

  19

  21

  —

  200

  90

  21

  23

  —

  275

  125

  23

  25

  —

  495

  190

  25

  27

  —

  —

  305

  27

  29

  —

  —

  450

  29

  30·49

  —

  —

  695

  (3) The Tables set out above shall also be substituted for Tables A, A(1) and A(2) in Part II of the Schedule 4 to the 1972 Act, but modified for that purpose by the substitution to." any reference to a plated gross weight of a reference to a relevant maximum weight.

  (4) In paragraph 2 of Schedule 4A to the 1971 Act and the 1972 Act (rates of duty for vehicles carrying or drawing exceptional loads) for "£1,600" there shall be substituted "£3,100".
  (5) In—

  (a) subsection (5) of section 16 of the 1971 Act (rates of duty for trade licences), including that subsection as set out in paragraph 12 of Part I of Schedule 7 to that Act, and

  (b) subsection (6) of section 16 of the 1972 Act, including that subsection as set out in paragraph 12 of Part I of Schedule 9 to that Act,

  for "£85" and "£17" there shall be substituted "£100" and "£20" respectively.—[Mr. Lawson.]

  6. VEHICLES EXCISE DUTY (ASSIGNMENT OF REGISTRATION MARKS)
  Resolved,
  That provision may be made—

  (a) for the payment of sums, payable into the Consolidated Fund, in respect of the acquisition of rights relating to the assignment of registration marks under the Vehicles (Excise) Act 1971 or the Vehicles (Excise) Act (Northern Ireland) 1972; and

  (b) for the payment of charges under section 12(11 of the Finance Act 1976 in connection with the assignment of registration marks in pursuance of rights so relating.—[Mr. Lawson.]

  7. SPECIAL MACHINES (VEHICLES EXCISE DUTY AND HYDROCARBON OIL)
  Resolved,
  That the Vehicles (Excise) Act 1971 ("the 1971 Act") and the Vehicles (Excise) Act (Northern Ireland) 1972 ("the 1972 Act") shall have effect, in relation to licences taken out after 14th March 1989, with the amendments set out in paragraphs (1) to (3) below; and the Hydrocarbon Oil Duties Act 1979 ("the 1979 Act") shall have effect, as from 15th March 1989, with the amendment set out in paragraph (4) below.
  And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
  (1) In Part I of Schedule 3 to the 1971 Act and the 1972 Act (annual rates of duty on tractors etc.)—
  (a) after paragraph 1 there shall be inserted—
  "1A. In this Schedule "special machine" means—

  (a) a tractor;

  (b) an agricultural engine;

  (c) a digging machine;

  (d) a mobile crane;

  (e) a works truck; or

  (f) a mowing machine.";

  (b) for paragraph 2 there shall be substituted—
  "2. In this Schedule "tractor" means a vehicle which is either—

  (a) an agricultural tractor, or

  (b) a tractor (other than an agricultural tractor) that is—

  (i) designed and constructed primarily for use otherwise than on roads, and

  (ii) incapable by reason of its construction of exceeding a speed of twenty-five miles per hour on the level under its own power.";

  (c) in paragraph 3(b), for the words "neither carries nor hauls any load than" there shall be substituted the words "does not carry any load except";

  (d) in paragraph 4(b), for the words "neither carries nor hauls any load than" there shall be substituted the words "does not carry any load except";

  (e) paragraph 5A shall be omitted; and

  (f) in paragraph 6, for the words from "(other than" to "8 below)" there shall be substituted the words "(other than a special machine, a recovery vehicle or a vehicle to which Schedule 4A to this Act applies)".

  (2) In Part II of Schedule 3 to the 1971 Act and the 1972 Act, in column 1, for paragraph 1 there shall be substituted—
  "1. Special machines."
  (3) In Part I of Schedule 4 to the 1971 Act and the 1972 Act (annual rates of duty on goods vehicles)—

  (a) in paragraph 11, for paragraphs (b) and (c) there shall be substituted—

  (b) a special machine within the meaning of Schedule 3 to this Act;

  (c) a recovery vehicle within the meaning of that Schedule; or";

  (b) paragraphs 12 and 13 shall be omitted; and

  (c) in paragraph 15(1), the definitions of "agricultural machine", "fisherman's tractor", "mobile crane", "recovery vehicle" and "works truck" shall be omitted.

  (4) In paragraph 2 of Schedule 1 to the 1979 Act (vehicles which are not road vehicles within the meaning of that Act), for sub-paragraph (b) there shall be substituted—
  "(b) a special machine within the meaning of Schedule 3 to that Act;".—[Mr. Lawson.]

  8. VALUE ADDED TAX (BUILDINGS AND LAND: ZERO-RATING AND EXEMPTION ETC.)
  Resolved,
  That—
  (1) For Group 8 of Schedule 5 to the Value Added Tax Act 1983 there shall be substituted—

  GROUP 8—CONSTRUCTION OF DWELLINGS, ETC.
  Item No.
  1. The grant by a person constructing a building—

  (a) designed as a dwelling or number of dwellings; or

  (b) intended for use solely for a relevant residential purpose or a relevant charitable purpose,

  of a major interest in, or in any part of, the building or its site.
  2. The supply in the course of the construction of—

  (a) a building designed as a dwelling or number of dwellings or intended for use solely for a relevant residential purpose or a relevant charitable purpose; or

  (b) any civil engineering work necessary for the development of a permanent park for residential caravans,

  of any services other than the services of an architect, surveyor or any person acting as consultant or in a supervisory capacity.
  3. The supply to a person of—

  (a) materials; or

  (b) builder's hardware, sanitary ware or other articles of a kind ordinarily installed by builders as fixtures,

  by a supplier who also makes to the same person supplies within item 2 of this Group or Group 8A below of services which include the use of the materials or the installation of the articles.
  Notes:
  (1) "Grant" includes assignment.
  (2) "Dwelling" includes a garage constructed at the same time as a dwelling for occupation together with it.
  (3) Use for a relevant residential purpose means use as—

  (a) a home or other institution providing residential accommodation for children;

  (b) a home or other institution providing residential accommodation with personal care for persons in need of personal care by reason of old age, disablement, past or present dependence on alcohol or drugs or past or present mental disorder;

  (c) a hospice;

  (d) residential accommodation for students or school pupils;

  (e) residential accommodation for members of any of the armed forces;

  (f) a monastery, nunnery or similar establishment; or

  (g) an institution which is the sole or main residence of at least 90 per cent. of its residents,

  except use as a hospital, a prison or similar institution or an hotel, inn or similar establishment.
  (4) Use for a relevant charitable purpose means use by a charity otherwise than in the course or furtherance of a business.
  (5) Where part of a building is designed as a dwelling or number of dwellings or intended for use solely for a relevant residential purpose or a relevant charitable purpose (and part is not)—

  (a) a grant or other supply relating only to the part so designed or intended for such use (or its site) shall be treated as relating to a building so designed or intended for such use;

  (b) a grant or other supply relating only to the part neither so designed nor intended for such use (or its site) shall not be so treated; and

  (c) in the case of any other grant or other supply relating to, or to any part of, the building (or its site), an apportionment shall be made to determine the extent to which it is to be so treated.

  (6) Where all or part of a building is intended for use solely for a relevant residential purpose or a relevant charitable purpose—

  (a) a supply relating to the building (or any part of it) shall not be taken for the purposes of item 2

  833
  or 3 as relating to a building intended for such use unless it is made to a person who intends to use the building (or part) for such a purpose; and
  (b) a grant or other supply relating to the building (or any part of it) shall not be taken as relating to a building intended for such use unless before it is made the person to whom it is made has given to the person making it a certificate in such form as may be specified in a notice published by the Commissioners stating that the grant or other supply (or a specified part of it) so relates.
  (7) The grant of an interest in, or in part of, a building designed as a dwelling or number of dwellings is not within item I if—

  (a) the interest granted is such that the grantee will not be entitled to reside in the building, or part, throughout the year; or

  (b) residence there throughout the year will be prevented by the terms of a covenant, statutory planning consent or similar permission.

  (8) Where the major interest referred to in item I is a tenancy or lease—

  (a) if a premium is payable, the grant falls within that item only to the extent that it is made for consideration in the form of the premium; and

  (b) if a premium is not payable, the grant falls within that item only to the extent that it is made for consideration in the form of the first payment of rent due under the tenancy or lease.

  (9) Where the benefit of the consideration for the grant of a major interest as described in item 1 accrues to the person constructing the building but that person is not the person making the grant, he shall for the purposes of that item be treated as the person making the grant.
  (10) The reference in item 2 to the construction of a building or work does not include a reference to—

  (a) the conversion, reconstuction, alteration or enlargement of an existing building or work; or

  (b) any extension or annexation to an existing building which provides for internal access to the existing building or of which the separate use, letting or disposal is prevented by the terms of any convenant, statutory planning consent or similar permission;

  and the reference in item 1 to a person constructing a building shall be construed accordingly.
  (11) A caravan is not a residential caravan if residence in it throughout the year is prevented by the terms of a covenant, statutory planning consent or similar permission.
  (12) Item 2 does not include the supply of services described in paragraph 1(1) or 5(3) of Schedule 2 to this Act.
  (13) The goods referred to in item 3 do not include—

  (a) finished of prefabricated furniture, other than furniture designed to be fitted in kitchens;

  (b) materials for the construction of fitted furniture, other than kitchen furniture;

  (c) domestic electrical or gas appliances, other than those designed to provide space heating or water heating or both; or

  (d) carpets or carpeting material.

  (14) Section 16(3) of this Act does not apply to goods forming part of a description of supply in this Group."
  (2) In item 1 of Group 8A of that Schedule, for the word "granting" there shall be substituted the word "grant".
  (3) In Note (1) to that Group, for the words "a building which" there shall be substituted the words "a building which is designed to remain as or become a dwelling or number of dwellings or is intended for use solely for a relevant residential purpose or a relevant charitable purpose after the reconstruction or alteration and which, in either case,".
  (4) After that Note there shall be inserted—
  "(1A) Notes (1) to (8) above apply in relation to this Group as they apply in relation to that Group."
  (5) After Note (6) to that Group there shall be inserted—
  "(6A) For the purposes of item 2 the construction of a building separate from, but in the curtilage of, a protected building does not constitute an alteration of the protected building."
  (6) The following Note shall be substituted for Note (7) to that Group—
  "(7) Item 2 does not include the supply of services described in paragraph 1(1) or 5(3) of Schedule 2 to this Act."
  (7) In Group 11 of that Schedule, for paragraph (6) of the Note there shall be substituted—
  "(b) the supply of accommodation in a caravan or houseboat."
  (8) For Group 1 of Schedule 6 to the Value Added Tax Act 1983 there shall be substituted—

  GROUP 1—LAND
  Item No.
  1. The grant of any interest in or right over land or of any licence to occupy land, other than—

  (a) the grant of the fee simple in—

  (i) a building which has not been completed and which is neither designed as a dwelling or number of dwellings nor intended for use solely for a relevant residential purpose or a relevant charitable purpose;

  (ii) a new building which is neither designed as a dwelling or number of dwellings nor intended for use solely for a relevant residential purpose or a relevant charitable purpose after the grant;

  (iii) a civil engineering work which has not been completed;

  (iv) a new civil engineering work;

  (b) the grant of any interest, right or licence consisting of a right to take game or fish;

  (c) the provision in an hotel, inn, boarding house or similar establishment of sleeping accommodation or of accommodation in rooms which are provided in conjunction with sleeping accommodation or for the purpose of a supply of catering;

  (d) the provision of holiday accommodation in a house, flat, caravan, houseboat or tent;

  (e) the provision of seasonal pitches for caravans, and the grant of facilities at caravan parks to persons for whom such pitches are provided;

  (f) the provision of pitches for tents or of camping facilities;

  (g) the grant of facilities for parking a vehicle;

  (h) the grant of any right to fell and remove standing timber;

  (i) the grant of facilities for housing, or storage of, an aircraft or for mooring, or storage of, a ship, boat or other vessel;

  (j) the grant of any right to occupy a box, seat or other accommodation at a sports ground, theatre, concert hall or other place of entertainment; and

  (k) the grant of facilities for playing any sport or participating in any physical recreation.

  Notes:
  (1) "Grant" includes an assignment, other than an assignment of an interest made to the person to whom a surrender of the interest could be made.
  (2) A building shall be taken to be completed when an architect issues a certificate of practical completion in relation to it or it is first fully occupied, whichever happens first; and a civil engineering work shall be taken to be completed when an engineer issues a certificate of completion in relation to it or it is first fully used, whichever happens first.
  (3) Notes (2) to (6) to Group 8 of Schedule 5 to this Act apply in relation to this Group as they apply in relation to that Group.
  (4) A building or civil engineering work is new if it was completed less than three years before the grant.
  (5) Subject to Note (6), the grant of the fee simple in a building or work completed before 1st April 1989 is not excluded from this Group by paragraph (a)(ii) or (iv).
  (6) Note (5) does not apply where the grant is the first grant of the fee simple made on or after 1st April 1989 and the building was not fully occupied, or the work not fully used, before that date.
  (7) Where a grant of an interest in, right over or licence to occupy land includes a valuable right to take game or fish, an apportionment shall be made to determine the supply falling outside this Group by virtue of paragraph (b).
  (8) "Similar establishment" includes premises in which there is provided furnished sleeping accommodation, whether with or without the provision of board or facilities for the preparation of food, which are used by or held out as being suitable for use by visitors or travellers.
  (9) "Houseboat" includes a houseboat within the meaning of Group 11 of Schedule 5 to this Act.
  (10) "Holiday accommodation" includes any accommodation advertised or held out as such.
  (11) A seasonal pitch is a pitch—

  (a) which is provided for a period less than a year; or

  (b) which is provided for a year or a period longer than a year but which the person to whom it is provided is prevented by the terms of any covenant, statutory planning consent or similar permission from occupying by living in a caravan at all times throughout the period for which the pitch is provided.

  (12) "Mooring" includes anchoring or berthing.
  (13) Paragraph (k) shall not apply where the grant of the facilities is for—

  (a) a continuous period of use exceeding twenty-four hours; or

  (b) a series of ten or more periods, whether or not exceeding twenty-four hours in total, where the following conditions are satisfied—

  (i) each period is in respect of the same activity carried on at the same place;

  (ii) the interval between each period is not less than one day and not more than fourteen days;

  (iii) consideration is payable by reference to the whole series and is evidenced by written agreement;

  (iv) the grantee has exclusive use of the facilities; and

  (v) the grantee is a school, a club, an association or an organisation representing affiliated clubs or constituent associations."

  (9) In consequence of the amendment made by paragraph (8) of this Resolution, in paragraph 9(1) of Schedule 4 to the Value Added Tax Act 1983 for "(a)" there shall be substituted "(c)"
  (10) The following section shall be inserted in the Value Added Tax Act 1983 after section 35—
  "Buildings and land.
  35A. Schedule 6A to this Act shall have effect with respect to buildings and land."
  (11) The following Schedule shall be inserted in the Value Added Tax Act 1983 after Schedule 6—

SCHEDULE 6A

  BUILDINGS AND LAND
  1.—(1) In this paragraph "relevant zero-rated supply" means a grant or other supply taking place on or after 1st April 1989 which—

  (a) relates to a building intended for use solely for a relevant residential purpose or a relevant charitable purpose or part of such a building; and

  (b) is zero-rated, in whole or in part, by virtue of Group 8 of Schedule 5 to this Act.

  (2) Sub-paragraph (3) below applies where—

  (a) one or more relevant zero-rated supplies relating to a building (or part of a building) have been made to any person;

  (b) within the period of ten years beginning with the day on which the building is completed, the person grants an interest in, right over or licence to occupy the building or any part of it (or the
  836
  building or any part of it including, consisting of or forming part of the part to which the relevant zero-rated supply or supplies related); and

  (c) after the grant the whole or any part of the building, or of the part to which the grant relates, (or the whole of the building or of the part to which the grant relates, or any part of it including, consisting of or forming part of the part to which the relevant zero-rated supply or supplies related) is not intended for use solely for a relevant residential purpose or a relevant charitable purpose.

  (3) Where this sub-paragraph applies, to the extent that the grant relates to so much of the building as—

  (a) by reason of its intended use gave rise to the relevant zero-rated supply or supplies; and

  (b) is not intended for use solely for a relevant residential purpose or a relevant charitable purpose after the grant,

  it shall be taken to be a taxable supply in the course or furtherance of a business which is not zero-rated by virtue of Group 8 of Schedule 5 to this Act (if it would not otherwise be such a supply).
  (4) Sub-paragraph (5) below applies where—

  (a) one or more relevant zero-rated supplies relating to a building (or part of a building) have been made to any person; and

  (b) within the period of ten years beginning with the day on which the building is completed, the person uses the building or any part of it (or the building or any part of it including, consisting of or forming part of the part to which the relevant zero-rated supply or supplies related) for a purpose which is neither a relevant residential purpose nor a relevant charitable purpose.

  (5) Where this sub-paragraph applies, his interest in, right over or licence to occupy so much of the building as—

  (a) by reason of its intended use gave rise to the relevant zero-rated supply or supplies; and

  (b) is used otherwise than for a relevant residential purpose or a relevant charitable purpose,

  shall be treated for the purposes of this Act as supplied to him for the purpose of a business carried on by him and supplied by him in the course or furtherance of the business when he first uses it for a purpose which is neither a relevant residential purpose nor a relevant charitable purpose.
  (6) Where sub-paragraph (5) above applies—

  (a) the supply shall be taken to be a taxable supply which is not zero-rated by virtue of Group 8 of schedule 5 to this Act (if it would not otherwise be such a supply); and

  (b) the value of the supply shall be such that the amount of tax chargeable on it is equal to the amount of the tax which would have been chargeable on the relevant zero-rated supply (or, where there was more than one such supply, the aggregate amount which would have been chargeable on them) had so much of the building as is mentioned in sub-paragraph (5) above not been intended for use solely for a relevant residential purpose or a relevant charitable purpose.

  2. The Notes to Group 8 of Schedule 5 to this Act apply in relation to this Schedule as they apply in relation to that Group but subject to any appropriate modifications."
  (12) In section 48 of the Value Added Tax Act 1983, after the definition of "Commissioners" there shall be inserted—
  " "fee simple", in relation to Scotland, means—

  (a) the estate or interest of the proprietor of the dominium utile, or

  (b) in the case of land not held on feudal tenure, the estate or interest of the owner;".

  (13) In Schedule 1 to the Value Added Tax Act 1983—
  (a) in paragraph 1 there shall be added at the end—
  "(6) Where, apart from this sub-paragraph, an interest in, right over or licence to occupy any land would under sub-paragraph (5) above be disregarded

  837
  for the purposes of sub-paragraph (1) above, it shall not be if it is supplied on a taxable supply which is not zero-rated." and
  (b) in paragraph 2 there shall be added at the end—
  "(4) Where, apart from this sub-paragraph, an interest in, right over or licence to occupy any land would under sub-paragraph (3) above be disregarded for the purposes of sub-paragraph (I) above, it shall not be if it is supplied on a taxable supply which is not zero-rated."
  (14) Subject to paragraphs (16) to (19) of this Resolution, the amendments made by paragraphs (1) to (9) of this Resolution shall have effect in relation to grants, assignments and other supplies made on or after 1st April 1989.
  (15) The remainder of this Resolution shall come into force on 1st April 1989.
  (16) Subject to paragraph (18) of this Resolution, the amendments made by paragraphs (1) to (6) of this Resolution shall not have effect in relation to a grant, assignment or other supply where—

  (a) it is made in pursuance of a legally binding obligation to make it which was incurred before 21st June 1988, and

  (b) if the Commissioners so require (whether before or after it is made), it is proved to their satisfaction by the production of documents made before that date that it is so made.

