Commons Sitting of 24 October 1989

Preamble
The House met at half-past Two o'clock
PRAYERS
[MR. SPEAKER in the Chair]
PRAYERS

  PRIVATE BUSINESS
  CITY OF LONDON (SPITALFIELDS MARKET) BILL
  Order read for consideration of Lords amendments.
  To be considered on Thursday 26 October.
  MEDWAY TUNNEL BILL [Lords]
  Order for Second Reading read.
  To be read a Second time on Thursday 26 October.
  NOTTINGHAM PARK ESTATE BILL [Lords]
  Read a Second time, and committed.
  ISLE OF WIGHT BILL (By Order)
  ST. GEORGE'S HILL, WEYBRIDGE, ESTATE BILL (By Order)
  HYTHE MARINA VILLAGE (SOUTHAMPTON) WAVESCREEN BILL (By Order)
  NEW SOUTHGATE CEMETERY AND CREMATORIUM LIMITED BILL (By Order)
  Orders read for consideration of Lords amendments.
  To be considered on Thursday 26 October.
  CITY OF LONDON (VARIOUS POWERS) BILL (By Order)
  Order for consideration, as amended, read.
  To be considered on Thursday 26 October.
  BRITISH FILM INSTITUTE SOUTHBANK BILL (By Order)
  Read a Second time, and committed.
  ASSOCIATED BRITISH PORTS (No. 2) BILL
  Motion made, and Question proposed,
  That the Promoters of the Associated British Ports (No. 2) Bill shall have leave to suspend proceedings thereon in order to proceed with the Bill, if they think fit, in the next Session of Parliament, provided that the Agents for the Bill give notice to the Clerks in the Private Bill Office not later than the day before the close of the present Session of their intention to suspend further proceedings and that all Fees due on the Bill up to that date be paid;
  That on the fifth day on which the House sits in the next Session the Bill shall be presented to the House;
  That there shall be deposited with the Bill a declaration signed by the Agents for the Bill. stating that the Bill is the same, in every respect, as the Bill at the last stage of its proceedings in this House in the present Session;
  That the Bill shall be laid upon the Table of the House by one of the Clerks in the Private Bill Office on the next meeting of the House after the day on which the Bill has been presented and, when so laid, shall be read the first and second time (and shall be recorded in the Journal of this House as having been so read) and shall be ordered to be read the third time;
  That no further Fees shall be charged in respect of any proceedings on the Bill in respect of which Fees have already been incurred during the present Session.
  That these Orders be Standing Orders of the House.— [The Chairman of Ways and Means.]
  Hon. Members: Object.
  Debate to be resumed on Thursday 26 October.
  CARDIFF BAY BARRAGE BILL [Lords]
  Motion made, and Question proposed,
  That the Promoters of the Cardiff Bay Barrage Bill [Lords] shall have leave to suspend proceedings thereon in order to proceed with the Bill, if they think fit, in the next Session of Parliament, provided that the Agents for the Bill give notice to the Clerks in the Private Bill Office of their intention to suspend further proceedings not later than the day before the close of the present Session and that all Fees due on the Bill up to that date be paid;
  That if the Bill is brought from the Lords in the next Session, the Agents for the Bill shall deposit in the Private Bill Office a declaration signed by them, stating that the Bill is the same, in every respect, as the Bill which was brought from the Lords in the present Session;
  That as soon as a certificate by one of the Clerks in the Private Bill Office, that such a declaration has been SO deposited, has been laid upon the Table of the House, the Bill shall be deemed to have been read the first and shall be ordered to be read a second time;
  That the Petitions against the Bill presented in the present Session which stand referred to the Committee on the Bill shall stand referred to the Committee on the Bill in the next Session;
  That no Petitioners shall be heard before the Committee on the Bill, unless their Petition has been presented within the time limited within the present Session or deposited pursuant to paragraph (b) of Standing Order 126 relating to Private Business;
  That, in relation to the Bill, Standing Order 127 relating to Private Business shall have effect as if the words "under Standing Order 126 (Reference to committee of petitions against Bill)" were omitted;
  That no further Fees shall be charged in respect of any proceedings on the Bill in respect of which Fees have already been incurred during the present Session;
  That these Orders be Standing Orders of the House.—[The Chairman of Ways and Means.]
  Hon. Members: Object.
  Debate to be resumed on Thursday 26 October.
  BIRMINGHAM CITY COUNCIL (No. 2) BILL
  Motion made, and Question proposed,
  That the Promoters of the Birmingham City Council (No. 2) Bill shall have leave to suspend proceedings thereon in order to proceed with the Bill, if they think fit, in the next Session of Parliament, provided that the Agents for the Bill give notice to the Clerks in the Private Bill Office not later than the day before the close of the present Session of their intention to suspend further proceedings and that all Fees due on the Bill up to that date be paid;
  That on the fifth day on which the House sits in the next Session the Bill shall be presented to the House;
  That there shall be deposited with the Bill a declaration signed by the Agents for the Bill, stating that the Bill is the same, in every respect, as the Bill at the last stage of its proceedings in this House in the present Session;
  That the Bill shall be laid upon the Table of the House by one of the Clerks in the Private Bill Office on the next meeting of the House after the day on which the Bill has been presented and, when so laid, shall be read the first and second time (and shall be recorded in the Journal of this House as having been so read) and, having been amended by the Committee in the present session, shall be ordered to lie upon the Table;
  That no further Fees shall be charged in respect of any proceedings on the Bill in respect of which Fees have already been incurred during the present Session;
  That these Orders be Standing Orders of the House.—[The Chairman of Ways and Means.]
  Hon. Members: Object.
  Debate to resumed on Thursday 26 October.