  (17) Subject to paragraph (18) of this Resolution, the amendments made by paragraphs (1) to (6) of this Resolution shall not have effect in relation to a grant or assignment of an interest in, or in any part of, a building or its site where—

  (a) the person making the grant or assignment was under a legally binding obligation incurred before 21st June 1988 to construct (or reconstruct) the building or to construct any development of which it forms part (other than an obligation to receive services or goods in the course of the construction or reconstruction),

  (b) if the Commissioners so require (whether before or after the grant or assignment is made), it is proved to their satisfaction by the production of documents made before that date that he was under that obligation, and

  (c) planning permission for the construction (or reconstruction) of the building was granted before 21st June 1988.

  (18) Where the grant or assignment is of a tenancy or lease—

  (a) if a premium is payable, paragraph (16) or (17) of this Resolution shall apply only to the extent that it is made for consideration in the form of the premium; and

  (b) if a premium is not payable, paragraph (16) or (17) of this Resolution shall apply only to the extent that it is made for consideration in the form of the first payment of rent due under the tenancy or lease.

  (19) The amendments made by paragraphs (1) to (6) of this Resolution shall not not have effect in relation to a supply relating to a building or civil engineering work where—

  (a) the supply is made to the person constructing the building or work (or reconstructing the building),

  (b) that person was under a legally binding obligation incurred before 21st June 1988 to construct the building or work (or to reconstruct the building) or to construct any development of which it forms part (other than an obligation to receive services or goods in the course of the construction or reconstruction),

  (c) if the Commissioners so require (whether before or after the supply is made), it is proved to their satisfaction by the production of documents made before that date that he was under that obligation,

  (d) planning permission for the construction of the building or work (or the reconstruction of the building) was granted before 21st June 1988, and

  (e) before the supply takes place the person construct-ing the building or work (or reconstructing the building) has given to the person making the supply a certificate in such form as may be specified in a notice published by the Commissioners stating that
  838
  the supply is zero-rated (in whole or to the extent specified in the certificate) by virtue of this paragraph.

  (20) Where a grant, assignment or other supply is zero-rated by virtue of paragraph (16), (17) or (19) of this Resolution, it is not a relevant zero-rated supply for the purposes of paragraph 1 of Schedule 6A to the Value Added Tax Act 1983.
  (21) This Resolution shall be construed as one with the Value Added Tax Act 1983.
  This Resolution shall not authorise the making of amendments that would make value added tax chargeable at a rate other than either nil or the rate specified in section 9 of the Value Added Tax Act 1983.
  And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Lawson.]

  9. VALUE ADDED TAX (ZERO-RATING: SEWERAGE SERVICES, WATER, FUEL AND POWER)
  Resolved,
  That provision may be made restricting Groups 2 and 7 of Schedule 5 to the Value Added Tax Act 1983.
  This Resolution shall not authorise the making of amendments that would make value added tax chargeable at a rate other than either nil or the rate specified in section 9 of the Value Added Tax Act 1983.—[Mr. Lawson.]

  10. VALUE ADDED TAX (ZERO-RATING: NEWS SERVICES)
  Resolved,
  That, in relation to supplies made on or after 1st April 1989, Schedule 5 to the Value Added Tax Act 1983 shall have effect with the omission of Group 6.
  This Resolution shall not authorise the making of amendments that would make value added tax chargeable at a rate other than either nil or the rate specified in section 9 of the Value Added Tax Act 1983.
  And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Lawson.]

  11. VALUE ADDED TAX (ZERO-RATING: PROTECTIVE BOOTS AND HELMETS)
  Resolved,
  That—
  (1) In relation to supplies made on or after 1st April 1989, Group 17 of Schedule 5 to the Value Added Tax Act 1983 shall have effect with the amendments mentioned in paragraphs (2) and (3) of this Resolution.
  (2) In item 2 there shall be inserted at the beginning the words "The supply to a person for use otherwise than by employees of his of".
  (3) In Note (5) there shall be inserted at the end the words ", but, in the case of goods comprised in item 2, only if the goods are for use otherwise than by employees of the person to whom the services are supplied."
  This Resolution shall not authorise the making of amendments that would make value added tax chargeable at a rate other than either nil or the rate specified in section 9 of the Value Added Tax Act 1983.
  And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.[Mr. Lawson.]

  12. VALUE ADDED TAX (BUILDINGS AND LAND: GENERAL)
  Resolved,

  839
  That the enactments relating to value added tax may be amended by provisions about buildings and land.
  This Resolution shall not authorise the making of amendments that would make value added tax chargeable at a rate other than either nil or the rate specified in section 9 of the Value Added Tax Act 1983.—[Mr. Lawson.]

  13. VALUE ADDED TAX (SELF-SUPPLIES)
  Resolved,
  That provision may be made amending the Value Added Tax Act 1983 in relation to input tax on supplies which, under or by virtue of that Act, a person is treated as making to himself.—[Mr. Lawson.]

  14. CAR TAX (RELIEF FOR VEHICLES LEASED TO HANDICAPPED)
  Resolved,
  After section 5 of the Car Tax Act 1983 there shall be inserted, as from 1st April 1989, the following section—
  "Relief where vehicle leased to the handicapped.
  5A.—(1) This section applies where—

  (a) a person registered under this Act sends out from any premises of his in the United Kingdom a chargeable vehicle made or imported by him, and,

  (b) at the time when he sends it out he holds a certificate of the person to whom it is sent ("the lessor") that the lessor intends to supply the vehicle to another in such circumstances that the supply will be a zero-rated supply by virtue of item 12 of Group 14 (letting on hire of motor vehicles to the handicapped) of Schedule 5 to the Value Added Tax Act 1983.

  (2) Tax on the vehicle—

  (a) shall not be payable by the registered person, but

  (b) if, within the period of three years beginning with that time, the lessor supplies the vehicle in any circumstances other than those mentioned in subsection (1)(b) above, shall be payable by the lessor and shall become due and payable at the time of the supply.

  (3) In this section—
  "certificate" means a certificate in a form for the time being approved by the Commissioners, and "supply" has the same meaning as in the Value Added Tax Act 1983."
  And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Lawson.]

  15. CUSTOMS AND EXCISE DUTIES, VALUE ADDED TAX AND CAR TAX (DIPLOMATS, MEMBERS OF VISITING FORCES, INTERNATIONAL ORGANISATIONS ETC.)
  Resolved,
  That provision may be made, in connection with duties of customs and excise, value added tax and car tax, about—

  (a) any person who, for the purposes of any provision of the Visiting Forces Act 1952 or the International Headquarters and Defence Organisations Act 1964 is—

  (i) a member of a visiting force or of a civilian component of such a force or a dependant of such a member, or

  (ii) a headquarters, a member of a headquarters or a dependant of such a member,

  (b) any person enjoying any privileges or immunities under or by virtue of—

  (i) the Diplomatic Privileges Act 1964,

  (ii) the Commonwealth Secretariat Act 1966,

  (iii) the Consular Relations Act 1968,

  (iv) the International Organisations Act 1968, or

  840

  (v) the Overseas Development and Co-operation Act 1980,

  (c) any person enjoying any privileges or immunities similar to those enjoyed under or by virtue of those enactments.—[Mr. Lawson.]

  16. INCOME TAX (CHARGE AND RATES FOR 1989–90)
  Resolved,
  That income tax shall be charged for the year 1989–90, and—

  (a) the basic rate of tax shall be 25 per cent. and

  (b) the higher rate at which tax is charged in respect of so much of an individual's total income as exceeds the basic rate limit (£20,700) shall be 40 per cent.

  And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Lawson.]

  17. INCOME TAX (AGE ALLOWANCE)
  Resolved,
  That—
  (1) For the year 1989–90, section 257 of the Income and Corporation Taxes Act 1988 shall have effect with the following amendments—

  (a) in subsection (3) (increased allowance for those aged 80 and over) for "80", wherever occurring, there shall be substituted "75", and

  (b) in subsection (5) (age allowance withdrawn by two-thirds of amount by which income exceeds a specified limit) for "two-thirds" there shall be substituted "one half"

  (2) This Resolution shall not require any change to be made in the amounts deductible or repayable under section 203 of the Income and Corporation Taxes Act 1988 (pay as you earn) before 18th May 1989.
  And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Lawson.]

  18. INCOME TAX (OPERATIVE DATE OF INDEXATION FOR PAYE)
  Resolved,
  That, for the year 1989–90, sections 1(5) and 257(10) of the Income and Corporation Taxes Act 1988 (which specify the date from which indexed changes in the basic rate limit and in allowances are to be brought into account for the purposes of PAYE) shall have effect as if for the reference to 5th May there were substituted a reference to 18th May.
  And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Lawson.]

  19. RELIEF FOR INTEREST (LIMIT FOR 1989–90)
  Resolved,
  That, for the year 1989–90, the qualifying maximum defined in section 367(5) of the Income and Corporation Taxes Act 1988 (limit on relief for interest on certain loans) shall be £30,000.
  And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Lawson.]

  20. CORPORATION TAX (CHARGE AND RATE FOR FINANCIAL YEAR 1989)
  Resolved,
  That corporation tax shall be charged for the financial year 1989 at the rate of 35 per cent.—[Mr. Lawson.]

  21. CORPORATION TAX (SMALL COMPANIES)
  Resolved,
  That for the financial year 1989—

  (a) the small companies rate shall be 25 per cent.

  (b) the fraction mentioned in section 13(2) of the Income and Corporation Taxes Act 1988 shall be one-fortieth—[Mr. Lawson.]

  PART I

  TABLES OF FLAT RATE CASH EQUIVALENTS

  TABLE A

  Cars with an original market value up to £19,250 and having a cylinder capacity

  Cylinder capacity of car in cubic centimetres

  Age of car at end of relevant year of assessment

  Under 4 years

  4 years or more

  1400 or less … … … … … … … … …

  £1,400

  £950

  More than 1400 but not more than 2000 … … …

  £1,850

  £1,250

  More than 2000 … … … … … … … …

  £2,950

  £1,950

  24. CALCULATION OF PROFITS OR GAINS
  Resolved,
  That provision may be made as to the calculation of profits or gains—

  (a) for the purposes of Schedule D;

  (b) for the purposes of corporation tax.—[Mr. Lawson.]

  22. SCHEDULE E
  Resolved,
  That charges to income tax may be imposed by provisions relating to Schedule E.—[Mr. Lawson.]

  23. BENEFITS IN KIND (CARS)
  Resolved,
  That—
  (1) For the year 1989–90 and subsequent years of assessment, Schedule 6 to the Income and Corporation Taxes Act 1988 (taxation of directors and others in respect of cars) shall have effect with the substitution for Part I (tables of flat rate cash equivalents) of the following—

  25 CHARITIES
  Resolved,
  That, for the year 1989–90 and subsequent years of assessment, section 202(7) of the Income and Corporation Taxes Act 1988 (which limits to £240 the payroll deductions attracting relief) shall have effect with the substitution of "£480" for "£240".

  843
  And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Lawson.]

  26. PROFIT-RELATED PAY
  Resolved,
  That further provision may be made about profit-related pay.—[Mr. Lawson.]

  27. PROFIT SHARING SCHEMES (INCREASE OF MAXIMUM SHARE APPROPRIATION)
  Resolved.
  That section 187(2) of the Income and Corporation Taxes Act 1988 shall have effect for the year of assessment 1989–90 as if in the definition of "relevant amount" for the words "not less than £1,250 and not more than £5,000" there were substituted the words "not less than £2,000 and not more than £6,000".
  And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Lawson.]

  28. RETIREMENT BENEFITS SCHEMES
  Resolved,
  That provision may be made about retirement benefits schemes.—[Mr. Lawson.]

  29. PERSONAL PENSION SCHEMES
  Resolved,
  That provision may be made about personal pension schemes.—[Mr. Lawson.]

  30. COLLECTIVE INVESTMENT SCHEMES
  Resolved,
  That charges to income tax, corporation tax and capital gains tax may be imposed by provisions relating to collective investment schemes (including unit trusts) and investors in them.—[Mr. Lawson.]

  31. OFFSHORE FUNDS
  Resolved,
  That charges to income tax and corporation tax may be imposed by provisions relating to investors in offshore funds. —[Mr. Lawson.]

  32. INSURANCE COMPANIES AND FRIENDLY SOCIETIES
  Resolved,
  That provision may be made about the taxation of insurance companies and friendly societies, and about policies of life insurance, contracts for life annuities and capital redemption policies.—[Mr. Lawson.]

  33. PREMIUMS TRUST FUNDS
  Resolved,
  That provision may be made about stock lending by the trustees of premiums trust funds.—[Mr. Lawson.]

  34. REGULATIONS ABOUT UNDERWRITERS ETC.
  Resolved,
  That provision may be made amending section 451 of the Income and Corporation Taxes Act 1988 and section 142A of the Capital Gains Tax Act 1979.—[Mr. Lawson.]

  35. SECURITIES
  Resolved,
  That charges to income tax, capital gains tax and corporation tax may be imposed by provisions about securities.—[Mr. Lawson.]

  36. GROUPS OF COMPANIES AND CHANGES IN THE OWNERSHIP OF COMPANIES
  Resolved,
  That provision may be made—

  (a) in relation to advance corporation tax in connection with groups of companies and changes in the ownership of companies; and

  (b) amending sections 247 and 769 of the Income and Corporation Taxes Act 1988.—[Mr. Lawson.]

  37. CLOSE COMPANIES
  Resolved,
  That provision may be made in relation to close companies.—[Mr. Lawson.]

  38. SETTLEMENTS
  Resolved,
  That provision may be made about income arising under settlements—[Mr. Lawson.]

  39. DOUBLE TAXATION (TAX CREDITS)
  Resolved,
  That provision (including provision having retrospective effect) may be made as to the amount of tax credits paid to persons resident outside the United Kingdom.—[Mr. Lawson.]

  40. CAPITAL ALLOWANCE
  Resolved,
  That provision may be made about capital allowances. —[Mr. Lawson.]

  41. CAPITAL GAINS (ANNUAL EXEMPT AMOUNT)
  Resolved,
  That provision may be made as to the operation of section 5 of the Capital Gains Tax Act 1979 for the year 1989–90. —[Mr. Lawson.]

  42. CAPITAL GAINS (GIFTS ETC.)
  Resolved,
  That provision may be made about capital gains tax on gifts and other disposals not made under a bargain at arm's length.[Mr. Lawson.]

  43. NON-RESIDENTS
  Resolved,
  That charges to capital gains tax and corporation tax may be imposed by provisions relating to persons not resident and not ordinarily resident in the United Kingdom but carrying on or ceasing to carry on an activity in the United Kingdom through a branch or agency.—[Mr. Lawson.]

  44. DUAL RESIDENT COMPANIES
  Resolved,
  That charges to corporation tax may be imposed by provisions relating to companies resident in the United Kingdom and falling to be regarded for the purposes of double taxation relief arrangements as resident in a territory outside the United Kingdom..—[Mr. Lawson.]

  45. NON-RESIDENT COMPANIES (NON-PAYMENT OF TAX)
  Resolved,
  That, in relation to corporation tax payable by a non-resident company on chargeable gains, provision may be made with respect to the payment by other persons of tax not paid by the company.—[Mr. Lawson.]

  46. EXPLORATION AND EXPLOITATION ASSETS
  Resolved,
  That charges to capital gains tax and corporation tax may be imposed by provisions relating to exploration or exploitation assets.—[Mr. Lawson.]

  47. CAPITAL GAINS (RE-BASING TO 1982 ETC.)
  Resolved,
  That further provision (including provision having retrospective effect) may be made about capital gains and losses accruing on, or attributable to, disposals of assets acquired before 1st April 1982.—[Mr. Lawson.]

  48. INHERITANCE TAX
  Resolved,
  That charges to inheritance tax may be imposed—

  (a) by provisions relating to the variation of dispositions taking effect on death; and

  (b) by provisions relating to the settlement by recipients of exempt gifts of claims against the estates of deceased persons.—[Mr. Lawson.]

  49. BROADCASTING: ADDITIONAL PAYMENTS BY PROGRAMME CONTRACTORS
  Resolved,
  That provision he made with respect to additional payments payable under section 32 of the Broadcasting Act 1981.—[Mr. Lawson.]

  50. RELIEF FROM TAX (INCIDENTAL AND CONSEQUENTIAL CHARGES)
  Resolved,
  That it is expedient to authorise any incidental or consequential charges to any duty or tax (including charges having retrospective effect) which may arise from provisions designed in general to afford relief from taxation.—[Mr. Lawson.]

PROCEDURE RESOLUTIONS

  PROCEDURE (SUB-CONTRACTORS IN THE CONSTRUCTION INDUSTRY)
  Resolved,
  That, notwithstanding anything to the contrary in the practice of the House relating to matters which may be included in Finance Bills, and Finance Bill of the present Session may make provision for the application, in discharging liability for social security contributions, of sums required to be deducted from payments of any description made by way of remuneration for labour used or to be used in construction operations.—[Mr. Lawson.]

  PROCEDURE (FUTURE TAXATION)
  Question put.
  That, notwithstanding anything to the contrary in the practice of the House relating to matters which may be included in Finance Bills, any Finance Bill of the present Session may contain the following provisions taking effect in a future year—
  846

  (a) provisions about value added tax restricting the zero-rating of supplies of sewerage services, water, fuel and power;

  (b) provisions about contracts of private medical insurance;

  (c) provisions about persons who are or have been married;

  (d) provisions about the management of tax.

  The House divided: Ayes 337, Noes 221.

  Division No. 123]

  [10.15 pm

  AYES

  Adley, Robert

  Coombs, Simon (Swindon)

  Aitken, Jonathan

  Cope, Rt Hon John

  Alexander, Richard

  Cormack, Patrick

  Alison, Rt Hon Michael

  Couchman, James

  Allason, Rupert

  Cran, James

  Amery, Rt Hon Julian

  Critchley, Julian

  Amess, David

  Currie, Mrs Edwina

  Amos, Alan

  Curry, David

  Arbuthnot, James

  Davies, Q. (Stamf'd & Spald'g)

  Arnold, Jacques (Gravesham)

  Davis, David (Boothferry)

  Arnold, Tom (Hazel Grove)

  Day, Stephen

  Ashby, David

  Devlin, Tim

  Aspinwall, Jack

  Dicks, Terry

  Atkins, Robert

  Dorrell, Stephen

  Atkinson, David

  Douglas-Hamilton, Lord James

  Baker, Rt Hon K. (Mole Valley)

  Dover, Den

  Baker, Nicholas (Dorset N)

  Dunn, Bob

  Baldry, Tony

  Dykes, Hugh

  Banks, Robert (Harrogate)

  Eggar, Tim

  Batiste, Spencer

  Evans, David (Welwyn Hatf'd)

  Beaumont-Dark, Anthony

  Fallon, Michael

  Bellingham, Henry

  Favell, Tony

  Bendall, Vivian

  Fenner, Dame Peggy

  Bennett, Nicholas (Pembroke)

  Field, Barry (Isle of Wight)

  Benyon, W.

  Fishburn, John Dudley

  Bevan, David Gilroy

  Fookes, Dame Janet

  Biffen, Rt Hon John

  Forman, Nigel

  Blackburn, Dr John G.

  Forsyth, Michael (Stirling)

  Blaker, Rt Hon Sir Peter

  Fowler, Rt Hon Norman

  Body, Sir Richard

  Fox, Sir Marcus

  Bonsor, Sir Nicholas

  Franks, Cecil

  Boscawen, Hon Robert

  Freeman, Roger

  Boswell, Tim

  French, Douglas

  Bottomley, Peter

  Fry, Peter

  Bottomley, Mrs Virginia

  Gale, Roger

  Bowden, A (Brighton K'pto'n)

  Gardiner, George

  Bowden, Gerald (Dulwich)

  Gill, Christopher

  Bowis, John

  Gilmour, Rt Hon Sir Ian

  Boyson, Rt Hon Dr Sir Rhodes

  Glyn, Dr Alan

  Brandon-Bravo, Martin

  Goodhart, Sir Philip

  Brazier, Julian

  Goodson-Wickes, Dr Charles

  Bright, Graham

  Gorman, Mrs Teresa

  Brooke, Rt Hon Peter

  Gorst, John

  Brown, Michael (Brigg & Cl't's)

  Gow, Ian

  Browne, John (Winchester)

  Grant, Sir Anthony (CambsSW)

  Bruce, Ian (Dorset South)

  Greenway, Harry (Ealing N)

  Buchanan-Smith, Rt Hon Alick

  Greenway, John (Ryedale)

  Budgen, Nicholas

  Gregory, Conal

  Burns, Simon

  Griffiths, Peter (Portsmouth N)

  Burt, Alistair

  Ground, Patrick

  Butcher, John

  Grylls, Michael

  Butler, Chris

  Gummer, Rt Hon John Selwyn

  Butterfill, John

  Hague, William

  Carlisle, John, (Luton N)

  Hamilton, Hon Archie (Epsom)

  Carlisle, Kenneth (Lincoln)

  Hamilton, Neil (Tatton)

  Carrington, Matthew

  Hampson, Dr Keith

  Carttiss, Michael

  Hanley, Jeremy

  Cash, William

  Hannam, John

  Channon, Rt Hon Paul

  Hargreaves, A. (B'ham H'll Gr")

  Chapman, Sydney

  Harg reaves, Ken (Hyndburn)

  Chope, Christopher

  Harris, David

  Churchill, Mr

  Haselhurst, Alan

  Clark, Dr Michael (Rochford)

  Hawkins, Christopher

  Clark, Sir W. (Croydon S)

  Hayes, Jerry

  Clarke, Rt Hon K. (Rushcliffe)

  Hayhoe, Rt Hon Sir Barney

  Colvin, Michael

  Hayward, Robert

  Conway, Derek

  Heathcoat-Amory, David

  Coombs, Anthony (Wyre F'rest)

  Heddle, John

  847

  Heseltine, Rt Hon Michael

  Moate, Roger

  Hicks, Mrs Maureen (Wolv' NE)

  Molyneaux, Rt Hon James

  Higgins, Rt Hon Terence L.

  Monro, Sir Hector

  Hind, Kenneth

  Montgomery, Sir Fergus

  Hogg, Hon Douglas (Gr'th'm)

  Moore, Rt Hon John

  Holt, Richard

  Morris, M (N'hampton S)

  Hordern, Sir Peter

  Morrison, Sir Charles

  Howard, Michael

  Morrison, Rt Hon P (Chester)

  Howarth, Alan (Strat'd-on-A)

  Moss, Malcolm

  Howarth, G. (Cannock & B'wd)

  Moynihan, Hon Colin

  Howe, Rt Hon Sir Geoffrey

  Neale, Gerrard

  Howell, Rt Hon David (G'dford)

  Needham, Richard

  Howell, Ralph (North Norfolk)

  Nelson, Anthony

  Hughes, Robert G. (Harrow W)

  Neubert, Michael

  Hunt, David (Wirral W)

  Nicholls, Patrick

  Hunt, John (Ravensbourne)

  Nicholson, David (Taunton)

  Hunter, Andrew

  Nicholson, Emma (Devon West)

  Hurd, Rt Hon Douglas

  Norris, Steve

  Irvine, Michael

  Onslow, Rt Hon Cranley

  Irving, Charles

  Oppenheim, Phillip

  Jack, Michael

  Page, Richard

  Jackson, Robert

  Paice, James

  Janman, Tim

  Patnick, Irvine

  Jessel, Toby

  Patten, Chris (Bath)

  Jones, Gwilym (Cardiff N)

  Patten, John (Oxford W)

  Jones, Robert B (Herts W)

  Pattie, Rt Hon Sir Geoffrey

  Jopling, Rt Hon Michael

  Pawsey, James

  Kellett-Bowman, Dame Elaine

  Porter, Barry (Wirral S)

  Key, Robert

  Porter, David (Waveney)

  Kilfedder, James

  Portillo, Michael

  King, Roger (B'ham N'thfield)

  Powell, William (Corby)

  Kirkhope, Timothy

  Price, Sir David

  Knapman, Roger

  Rattan, Keith

  Knight, Greg (Derby North)

  Raison, Rt Hon Timothy

  Knight, Dame Jill (Edgbaston)

  Rathbone, Tim

  Knowles, Michael

  Redwood, John

  Knox, David

  Renton, Tim

  Lamont, Rt Hon Norman

  Rhodes James, Robert

  Lang, Ian

  Riddick, Graham

  Latham, Michael

  Ridley, Rt Hon Nicholas

  Lawrence, Ivan

  Ridsdale, Sir Julian

  Lawson, Rt Hon Nigel

  Rifkind, Rt Hon Malcolm

  Lee, John (Pendle)

  Roberts, Wyn (Conwy)

  Leigh, Edward (Gainsbor'gh)

  Roe, Mrs Marion

  Lennox-Boyd, Hon Mark

  Rossi, Sir Hugh

  Lester, Jim (Broxtowe)

  Rost, Peter

  Lightbown, David

  Rowe, Andrew

  Lilley, Peter

  Rumbold, Mrs Angela

  Lloyd, Sir Ian (Havant)

  Sackville, Hon Tom

  Lloyd, Peter (Fareham)

  Sainsbury, Hon Tim

  Lord, Michael

  Sayeed, Jonathan

  Luce, Rt Hon Richard

  Scott, Nicholas

  Lyell, Sir Nicholas

  Shaw, David (Dover)

  McCrindle, Robert

  Shaw, Sir Giles (Pudsey)

  MacKay, Andrew (E Berkshire)

  Shaw, Sir Michael (Scarb')

  Maclean, David

  Shephard, Mrs G. (Norfolk SW)

  McLoughlin, Patrick

  Shepherd, Colin (Hereford)

  McNair-Wilson, Sir Michael

  Shepherd, Richard (Aldridge)

  McNair-Wilson, P. (New Forest)

  Shersby, Michael

  Madel, David

  Sims, Roger

  Major, Rt Hon John

  Skeet, Sir Trevor

  Malins, Humfrey

  Smith, Tim (Beaconsfield)

  Mans, Keith

  Soames, Hon Nicholas

  Maples, John

  Speller, Tony

  Marland, Paul

  Spicer, Sir Jim (Dorset W)

  Marlow, Tony

  Spicer, Michael (S Worcs)

  Marshall, John (Hendon S)

  Squire, Robin

  Marshall, Michael (Arundel)

  Stanbrook, Ivor

  Martin, David (Portsmouth S)

  Stanley, Rt Hon Sir John

  Mates, Michael

  Steen, Anthony

  Maude, Hon Francis

  Stern, Michael

  Mawhinney, Dr Brian

  Stevens, Lewis

  Maxwell-Hyslop, Robin

  Stewart, Allan (Eastwood)

  Mellor, David

  Stewart, Andy (Sherwood)

  Meyer, Sir Anthony

  Stokes, Sir John

  Miller, Sir Hal

  Stradling Thomas, Sir John

  Mills, Iain

  Sumberg, David

  Miscampbell, Norman

  Tapsell, Sir Peter

  Mitchell, Andrew (Gedling)

  Taylor, Ian (Esher)

  Mitchell, Sir David

  Taylor, John M (Solihull)

  848

  Taylor, Teddy (S'end E)

  Walters, Sir Dennis

  Tebbit, Rt Hon Norman

  Ward, John

  Temple-Morris, Peter

  Wardle, Charles (Bexhill)

  Thatcher, Rt Hon Margaret

  Warren, Kenneth

  Thompson, D. (Calder Valley)

  Watts, John

  Thompson, Patrick (Norwich N)

  Wells, Bowen

  Thorne, Neil

  Wheeler, John

  Thornton, Malcolm

  Whitney, Ray

  Thurnham, Peter

  Widdecombe, Ann

  Townend, John (Bridlington)

  Wiggin, Jerry

  Townsend, Cyril D. (B'heath)

  Wilshire, David

  Tracey, Richard

  Winterton, Mrs Ann

  Tredinnick, David

  Winterton, Nicholas

  Trippier, David

  Wolfson, Mark

  Trotter, Neville

  Wood, Timothy

  Twinn, Dr Ian

  Woodcock, Mike

  Vaughan, Sir Gerard

  Yeo, Tim

  Viggers, Peter

  Young, Sir George (Acton)

  Waddington, Rt Hon David

  Wakeham, Rt Hon John

  Tellers for the Ayes:

  Waldegrave, Hon William

  Mr. Tristan Garel-Jones and

  Walden, George

  Mr. Tony Durant.

  Waller, Gary

  NOES

  Abbott, Ms Diane

  Dixon, Don

  Adams, Allen (Paisley N)

  Dobson, Frank

  Alton, David

  Doran, Frank

  Anderson, Donald

  Douglas, Dick

  Archer, Rt Hon Peter

  Dunnachie, Jimmy

  Armstrong, Hilary

  Dunwoody, Hon Mrs Gwyneth

  Ashdown, Rt Hon Paddy

  Evans, John (St Helens N)

  Banks, Tony (Newham NW)

  Ewing, Mrs Margaret (Moray)

  Barnes, Harry (Derbyshire NE)

  Fatchett, Derek

  Barnes, Mrs Rosie (Greenwich)

  Faulds, Andrew

  Battle, John

  Fearn, Ronald

  Beckett, Margaret

  Field, Frank (Birkenhead)

  Beith, A. J.

  Fields, Terry (L'pool B G'n)

  Benn, Rt Hon Tony

  Fisher, Mark

  Bennett, A. F. (D'nt'n & R'dish)

  Flannery, Martin

  Bermingham, Gerald

  Flynn, Paul

  Bidwell, Sydney

  Foot, Rt Hon Michael

  Blair, Tony

  Foster, Derek

  Blunkett, David

  Foulkes, George

  Boyes, Roland

  Fraser, John

  Bradley, Keith

  Fyfe, Maria

  Bray, Dr Jeremy

  Galbraith, Sam

  Brown, Gordon (D'mline E)

  Galloway, George

  Brown, Nicholas (Newcastle E)

  Garrett, John (Norwich South)

  Brown, Ron (Edinburgh Leith)

  George, Bruce

  Bruce, Malcolm (Gordon)

  Gilbert, Rt Hon Dr John

  Buchan, Norman

  Godman, Dr Norman A.

  Buckley, George J.

  Golding, Mrs Llin

  Caborn, Richard

  Gordon, Mildred

  Callaghan, Jim

  Graham, Thomas

  Campbell, Menzies (Fife NE)

  Grant, Bernie (Tottenham)

  Campbell, Ron (Blyth Valley)

  Griffiths, Nigel (Edinburgh S)

  Campbell-Savours, D. N.

  Griffiths, Win (Bridgend)

  Carlile, Alex (Mont'g)

  Grocott, Bruce

  Cartwright, John

  Hardy, Peter

  Clark, Dr David (S Shields)

  Harman, Ms Harriet

  Clarke, Tom (Monklands W)

  Hattersley, Rt Hon Roy

  Clay, Bob

  Haynes, Frank

  Clelland, David

  Healey, Rt Hon Denis

  Clwyd, Mrs Ann

  Heffer, Eric S.

  Coleman, Donald

  Henderson, Doug

  Cook, Robin (Livingston)

  Hinchliffe, David

  Corbett, Robin

  Hogg, N. (C'nauld & Kilsyth)

  Corbyn, Jeremy

  Holland, Stuart

  Cousins, Jim

  Home Robertson, John

  Crowther, Stan

  Hood, Jimmy

  Cryer, Bob

  Howarth, George (Knowsley N)

  Cummings, John

  Howell, Rt Hon D. (S'heath)

  Cunliffe, Lawrence

  Howells, Geraint

  Dalyell, Tam

  Howells, Dr. Kim (Pontypridd)

  Darling, Alistair

  Hoyle, Doug

  Davies, Rt Hon Denzil (Llanelli)

  Hughes, John (Coventry NE)

  Davies, Ron (Caerphilly)

  Hughes, Robert (Aberdeen N)

  Davis, Terry (B'ham Hodge H'l)

  Hughes, Roy (Newport E)

  Dewar, Donald

  Hughes, Sean (Knowsley S)

  849

  Hughes, Simon (Southwark)

  Mullin, Chris

  Illsley, Eric

  Murphy, Paul

  Ingram, Adam

  Nellist, Dave

  Johnston, Sir Russell

  Oakes, Rt Hon Gordon

  Jones, Barry (Alyn & Deeside)

  O'Brien, William

  Jones, Ieuan (Ynys M⃴n)

  O'Neill, Martin

  Jones, Martyn (Clwyd S W)

  Orme, Rt Hon Stanley

  Kennedy, Charles

  Owen, Rt Hon Dr David

  Kirkwood, Archy

  Patchett, Terry

  Lamond, James

  Pendry, Tom

  Leadbitter, Ted

  Pike, Peter L.

  Leighton, Ron

  Powell, Ray (Ogmore)

  Lestor, Joan (Eccles)

  Prescott, John

  Lewis, Terry

  Primarolo, Dawn

  Litherland, Robert

  Quin, Ms Joyce

  Lloyd, Tony (Stratford)

  Radice, Giles

  Lofthouse, Geoffrey

  Randall, Stuart

  Loyden, Eddie

  Redmond, Martin

  McAllion, John

  Rees, Rt Hon Merlyn

  McAvoy, Thomas

  Reid, Dr John

  McCartney, Ian

  Richardson, Jo

  McFall, John

  Roberts, Allan (Bootle)

  McKay, Allen (Barnsley West)

  Robertson, George

  McKelvey, William

  Robinson, Geoffrey

  McLeish, Henry

  Rogers, Allan

  Maclennan, Robert

  Ross, Ernie (Dundee W)

  McNamara, Kevin

  Rowlands, Ted

  McTaggart, Bob

  Ruddock, Joan

  McWilliam, John

  Salmond, Alex

  Madden, Max

  Sedgemore, Brian

  Mahon, Mrs Alice

  Sheerman, Barry

  Marek, Dr John

  Sheldon, Rt Hon Robert

  Marshall, David (Shettleston)

  Shore, Rt Hon Peter

  Marshall, Jim (Leicester S)

  Short, Clare

  Martin, Michael J. (Springburn)

  Skinner, Dennis

  Martlew, Eric

  Smith, Andrew (Oxford E)

  Maxton, John

  Smith, C. (Isl'ton & F'bury)

  Meacher, Michael

  Smith, Rt Hon J. (Monk'ds E)

  Meale, Alan

  Snape, Peter

  Michael, Alun

  Soley, Clive

  Michie, Bill (Sheffield Heeley)

  Spearing, Nigel

  Michie, Mrs Ray (Arg'l & Bute)

  Steel, Rt Hon David

  Mitchell, Austin (G't Grimsby)

  Steinberg, Gerry

  Moonie, Dr Lewis

  Stott, Roger

  Morgan, Rhodri

  Strang, Gavin

  Morley, Elliott

  Straw, Jack

  Morris, Rt Hon A. (W'shawe)

  Taylor, Mrs Ann (Dewsbury)

  Morris, Rt Hon J. (Aberavon)

  Thomas, Dr Dafydd Elis

  Mowlam, Marjorie

  Turner, Dennis

  850

  Wallace, James

  Winnick, David

  Warden, Gareth (Gower)

  Worthington, Tony

  Wareing, Robert N.

  Wray, Jimmy

  Welsh, Andrew (Angus E)

  Young, David (Bolton SE)

  Welsh, Michael (Doncaster N)

  Wigley, Dafydd

  Tellers for the Noes:

  Williams, Rt Hon Alan

  Mr. Ken Eastham and

  Williams, Alan W. (Carm'then)

  Mr. Frank Cook.

  Wilson, Brian

  Question accordingly agreed to.

  FINANCE BILL [Money]
  Queen's Recommendation having been signified—
  Resolved,
  That, for the purposes of any Act resulting from the Finance Bill, it is expedient to authorize—

  (a) the payment out of the National Loans Fund of any expenses incurred by the Treasury in connection with the redemption before maturity of securities held in the Issue Department of the Bank of England;

  (b) the payment into the Consolidated Fund of the surplus standing to the credit of the Redemption Annuities Account immediately before that account is wound up.—[Mr. Lawson.]

  Ordered,
  That a Bill be brought in upon the foregoing resolutions: And that the Chairman of Ways and Means, Mr. Chancellor of the Exchequer, Mr. Secretary Fowler, Mr. Secretary Ridley, Mr. Secretary Channon, Mr. Secretary Moore, Mr. Secretary Parkinson, Mr. John Major, Mr. Tony Newton, Mr. Norman Lamont, Mr. Peter Brooke, and Mr. Peter Lilley do prepare and bring it in

  FINANCE BILL
  Mr. Norman Lamont accordingly presented a Bill to grant certain duties, to alter other duties, and to amend the law relating to the national debt and the public revenue, and to make further provision in connection with finance: And the same was read the First time; and ordered to be read a Second time tomorrow and to be printed. [Bill 102]

  Water Bill [Money] (No. 2)
  Queen's recommendation having been signified—
  Motion made, and Question proposed,
  That, for the purposes of any Act resulting from the Water Bill, it is expedient to authorise the payment out of money provided by Parliament of—

  (a) any travelling or other allowances payable under the Act to members of the committee established and maintained for advising the Secretary of State with respect to matters affecting or otherwise connected with the carrying out in Wales of the functions of the National Rivers Authority; and

  (b) sums required by a Minister of the Crown for making loans to the National Rivers Authority for capital purposes in connection with the carrying out of its flood defence functions, so long as the aggregate amount outstanding in respect of the principal of sums borrowed by the Authority shall not exceed £160 million.—[Mr. Norman Lamont.]