Oral Answers to Questions
  DEFENCE

    Trident
    Mr. William Powell: To ask the Secretary of State for Defence whether he intends altering the Trident programme.
    The Secretary of State for Defence (Mr. Tom King): No. The planned in-service date for Trident remains the mid- 1990s, as originally announced in 1982.
    Mr. Powell: Has my right hon. Friend been able to identify anything so far in the changes sweeping Europe that would justify a reduction in the current Trident programme? In particular, has he been able to identify anything that would in any way justify this country abandoning the fourth Trident ship?
    Mr. King: Although we welcome and shall play our full part in the conventional force reduction talks in Vienna, in support of the NATO position, and although we want substantial reductions in nuclear weapons, there can be no question of abandoning our deterrent before we are certain that there is no threat to this country.
    Mr. Menzies Campbell: How does the Secretary of State justify the fourfold increase in warheads which the Trident system represents over the existing Polaris system? Polaris is an effective deterrent in present circumstances with its existing warheads. Why is it necessary to have a substantial escalation in firepower to the extent that the D5 system necessarily involves?
    Mr. King: It is a sobering thought that even with the increase which I accept Trident represents over the existing Polaris system, it will still represent a smaller percentage in relation to the number of Soviet warheads and the threat posed by the Soviet Union than Polaris did at the time of its introduction. Although I note the hon. and learned Gentleman's judgment that there is no need for it, it is our judgment that Trident—and the number of warheads proposed in Trident—is the minimum necessary to maintain a credible deterrent against the increasing sophistication of the Soviet defences.
    Sir Antony Buck: Does my right hon. Friend agree that the reasons for our updating our nuclear capability are precisely the same as those that caused the former Labour Administration to update our nuclear capability? They did it behind the scenes, but we do it openly.
    Mr. King: I hope that it would be common ground and manifestly obvious that if there is to be a nuclear deterrent, it must be a credible deterrent. It would be the most outrageous waste to have a deterrent that was not credible or competent for the job.
    Mr. O'Neill: Will the Secretary of State confirm that the Trident project is still up to date and within budget? Will he also explain to the House what the ambassador in Washington was doing when he seemed to be lobbying the Senate and Congress to secure extra funding, if the story in last week's Jane's Defence Weekly is true?
    Mr. King: I think that I can help the hon. Gentleman. He can read the story in the congressional record as well, which may be even better than Jane's Defence Weekly. I have made representations, as has our ambassador in Washington, to ensure that the American authorities and Congress understand and appreciate the importance to us of the continuing Trident programme. We are confident that with the necessary funds, subject to internal matters in the United States and Congress, the programme will go forward satisfactorily.
    I can confirm my earlier answer: we are still on schedule for an in-service date of the mid-1990s. I believe, although I do not have the final figures, that the next figures are likely to show a continuing fall in the cost of the programme.
    Mr. Allason: Has my right hon. Friend had an opportunity to follow the correspondence on Trident in The Times which has been conducted between various members of the Opposition in the other place? Will he confirm, and once and for all scotch suggestions to the contrary, that the Trident navigational system is entirely independent and will not require any dependence on American satellites or guidance systems?
    Mr. King: I am afraid that I missed the correspondence, but I can confirm the statement in the latter part of my hon. Friend's question. There has been a suggestion, which was deployed in the defence debate, that somehow Trident will not be independent and will not be under British control. I confirm that it will be independent.