  10.29 pm
  Mr. Bob Cryer: I shall raise several questions on this money resolution. I spoke on the Water Bill [Money] (No. 1) resolution. I am concerned, because the first money resolution—[Interruption.]
  Mr. Speaker: Order. Would hon. Members who are not staying for this important debate please leave quietly?
  Mr. Cryer: I am grateful to you, Mr. Speaker. After all, the hon. Members who are moving out of the Chamber in such a noisy fashion belong to the party that continually complains about looking after the taxpayer's money. We are discussing a money resolution that authorises the spending of at least £160 million, and Conservative Members are leaving the Chamber in a noisy and indifferent fashion.
  The first section of the resolution deals with
  "any travelling or other allowances payable under the Act to members of the committee established and maintained for advising the Secretary of State with respect to matters affecting or otherwise connected with the carrying out in Wales of the functions of the National Rivers Authority".
  The National Rivers Authority is part of the hierarchy which is established by this wretched bit of legislation—it is hardly a bit of legislation; it is one of the biggest Bills ever brought before the House—yet hon. Members were not informed that extra money would be required for a committee established by the Secretary of State to advise him about the NRA. We were told that the NRA would be a free-standing body able to operate on its own, and that grant aid would be provided for it. The Minister responded to me in that way on 8 December when we discussed the first resolution. He said:
  "The hon. Member for Bradford, South rightly referred to the National Rivers Authority and the grants to it by the Secretary of State. Paragraph 17 to schedule 1 enables the Secretary of State, with the approval of the Treasury, to make grants to the NRA of such amounts, and on such terms, as he considers appropriate. He must, of course, provide the Comptroller and Auditor General with an account for each financial year of any grant paid and the Comptroller and Auditor General must then certify and report on that account. As the hon. Gentleman knows, copies of the Comptroller and Auditor General's report must be laid before both Houses of Parliament."
  I should like the Minister to confirm that that safeguard will apply to the expenditure sought—they may be minor amounts—for the committee which is being established to advise the Secretary of State on matters concerning the functions of the NRA in Wales.
  Mr. Dennis Skinner: Do not ask him too many questions, Bob, he has been busy.
  Mr. Cryer: My hon. Friend the Member for Bolsover (Mr. Skinner) is referring to the extra-curricular activities of the Minister. I want him to be bright and alert and not feeling too weak and worn out, for whatever reason, to answer the debate.
  The second part of the money resolution refers to
  "sums required by a Minister of the Crown for making loans to the National Rivers Authority for capital purposes in connection with … flood defence functions".
  On 8 December, I raised the issue of the grant-making power. The Minister said:
  "The grant-making power will enable grant-in-aid to meet the deficit on the NRA's operations. Although the NRA will be encouraged to maximise its income from direct charges, a deficit will arise largely because the environmental service charge will not be levied after 1989–90. Grant-in-aid is considered a more appropriate method of paying for services which are of benefit to the whole community."—[Official Report. 8 December 1989; Vol. 143, c. 539.]
  Clearly, flood defence arrangements are of benefit to the whole community. Why did the Minister tell me on 8 December that the benefits that would be enjoyed by the entire community would be paid for by grant in aid, to meet any deficits, when now, a few weeks later, the Government find it necessary to make loans? Is the wretched Bill so complex and so difficult to follow that Ministers could not produce a money resolution to cater for every contingency for which the Bill provides, as the contingencies were discovered in Committee? If so, that is not a good process of legislation. The Bill is complicated, but surely Ministers should have made provision at the beginning of the legislative programme, not when we are halfway through it.
  Indeed, tomorrow the House will be debating the Water Bill on Report. It is a bit late in the day for the Government to produce a second money resolution. It is clear that they have discovered oversights in the past few weeks. It is clear that there has been a lack of planning and understanding in the construction and progress of the Bill. There has been a serious miscalculation, bearing in mind that the original money resolution was, to all intents and purposes, massively comprehensive. The first section contained 12 parts, the first of which provided for grants by the Secretary of State to the National Rivers Authority. It seems that grants are not enough. Loans are required for a specific purpose. Why were grants authorised in the previous resolution for the generality of community purposes with loans being authorised only for flood defence purposes? Why was there that differentiation? I hope that the Minister who is to reply will provide an adequate response.
  As I have said, the first resolution was comprehensive. Are the Government considering the introduction of further money resolutions? We know from our experience that the Government's calculations are often so incompetent that sometimes three resolutions have been required. It seems that they have no idea of making adequate provision. For example, they introduced two further money resolutions following the Second Reading of the Firearms (Amendment) Bill, as it then was, and the original resolution.
  I hope that the Minister will be able to provide the assurances that I seek. I am surprised that an explanation was not provided in the first instance. It is outrageous that the House should be asked for £160 million, with a few

  853
  extra million pounds, I suppose, for the expenses of the committee that is advising the Secretary of State for the Environment on the NRA. I suppose that the extras are too trivial to bother about. Approval is sought for the expenditure of £160 million, yet no explanation is vouchsafed to the House. In other words, a Minister has had to be forced to his feet. We are talking of a Government who are supposed to be concerned about the taxpayers' interests. It seems that if they think that they can get away with pushing expenditure of £160 million through the House on the nod, they will try to do so. That is a disgraceful attitude for any Government to take.
  10.38 pm
  Mr. Dafydd Wigley: I was surprised to find at 2.30 pm that the resolution was on the Order Paper. There was no announcement last week that any such measure would appear before us. I understand, however, that that is the normal way in which such business is handled. I suggest that in future there should be reference to a resolution such as that which is now before us when the business of the House is discussed on a Thursday. If not, the allegation of the hon. Member for Bradford, South (Mr. Cryer) that something is being slipped through will have additional credence. Nothing was said last week to the effect that a second money resolution would be on the agenda this week, whether on the nod or otherwise.
  I was a member of the Committee which considered the Water Bill and I do not oppose the provisions contained in the resolution. In some respects, they meet some of the arguments that I and other Opposition Members raised in Committee over several weeks. First, the resolution will facilitate the acknowledgement in legislation that the advisory committee on rivers in Wales will have money made available to it to enable it to do its work. We had a long argument in Committee about whether the advisory committee in Wales would be a statutory one. For a long period the Government appeared not to be too keen on making it a statutory body. I am glad that we have won the argument and that the Government have conceded that. I hope that the statutory committee will feel that it has an important function to carry out and that the Secretary of State will take account of the weight of its opinion.
  I hope that the sums made available to the Committee will enable it to undertake a professional job and that it will not be a committee of people who have retired or have independent incomes and are thus able to undertake do-gooding work for the Secretary of State. It must consist of people who do ordinary everyday jobs, and the scale of the allowances and costs must be adequate to recompense those who do not have private means or a retirement income. It is important to strike the right balance. I welcome paragraph (a) as a concession to the points that I made in Committee, as did the hon. Members for Cardiff, South and Penarth (Mr. Michael) and for Brecon and Radnor (Mr. Livsey).
  I should be grateful for clarification of how the second paragraph will work. Although I welcome any source of additional publicly originated finance available to undertake important works that should be undertaken in the public sector, such as flood defence mechanisms, it is important to know how the charging for that will be affected by the money resolution. Will there be additional charges to service the loans? They are loans, not grants. If there are additional charges, will they go through to
  854
  communities which suffer from floods and need defence mechanisms? I should be grateful if the Minister, in responding to this brief debate, would give some indication of the additional implications that this part of the resolution may have for those who are to benefit from the work undertaken.
  My other slight misgiving is whether £160 million is enough and about the mechanism for increasing the figure, if more is needed. Presumably it will not be necessary to go back to primary legislation and the money may be provided by an order on an annual basis or by some similar arrangement.
  In introducing this money resolution the Government are providing a prelude to the debate on the Bill that we shall have in the next two days and on the first day after the recess, when they will have to introduce many amendments and proposals to meet the points of weakness that we pointed out to them in Committee. The Bill has been fully opposed in Committee because Tory Back Benchers, Opposition Members and people outside do not believe that it is coherent legislation. It will need considerably more than this money resolution to overcome the basic fallacies in the Bill, not least the financial ones.
  10.43 pm
  Mr. Alun Michael: It is a little surprising to see the scrappy way in which the Government are beginning to backtrack on this curious Bill. In view of the criticism that the Secretary of State and the Prime Minister made of the Ministers' handling of the Water Bill, it should be said in fairness that they have done their job throughout the Committee stage and given way on nothing. Now we see a little room for manoeuvre creeping in. Besides this money resolution are we to see more money resolutions about the writing off of debt or the suggestions made by the right hon. Member for Henley (Mr. Heseltine) to give grants to the privatised water companies?
  I should like to make it clear that we will not oppose these proposals because they mark concessions wrung from reluctant Ministers who have taken a pounding. One has rarely seen Ministers in such disarray as we saw in Committee.
  Paragraph (b) reflects a response to one element of the muddle through which Ministers have tried to find their way. That is certainly welcome as an important step by the Government in recognising the need for a loan facility, which Ministers, of course, failed to recognise throughout the Committee stage. The Secretary of State is obviously not aware of the difficulties that his junior Ministers have been suffering over recent weeks and months. Our response to paragraph (b) is that at last perhaps the Secretary of State has recognised—[Interruption.]
  Madam Deputy Speaker (Miss Betty Boothroyd): Order. Mr. Michael.
  Mr. Michael: I am grateful, Madam Deputy Speaker. It is obvious that the Secretary of State is somewhat needled on this matter.
  Paragraph (a) will give the financial requirements for a committee that will at last be written into the Bill. Of course, the Minister of State at the Welsh Office continually refused our request to write this into the Bill

  855
  during the Committee stage. I am glad to see that it will be in the Bill and that the money resolution is before the House.
  Tomorrow's debate will be about the committee's composition and what it will do. Our welcome, therefore, for paragraph (a) depends on the debate tomorrow. The Government are, in effect, accepting the amendment that we pressed on them in Committee that the advisory committee should be written into the Bill. Our amendments will give teeth to the committee, but they will require the same provisions as are given tonight. However, the purpose of our amendments—which also require the money resolution—are to protect the Welsh people from the worst effects of the Water Bill. Our plea is for a watchdog with real teeth. Our amendments will give real teeth without which the body would be completely meaningless.
  The amendments will go further than simply to say that there will need to be a committee to advise the Secretary of State for Wales. They will seek to give proper weight to that committee by appointing to it representatives of local authorities in Wales, the chairman of the fisheries drainage and recreation committees and representatives of consumer, environmental and recreational organisations to be named by the Secretary of State. That will provide a meaningful committee and will give some purpose to the payments to be made under the resolution.
  There will also be the possibility of the Secretary of State giving that committee some real work, by enabling it to carry out any function exercisible by him by virtue of the Bill. I refer to Wales because, of course, the first part of the resolution refers to Wales. It appears that the Secretary of State for the Environment does not require those functions for England.
  It is important that there is an environmental oversight by a proper body. We believe that that should be carried out by a Welsh rivers authority and we have tabled an amendment to that effect. However, failing such an authority, there is a need for a Secretary of State's committee that is not just a nominal cipher, but has some power and responsibilities and can be seen to exercise functions within Wales.
  During the Committee stage we won from a reluctant Minister of State the concession of a special committee for Wales, which has led to the money resolution. After fresh controversy, the Minister has tabled an amendment to write the committee into the Bill. However, unless the committee is given proper authority by our amendments, it will be a toothless corgi.
  We propose further changes to make the body effective and representative of Welsh interests. As the paragraph now stands, the Secretary of State could use the money resolution simply to pay for three or four members of the Conservative party to meet in a hotel somewhere near the Welsh border, or even in London, for half an hour once a year and to offer him private advice that he could then ignore. That would be completely meaningless, but I suspect that that is what the concession means as it stands. If the amendments debated tomorrow are accepted, however, the money resolution will enable proper payment to a proper committee that will consist of proper
  856
  representation from environmental groups, fishermen as well as local authorities and the chairman of the committees to which I referred earlier.
  If the sell off of our water goes ahead information will be vital, but it will not be available to the public in Wales unless we have the powers that are allowed for in our amendments to the Government's new clause. Our amendments will empower the committee to require information from the water companies and from the rivers authority. In that event, the payment called for in the money resolution will be money well spent. Without such expenditure it is difficult to see how the public in Wales will be properly protected.
  The Secretary of State for Wales will be able to delegate any of his powers under the Bill to the committee and give it a real job to do. That will also give some purpose to the financial provisions that we are debating.
  We believe that the privatisation of water will do nothing positive for the environment or for the consumer in Wales. The minimum that we shall seek tomorrow is the establishment of a Welsh rivers authority and a consumers' charter of measures to be included in the Bill. Failing that, the Secretary of State for Wales should recognise that the amendments that we shall debate tomorrow and the financial provisions before us tonight are modest, constructive and positive proposals which would be welcomed in Wales and which the Secretary of State should accept if he has the slightest desire to protect Welsh interests.
  We hope that the money resolution will pave the way for the Secretary of State for Wales to accept our amendments to the new clause tomorrow so that there will be something in the Bill that means something to the Welsh people.
  To a great extent, tonight's debate is meaningless until we have tomorrow's debate. The way in which the Government have sought to rush through such an amendment by putting it on the Order Paper in such an extraordinary fashion leads to us having to refer to tomorrow's business while we debate that of tonight. That is a nonsensical way in which to deal with business but that is the way in which the Government operate. They have got themselves in a complete mess, but, because of that, we welcome what we think today's money resolution may mean and look forward to the substantive debate tomorrow.
  10.52 pm
  The Parliamentary Under-Secretary of State for the Environment (Mr. Cohn Moynihan): By the tenor of the laboriously scribed responses of the hon. Member for Cardiff, South and Penarth (Mr. Michael) in Committee, I often thought that his mind was not even on the same Committee. Tonight is no exception. We have won the argument, we have won the debate and tonight the hon. Gentleman has stood at the Dispatch Box to agree with us on the money resolution.
  The first part of the money resolution relates to the establishment of the advisory committee for Wales, which the Secretary of State for Wales will be able to appoint if new clause 8 is approved by the House. The advisory committee's role is to ensure that the Secretary of State for Wales is kept fully informed, and obtains a Welsh view, of

  857
  National Rivers Authority policies which affect Wales and of the needs of the NRA if Welsh requirements are to be met.
  The clause provides for the Secretary of State to pay —with the consent of the Treasury, out of money provided by Parliament—to the members of the committee sums reimbursing them for loss of remuneration, for travelling expenses and for other out-of-pocket expenses. The costs are not likely to be "a few million pounds", to quote the hon. Member for Bradford, South (Mr. Cryer). We expect them to be about £25,000 per year.
  Paragraph (b) of the resolution provides for the payment of loans to the NRA in connection with its flood defence function, and sets a limit to the amount that the NRA could borrow for this purpose. The resolution is necessary because we have tabled amendments to the Water Bill to provide for such arrangements. Paragraph 18 of schedule I already allows the NRA, with the consent of the Secretary of State or the Minister of Agriculture, Fisheries and Food, and the approval of the Treasury, to undertake temporary borrowing. That power is intended to enable the NRA to overcome any problems that may arise with short-term cash flow.
  The hon. Member for Bradford, South wanted to know why we should have to discuss these details now when we have already debated a money resolution. He would be the first to accept that we should listen very carefully to points raised in Committee by his hon. Friends and also by our own hon. Friends, and that is what we did. Concern was expressed that a power for the NRA to borrow temporarily was not sufficient on its own and that the NRA should also be able to undertake long-term borrowing to fund its flood defence work.
  Mr. Peter L. Pike: We debated the issue of temporary borrowing in Committee. I argued then that temporary borrowing was unnecessary because all borrowing is temporary if the intention is to repay it. Why has the Minister produced a proposal after all this time when he refused to accept in Committee that there was any need for additional provision in the Bill? If money is borrowed, the intention must be to pay it back.
  Mr. Moynihan: In Committee, the hon. Gentleman and his hon. Friends put the case for long-term borrowing powers, to which we are responding positively now. We have taken account of the hon. Gentleman's views and of the admirable views expressed by my hon. Friends on this point in the debate in Committee.
  Mr. Alistair Burt: I wonder whether my hon. Friend the Minister noted the point made by the hon. Member for Burnley (Mr. Pike) that money which is
  858
  borrowed is intended to be paid back. I do not know where the hon. Member for Burnley was while the Labour party was in government, but the Labour Government did not pay back a penny piece. The Conservative Government are paying money back, whereas the Labour Government just kept on borrowing, leaving the burden to the next generation.
  Mr. Moynihan: If we ever wanted living proof of the fact that we won the argument in Committee, it exists in the form of my hon. Friend the Member for Bury, North (Mr. Burt).
  We do not believe that it is necessary to provide the NRA with long-term borrowing powers for situations other than emergencies. It should be possible for the NRA to plan a balanced budget for the normal run of its flood defence work without recourse to borrowing. Indeed, water authorities have generally managed without significant and new borrowings in recent years.
  I confirm that the report that Ministers are required to make to both Houses of Parliament under paragraph 21(3) of schedule 1 will include a reference to money expended on the Welsh committee. This money resolution is necessary because of the amendment to provide borrowing powers following the strong views expressed in Committee which I reflected in my earlier comments.
  In response to the points raised by the hon. Member for Caernarfon (Mr. Wigley), the money resolution provides for loans to the NRA to finance emergency flood defence work. The cost of servicing the loans will come from the land drainage precepts. The effect of that is to spread the costs of major emergency works over a number of years. I hope that in a spirit of harmony and agreement between hon. Members on both sides of the House about the great benefits and wisdom of this money resolution the House will accept the motion without a Division.
  Question put and agreed to.
  Resolved,
  That, for the purposes of any Act resulting from the Water Bill, it is expedient to authorise the payment out of money provided by Parliament of—

  (a) any travelling or other allowances payable under the Act to members of the committee established and maintained for advising the Secretary of State with respect to matters affecting or otherwise connected with the carrying out in Wales of the functions of the National Rivers Authority; and

  (b) sums required by a Minister of the Crown for making loans to the National Rivers Authority for capital purposes in connection with the carrying out of its flood defence functions, so long as the aggregate amount outstanding in respect of the principal of sums borrowed by the Authority shall not exceed £160 million.

  Grant-Maintained Schools
  10.58 pm
  Mr. Jack Straw: I beg to move,
  That an humble Address be presented to Her Majesty, praying that the Education (Grants) (Grant-Maintained Schools Limited) Regulations 1989 (S.I., 1989, No. 165), dated 8th February 1989, a copy of which was laid before this House on 10th February, be annulled.
  This debate is about an abuse of powers, and the Government's double standards. It is about the arrogance of power of a Government, who in the words of one of their leading members, Lord Hailsham, have now become an elective dictatorship and effectively accountable to no one but themselves.
  This debate is also about a simple question of morality: whether taxpayers should fund a body which is palpably a party political front organisation, but which has sought to hide its true nature by falsely claiming that it was a charitable trust, when at no stage in its existence has it ever had that status.
  The regulations empower the Secretary of State to grant-aid Grant-Maintained Schools Limited for a variety of activities. Speaking on the radio this morning, the Secretary of State said that those activities would comprise mainly training for grant-maintained schools already established. However, paragraph 2(1) of the regulations goes very much wider than that, allowing
  "expenditure incurred or to be incurred by it for the purposes of, or in connection with, the provision (or proposed provision) of educational services in grant-maintained schools (or proposed grant-maintained schools), which expenditure is for the time being approved by the Secretary of State."
  Despite questioning by me, the Secretary of State says that he cannot put a figure on the sum that he is likely to grant. However, the Grant-Maintained Schools Trust has applied for the purposes specified by the regulations for £25,000 for the 11 remaining days of the current financial year and for £150,000 for the next financial year.
  A Department of Education and Science grant of £150,000 is very large indeed, by comparison with the moneys made available to other organisations. The Pre-School Playgroups Association, which has a worthier function than the Grant-Maintained Schools Trust and provides services for hundreds of thousands of children, receives the princely sum of £153,000. If the trust's application is granted in full, it will receive more in total grant than the Church of England Board of Education, the National Association of Governors and Managers, the National Children's Bureau, the Family Welfare Association and the Girls Brigade combined.
  Mr. John Maples: The hon. Gentleman says that £150,000 is a lot of money. If a Labour-controlled local education authority were to run up £75,000 in legal fees on its own account, and another £75,000 on the account of the governors, over an attempt to frustrate the governors' wishes to turn their school into a grant-maintained school, would not the hon. Gentleman agree that that was a misuse of public money? That is exactly what happened in at least one case.
  Mr. Straw: As usual, the hon. Gentleman does not mention which authority. [HON. MEMBERS: "ILEA."] If the school in question is Haberdashers' Aske's, that case concerns an application to become not a grant-maintained school but a city technology college. The hon. Gentleman knows full well that ILEA won in court in the first
  860
  instance, and that it now has leave to appeal to the House of Lords. Citizens and local authorities have a right to go to court and have their rights established, not have them crushed by Conservative Members. [Interruption.] It is understandable that Conservative Members do not want to debate the matter of the Grant-Maintained Schools Trust being a Conservative front organisation, the abuse of power that there has been in funding it, and why the trust has so falsely misrepresented its position.
  The trust is a Conservative front organisation. When the Prime Minister gave an interview to The Independent in September 1987, speaking of opting out, she said—and she used the first person plural—
  "We are very much aware that we have got to form some kind of organisation to help people to do it"—
  that is, opt out.
  "And we have got to get the people who already run schools and say to them 'Now look! This is the way to go about it'."
  The trust was established at the Prime Minister's behest. All the main trustees are Conservative party activists. The chairman is the hon. Member for Epping Forest (Mr. Norris), and its director is Mr. Andrew Turner, formerly of Conservative Central Office research department and a Conservative city councillor for Oxford. One of the trustees is Judith Chaplin, a former Conservative councillor and head of the Institute of Directors policy unit. Another trustee is Mr. Ronald Baird, group director of Saatchi and Saatchi and a former Conservative party public relations manager. So the trust is a Conservative front.
  Secondly, it has acted as such. The organisation's first act—even before the Education Reform Act was passed —was to write not to all councillors, but to all Conservative councillors, asking them whether they could identify schools that might opt out and concluding:
  "Needless to say the Trust would treat any such information in the strictest confidence".
  That, I suggest, is not the behaviour of an above-board, respectable charitable organisation.
  Dame Elaine Kellett-Bowman: Is the hon. Gentleman aware that one Labour organisation wrote to all Labour councillors in Birmingham before one election —which the hon. Gentleman may well remember—telling them to oppose grammar schools because they taught the children of working-class families to vote Conservative?
  Mr. Straw: I was not aware of that. As ever, I am deeply grateful to the Lady, but that is not the subject that we are discussing.
  The third point is that, even if training were needed —as the Secretary of State says it is—it would be quite wrong for it to be provided by this organisation. There are resources and skills enough within the Department of Education and Science, and within respectable, established educational charities, to provide training—if it is training, and not indoctrination of those running grant-maintained schools, that is needed.
  What of the resources of the DES? We do not have a unit for grant-maintained schools, or even a branch; a whole division of the Department is devoted to nothing but grant-maintained schools, costing £150,000 a year in salaries alone. Are those people not capable of providing the training? Can the inspectorate—whose costs are added to that £150,000—not provide it?
  The fourth and last point is this: we should not pay the organisation because it has wilfully misled parents and the