    Nuclear Submarines
    Dr. Reid: To ask the Secretary of State for Defence if he will make a further statement about his Department's plans for the decommissioning of nuclear submarines.
    The Minister of State for Defence Procurement (Mr. Alan Clark): We are actively considering the available options, and I refer the hon. Member to the evidence given by my Department to the Select Committee which was published in its seventh report.
    Dr. Reid: Is it not time that Ministers made a decision? The only policy that the Government seem to have on the decommissioning of nuclear submarines is to leave them sitting round in port to corrode. Given that the Dreadnought has been hanging around for years and that other submarines are due to be decommissioned before the year 2000, is it not about time that Ministers came to the House with a clear, definitive statement of their intentions on the decommissioning of nuclear submarines?
    Mr. Clark: It is important not to make a precipitate judgment. To moor and store submarines in this way is a perfectly safe option, and during that time the radiation in the power units degrades. The United States has been storing submarines in this way for more than 20 years.
    Mr. Boyes: Is it not time that the Government came to a conclusion on the matter, which I understand has been actively considered for some time? We will have 10 more nuclear submarines within the next few years. Why does not the Minister advise us of some of the important criteria

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    on which he will base this decision? I suggest that monitoring should be carried out and that the Government should ensure that the submarines are recoverable, repairable and tested. The Government have been dilatory; it is about time that they got their finger out and did something about it.
    Mr. Clark: It is important to get the solution right. There is no danger of these submarines corroding. Dreadnought will be docked briefly for an overhaul within the next six months to ensure that that does not happen. The radiation from the existing hulls is very slight. In accordance with the requirements suggested by the Select Committee, we have monitored the radiation and we are supplying details to Dunfermline council. This is a perfectly acceptable way of storing the vessels until a solution, which will undoubtedly embrace the factors mentioned by the hon. Gentleman, is arrived at.

    Tornado
    Mr. Win Griffiths: To ask the Secretary of State for Defence what comparative figures he has for the accident rates for Tornado aircraft for each of the European countries which operate these aircraft.
    The Parliamentary Under-Secretary of State for Defence Procurement (Mr. Michael Neubert): It is not our policy to publish accident rates for particular aircraft types. The public release of aircraft accident statistics for other nations is a matter for the respective Governments.
    Mr. Griffiths: Is it not true that the Tornado accident rate in Britain is twice that of the other European countries which operate the aircraft? Is it not about time that we reviewed our low-flying procedures—they are not followed by any other nation in the western world—to stop this unnecessary loss of life and huge loss of aircraft?
    Mr. Neubert: The hon. Gentleman's opening assertion is not true. The number of accidents is not relevant. What is relevant is the number of accidents in relation to the amount of flying activity. Taking that as the basis for comparison, if we exclude the early accidents that occurred as a result of technical defects which were part of the early experience of operating that aircraft—in which the United Kingdom was a leader—our accident rate since then has been broadly comparable with that in Germany and Italy.
    Mr. Mans: Does my hon. Friend agree that the Tornado has a lower accident rate than any other combat aircraft which has been brought into service in the Royal Air Force?
    Mr. Neubert: I confirm that Tornado has a very comparable record with other fast jet aircraft in operation with the RAF.
    Mr. Rogers: The Minister's statement is quite incredible. He knows very well that figures are available which show that 17 Tornado GR1 bombers have crashed, and that in the past three years in Britain 10 Tornado GR1 s have crashed while only four have crashed in the German air force. Earlier, the Government stated that early Tornado losses were due to teething problems. Our losses are much higher than for any other air force; are they due to faulty equipment or to pilot error?
    Mr. Neubert: Each accident is subject to an inquiry, as the hon. Gentleman will know. I am well aware of the article in The Independent on 8 June from which the hon. Gentleman draws this incorrect inference. I can repeat only that it is not a question of the number of accidents. The important point is the number of accidents that occur in relation to the amount of flying activity with that aircraft.
    Mr. Devlin: Will my hon. Friend assure my constituents and those in neighbouring constituencies in the north of England that the low-flying exercises from places such as RAF Leeming involving Tornado jets are absolutely essential to the future defence of Great Britain and must be carried out? Although they impose a small price in terms of inconvenience for local households, it would be totally irresponsible of the Government to abandon them.
    Mr. Neubert: My hon. Friend puts it extremely well. The fast, low operation of modern jet fighter and bomber aircraft is the only possible way, in present circumstances, of surviving the electronic warfare environment that we would be likely to meet in a war.

    Demography
    Mr. Litherland: To ask the Secretary of State for Defence what is his latest assessment of the effects of demographic changes upon Her Majesty's Government's defence policy.
    Mr. Nigel Griffiths: To ask the Secretary of State for Defence what is his latest assessment of the effects of demographic changes upon Her Majesty's Government's defence policy.
    Mr. Neubert: Demographic changes pose a particular challenge which we are taking steps to address for the recruitment and retention of manpower, but they do not require changes in current defence policies and commitments.
    Mr. Litherland: Why do the Government have a negative attitude towards the conventional forces in Europe talks in Vienna when we could be discussing the reductions in troop levels? Does he agree that the Government's record in the planning of reductions in the 1990s has been pathetic and short sighted and that it will be very costly for the taxpayer?
    Mr. Neubert: The premise of the hon. Gentleman's question is wrong. We played a full part in the events that led to the conventional forces in Europe talks in Vienna and we shall continue to do so. We lack no vigour or enthusiasm for those developments. However, when it comes to defending our country against potential threat, we must maintain our forces at assessed levels. We are endeavouring to do that through a range of initiatives which were put under way long ago—not as recently as the hon. Gentleman first discovered the problem.
    Mr. Griffiths: Does the Minister realise that inadequate living conditions are driving people out of the armed forces and that a quarter of armed forces accommodation is of the lowest grade, grade 4? What is the Minister doing to improve the quality of accommodation so that it meets demographic changes?
    Mr. Neubert: The hon. Gentleman has a point, and we recognise it. There is—[Interruption.] If hon. Members will be good enough to wait for the answer—[Interruption.]
    Mr. Win Griffiths: The Minister thinks he is Sergeant Bilko.
    Mr. Speaker: Order. The Minister must have a chance to answer.
    Mr. Neubert: If I were Sergeant Bilko, I would call the hon. Gentleman to attention.
    If Opposition Members were to await the answer, they would know that, over the passage of 10 years, that property, like any other property, deteriorates. We have a major programme of works to accommodate that. The existence of a substantial number of lower-graded dwellings is perhaps of convenience and acceptability to those who occupy them, because they pay low rents.
    Mr. Ian Bruce: Does my hon. Friend agree that one of the main reasons why we lose members of the armed forces is that highly skilled personnel are asked to do such things as security duties and ship deep-cleaning? Does he agree that we should continue to ensure that those tasks are civilianised and that security is kept at a high level without having to use highly trained people?
    Mr. Neubert: Yes. There are many component parts in the well-being of members of Her Majesty's armed forces. My hon. Friend has pointed to another need, which is to avoid stretch and over-stretch and, wherever possible, to accommodate civilian manpower in operationally administrative roles so that serving men and women can be released to do their proper jobs.
    Sir Dudley Smith: Is my hon. Friend aware that, even with the best will in the world and provided that it keeps its bargain, the Soviet Union will take six to eight years or even longer to reduce its conventional forces? Is he further aware that, in respect of NATO, we start from a much lower base, which also includes troops? In those circumstances, does he agree that there is a danger of a serious imbalance occurring unless we watch matters very carefully?
    Mr. Neubert: My hon. Friend observes with a rather more expert eye the scene in eastern Europe and beyond. It is quite clear that we shall have a continuing need for manpower and womanpower in the armed services, and we are doing all that we can to maintain assessed levels of need.

    Troop Numbers
    Mr. McCartney: To ask the Secretary of State for Defence what assessment he has made of the effect on the British Army of the proposals tabled in Vienna for ceilings on troop numbers.
    Mr. Tom King: The current NATO proposals on manpower are limited to forces stationed by the United States and the Soviet Union in Europe.
    Mr. McCartney: I should have thought that the Secretary of State would be a little more enthusiastic about initiatives being taken at Vienna, especially as recent public opinion polls in the Federal Republic of Germany show that people are in favour of more troop reductions
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    there. Surely it is part of the British Government's commitment to a safer and peaceful Europe to offer troop reductions in central Europe, as part of our contribution to demilitarising Europe.
    Mr. King: I am not sure whether the hon. Gentleman was present when I made clear our full support for the reduction talks in Vienna and our determination to play a full part in them as members of NATO. The proposals tabled by the Warsaw pact and by NATO involve items of equipment. The present proposals affect forces stationed outside the national territory of the United States and the Soviet Union. The most important thing for those who care about arms reductions and force reductions is that this first major undertaking is successfully completed with confidence and trust.
    Mr. Batiste: Does my right hon. Friend agree that, as our troop numbers are contained, they should have the latest, most modern equipment to take fullest advantage of resources? Is that policy not wholly inconsistent with the Labour party's commitment to massive cuts in conventional defence expenditure? What assurance can my right hon. Friend offer to our defence industries and to the many thousands of people who work in them that the Government at least are committed to the sound security of this country?
    Mr. King: Consistency is not a word with which one should ever charge the Opposition. Although they have proposals for massive reductions in defence expenditure, they never lose opportunities to complain about the potential job losses that they suspect lie somewhere within our proposals, which are for considerably greater defence expenditure—[Interruption.]
    Mr. Speaker: Order. I ask hon. Members to settle down.