  861
  public about its true nature. The first major pamphlet sent out by the trust—I understand that it was sent to all eligible schools—was called "A New Choice of Schools". I have a photocopy here. It is very cleverly put together, with pictures of children on beaches and in school libraries, and it talks in tendentious terms about the problems that schools have faced in the past. Turning to page 10, we read as follows—[HON MEMBERS: "We?"] Yes, I assumed that Conservative Members could also read—
  "The Grant-Maintained Schools Trust has been set up to promote and assist in the development of Grant-Maintained Schools. As a registered charity it is independent of, but fully briefed by, the Department of Education and Science".
  That statement—that the trust was and is a registered charity—is a simple, straightforward, bare-faced lie. The Charity Commissioners wrote to me as recently as 28 February this year, saying:
  "As you know, the current activities of the Trust are carried on through a non-charitable company and that a charity has yet to be constituted."
  Yet the statement that it was a charity was made nine months before that letter was written.
  Whoever wrote that, and whoever allowed it to go out, must have known that it was not true. I suspect that someone will stand up tonight and say that it was all a mistake, but to suggest that that was a mistake is to ask us to suspend our judgment and our experience of the wholly unscrupulous operation of the present Government over the past 10 years. I will accuse the trustees—including the hon. Member for Epping Forest—of many things, but incompetence is not one of them. Nor is that an accusation that I bring against Field Fisher and Martineau, one of the country's leading firms of solicitors and the solicitors to the trust.
  There was no mistake when that claim was made; just arrogance—an arrogance that led the trust to believe that it was above the law and could get away with making a claim that it probably knew to be untrue. What is more, it was not a mistake. Mr. Andrew Turner, Conservative city councillor and director of the trust, has damned himself out of his own mouth. He was the man who, last summer, issued the document that used the words "As a registered charity". In The Observer yesterday, he said:
  "We never thought that all our activities were charitable."
  That is interesting. The Secretary of State and Mr. Turner must know that one cannot have a charitable trust if parts of its activities are not charitable. That makes the operation of such a trust wholly impossible and bogus. It means that Mr. Turner was party to wilfully misleading the public and parents about the nature of the trust and that it was done for a purpose: that the trust could be presented as independent—to use its word—of the Department of Education and Science and the Conservative party when it was not.
  Further evidence of the wilful intent to mislead is that, once a fuss was made about it, initially in the education press, no apology was sent by the Department of Education and Science to the thousands of schools that had received the document. It did not say, "We have been referring to this as a trust. By the way, it is not a charitable trust; it is a political front organisation." All the Department did was to change the word "charity" for "non-profit". There is still the insinuation, with the use of the word "trust", which is customarily associated in people's minds with charity, that this body is a charity.
  I asked the Secretary of State twice on the radio this morning, and twice he refused to answer, this question;
  862
  perhaps he will do so now: does he approve of a body of this kind wilfully misleading the public and parents about its nature? I asked him whether he was aware that those who make false representations that a body is a charity and who collect funds from the public might find themselves in the criminal courts. Is the Secretary of State seriously suggesting that a body such as this, which has fraudulently misrepresented its position, is a proper recipient of public funds?
  Opting out has flopped. Only a handful of schools have balloted to become nationalised, state-controlled institutions. Most of them are threatened with closure and reorganisation. Most of them are not in Labour-controlled areas. Four weeks ago the Secretary of State tried to revive opting out by some cheap and grubby accusations against Labour authorities and against some of my hon. Friends. He has failed, despite repeated requests, to justify them. Tonight he seeks to breathe life into a flagging campaign by involuntarily invoking the taxpayers' assistance.
  This is the Secretary of State who is only too ready to lecture others about morality. We remember his lecture to the General Synod of the Church of England on 1 February about the need for the Church to maintain moral values. Before he next examines the mote in the eye of his brother, or in the eye of local authorities, hon. Members, or the Church, let him examine the beam in his own eye. Let him practise what he preaches, for once. The regulations are an abuse of power. We shall oppose them in the Lobby.
  11.13 pm
  The Secretary of State for Education and Science (Mr. Kenneth Baker): He got a bit worked up, didn't he? I welcome this opportunity to explain to the House the merits of the Education (Grants) (Grant-Maintained Schools Limited) Regulations 1989. I find it richly comic to be lectured by the Opposition about the proper and prudent use of public money. The hon. Member for Blackburn (Mr. Straw) certainly overreached himself this time.
  The hon. Gentleman said at the end of his speech that the grant-maintained schools movement had flopped, but the debate is not just about the Grant-Maintained Schools Trust—it is also about the position of grant-maintained schools. The regulations cannot be discussed without grant-maintained schools also being discussed. Behind the hon. Gentleman's self-righteous pose is the unmistakable sound of wailing and gnashing of teeth. The debate is about the Opposition's rage and frustration that yet another of the Government's policies has proved both popular and successful. That success leads directly to these regulations and to the Opposition's mingled pain and grief.
  The speech of the hon. Member for Blackburn has only illustrated his penchant for what I might describe as the Billy Bunter school of oratory. Hon. Members will recall Bunter's words:
  "I didn't eat your … jam, you rotter; and anyway, it tasted awful".
  The hon. Gentleman's version is that grant-maintained schools will ruin the state education system, but that no school will want to be grant maintained. He is wrong on both counts. The hon. Gentleman said that the whole system has flopped, but I have already approved four schools for grant-maintained status from September this year. Eighteen more have published formal applications to

  863
  me, which I shall consider and determine as soon as possible. Parents at 12 more schools have voted yes in secret postal ballots, and will publish proposals in due course. Eleven more schools are committed to holding ballots shortly, and another three have just embarked on the statutory procedures. I should add that a further 12 have held ballots and voted no to pursuing grant-maintained status. I have no trouble with that at all. If parents are given choice, they can choose not to change.
  Mr. Patrick McLoughlin: Is my right hon. Friend aware that one of the schools to which he has just referred is in Chesterfield? We can imagine how embarrassing it would be for the Labour party if a school in Chesterfield opted out. Is my right hon. Friend aware that there is a lot of jiggery-pokery going on and that the county council allocated money to teachers to campaign against opting out? Is my right hon. Friend aware of any other local authorities which have used public money to obstruct parents' democratic choice?
  Mr. Baker: My hon. Friend raises a case about which we have documentary evidence. [HON. MEMBERS: "Publish it."] It has already been published by Derbyshire county council, which voted £500 to be given to teachers to campaign against opting out. That is not fair because it is money for one side only.
  Mr. Straw: Will the right hon. Gentleman give way?
  Mr. Baker: In a moment. The money that has been used for that campaigning is public money. [HON. MEMBERS: "So is this."] The money that we are debating in the regulations will not be used for campaigning. Not a penny of public money has been spent by the Government on campaigning for grant-maintained schools.
  Mr. Straw: That may be so, but £22,700 has been spent on 100,000 pamphlets, copies of which have been sent to every school governor asking them to opt out. Was that not campaigning?
  Mr. Baker: It did not ask them to opt out. The leaflets that we sent out were an explanation of the law relating to grant-maintained schools. I am always being asked to explain the law. That is perfectly legitimate. Derbyshire county council produced the leaflet that I am holding up now at ratepayers' expense. I believe that 50,000 copies were produced.
  The hon. Member for Blackburn alleges that grant-maintained schools have flopped. More than 60 schools——
  Mr. Nicholas Bennett: On a point of order, Madam Deputy Speaker. The hon. Member for Rhondda (Mr. Rogers) has just walked into the Chamber and is now accusing my right hon. Friend the Secretary of State of being the biggest hypocrite in politics. Will you ask the hon. Gentleman to withdraw that comment?
  Madam Deputy Speaker (Miss Betty Boothroyd): Order. I am listening to the Secretary of State.
  Mr. Baker: I was trying to remind the House that the Labour party cannot stomach the order because, so far, 60
  864
  schools have opted out. That is a confirmation of the importance of parental choice, which the Labour party does not like and will not have.
  Mr. Bob Dunn: Does my right hon. Friend agree that the Opposition's approach tonight has been motivated by their fear of the success of the Government's policy? Does he further agree that within a few months the Opposition will probably reincarnate the policy and claim it as their own? They may even go so far as to claim that they invented it in the first place.
  Mr. Baker: I hope that there will be such a conversion, but I am not optimistic. My hon. Friend is absolutely right that our policy has proved popular. Last year, during the long proceedings on the Education Reform Bill in Committee and in the Chamber, I was told that there would be a low turnout in the ballots, that parents would take no interest and that small handfuls of parents would take schools away from local education authorities. What actually happened? In the 46 ballots so far, the average turn out has been 71 per cent. of those eligible to vote, some schools have had turnouts of more than 80 per cent., and the average vote in favour has been 68 per cent.
  Mr. Derek Fatchett: The Secretary of State seems to be having some difficulty with his statistics. He told us that 60 schools had opted out, then he said that four had been approved, and now he is saying that 46 schools have held ballots. Which is the correct figure?
  Mr. Baker: I said that four schools had completed the process. So far, 46 of the 60 schools have reached the ballot. I remind the hon. Gentleman, who likes these figures, that in the 46 ballots so far, 71 per cent. of those eligible have voted, so the measure is proving very popular with parents.
  Mr. Fatchett: Whether by mistake or deliberately, the Secretary of State has misled the House. His original claim was that 60 schools had opted out. The right hon. Gentleman must come clean. Although 60 schools may have approval by resolution of their governors to hold a ballot, they have not opted out. Will the Secretary of State now correct the record?
  Mr. Baker: I have no wish to mislead the House, but 61 schools are in the process of opting out—[Interruption.] The number has increased since I have been in the Chamber——
  Madam Deputy Speaker: Order. I remind the Secretary of State that the scope of the debate is very narrow. It relates to the desirability of paying grant to the company for the specified purpose. I hope that we shall contain the debate within its scope.
  Mr. Baker: May I clear up the point that I was asked to clarify? [Interruption.]
  Madam Deputy Speaker: Order. I require the Secretary of State to adhere to his responsibilities and to talk within the scope of the debate.
  Mr. Baker: I am delighted to do that.
  With regard to the purpose of the regulations, the governors and senior staff of a school approved for grant-maintained status will obviously need to prepare for their new and important responsibilities. Particularly in the early days, grant-maintained schools may well wish to

  865
  have access to sources of expertise and advice in a number of areas—for example, on financial matters, such as proper budgeting and accounting practices, on effective use of computer hardware and software to collect, store, retrieve and use management information on the purchase of goods and services, on the making of contracts with staff and suppliers and on legal, architectural, health and safety and other matters.
  The Grant-Maintained Schools Trust has submitted a proposal to my Department to make advice on each of these areas available to schools approved for grant-maintained status. It also intends to provide training for governors and staff. In the longer term, it will seek to build up a group ethos in this new sector of maintained schools and to ensure that they share good practice.
  These are all worthwhile objectives, the pursuit of which it is entirely right and proper for my Department to finance. The regulations empower me to do so. The trust has made a good case. It has thought hard about what its potential customers' needs will be and how it can best help to meet them. I have therefore concluded that my Department should make a pump-priming grant of £25,000 to the trust for the remainder of the 1988–89 financial year and a further sum of the order of £150,000 in 1989–90.
  Mr. Simon Hughes: Will the right hon. Gentleman give way?
  Mr. Baker: I must finish this point as it is germane to the issues that have been raised.
  Let me make it absolutely clear. I shall make grants to the trust, in the words of regulation 2(1),
  "in respect of expenditure incurred or to be incurred by it for the purposes of, or in connection with, the provision (or proposed provision) of educational services in grant-maintained schools (or proposed grant-maintained schools)".
  The hon. Member for Blackburn raised this point.
  Mr. Straw: The Secretary of State has talked about the need for good practice. What about the issue that I raised in relation to sharp practice on the part of the trust? It has said that it is a registered charity when it is not. When will the Secretary of State say whether he regards that as acceptable conduct by a public body?
  Mr. Baker: I shall come to that.
  I shall continue with the point that I was making because the hon. Member for Blackburn asked me about the important phrase, "proposed provision". He suggested that money will be made available by the trust in the future for schools contemplating opting out as opposed to those whose applications have been approved. It is important to realise that only four schools have gone through the process of being approved. The hon. Gentleman found it hard to grasp the fact—he made the same mistake on radio this morning—that my intention is to provide grant only to support the trust's educational services to schools which have gone all the way through the procedures and been approved for grant-maintained status. That is a clear statement. The phrase "proposed provision" applies only to schools which have gone right through the process. I wish to make it clear to the House that no money will be provided by the trust for schools which are applying for grant-maintained status.
  Mr. Simon Hughes: The Secretary of State might consider altering the wording of the regulations to prevent that happening. If the Secretary of State is claiming that
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  the justification for the trust is to provide expertise, why is it that it neither employs nor has as trustees people with recognised educational expertise but instead has Tory party nominees and known Tory party activists?
  Mr. Baker: I shall deal with the political nature of the trust shortly. I must finish the important point that I was making. As I have said, I wish to make it clear that the money will be provided only for the educational services of schools that have opted out.
  The trust will be subject to the same sort of financial controls as other bodies grant-aided by my Department. In particular, it will be required to set up a bank account solely for the handling of grant from my Department, to ensure that grant is used solely for the purposes for which it is payable, and to publish annual, audited accounts and make such other returns as I request demonstrating that all grant has been spent for the purposes for which it was intended. My Department's accounting officer, the permanent secretary, is satisfied that those conditions of grant can be met by the trust and checked by the Department. I shall be accountable to Parliament in the usual way for the public funds expended, which means that the National Audit Office or the Public Accounts Committee will be able to examine the spending of every penny of the money for which I am asking the House.
  On charitable status, I have seen the document to which the hon. Member for Blackburn referred and I have also seen the amended document. I understand that the trust believed that it would receive charitable status for its activities and advertised itself on that basis. I agree that that was regrettable. However, within one month of the facts being drawn to the trust's attention, the revised document was printed with the amendment. The trust took steps to correct the impression made by its literature. The trust tells me that it is now discussing with the Charity Commission charitable status for the educational services that I have described, which are the only activities for which I shall pay it grant.
  Mr. Straw: It is more than regrettable—it is reprehensible. How could the trust have believed that it would receive charitable status when, according to the Charity Commissioners, a charity has yet to be constituted, even at this date, and no charity or charitable trust was in existence at the time when the trust wrote those words?
  Mr. Baker: I said that I considered it to be most regrettable. However, the trust corrected the mistake within a month.
  The question is whether money for educational services should be passed to a body which does not have charitable status. I have checked carefully the various bodies for which I provide grants for educational services. The majority are charities, but a large minority are not charitable bodies. Money is provided to them for the educational services that they provide, which we consider worth purchasing.
  Mr. Straw: The Secretary of State says that the mistake —not to say complete inaccuracy—was corrected. Did the Grant-Maintained Schools Trust send to all recipients of the original document a correction pointing out that the trust was not a charity?
  Mr. Baker: I am not aware that a correction was sent out to every recipient. The trust showed the corrected