    F111 Aircraft
    Mr. Caborn: To ask the Secretary of State for Defence what discussions the NATO nuclear planning group has had concerning the possible deployment of additional F111 aircraft.
    Mr. Tom King: At the nuclear planning group meeting in April 1988, Ministers endorsed a proposed package of force restructuring and modernisation measures designed to enable the Alliance to sustain its strategy of flexible response in the post-INF era. The options included possible deployment to Europe of longer-range dual capable aircraft from the United States. However, no decisions have yet been taken.
    Mr. Caborn: I thank the Secretary of State for his usual unclear answer. Is he aware that it has been widely reported—as his answer suggests—that the debate has gone beyond the F111s and is now centred on the F15-E strike eagles? Have there been any consultations with the British Government about that and, if so, what attitude are the Government taking? Will it be in the context of trying to reduce nuclear weapons in Europe, not increase them, as President Gorbachev has been trying to instill into the Western Alliance?
    Mr. King: I am sorry that the hon. Gentleman found my answer unclear. It precisely answered the two points that he then made in his supplementary question. I made

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    it absolutely clear that consultations are continuing, and I referred to a package of force restructuring and modernisation measures. Those measures were discussed in the nuclear planning group in April 1988 and discussions and consultations have continued. Furthermore, I have made it absolutely clear that no decisions have yet been taken.
    Mr. Bellingham: Is my right hon. Friend aware that there have been rumours that RAF Sculthorpe in north Norfolk might be designated as a new base for the F111s? Will my right hon. Friend comment on that rumour and, if there is substance in it, will he confirm that there will be the widest possible consultation before any final decision is taken?
    Mr. King: I am aware that misleading stories have recently appeared in the press as though decisions had been taken. They are not true because no decision has yet been taken. I can confirm that——
    Mr. O'Neill: Was it in The Times?
    Mr. King: The story was correct in some newspapers and wrong in one. If the hon. Member for Clackmannan (Mr. O'Neill) would like to check, he will find that one correspondent managed to get it wrong, unfortunately leaving out a "not" from his report.
    I hope that my hon. Friend will forgive me, but I cannot comment at this stage. Such matters are under consideration, but obviously we shall want to give careful consideration to any of the aspects causing concern to hon. Members.
    Ms. Short: Will the Secretary of State confirm that Britain is becoming increasingly isolated as a NATO power in pushing so strongly for modernisation? Will he reconsider the commitment to a longer-range dual capability aircraft which could undermine the INF treaty? Is Britain in favour of disarmament in Europe or not?
    Mr. King: I have made it absolutely clear that we are in favour of a reduction in conventional arms. We are in favour of a substantial reduction in strategic arms. We are in favour of the removal of intermediate nuclear forces. We have a more successful record of achievement on disarmament than the Labour party has ever dreamt of. However, at the same time we know that we have achieved progress towards disarmament from a position of strength. We make no apologies for saying that we will maintain the defence of this country and of NATO while we continue with the process of disarmament.
    Sir Geoffrey Johnson Smith: Although I accept what my right hon. Friend has said, will he bear in mind, when coming to a decision about the deployment of such systems, the fact that the Soviet Union has developed and deployed its own air cruise missile system for its own aircraft?
    Mr. King: The latest information about the scale of Soviet nuclear resources suggests substantial quantities and that they are pursuing an increased programme of modernisation. Against that background, it would be grossly irresponsible if we did not ensure that, while pursuing sensible disarmament measures, we keep our own defences modernised and effective.

    NATO Nuclear Planning Group
    Ms. Ruddock: To ask the Secretary of State for Defence when the NATO nuclear planning group last met; and what items were on the agenda.
    Mr. Heffer: To ask the Secretary of State for Defence when the NATO nuclear planning group last met; and what items were on the agenda.
    Mr. Tom King: The NATO nuclear planning group is meeting today and tomorrow in Portugal. I have postponed my attendance so that I could answer Questions in the House today. My hon. Friend the Minister of Stale for the Armed Forces is attending today, and I shall join the meeting immediately after Question Time. The group will discuss a range of matters concerning nuclear issues.
    Ms. Ruddock: When the Secretary of State gets to the nuclear planning group meeting does he intend to agree to the return of cruise missiles to Britain on American aircraft? Does he not support the follow-on to the Lance missile, which recycles cruise missile warheads and brings them back to Europe? Is he not, on behalf of the Tory Government, acting as a bulwark for rearmament in Europe, which the rest of western Europe does not want?
    Mr. King: I cannot accept that. I have made it clear that we have given strong support to disarmament. The lesson—which I believe profoundly, but on which I know that the hon. Lady and I will never agree—is that because we have held a strong position we have been able to achieve greater stability and peace in Europe. We intend to maintain the policy which has proved such a success.
    Mr. Heffer: Will the right hon. Gentleman confirm o r deny reports in The Times and The Guardian yesterday which suggested that the air cruise missile will be brought back to Britain by the United States? Will he confirm or deny that the Government have agreed that this should happen? Are the Government not being deceitful to the people through their actions? Is the right hon. Gentleman aware that people thought that the cruise missile was going for all time and it is an absolute disgrace that the Government should follow this policy?
    Mr. King: There is no question of reintroducing cruise missiles of the type that the hon. Gentleman mentions. He is talking about discussions that have taken place separately on a weapon that is known as the tactical air-to-surface missile, and also a French equivalent. We have made it clear publicly that we are looking at both as possible alternatives in our modernisation programme to replace the existing free-fall bomb. To try to describe that as the reintroduction of land-based cruise missiles is a total distortion. There is no truth in it whatsoever.
    Mr. Brazier: Does my right hon. Friend agree that the gap between nuclear weapons in the East and in the West continues to widen? Would it not be very strange if the Government were to become more worried about the possibility of extra weapons in the West than about actual weapons coming into service in the East?
    Mr. King: I fear that those people who have been proved to have lost the argument about the importance of maintaining strong and credible defences continue to put