  867
  document to schools that approached it. That is the important point. I should make it clear that it is legitimate for my Department to provide money for educational services to bodies which are not charities. I looked carefully through the list and I found that one of the largest grants for educational services given to a body that is not a charity is to the Trades Union Congress, which has received more than £750,000 in the current year. There are many other bodies in that position.
  The accusation has been made that the trust will receive public money for campaigning. I emphasise that the trust will not receive money for campaigning in favour of grant-maintained schools. So far, not a penny has been provided to the trust out of public money for any purpose. In future, the trust will not receive money for public campaigning, but only for the substantial provision of educational services.
  Mr. Tony Marlow: As I am sure my right hon. Friend is aware, the regulations say that he may pay grants for
  "the provision (or proposed provision) of educational services in grant-maintained schools".
  The regulations say, "in grant-maintained schools". When schools are going through the process, they are not grant-maintained schools, so my right hon. Friend cannot pay the money until a school is a grant-maintained school. What the hon. Member for Blackburn (Mr. Straw) has said is either a red herring or he cannot understand plain English.
  Mr. Baker: I am delighted to have the support of my hon. Friend. He has confirmed the advice that I received from the Clerks of the House this morning. The fact that the hon. Member for Blackburn cannot understand plain English is no surprise to me.
  We shall not provide money for campaigning purposes —it will be for educational services. On that basis, I am perfectly entitled to be concerned at the heavy expenditure which some local authorities have apparently used in campaigning, or in enabling others to campaign, against grant-maintained status. That was the point raised by my hon. Friend the Member for Derbyshire, West (Mr. McLoughlin). We know that substantial sums have been made available by certain local authorities. An article in The Guardian—the hon. Member for Blackburn must agree that it is true if it has appeared in The Guardian—states:
  "Rochdale Council spent £5,414 on its campaign to persuade parents at Queen Elizabeth High School to vote against opting out."
  The article also refers to Rochdale spending
  "£6,165 on a similar campaign at Siddal Moore high school".
  Whether or not that money has been properly spent is not a matter for me, but reference has already been made to the money that Derbyshire county council has approved for campaigning. That is a direct use of public money for campaigning. Tonight the hon. Member for Blackburn has again accused the Government of using such money for party political purposes. Does he not realise that grant-maintained schools are nothing to do with party politics? If he does not agree with that, perhaps he will recognise that 24 schools in Labour areas have asked to
  868
  opt out, compared with only 21 schools in Conservative areas. That shows clearly that a great many Labour parents and councillors are in favour of opting out.
  The hon. Member for Blackburn has referred to political pressure, so I shall remind him of what happened to a Labour councillor in Bolton——
  Madam Deputy Speaker: Order. I regret that the Secretary of State is going wide of the debate. I remind the House that this is a short debate and will finish at 12.28 am. Short speeches will be welcome and speeches that go beyond the scope of the debate are out of order.
  Mr. Baker: The Government have been accused of using public money for party political purposes, so surely I am allowed to answer that point——
  Mr. Elliot Morley rose——
  Mr. David Young rose——
  Madam Deputy Speaker: Order.
  Mr. Baker: None of the money that will be provided under these regulations will be used for campaigning purposes, although other money has been used for such purposes by LEAs. Indeed, pressure has been put on Labour councillors. The hon. Member for Blackburn knows of a Labour councillor in Bolton who has had to resign the whip because he is in favour of grant-maintained schools.
  In conclusion—I know that other hon. Members wish to speak—we know that the hon. Member for Blackburn is implacably opposed to grant-maintained schools. [HON. MEMBERS: "This week."] If that is so, perhaps the hon. Member for Blackburn will come to the Dispatch Box and tell us what he intends to say in the next Labour manifesto about grant-maintained schools. Will he keep them or abolish them?
  Madam Deputy Speaker: Order. This debate is not about grant-maintained schools. I ask the Secretary of State to keep to the scope of the debate.
  Mr. Baker: I shall, of course, observe your ruling, Madam Deputy Speaker. I shall not press the hon. Member for Blackburn to answer that question tonight.
  Madam Deputy Speaker: Order. I am not concerned about that. I am concerned that the Secretary of State should keep within the scope of the debate.
  Mr. Baker: I conclude by repeating the point that I have already made. The money that we are asking the House to approve today is not for campaigning or for party political purposes—it is to provide educational services to grant-maintained schools, which have proved popular. I am sure that the Opposition are opposing this regulation not because of its terms but because they are fundamentally opposed to the concept of grant-maintained schools. I ask the House to approve the regulations.
  11.38 pm
  Mr. Denis Howell: We have heard a sordid speech that matches the sordid proposals before the House. It is a disgrace——
  Mr. Dunn: On a point of order, Madam Deputy Speaker. Will you please direct the right hon. Gentleman to confine himself to the regulations before the House?
  Madam Deputy Speaker: The debate must remain in order. I am sure that the right hon. Gentleman will refer to the scope of the debate. If he does not do so, I shall call him to order.
  Mr. Howell: In all my years of refereeing football matches—[Interruption.]
  Mr. John Marshall: On a point of order, Madam Deputy Speaker. I clearly heard a Labour Member make a disgraceful comment and I suggest that the hon. Member for Rhondda (Mr. Rogers) be brought to book.
  Madam Deputy Speaker: Order. I call Mr. Howell.
  Mr. Howell: I shall of course do my best to comply with your injunction, Madam Deputy Speaker, but I am bound to say that in all my years of refereeing football, this is the first time that I have been told to observe the laws before I have even taken to the field of play.
  This is a sordid business. In accordance with your line of thought, Madam Deputy Speaker, I wish to illustrate the activities of a trust in Small Heath school in my constituency. It is a disgraceful state of affairs. From day one, the trust, whether or not it has yet received money from the Government, has been involved in a collusion between the head teacher, certain governors and Conservative councillors. Two judicial reviews have now been granted by the courts. It would be wrong for the House to discuss them. All those activities——
  Mr. Harry Greenway: On a point of order Madam Deputy Speaker. What is sauce for the goose is sauce for the gander. The right hon. Gentleman's speech is not within the terms of the order. [Interruption.]
  Madam Deputy Speaker: Order. I have no intention of naming any hon. Member. I can deal with the matter without naming the right hon. Member. Does the right hon. Member understand that the scope of the debate relates to the desirability of paying grants to the company for specified purposes? I am sure that the right hon. Gentleman, who is a considerable parliamentarian, will confine himself to the guidelines that I have laid down.
  Mr. Howell: I assure you, Madam Deputy Speaker, that every word of my speech will deal with the activities of grant-maintained schools and the company. [Interruption.] I am sure that Madam Deputy Speaker will tell me if I am out of order. She does not need any assistance from the rabble on the Conservative Benches.
  I wish to deal with the activities of the trust in that school in my constituency. An unfortunate situation arose. Of the governors who were elected as a result of the Secretary of State's activities in a Labour constituency, only one Conservative governor attended once in 10 years. That is what happened. Suddenly, and in spite of their record——
  Mr. Harry Greenway rose——
  Mr. Howell: The hon. Gentleman should keep quiet and not get upset. There is no need to get excessively agitated.
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  I make it clear that, suddenly, and under the influence of that trust in an area in which, in 10 years, not one Tory governor had ever attended a meeting, because of the Secretary of State's activities, the governors were transformed and a multiplicity of Tories appeared. It would be out of order——
  Mr. Spencer Batiste: On a point of order, Madam Deputy Speaker. I seek your guidance. If the Secretary of State has said that the money under this Bill will be provided to an organisation only for the purpose of helping schools which have already opted out, how can it be in order to deal with schools which are contemplating opting out?
  Madam Deputy Speaker: Order. The hon. Member for Elmet (Mr. Batiste) should read the order before he raises with me points of order of that nature.
  Mr. Howell: I am dealing with proposed grant-maintained schools, which are mentioned in the order. That should be in order. In all my time in this place, any self-respecting Minister who said that he wished not to deal with proposed school trusts but only with those that are already formed, out of courtesy to the House, would have withdrawn his order. That is not what this Secretary of State has done. He is going on hell-fire with his order, which has no relevance to his speech. However, hon. Members must put up with such discourtesies.
  As a result of the company—the grant trust—the people on the board of parent governors——
  Mr. Steve Norris: I am grateful to the right hon. Gentleman for allowing me to intervene because I intend to make my own contribution to the debate. On the assumption that he is making a spurious attempt to raise matters that are not within the scope of the regulations, will he agree that no member of the grant maintained schools trust had any discussion on the composition of any governing body, whether in Birmingham or in any other education authority? To imply otherwise is to lie to the House.
  Mr. Howell: Perhaps the hon. Gentleman will tell us why the secretary of the trust attended the meeting of governors at which co-option was discussed.
  Mr. Norris: I am grateful to the right hon. Gentleman for allowing me to clarify the position. In Birmingham, the trust has discussed with interested parents and governors the concept of grant maintenance. That is what it should do, and that is what it has done. It is the elected Labour councillors of Birmingham who have so far spent over £20,000 of ratepayers' money on spurious legal actions to try to frustrate the wishes of parents and governors in Birmingham.
  Mr. Howell: If the trust is behaving as a trust, why has it not had one minute's consultation with the chairman of the governors, who happens to be a distinguished former lord mayor and Labour councillor? Why are representatives of the trust seen going into the Conservative room at the Birmingham city council with Conservative governors? If it is a trust, it has an obligation in law to be evenhanded in all the advice that it gives. It has an obligation in law to speak to the governors as a whole, which it has not yet done. It is conniving in a

  871
  hole-in-the-corner method by meeting certain governors only. For that reason, the Secretary of State should not give it a penny. It is not behaving properly.
  Mr. Norris: As long as the right hon. Gentleman makes statements that are wildly inaccurate and accuses me of involvement, he must expect me to interrupt him. He has said that the trust has an obligation in law to consult every governor. For my edification, will he draw the attention of the House to that specific law? Where does he find it? Where does the obligation arise? I know of no such law.
  Mr. Howell: If that obligation does not exist and the trust—[Interruption.] I assert that as the trust is a charity the obligation does exist because a charity cannot be partial in its activities. It cannot be party political. If the obligation does not exist, the Secretary of State is showing a monumental abuse of his powers by allowing the trust to behave as it is. May I add——
  Mr. Anthony Coombs: Will the right hon. Gentleman give way?
  Mr. Howell: If no one else wishes to speak, I shall continue to give way.
  Mr. Coombs: Does the right hon. Gentleman agree that it is a monumental abuse of power for the Birmingham city council to make available confidential names and addresses of parents so that they can be lobbied and canvassed in their own homes by supporters of the council against the opting-out proposal?
  Mr. Howell: I am delighted to deal with that intervention because it echoes an argument that has been advanced by the Secretary of State, as reported in Education. The right hon. Gentleman asserted that it was wrong for members of the city council and others, such as my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) and myself, to have access to the names and addresses of parents for the purpose of writing to them. The headmaster of the school in question has used the register to write five, six or seven letters——
  Madam Deputy Speaker: Order. The right hon. Gentleman is straying into territory beyond the scope of the debate.
  Mr. Howell: With the greatest respect—[HON. MEMBERS: "Oh."]
  Madam Deputy Speaker: Order. I am sure that the right hon. Gentleman will adhere to my guidelines and stay within the scope of the debate.
  Mr. Howell: It is typical of the Tory rabble that I have only to address you, Madam Deputy Speaker, with the greatest respect, which is the phrase that I used, to bring them off their seats. With the greatest respect, I made the error of replying to the question put to me and I should not have done so.
  Madam Deputy Speaker: Order. The right hon. Gentleman and hon. Members should not respond to interventions. They should stay within the scope of the debate; it is a narrow one and I intend to keep the House to it.
  Mr. Howell: You are right, Madam Deputy Speaker, but nobody interrupted the hon. Member for Wyre Forest (Mr. Coombs), so I thought that it would be in order to reply to him.
  To return to the trust, it is advising on the gerrymandering of boards of governors.[Interruption.]
  Madam Deputy Speaker: Order. Gerrymandering and boards of governors do not come within the scope of the regulations.
  Mr. Howell: With the greatest respect—[Laughter.] I am dealing with the activities of the trust. It is behaving in a disgraceful way. I am perfectly entitled to express that to the House. What has happened in Small Heath is wholly——
  Mr. Roger King: How did the parents vote?
  Mr. Howell: I will tell the hon. Gentleman how they voted. They voted in a way which has been challenged, rightly, in the courts, therefore—[Interruption.] I will tell the House what happened. The trust was advising the headmaster who called a special school assembly of pupils of 11 to 15, distributed leaflets and told them to go home and vote no. That matter is before the courts.
  Mr. Dunn: The right hon. Gentleman is making an interesting case and I understand his difficulties. Can he please tell the House what his opinion is of his constituents who as parents exercised their democratic right and voted to opt out?
  Mr. Howell rose——
  Madam Deputy Speaker: Order. I am sure that the right hon. Gentleman will not stray down that familiar route. The debate has nothing to do with opting out.
  Mr. Howell: Done again. I am sorry that we are put in this position and I shall not follow that route.
  The body has been advising the headmaster and governors who now face two judicial reviews, neither of which was acknowledged by the Secretary of State at Question Time, nor in his disgraceful speech to the Young Conservatives when he was dealing with the trust and the legislation. Instead he attacked those who were ensuring that the legality of what was going on was properly reviewed in the courts.
  We shall have other opportunities to talk about the sort of literature that has gone out and certainly to defend the charges made against us. It does not equate with the concept of any democratic process that I have ever been brought up in to understand that, on the one hand, parents could be written to six or eight times and, on the other, people are pilloried by the Secretary of State for writing one single letter to parents advising them of the case against opting out.
  The regulations are a disgrace to the British democratic process. It is an absolute disgrace to the Secretary of State for Education and Science, who, if he had an ounce of decency left in him, would take them away and rectify them.
  11.54 pm
  Mr. Steve Norris: I had no idea until tonight just how successful the principle of opting out obviously is with education authorities. I do not believe

  873
  that I have ever heard such an appalling display of self-righteous humbug in all my years in the House. During my recent sabbatical, when I had the pleasure of reading these debates as one removed, I was just as excited by the concept of grant maintenance—the idea of allowing schools to operate as independent schools free from the sort of political chicanery that we have heard about in the examples that my hon. Friends and even Opposition Members have given. It was a marvellous concept, which we had to follow through as vigorously as possible.
  I shall first of all dispel what I see as possibly the only valid point that the hon. Member for Blackburn (Mr. Straw) made. He is right that on page 10 of one of the early documents published by the trust the words "As a registered charity" appeared. Those words were written in the context of what we expected at that time would be a successful application for charitable status, bearing in mind the trust's three objectives, which I shall later outline.
  As it happens, by the time that that publication was issued, charitable status had not been obtained. Any decision——
  Mr. Win Griffiths: Will the hon. Gentleman give way?
  Mr. Norris: When I have finished my sentence, I will give way.
  As it happened, at the time that that document was published, charitable status had not been obtained. At that time, it was still being sought for the trust as a whole. We have been advised that, because of the nature of the political debate surrounding grant maintenance—whereas the objectives of the trust were perfectly clear and not concerned with the debate in the House on the Education Reform Bill—charitable status would not follow automatically. It was therefore brought to our attention that the document was in error. Immediately that that document was shown to us to be in error, the—[Interruption.]
  Mr. Win Griffiths rose——
  Mr. Norris: I must say that, in a fairly lengthy document of 15 pages, the only correction that was required was to four words.
  Mr. Martin Flannery rose——
  Mr. Win Griffiths rose——
  Mr. Norris: I shall finish my sentence, then the hon. Member for Bridgend (Mr. Griffiths) or any one of his army of hon. Friends may intervene.
  A correction to four words was made in a quite complex document, copies of which I am more than happy to allow my hon. Friends and, indeed, Opposition Members to see. We ensured that the education press, especially The Times Educational Supplement, The Guardian and other interested journals, had full details of the change that we had made. We were very keen that, if there was any suggestion that any of the work of the trust was not charitable—in the sense that it involved the discussion of any principle that might be defined as political—the trust should not seek grant-maintained status in that regard.
  An important consideration was the belief of all those associated with the trust that it was reprehensible to use public money to make a political point. The irony is that in that regard the trust accepted——
  Mr. Win Griffiths rose——
  Mr. Straw rose——
  Mr. Norris: We have a short time and others want to speak. When I have finished, I shall give way to the hon. Member for Bridgend.
  In that regard, the trust was clear that it had three main functions. They were first——
  Mr. Win Griffiths rose——
  Mr. Norris: The hon. Gentleman must contain himself —[Interruption.]
  Madam Deputy Speaker: Order. It is clear that, for the moment, the hon. Gentleman is not giving way. In that case, I must ask hon. Members not to persist in seeking to intervene.
  Mr. Norris: If hon. Members will contain themselves, we shall get through much more quickly.
  The trust has three objectives. The first is to advise schools that inquire of the trust about what grant-maintained status means. Earlier, figures were tossed around about the popularity of the concept of grant-maintaned status. There are 6,300 schools eligible for grant-maintained status, and the House will be interested to know that of those more than 10 per cent. have now inquired of the trust as to how they might seek grant-maintained status. Therefore, more than 600 schools have expressed interest in the principle.
  The second purpose for which the trust was established was to assist those schools that have balloted their parents and have decided that they will make an application for grant-maintained status. Those schools would need two kinds of technical information about the issues to be decided upon while the balloting takes place and about the process for preparing an application to my right hon. Friend the Secretary of State were the ballot successful. My right hon. Friend acts in a quasi-judicial capacity in determining any application to him for grant-maintained status, but he could not, of course, offer advice on the preparation of an individual application.
  I shall now give way to the hon. Member for Bridgend. The hon. Gentleman has not risen and, having given him every opportunity, I see no reason to detain further—[Interruption.]
  Madam Deputy Speaker: Order. The hon. Member for Epping Forest (Mr. Norris) has the Floor.
  Mr. Allan Rogers: On a point of order, Madam Deputy Speaker. The hon. Gentleman is well known for his chicanery—[Interruption.] He gave way to my hon. Friend the Member for Bridgend (Mr. Griffiths) and you should now rule that my hon. Friend has the Floor because the hon. Gentleman gave way.
  Madam Deputy Speaker: Order. Mr. Norris has the Floor.
  Mr. Norris: The third function——
  Mrs. Maureen Hicks: Will my right hon. Friend give way?
  Mr. Norris: As my hon. Friend is kind enough to elevate me to the Privy Council, the least I can do is give way.
  Mrs. Hicks: Does my hon. Friend agree that grant-maintained schools are about parental choice? Does it come as any surprise to my colleague that the Opposition, who are totally opposed to choice——
  Madam Deputy Speaker: Order. The hon. Lady probably was not present earlier when I insisted that we keep to the scope of the regulations.
  Mr. Norris: Perhaps it would assist my hon. Friend and the general debate to make one point clear in answer to a serious allegation by the right hon. Member for Birmingham, Small Heath (Mr. Howell). At no time has the trust had any discussions with any member of my right hon. Friend's ministerial team or with any local authority about the composition of governing bodies. That is entirely a matter for the appropriate authorities and it is absolutely nothing to do with the trust. I assure the House that the trust has plenty of work on its hands without engaging in matters that are entirely outside its purview.
  Mr. Norris rose——
  Mr. Denis Howell: My accusation was crystal clear. It was not that the trust was negotiating with officers or with the city council as a whole, but that at every stage it was advising a Conservative group on Birmingham council's education committee. The trust members attended meetings in Conservative members' rooms and acted in a quasi-party political way.
  Mr. Norris: The right hon. Gentleman raises a very interesting point. The trust had embarked on its work in a spirit of explaining the concept of grant maintenance to interested parents and governors. Perhaps the trust was naive to believe that it could do that without encountering the sheer distortion which the Opposition seem to regard as their everyday stock in trade.
  I have a copy of a document which was issued at public expense by Rochdale council during its "Think Twice" campaign. The document is headed:
  "If you are thinking about grant maintained schools, Think Twice: it's your child's future."
  That document describes in fairly lurid terms a version of grant-maintained status which a reader would find incomprehensible. In those circumstances, the trust was obliged——
  Mr. Flannery: Give way. Go on, give way now.
  Mr. Norris: It was obliged to explain in the clearest possible terms the true principle of grant-maintained status so that all parents would understand what grant-maintained status actually means when they take that important decision about a school's future. If parents were left to the tender mercies of the Labour party, they would never be able to avail themselves of that information.
  Mr. Maples: If a school governing body was deciding whether to opt out, would it be possible for my hon. Friend's organisation to use any of the money that my right hon. Friend the Secretary of State could award under the regulations to finance a lawsuit to attempt to remove two of the governors who were against the school's opting out and therefore run up a legal bill of £75,000 and force the other side to run up a similar bill? That is exactly what the Inner London education authority has done with a school in my constituency.
  Mr. Norris: My hon. Friend has made his point extremely well. It would be entirely improper for the trust or any other body charged with a proper discharge of educational responsibility to act in the way that he has described. It saddens me and it must sadden my hon. Friend and all Conservative Members that so often Labour councillors use public funds and ratepayers' money to gerrymander and engineer without any regard for the political consequences. It is becoming clearer through this bad-tempered debate that the Opposition are scared stiff of giving parents the right to control their own schools.
  Having in the 1960s and 1970s destroyed so many of our great schools which actually delivered the best education without replacing them, the Opposition now want to get their greasy hands on the rest of the education system. They want to deny parents the right to make their own decisions.
  With regard to the matter before the House this evening, Madam Deputy Speaker, you were entirely correct to draw the attention of the House to the limited scope of the measure, although I am sure that you do not need my reassurances about that. This measure enables my right hon. Friend the Secretary of State to make grants, under the most stringent conditions, to the trust in the discharge of one of its stated purposes—to research and provide facilities for grant-maintained schools, which the Opposition are the first to point out are not provided by a local education authority once the school becomes grant-maintained. Once it becomes grant-maintained, in addition to its per capita funding it receives an amount in recognition of the LEA's share of the administrative costs of the school. The school must then find its bursar, accounting system, advice on property maintenance, grants maintenance and in-service training for teaching and non-teaching staff.
  Many schools may decide that, rather than appoint another racial awareness adviser or send half the staff on sexual orientation courses during teaching time, it might be better to use some of the money available to enhance teaching levels and salaries in the school. That decision is one that many of my right hon. and hon. Friends would applaud. In so far as any of the schools need services that the ILEA previously provided, it is clearly necessary that they should continue to be available, and that schools may know where those services can be found.
  The purpose of the trust in that regard is specific—to determine where those services can be provided and on what basis, to cost them, to endeavour to determine which of them is appropriate for a particular type of school, and to offer free advice to schools accordingly. In that, the trust will do a job that previously has been done by the Department of Education and Science and by local education authorities, and therefore it is entirely appropriate that my right hon. Friend's Department should fund that work. That work will be accounted for separately and appear in separate bank accounts in the trust's accounts.
  Mr. Flannery: The hon. Gentleman departs from the fundamental point made earlier, that the organisation of which he is chairman—he ought to declare that interest —sent out a pamphlet containing a direct lie in claiming that the trust was a charity. Why does not the hon.

  877
  Gentleman put that right in a proper manner by sending out a pamphlet correcting that earlier statement? The trust is not a charity, yet the pamphlet claimed that it was.
  Mr. Norris: I am sorry that the House was detained by that intervention, because the hon. Gentleman could not have listened to a word I said earlier, when I fully answered that point. As the hon. Gentleman may or may not have observed, I am, I think, the only speaker in this debate —with the exception of my right hon. Friend, I hurriedly add—who has stayed in order. I do so because the motion's purpose is very clear. I reiterate that the trust is in no doubt as to the limitations placed on its powers, or about the heavy responsibility borne by any non-profit-making body such as the trust—a company limited by guarantee—in the discharge of public funds.
  I give this unequivocal undertaking to the House. As to the trust, there is no question whatsoever but that any funds received by the trust on behalf of my right hon. Friend the Secretary of State for Education and Science will he used exclusively and totally to provide those services that were previously provided by local education authorities, under the specific terms of the regulations.
  I was privileged to attend a great grammar school in Liverpool, the Liverpool Institute high school. I used to say that I went to school with the Beatles, but these days I say that I went to school with my hon. Friend the Member for Derbyshire, South (Mrs. Currie) because more people know who one means. That school provided the best possible education for children, regardless of their families' incomes. If a child had the ability, he was able to utilise it fully, go to university and make a career—which he could not possibly have done in any other way in a system that did not provide that excellent start.
  The tragedy of education in the 1980s is that, thanks to Labour intervention over 20 years, those schools——
  Madam Deputy Speaker: Mr. Simon Hughes.
  12.8 am
  Mr. Simon Hughes: Methinks the Conservatives do protest too much. The questions so far asked about the Grant-Maintained Schools Trust have not been answered. The reality of this debate is that there are regulations before the House—[Interruption.] Yes, this is my speech. Conservative Members have had plenty of time.
  Mr. Norris rose——
  Madam Deputy Speaker: Order. The hon. Member for Epping Forest (Mr. Norris) had completed his speech as far as the Chair was concerned. He was moving widely away from the scope of the debate. Mr. Simon Hughes.
  Mr. Norris: On a point of order, Madam Deputy Speaker. If I strayed I apologise, but I submit that to infer from that straying that I had completed my speech was perhaps less than charitable of you. You might at least permit me to conclude my peroration.
  Madam Deputy Speaker: The hon. Gentleman had a superb peroration, but it went on for a very long time. Mr. Simon Hughes.
  Mr. Hughes: The hon. Member for Epping Forest (Mr. Norris) has done his cause no service by taking a long time to say very little about the trust and its origins. The
  878
  Secretary of State was equally evasive, as he was on the radio this morning and as his colleagues up and down the land know him and his hon. Friends to be.
  This matter was debated by the Association of County Councils last Thursday. Not only had the association in February condemned the Secretary of State's action in laying regulations giving him powers to pay Grant-Maintained Schools Ltd., but—so embarrassed were its Conservative members—not a word did they utter about the issue in last week's ACC debate. The questions about why the trust had been described as a charity were not answered for some time; moreover, at no time has the question been answered whether an application had even then been made—and it is believed, on firm evidence, that it had not.
  At no time have the Secretary of State and his colleagues described how leaflets came to be circulated which give the game away very clearly. One of them— printed on blue paper—reads as follows:
  "Schools making this choice need independent advice. Not every school will qualify; there will be strict checks and safeguards to ensure that only well-run schools obtain GM status. The Trust can offer advice on whether GM status is right for your school. It will also be able to offer specialist advice on and assistance with the completion and submission of applications."
  That is not advice to schools that have already become grant-maintained, have voted to become grant-maintained or even have started the procedure to become grant-maintained.
  I have here the company's memorandum of association, lodged I believe with Companies house on 18 July last year. They clearly include in the company's objects:
  "To assist governors and headmasters in acquiring GM status".
  There was never any prospect of the organisation's being a charity. The Secretary of State and his colleagues know that, and they have been dishonest to the House—as they have been dishonest throughout the debate. The reality is that a Tory front organisation has been set up. It has been campaigning for grant-maintained status, although so far without Government money. Where has the money come from so far? We have not been told, but the organisation has been active, and people have been evasive about explaining its activities. I phoned one of the trust company's directors today. He refused to answer any questions about the trust's activities. The trust's telephone number, indeed, was unobtainable today, so willing is it to give advice.
  The Secretary of State's tawdry defence of this Tory front organisation might be that he appointed the hon. Member for Epping Forest when he was not a Member of Parliament. He should now make it clear that the hon. Gentleman should no longer be in that position, because it is prejudicial to the independence of the organisation, as it is for Tory activists, known former Tory party employees and Tory councillors to be its backbone and only political appointees.
  Mr. Jerry Hayes: Give us the reason why.
  Mr. Hughes: Because the Government assert that this is an independent, non-campaigning organisation, whereas the reality is that it is urging people, directly and indirectly, to seek grant-maintained status. I hold no brief for Rochdale or for any other authority that spends public money——
  Mr. John Marshall: Will the hon. Gentleman give way?
  Mr. Hughes: I shall not give way. Hon. Members have had plenty of time to argue the case, and Conservative Members have not argued it successfully.
  I hold no brief for local authorities that spend public money in this sort of campaigning. However, it is equally unacceptable for the Government to set up an organisation improperly and prematurely and to ignore advice, or fail to take proper advice. There has been no explanation of the Secretary of State's mistakes, or those of his officials.
  The Government ask the House to approve regulations that allow the funding not only of grant-maintained schools but also of proposed grant-maintained schools, which is not provided for in the Act. The criteria here relate to schools with a good reputation, able staff and the support of the community and that is not provided for in the Act either. They will therefore be unable in future to come to the House and say that other public bodies should not spend public money on campaigns. The Secretary of State has done his career, credibility and integrity a great disservice. I ask him to reconsider his position; and if the hon. Member for Epping Forest has any honour, he ought to resign his post before the end of the debate tonight.
  12.20 am
  Mr. Derek Fatchett: It is clear that the debate is not about the grant-maintained schools principle, the desirability of grant-maintained schools, or the holding of ballots. It is about one important principle: that the Secretary of State and the Government want to use taxpayers' money to fund a Conservative party front organisation.
  No evidence has been produced in the debate to counter that accusation. The chairman of the organisa-tion earned his meal ticket back into the House of Commons by running that organisation. The director of the organisation is a former employee of Conservative central office. He is a Conservative member of Oxford city council. So keen is that individual to look after public funds that recently he was thrown out of the members' room of Oxfordshire county council for using the telephone on grant-maintained schools trust business.
  Mr. James Pawsey: That is petty.
  Mr. Fatchett: The hon. Gentleman says that that is petty. Mr. Turner is the gentleman to whom we are to entrust taxpayers' money. When he behaves in that way, he is not worthy of that trust. Every other member of the trust is a paid-up, card-carrying member of the Conservative party. The House is being asked for a blank cheque to support the Conservative party. Taxpayers, without their knowledge, are being asked to fund a blank cheque because the Conservative party does not have the courage to campaign throughout the country on behalf of opting out and grant-maintained schools. That blank cheque should have been underwritten by the Conservative party. It should have been paid for by Conservative party funds.
  When the Secretary of State says that the money will be used in a particular way, what greater nonsense could he offer? We know that when that money is used in a particular way, other money will be released for straightforward party political purposes. The trust has deliberately misled the public and parents. The hon.
  880
  Member for Epping Forest (Mr. Norris) said that there had been a mistake. It took the organisation a month to find out that there had been a mistake. During that time that information was sent to headteachers, parents and teachers.
  Mr. Norris rose——
  Mr. Fatchett: I shall not give way to the hon. Gentleman.
  Mr. Norris: The hon. Gentleman is making unjustified allegations about me and he ought to give way.
  Mr. Fatchett: I shall not give way. The hon. Gentleman spoke for more than 25 minutes. His speech was a disgrace and an embarrassment.
  Mr. Hayes: On a point of order, Madam Deputy Speaker. The hon. Member has made serious allegations against the honour of my hon. Friend the Member for Epping Forest (Mr. Norris)—
  Madam Deputy Speaker: Order. That is not a point of order for the Chair.
  Mr. Fatchett: I am perfectly prepared to talk on for the next four minutes. We saw that the hon. Member for Epping Forest had no supporters on his side of the House. He had to speak for more than 20 minutes to fill in the time. If the Conservative party wants to behave in that way, two of us can play at that game.
  I want to ask the Minister a question—maybe we can have a response. We know that the trust has misled parents and that because of that——
  Mr. Peter Thurnham: Will the hon. Gentleman give way?
  Mr. Fatchett: No. The hon. Gentleman is wasting the Minister's time.
  We know that parents have been misled by the trust. Where ballots have taken place, I would advise parents to examine their legal rights closely to see whether they can challenge in court the conduct of ballots because of the misrepresentation that has taken place.
  It took the trust one month to change the word "charity". We need to know when the Department of Education and Science found out and what advice it gave the charity and what advice it gave the trust. I think that the answer is that they were in collusion and that the Department knew exactly what was going on.
  I will leave the Minister time to wind up. This measure is one of arrogance. It tries to use taxpayers' money for party-political purposes. If local government behaved in this way, the Government would use legislation to stop it. The Secretary of State says that that is right. This Secretary of State has no principles. He will move the goal posts whenever it is convenient to him to move them. That is why the regulations are flawed.
  We believe in consistency and in principle. We shall vote against the regulations because we believe in good law and because we do not believe in using taxpayers' money for party-political purposes.
  12.27 am
  The Minister of State, Department of Education and Science (Mrs. Angela Rumbold): Such a lot of huffing and puffing, such a lot of pompous, holier-than-thou sentiments and sanctimonious rubbish have been spoken tonight.
  No money from the public purse has been spent by the Grant-Maintained Schools Trust, but money to campaign against parents exercising their rights under the law has been spent by public authorities, and that is totally unacceptable.
  I think that my hon. Friend the Member for Epping Forest (Mr. Norris) has honourably acknowledged the mistake that was made by his trust, and I hope that the House will have the grace to accept what he said. I believe that he was right in every respect, especially that the purpose of the trust is to advise governors——
  It being one and half hours after commencement of proceedings on the motion, MADAM DEPUTY SPEAKER put the Question, pursuant to Order [17th March].
  The House divided: Ayes 193, Noes 255.

  Division No. 124]

  [12.28 pm

  AYES

  Abbott, Ms Diane

  Dixon, Don

  Adams, Allen (Paisley N)

  Dobson, Frank

  Alton, David

  Doran, Frank

  Anderson, Donald

  Dunnachie, Jimmy

  Archer, Rt Hon Peter

  Dunwoody, Hon Mrs Gwyneth

  Armstrong, Hilary

  Eastham, Ken

  Ashdown, Rt Hon Paddy

  Evans, John (St Helens N)

  Banks, Tony (Newham NW)

  Fatchett, Derek

  Barnes, Harry (Derbyshire NE)

  Faulds, Andrew

  Battle, John

  Field, Frank (Birkenhead)

  Beckett, Margaret

  Fields, Terry (L'pool B G'n)

  Beith, A. J.

  Fisher, Mark

  Benn, Rt Hon Tony

  Flannery, Martin

  Bennett, A. F. (D'nt'n & R'dish)

  Flynn, Paul

  Bermingham, Gerald

  Foot, Rt Hon Michael

  Bidwell, Sydney

  Fraser, John

  Blair, Tony

  Fyfe, Maria

  Blunkett, David

  Galbraith, Sam

  Boyes, Roland

  Garrett, John (Norwich South)

  Bradley, Keith

  George, Bruce

  Bray, Dr Jeremy

  Gilbert, Rt Hon Dr John

  Brown, Gordon (D'mline E)

  Godman, Dr Norman A.

  Brown, Nicholas (Newcastle E)

  Gordon, Mildred

  Brown, Ron (Edinburgh Leith)

  Graham, Thomas

  Buckley, George J.

  Grant, Bernie (Tottenham)

  Caborn, Richard

  Griffiths, Win (Bridgend)

  Callaghan, Jim

  Grocott, Bruce

  Campbell, Ron (Blyth Valley)

  Hardy, Peter

  Campbell-Savours, D. N.

  Harman, Ms Harriet

  Clark, Dr David (S Shields)

  Haynes, Frank

  Clarke, Tom (Monklands W)

  Healey, Rt Hon Denis

  Clay, Bob

  Henderson, Doug

  Clelland, David

  Hinchliffe, David

  Clwyd, Mrs Ann

  Hogg, N. (C'nauld & Kilsyth)

  Coleman, Donald

  Holland, Stuart

  Cook, Frank (Stockton N)

  Home Robertson, John

  Cook, Robin (Livingston)

  Hood, Jimmy

  Cope, Rt Hon John

  Howarth, George (Knowsley N)

  Corbett, Robin

  Howell, Rt Hon D. (S'heath)

  Cousins, Jim

  Howells, Dr. Kim (Pontypridd)

  Crowther, Stan

  Hoyle, Doug

  Cryer, Bob

  Hughes, John (Coventry NE)

  Cummings, John

  Hughes, Robert (Aberdeen N)

  Cunliffe, Lawrence

  Hughes, Roy (Newport E)

  Dalyell, Tam

  Hughes, Sean (Knowsley S)

  Darling, Alistair

  Hughes, Simon (Southwark)

  Davies, Rt Hon Denzil (Llanelli)

  Illsley, Eric

  Davies, Ron (Caerphilly)

  Ingram, Adam

  Davis, Terry (B'ham Hodge H'l)

  Jones, Barry (Alyn & Deeside)

  Dewar, Donald

  Jones, Martyn (Clwyd S W)

  882

  Kirkwood, Archy

  Quin, Ms Joyce

  Lamond, James

  Radice, Giles

  Leadbitter, Ted

  Randall, Stuart

  Leighton, Ron

  Redmond, Martin

  Lestor, Joan (Eccles)

  Rees, Rt Hon Merlyn

  Lewis, Terry

  Reid, Dr John

  Litherland, Robert

  Richardson, Jo

  Lloyd, Tony (Stretford)

  Robertson, George

  Lofthouse, Geoffrey

  Robinson, Geoffrey

  Loyden, Eddie

  Rogers, Allan

  McAllion, John

  Rooker, Jeff

  McAvoy, Thomas

  Ross, Ernie (Dundee W)

  McCartney, Ian

  Rowlands, Ted

  McFall, John

  Ruddock, Joan

  McKay, Allen (Barnsley West)

  Sheerman, Barry

  McKelvey, William

  Sheldon, Rt Hon Robert

  McLeish, Henry

  Shore, Rt Hon Peter

  McWilliam, John

  Skinner, Dennis

  Madden, Max

  Smith, Andrew (Oxford E)

  Mahon, Mrs Alice

  Smith, C. (Isl'ton & F'bury)

  Marek, Dr John

  Snape, Peter

  Marshall, David (Shettleston)

  Soley, Clive

  Marshall, Jim (Leicester S)

  Spearing, Nigel

  Martin, Michael J. (Springburn)

  Steinberg, Gerry

  Martlew, Eric

  Stott, Roger

  Maxton, John

  Straw, Jack

  Meacher, Michael

  Taylor, Mrs Ann (Dewsbury)

  Meale, Alan

  Turner, Dennis

  Michael, Alun

  Vaz, Keith

  Michie, Bill (Sheffield Heeley)

  Wall, Pat

  Mitchell, Austin (G't Grimsby)

  Wallace, James

  Moonie, Dr Lewis

  Wardell, Gareth (Gower)

  Morgan, Rhodri

  Wareing, Robert N.

  Morley, Elliott

  Welsh, Michael (Doncaster N)

  Morris, Rt Hon A. (W'shawe)

  Wigley, Dafydd

  Mowlam, Marjorie

  Williams, Rt Hon Alan

  Mullin, Chris

  Williams, Alan W. (Carm'then)

  Murphy, Paul

  Wilson, Brian

  Nellist, Dave

  Winnick, David

  Oakes, Rt Hon Gordon

  Wise, Mrs Audrey

  O'Brien, William

  Worthington, Tony

  O'Neill, Martin

  Wray, Jimmy

  Orme, Rt Hon Stanley

  Young, David (Bolton SE)

  Patchett, Terry

  Pendry, Tom

  Tellers for the Ayes:

  Pike, Peter L.

  Mr. Llin Golding and

  Powell, Ray (Ogmore)

  Mr. Nigel Griffiths.

  Primarolo, Dawn

  NOES

  Adley, Robert

  Bowis, John

  Alexander, Richard

  Brandon-Bravo, Martin

  Alison, Rt Hon Michael

  Brazier, Julian

  Allason, Rupert

  Bright, Graham

  Amess, David

  Brooke, Rt Hon Peter

  Amos, Alan

  Brown, Michael (Brigg & Cl't's)

  Arbuthnot, James

  Browne, John (Winchester)

  Arnold, Jacques (Gravesham)

  Budgen, Nicholas

  Arnold, Tom (Hazel Grove)

  Burns, Simon

  Ashby, David

  Burt, Alistair

  Aspinwall, Jack

  Butcher, John

  Atkins, Robert

  Butler, Chris

  Atkinson, David

  Butterfill, John

  Baker, Rt Hon K. (Mole Valley)

  Carlisle, John, (Luton N)

  Baker, Nicholas (Dorset N)

  Carlisle, Kenneth (Lincoln)

  Baldry, Tony

  Carrington, Matthew

  Batiste, Spencer

  Carttiss, Michael

  Bellingham, Henry

  Cash, William

  Bendall, Vivian

  Channon, Rt Hon Paul

  Bennett, Nicholas (Pembroke)

  Chapman, Sydney

  Bevan, David Gilroy

  Chope, Christopher

  Blackburn, Dr John G.

  Churchill, Mr

  Blaker, Rt Hon Sir Peter

  Clark, Dr Michael (Rochford)

  Body, Sir Richard

  Clark, Sir W. (Croydon S)

  Bonsor, Sir Nicholas

  Clarke, Rt Hon K. (Rushcliffe)

  Boswell, Tim

  Colvin, Michael

  Bottomley, Peter

  Conway, Derek

  Bottomley, Mrs Virginia

  Coombs, Anthony (Wyre F'rest)

  Bowden, A (Brighton K'pto'n)

  Coombs, Simon (Swindon)

  Bowden, Gerald (Dulwich)

  Cope, Rt Hon John

  883

  Couchman, James

  Janman, Tim

  Cran, James

  Jessel, Toby

  Currie, Mrs Edwina

  Jones, Gwilym (Cardiff N)

  Curry, David

  Jones, Robert B (Herts W)

  Davies, Q. (Stamf'd & Spald'g)

  Kellett-Bowman, Dame Elaine

  Davis, David (Boothterry)

  Key, Robert

  Day, Stephen

  King, Roger (B'ham N'thfield)

  Devlin, Tim

  Kirkhope, Timothy

  Dicks, Terry

  Knapman, Roger

  Dorrell, Stephen

  Knight, Greg (Derby North)

  Douglas-Hamilton, Lord James

  Knight, Dame Jill (Edgbaston)

  Dover, Den

  Knowles, Michael

  Dunn, Bob

  Knox, David

  Durant, Tony

  Lang, Ian

  Dykes, Hugh

  Latham, Michael

  Eggar, Tim

  Lawrence, Ivan

  Evans, David (Welwyn Hatf'd)

  Lennox-Boyd, Hon Mark

  Fallon, Michael

  Lester, Jim (Broxtowe)

  Favell, Tony

  Lightbown, David

  Fenner, Dame Peggy

  Lilley, Peter

  Field, Barry (Isle of Wight)

  Lloyd, Peter (Fareham)

  Fishburn, John Dudley

  Lord, Michael

  Forman, Nigel

  Luce, Rt Hon Richard

  Forsyth, Michael (Stirling)

  Lyell, Sir Nicholas

  Fox, Sir Marcus

  MacKay, Andrew (E Berkshire)

  Franks, Cecil

  Maclean, David

  Freeman, Roger

  McLoughlin, Patrick

  French, Douglas

  McNair-Wilson, Sir Michael

  Fry, Peter

  McNair-Wilson, P. (New Forest)

  Gale, Roger

  Madel, David

  Gardiner, George

  Major, Rt Hon John

  Garel-Jones, Tristan

  Matins, Humfrey

  Gill, Christopher

  Mans, Keith

  Glyn, Dr Alan

  Maples, John

  Goodhart, Sir Philip

  Marland, Paul

  Goodlad, Alastair

  Marlow, Tony

  Goodson-Wickes, Dr Charles

  Marshall, John (Hendon S)

  Gorman, Mrs Teresa

  Marshall, Michael (Arundel)

  Gorst, John

  Martin, David (Portsmouth S)

  Gow, Ian

  Mates, Michael

  Grant, Sir Anthony (CambsSW)

  Maude, Hon Francis

  Greenway, Harry (Ealing N)

  Mawhinney, Dr Brian

  Greenway, John (Ryedale)

  Maxwell-Hyslop, Robin

  Gregory, Conal

  Meyer, Sir Anthony

  Griffiths, Peter (Portsmouth N)

  Miller, Sir Hal

  Grylls, Michael

  Mills, Iain

  Gummer, Rt Hon John Selwyn

  Miscampbell, Norman

  Hague, William

  Mitchell, Andrew (Gedling)

  Hamilton, Hon Archie (Epsom)

  Mitchell, Sir David

  Hamilton, Neil (Tatton)

  Moate, Roger

  Hampson, Dr Keith

  Monro, Sir Hector

  Hargreaves, A. (B'ham H'll Gr')

  Montgomery, Sir Fergus

  Hargreaves, Ken (Hyndburn)

  Morris, M (N'hampton S)

  Harris, David

  Morrison, Sir Charles

  Haselhurst, Alan

  Morrison, Rt Hon P (Chester)

  Hayes, Jerry

  Moss, Malcolm

  Hayhoe, Rt Hon Sir Barney

  Moynihan, Hon Colin

  Hayward, Robert

  Neale, Gerrard

  Heddle, John

  Nelson, Anthony

  Hicks, Mrs Maureen (Wolv' NE)

  Nicholls, Patrick

  Higgins, Rt Hon Terence L.