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    their old argument, which proved so disastrous and achieved no disarmament whatever. We are proud of what is happening and we shall play our full part in it.
    Mr. Cyril D. Townsend: Does my right hon. Friend agree that both the United States and Britain are well advised to seek to modernise their weapons systems, particularly their nuclear weapons systems and at the same time to try to respond to the changed mood in Moscow towards genuine disarmament at all levels? Would not the real mistake be to seek to substitute one for the other?
    Mr. King: My hon. Friend is correct. Everybody knows that the Soviet Union and the Warsaw pact have been pursuing their modernisation programme. They respect, and I have no doubt that President Gorbachev respects, the fact that we intend to ensure the security of our people, our country and NATO, in the same way as he seeks to secure his.
    Mr. Sean Hughes: If the Secretary of State is asked, how will he explain that the British Government clearly believe that our sea-based nuclear missiles are an insufficient deterrent because we insist on the maintenance of land-based nuclear weapons whether or not we have conventional parity?
    Mr. Tom King: I think that the hon. Member for Knowsley, South (Mr. Hughes) is aware that the principle of flexible response has been the NATO strategy for a considerable time, rather than dependence on a single strategic nuclear deterrent. He will also be aware that that strategy was reaffirmed at the recent NATO summit.
    Mr. Ian Taylor: At the NATO nuclear planning group meeting will my right hon. Friend remind some of our allies that it would be unwise to anticipate the further successful outcome of talks in Vienna and elsewhere on weapons reductions by further reducing their own defence commitment? It is especially important to remind those allies who already spend less than 3 per cent. of GDP on defence.
    Mr. King: It is very important at this time, when there is the opportunity for sensible disarmament built on confidence on both sides, that there is no unilateral disarmament which might destabilise the NATO position. Therefore it is extremely important that NATO holds together. It will be difficult for SACEUR—the Supreme Allied Commander Europe—and NATO command to give advice on exactly how the reductions are to be made and how equality of equipment, which one of my hon. Friends has already mentioned, will be achieved. A number of difficult decisions must be reached, which will be made all the more difficult if some countries anticipate what their share should be.

    Territorial Army (Nottingham)
    Mr. Allen: To ask the Secretary of State for Defence when he will next visit the Nottingham, North constituency to visit the Territorial Army base in Hucknall lane.
    Mr. Neubert: My right hon. Friend has no plans to visit the Territorial Army base in Hucknall lane, Nottingham, in the foreseeable future.
    Mr. Allen: Is the Minister aware that the TA conforms to the Government policy of having conventional defence on the cheap? Would he agree to investigate those companies—particularly a number of those which donate to the Conservative party—which, unlike many other companies, do not allow their staff time off to participate in TA activities?
    Mr. Neubert: The national employers' scheme is directed towards employers who are being encouraged to enable their working men and women to take time off for TA activities. I am pleased to say that as a result of the success of that scheme some 50 per cent. of the work force is involved.
    Mr. Conway: If my right hon. Friend should change his mind and decide to visit that TA unit, will he take the opportunity to explain that instead of having equipment of the same high standard as its regular counterparts, if we ever followed the policies advocated by the Opposition and slashed £5 billion from the procurement programme, the TA would be drilling with broomshanks and plimsolls instead of up-to-date equipment?
    Mr. Neubert: My hon. Friend draws what must be an irrefutable conclusion.