  Nicholson, David (Taunton)

  Hind, Kenneth

  Nicholson, Emma (Devon West)

  Hogg, Hon Douglas (Gr'th'm)

  Norris, Steve

  Howard, Michael

  Onslow, Rt Hon Cranley

  Howarth, Alan (Strat'd-on-A)

  Page, Richard

  Howarth, G. (Cannock & B'wd)

  Paice, James

  Howell, Rt Hon David (G'dford)

  Patnick, Irvine

  Howell, Ralph (North Norfolk)

  Patten, Chris (Bath)

  Hughes, Robert G. (Harrow W)

  Patten, John (Oxford W)

  Hunt, David (Wirral W)

  Pattie, Rt Hon Sir Geoffrey

  Hunt, John (Ravensbourne)

  Pawsey, James

  Hunter, Andrew

  Porter, Barry (Wirral S)

  Irvine, Michael

  Porter, David (Waveney)

  Jack, Michael

  Portillo, Michael

  Jackson, Robert

  Powell, William (Corby)

  884

  Price, Sir David

  Twinn, Dr Ian

  Raffan, Keith

  Vaughan, Sir Gerard

  Raison, Rt Hon Timothy

  Waddington, Rt Hon David

  Rathbone, Tim

  Walden, George

  Redwood, John

  Waller, Gary

  Renton, Tim

  Ward, John

  Rhodes James, Robert

  Wardle, Charles (Bexhill)

  Roe, Mrs Marion

  Warren, Kenneth

  Rumbold, Mrs Angela

  Watts, John

  Sackville, Hon Tom

  Wells, Bowen

  Shepherd, Colin (Hereford)

  Wheeler, John

  Shepherd, Richard (Aldridge)

  Whitney, Ray

  Skeet, Sir Trevor

  Widdecombe, Ann

  Stradling Thomas, Sir John

  Wiggin, Jerry

  Taylor, Ian (Esher)

  Winterton, Mrs Ann

  Taylor, Teddy (S'end E)

  Winterton, Nicholas

  Temple-Morris, Peter

  Wood, Timothy

  Thompson, D. (Calder Valley)

  Woodcock, Mike

  Thompson, Patrick (Norwich N)

  Yeo, Tim

  Thornton, Malcolm

  Young, Sir George (Acton)

  Thurnham, Peter

  Townend, John (Bridlington)

  Tellers for the Noes:

  Tracey, Richard

  Mr. John M. Taylor and

  Tredinnick, David

  Mr. David Heathcoat-

  Trippier, David

  Amory.

  Question accordingly negatived.

  SOCIAL SERVICES
  Ordered,
  That Dr. Lewis Moonie be discharged from the Social Services Committee and Mr. Andrew F. Bennett be added to the Committee.—[Mr. Ray Powell, on behalf of the Committee of Selection.]

  TREASURY AND CIVIL SERVICE
  Ordered,
  That Ms. Joyce Quin be discharged from the Treasury and Civil Service Committee and Dr. Lewis Moonie be added to the Committee.—[Mr. Ray Powell, on behalf of the Committee of Selection.]

  WELSH AFFAIRS
  Ordered,
  That Mr. Paul Murphy be discharged from the Welsh Affairs Committee and Dr. Kim Howells be added to the Committee.—[Mr. Ray Powell, on behalf of the Committee of Selection.]

PETITION

  Ripon Hospital (Maternity Unit)
  12.40 am
  Mr. David Curry: I beg leave to present a petition, containing 7,000 signatures collected in the ancient city of Ripon, seeking the intervention of my right hon. and learned Friend the Secretary of State for Health to prevent the closure of the maternity unit at the hospital in Ripon. The Friends of Ripon Hospital are seeking that intervention on the following grounds.
  There will be severe hardship to families in a very rural constituency if a local facility is closed. There will be special hardship to the 500 service families already in Ripon and to a further 500 who will be there when Dishforth base is fully developed. The unit has an essential role for lying in, even when births have taken place in Harrogate. Finally, although a new hospital is promised to Ripon and figures in the plans, it has no funding whatsover attached to it.
  To lie upon the Table.

  Cot Deaths
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Durant.]
  12.43 am
  Miss Joan Lestor: Each year in Britain more than 2,000 babies between the ages of one week and two years die suddenly and unexpectedly. Ninety per cent. of those deaths occur before those babies reach the age of eight months. In about 1,500 of those cases, no adequate cause of death is ever found. As the House is aware, such cases are described as the sudden infant death syndrome. There are between four and five such deaths a day.
  When it was publicised that my Adjournment debate tonight would deal especially with cot deaths, I received a great amount of literature from many organisations working in the area, and some heart-breaking letters from parents who have been thus bereaved. The plea from all of them is for more research into the subject. As I am sure we are all aware, there can be nothing worse than losing a child except, perhaps, losing a child and never knowing why that child died. Few parents do not fear this appalling tragedy and it is the responsibility of us all to ensure that no reasonably researched pilot scheme goes unfunded or is dismissed because it appears far-fetched. As long as we do not know the reason for such deaths, we must explore every possibility.
  I have never been a scaremonger or prone to react favourably to every claim in medicine—or any other area —that a cure has been found for some particular ill. But having been interested and concerned for years about the infant mortality rate and cot deaths in particular, I was startled when I read of the research into the possible connection between those sad, unexplained deaths of babies and the possibility that they are caused—or partly caused—by the growth in our environment of electromag-netic fields.
  The Minister will no doubt be aware of the recent publicity given to the work of Roger Coghill of Coghill Research Associates and I assume that it was that research to which he was referring on 20 February when, in a written answer to the hon. Member for Rutland and Melton (Mr. Latham) about whether his Department had investigated the studies into the electromagnetic wave theory and the possible relationship to cot deaths, he replied that neither his Department nor the National Radiological Protection Board, which has a responsibility to advise on hazards from electromagnetic fields, was aware of any authoritative, peer-reviewed studies that had demonstrated an association between sudden infant deaths and exposure to those fields at any frequency. In the list of areas under study given in the written answer, that area was not included. Of course, much depends on what is meant by "authoritative study", which was the phrase used in the written answer.
  I have come across other work on the same subject and, as I understand it, research has been going on since as far back as 1976. In that year a German doctor, Dr. Eckert, published research into cot deaths and the proximity of electromagnetic waves from tube trains, electric railways and similar things. It was widely discussed by the medical profession at the time and as recently as 1988 a Swedish researcher, Mr. Hansson, carried out experiments with small mammals exposed to such rays, using a method of high-powered cables of high voltage. The results seemed to
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  demonstrate at least the necessity to research further, as the reaction of the mammals was similar to those of babies dying unexplained deaths for which there appeared to be no medical cause. The work was edited by Connor and Lovely and published by Alan R. Liss.
  If the Department is not aware of those works, that should be rectified at once, as they add a little weight to the research that I mentioned earlier. If it is aware of them, perhaps the Minister will tell me why, apparently, that circumstantial evidence and research appears to have been dismissed. We all know that, although the research into cot deaths has produced various explanations, which could be termed individual explanations, it is far from conclusive and we are already looking at a variety of substances, areas and causes.
  I am sure that the Minister is aware of the research that has been carried out by Roger Coghill in a pilot study in this area. I am asking that those results should be researched further by the Department when it researches this whole subject. There is not enough evidence, in my view—I am no doctor—to be dogmatic, but on the other hand there is enough evidence to warrant further investigation and not simply dismiss that other research.
  The main argument is based on the massive rise in the use of artificially created electromagnetic energy. At the beginning of the century, few houses were centrally heated or lit by electricity. There were no commercial radio stations until 1920, no radar surveillance until 1939 and no widespread television until 1951, but all our homes are now electrified to an enormous degree. In the past 30 years the use of electricity in Britain has trebled. There has been a massive rise in the use of electrical appliances, from electric blankets to satellite dishes and car telephones.
  As the research points out, so filled is the air with radiated electromagnetic transmissions that only with the greatest difficulty can space be found for new radio stations. As the research states:
  "We have, in the space of one lifetime, bathed ourselves in an ocean of electromagnetic energy waves."
  As we are all aware, it took more than a quarter of a century before the regulations curtailing the use of X-rays were introduced, despite research of many years standing showing how organic tissue could be damaged by too much exposure. How many people died as a result of that ignorance of X-rays and how many were damaged we shall never know, but I have always been impressed by the fact that that knowledge was around for many years and was discussed long before the regulations were introduced. Many people, eminent in many areas, dismissed the evidence and argued that that connection was not possible and that much of the damage to tissue was caused by other things.
  One could enlarge that view into other areas, considering X-rays alone and the safeguards that we now have, the nervousness with which we approach them, and the fact that, the moment that a young woman enters a hospital to be X-rayed, the first question asked is. "Are you pregnant?" We must remember that those rays are dangerous, and then question some of the research, which has not been confined to one individual but has already been highlighted in other parts of the world and has not been investigated enough.
  In November last year, the Select Committee on Social Services published its report on infant mortality. The report is awaiting a response. I do not in any way criticise the Department for that. These things take time, and it is

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  important that, when we get a response, it is the correct one. Since that report was published, the electromagnetic theory has achieved some prominence in this country. I hope that, when they respond to the report, the Government will take on board the recommendation about cot deaths and the stated concern in the report that little progress has been made, particularly since a report in 1980 asked that there should be a general introduction of confidential inquiries into all health districts. I understand that special attention is being placed on one or two areas —Wolverhampton is one—because of certain incidents.
  Bearing in mind the criticisms of the report, that not enough work has been done on cot deaths and that more research generally needs to be done and notice taken of a report that was published nine years ago, the electromagnetic waves theory should be given more serious consideration in any future research and work than it is at present.
  I cannot refer to all the experiments that have led me to stand here tonight and make this plea. It would take too long, and none of us is expert in the matter and able to give a proper analysis. But I make this plea on behalf of all parents who have seen their children inexplicably die. On behalf of the people, many of whom work on the subject in various ways, it is in our interests that no research is left unlooked at and that proper credence is given to people who may have come up with at least something that bears a causal relationship to cot deaths, if it is not entirely the cause.
  12.52 pm
  The Parliamentary Under-Secretary of State for Health (Mr. Roger Freeman): I congratulate the hon. Member for Eccles (Miss Lestor) on being successful in the ballot for the Adjournment debate. This is a very important issue and one about which the Government are deeply concerned. In addition to the number of deaths attributed to sudden infant death syndrome, we are concerned about the devastating effect that such tragic losses have on the families involved. My hon. Friend the Member for Rutland and Melton (Mr. Latham) also is interested in the subject.
  It might be helpful if I commence by explaining that the terms "cot death" and "sudden infant death syndrome" are not synonymous. The term "cot death" was first introduced by Dr. A. M. Barrett in 1954 to describe the unexpected death during sleep of an apparently healthy infant. The term "sudden death syndrome" has been defined as "the sudden and unexpected death of any infant or young child which is unexpected by history and in which a thorough postmortem examination fails to demonstrate an adequate cause of death". Thus, whereas the term "cot death" might include an unexpected death for which an explanation is subsequently discovered—for example, an unsuspected congenital anomaly or a respiratory or gastro-intestinal infection—the term "sudden infant death syndrome" should be used only after a thorough postmortem has been unable to identify a cause. It is a diagnosis of exclusion.
  Both terms, and other similar phrases, are used in practice to record unexpected infant deaths on death certificates. The Office of Population Censuses and Surveys has indentified separately since 1971 deaths
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  registered where such terms have been mentioned on death certificates. Of the 4,108 post-neonatal deaths—that is deaths after 28 days but within one year of birth—in England and Wales in the past three years of available statistics, 1985–87, with mention of cot death or a similar term on the death certificate, sudden infant death syndrome was given as the underlying cause in 91 per cent. of cases, a respiratory condition in 5 per cent. and a non-respiratory condition in 4 per cent.
  In the 10 years to 1987, the latest year for which figures are available, there has been a significant increase in the number of deaths attributed to sudden infant death syndrome and a similar decrease in deaths attributed to respiratory conditions. The provisional figures for the first nine months of 1988 continue to bear this out. An expert group which prepared a report in 1988 on infant mortality in England for the chief medical officer drew attention to the belief that there is a trend in the pattern of certification towards certifying as sudden infant death syndrome deaths which, hitherto, would probably have been assigned to respiratory disease. The combined post-neonatal mortality rate has remained essentially unchanged over the same period at 2·3–2·4 deaths per 1,000 live births. I should add that the infant mortality rate as a whole in England has fallen from 12·8 per 1,000 live births in 1979 to 9·1 in 1987, the latest year for which figures are available. There have been significant decreases in the perinatal—the first week of life—and neonatal—the first month of life—mortality rates. That is encouraging. The worry is with the post-neonatal period.
  Few cases of sudden infant death syndrome occur after one year of age. The peak is between one and four months. I now turn to possible causes. The syndrome is much more common among boys than girls. About 60 per cent. of sudden infant deaths are among boys. There is a clear seasonal pattern to the syndrome. Most deaths occur in winter months. We must not jump to conclusions, however. There is evidence that unintentional overheating may be a factor in some babies, and accidental chilling is likely to be a factor in some others. Similar seasonal patterns occur with deaths due to recognisable respiratory disease.
  It would be unwise to believe that we are looking for one common factor among these unexplained deaths. It seems more likely that there is a variety of contributory clinical factors. Numerous theories have been mooted, and they can be classified into four kinds: first, that a previously normal infant succumbs to overwhelming stress —for example, chilling or infection—secondly, that there is a defect in function or anatomy that has been present from birth; thirdly, that infants are especially vulnerable to such events as minor infections, changes in temperature and even domestic upheaval during critical phases of development; fourthly, that there is some failure in the processes of maturation of one or more organ systems.
  The hon. Lady has mentioned in particular the theory linking sudden infant death to electromagnetic fields. The advice which I have received from the experts in this subject, the National Radiological Protection Board, is that it is not aware at present—I stress "at present"—of any authoritative study which has demonstrated an association between sudden infant death syndrome and exposure to these fields at any frequency. I shall respond to the hon. Lady's suggestion that research should take place.

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  The main Government agency for supporting biomedical and clinical research is the Medical Research Council. In the year 1987–88, about £400,000 was spent on projects directly or indirectly related to sudden infant death syndrome and respiratory distress in the new born. We recognise, however, that there is a need to continue such efforts, and in April the Department will be discussing with the Medical Research Council what further avenues of research, including, if necessary, the influence of electromagnetic fields, might next most fruitfully be explored. I can give the hon. Lady an undertaking that I shall draw specifically to the attention of the Medical Research Council this debate and the research that has been cited. Following the discussions, I shall write to the hon. Lady and my hon. Friend the Member for Rutland and Melton. I am sure that the hon. Lady will agree that this is essentially a matter for clinical judgment and research judgment. I shall discharge my duty to the House by drawing the attention of the council specifically to the debate.
  Sudden infant deaths have been shown to be associated with a number of social, biological and demographic factors, including social class, parents' marital status, mother's age, past pregnancies and low birth weight. Smoking during pregnancy and passive smoking have also been linked with sudden infant death syndrome. There are also regional variations but no common themes. I answered a recent question from my hon. Friend the hon. Member for Rutland and Melton on the regional pattern and he will have noted from my reply today, if he has had a chance to study it, that no clear themes seem to emerge from the statistics that I have provided.
  While none of those factors has been unequivocally identified as the cause of sudden infant death syndrome, it is important to increase public awareness of the factors that may be influenced by individual actions. We need to continue to encourage good professional practice and sound parenting to ensure that those families whose circumstances are associated with risk to their infant, or whose babies are unwell, have ready access to the advice, support and care that they may need. For example, all new mothers already receive, on their first visit to antenatal clinics, a free copy of the "Health Education Authority's Pregnancy Book" which gives advice on giving up smoking. That is backed up by advice at antenatal clinics and from general practitioners. A new teenage antismoking campaign costing £2·2 million a year starts in April and will take special account of the worrying trends in smoking among girls approaching child-bearing age.
  The hon. Lady may have seen the reports of the article in last week's British Medical Journal which discussed the relationship between the sleeping position of the infant and sudden infant death. However, I do not believe that clinicians can yet give parents unequivocal advice about the best sleeping position for their baby. I am sure that clinicians and paediatricians will be considering that.
  In the voluntary sector the Foundation for the Study of Infant Deaths plays a significant role in funding and promoting research. At present it is spending about half a
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  million pounds a year. The foundation also provides an extremely valuable support and counselling service for bereaved families. I pay tribute to its work.
  Both the Department and the Foundation for the Study of Infant Deaths are concerned that parents who have already lost a child—the risk for subsequent children is statistically only very slightly higher—or whose child is considered to be at risk of sudden infant death should not be misled by recent media coverage about the use of apnoea monitors. Unfortunately, there is no guarantee that these alarms, which are attached to the chest of an infant, will prevent sudden infant deaths occurring. We support the advice recently issued by the foundation that such monitors should be used only with the knowledge, advice and support of the paediatrician, the general practitioner and health visitor.
  As I have said, the Government are concerned about the incidence of sudden infant death syndrome—a concern shared by the Select Committee on Social Services, which, as the hon. Lady is well aware, published its report on perinatal, neonatal and infant mortality in December. The Government welcomed the Select Committee's interest in this area. However, as I am sure the hon. Lady will understand, and as she has already acknowledged, I cannot comment in any detail on our response to the Committee's report, which is currently being prepared and will, I hope, be published shortly after Easter. In our response to the Committee we plan to demonstrate by our proposals the importance which we attach not only to identifying the factors associated with sudden infant death syndrome, but to reducing further the infant mortality rate as a whole.
  We believe that the way forward could be to build on the approach of one of the most commonly referred to research studies on sudden infant death syndrome—the multi-centre study of post-neonatal mortality coordinated by Professor Knowelden and funded by the Department. This study investigated 988 infant deaths over a three-year period, 1976 to 1979, in eight parts of England and Wales. The aim in each case was to perform a full postmortem, carried out by a paediatric pathologist, to determine how far the death could be explained and, separately, to hold a confidential case conference to determine whether or not signs of the infant's terminal condition had been exhibited before death and whether appropriate action had been taken. The study showed that a number of deaths were partly or wholly explicable. The line of approach pursued by the professor in this study possibly shows the way forward, concentrating as it does on proper pathology and the importance of confidential case conferences to establish exactly the circumstances and factors surrounding each particular tragedy. As I have said, we shall be publishing our conclusions and our response to the Select Committee's report shortly, and I hope that that response will be constructive and will be studied by the whole House.
  Question put and agreed to.
  Adjourned accordingly at four minutes past One o'clock.