    Stand-off Missiles
    Ms. Mowlam: To ask the Secretary of State for Defence what discussions he has had with his United States counterpart about stand-off missiles.
    Mr. Alan Clark: My right hon. Friend, as he just told the House, will be meeting the United States Secretary of Defence later today at the meeting with NATO's nuclear planning group, when he will discuss a wide range of matters of mutual interest. It is not our general practice to disclose the details of such discussions.
    Ms. Mowlam: I understand that it is not the Minister's intention to give us details of those discussions, but it would be useful if he could give the House some assurance about whether there is any intention to purchase stand-off hydrogen bomb missiles from the United States.
    Mr. Clark: Yes, there is a NATO requirement for a medium-range stand-off weapon. That was emphasised in paragraph 92 of the Select Committee report, which suggested that that was the preferable route now that the free-fall bombs were becoming obsolete. The warhead will, of course, be manufactured in this country. We are talking only about the delivery systems.
    Mr. Bill Walker: When my right hon. Friend meets the Americans will he remind them of the problem that we are facing in Europe created by the West Germans refusing to allow adequate capability for low-flying aircraft? That has the result of reducing our deterrent capability in the eyes of the enemy. Will he therefore confirm that the need for a stand-off weapon system is essential if the United States and the Royal Air Force are to be credible deterrents?
    Mr. Clark: There is no doubt that the stand-off weapon is a requirement and my right hon. Friend will be discussing that. I do not doubt that my right hon. Friend will have noted the points made by my hon. Friend about low-flying aircraft.
    Mr. O'Neill: Does not the Minister agree that stand-off missiles on aircraft with in-flight refuelling, the like of which have been described in the press this week, will have a range capable of replicating the work which would have been done by ground-launched cruise missiles, and that because of that and because of their range, these would circumvent at least the spirit if not the text of the INF treaty? It is thus an extremely provocative deployment at a time when we seek further disarmament and possible reductions in tension in Europe.
    Mr. Clark: Those missiles do not come within the scope of the INF treaty, which is ground based, and they are not comparable with cruise missiles because both the method of delivery and the warhead are different.

    Ethnic Minorities
    Mr. Kirkwood: To ask the Secretary of State for Defence what measures he now plans to take to increase the recruitment of ethnic minorities into the armed forces; and if he will make a statement.
    Mr. Neubert: We have received the report on the study that we commissioned earlier this year into ethnic minority recruitment to the armed services and will be making an announcement shortly. In the meantime, we are giving greater attention to recruitment from the ethnic minorities, which we are keen to encourage.
    Mr. Kirkwood: Has it not taken the Government an unconscionable time to get round to doing something about this? Is the Minister aware that we are talking not just about recruitment of non-commissioned ranks but about commissioning for ethnic groups within all services and all ranks. I shall be interested to know how many black RAF officers the hon. Gentleman meets in the next six months of his ministerial duties.
    Mr. Neubert: I cannot accept the hon. Gentleman's strictures. He knows that we are anxious to recruit from ethnic minority communities. We have had policies under way to this end and shall no doubt be introducing more. Examples of how we seek to recruit from the ethnic minorities include translating recruiting pamphlets into ethnic minority languages, advertising in the ethnic minority press and making greater use of black recruiters in careers information offices.
    Mr. Marlow: Is my hon. Frend keener to recruit from ethnic minorities than from the rest of the community or is he equally keen?
    Mr. Neubert: Such linguistic discussion would be invidious. We are keen to recruit to the full level of manpower needed for the operational role.
    Mr. Ashley: When does the Minister intend to comment on the report that he has received about racism in the Army?
    Mr. Neubert: I regret that I did not hear all the right hon. Gentleman's question. Obviously, the report, which is being considered by officials and on which Ministers will shortly make an announcement, will deal with all factors in the perception of the ethnic minorities in relation to the armed services.

    European Fighter Aircraft
    Mr. Colvin: To ask the Secretary of State for Defence when he will make an announcement on the awarding of the contract for radar for the European fighter aircraft.
    Mr. Alan Clark: Discussions on the choice of radar are continuing between the four nations participating in the European fighter aircraft project. An announcement will be made as soon as they have been concluded.
    Mr. Colvin: Will my hon. Friend confirm that in the European fighter aircraft we have a winner with, for a change, a choice of two excellent radar systems, both of which have considerable British industrial components? Following discussions with their West German counterparts, are Ministers any nearer reaching a decision about which radar to choose?
    Mr. Clark: Yes, my hon. Friend is right to draw the attention of the House to the fact that there is a British industrial element in both bids. The MFD 2000 system is subject to a technical evaluation at present and we expect the results of that in the middle of next month. The national armament directors will then consider the matter and report to the Secretaries of State of the partner countries.

    Nuclear Weapons (Carriage by Sea)
    Mr. Loyden: To ask the Secretary of State for Defence what is his assessment of the efficiency of current technology to ascertain whether nuclear weapons are being carried at sea.
    Mr. Alan Clark: The technology to which the hon. Gentleman refers would require considerable development before its full value can be assessed.
    Mr. Loyden: Does the Minister welcome the experiments taking place in the United States with the Soviet Navy? Will her Majesty's Government be making vessels available for such experiments to take place involving the British Navy?
    Mr. Clark: We welcome any experiments which may provide further data in the complex sphere of verification. Although this technology exists, it has not yet reached a stage at which we could have any confidence in its accuracy.

    Defence Export Services Organisation
    Mr. Hind: To ask the Secretary of State for Defence whether his Department is considering changing the policy of the Defence Export Services Organisation.
    Mr. Alan Clark: No, Sir. The policy of the Defence Export Services Organisation remains unchanged. It will continue in its successful work of assisting United Kingdom companies, both large and small, to market and sell their defence products and services overseas. It is through the sustained efforts of British industry, with the support of the DESO, that Britain is able to maintain its position as a major exporter of defence equipment.
    Mr. Hind: My hon. Friend will be aware of the importance of DESO and of the companies in the north-west which contribute to it. Does he agree that any

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    attempt which might made along the lines of the Labour party's document on changing procurement policy, with a cut of a quarter in the defence budget, would lead to the loss of jobs and investment and would greatly damage the nation's balance of trade?
    Mr. Clark: Yes, indeed. We have a surplus of £517 million in this sphere and it is paradoxical that Labour Members should suggest an arms conversion agency which would take industrial production away from the defence industries and into industries which they regard as socially acceptable.

  PRIME MINISTER

    Engagements
    Ms. Quin: To ask the Prime Minister if she will list her official engagements for Tuesday 24 October 1989.
    The Lord President of the Council and Leader of the House of Commons (Sir Geoffrey Howe): I have been asked to reply.
    My right hon. Friend the Prime Minister is returning from the Commonwealth Heads of Government meeting in Kuala Lumpur.
    Ms. Quin: Does the right hon. and learned Gentleman recall the 1979 election statement by the Prime Minister, that under a Conservative Government
    "the products will stream from our factories and workshops while the customers of the world scramble over each other to buy them."
    Given the continuing and colossal trade deficit, what is his view now of that prediction?
    Sir Geoffrey Howe: The hon. Lady should understand that export performance, as recorded in the figures reported today, continues to be encouraging—[Interruption.] Export volume performances excluding erratic items are up over the latest three months by 8·5 per cent. in volume terms. That is consistent with the Prime Minister's claim.
    Mr. Brazier: To ask the Prime Minister if she will list her official engagements for Tuesday 24 October 1989.
    Sir Geoffrey Howe: I have been asked to reply.
    I refer my hon. Friend to the reply that I gave some moments ago.
    Mr. Brazier: Does my right hon. and learned Friend agree that the scenes last night of 250,000 East Germans demonstrating in Leipzig were a reminder yet again of the utter bankruptcy of Communism? Does he further agree that it is ridiculous for any party in the West to want to see a return to state control and economic collectivism?
    Sir Geoffrey Howe: The point that my hon. Friend makes is entirely valid and of great importance. It shows that people all over the world are turning away from the doctrine adopted by the Labour party, which has a prescription for Britain from which the rest of the world is trying to escape.
    Mr. Kinnock: Will the right hon. and learned Gentleman say why the Government are so opposed to the sensible course of referring the ambulance dispute to binding arbitration?
    Sir Geoffrey Howe: Because, as the right hon. Gentleman knows well, there is no provision for independent arbitration in the Whitley council procedures. On offer to the London ambulance service qualified staff is an increase of more than 9 per cent., with a consequent increase in overtime rates of almost 20 per cent. The real value of the 1986 salary structure has been more than maintained and the offer also contains the prospect of a review of that structure in the light of three years' experience. I am sure that the whole House will join me in wishing that those who are currently taking quite unjustified industrial action would return to the negotiating table and discuss the dispute there.
    Mr. Kinnock: If the right hon. and learned Gentleman will not help to get the ambulances back on the road by supporting binding arbitration as a means of resolving the dispute, will he tell us at what stage the Government intend to honour the pledge made by the Prime Minister that ambulance workers' pay should have firm and automatic linkage to national price or wage rises?
    Sir Geoffrey Howe: The right hon. Gentleman knows very well that the particular proposals put forward some years ago for linkage of ambulance men's pay to that of other services was specifically rejected by the Clegg commission, which was appointed by the Labour Government. I return to the point that there is no provision for independent arbitration in the current arrangements. National Health Service management must retain control over the pay of National Health Service staff, and since 94 per cent. of those working in the NHS have already settled their pay this year without industrial action, it is greatly to be hoped that the ambulance men will do the same.
    Mr. Kinnock: It really is not good enough for the Government, faced with the ambulance dispute, to use Whitley and Clegg as excuses. When will they face up to their responsibilities, support binding arbitration and get the ambulances back on the roads?
    Sir Geoffrey Howe: We do not need any advice from the right hon. Gentleman about facing up to responsibilities. When will he face up to his responsibility to confront an industrial dispute without supporting those who take industrial action?
    Mr. Squire: To ask the Prime Minister if she will list her official engagements for Tuesday 24 October.
    Sir Geoffrey Howe: I have been asked to reply.
    I refer my hon. Friend to the reply that I gave some moments ago.
    Mr. Squire: Against the background that we read of the possible non-uprating of child benefit for the third successive year, may I urge my right hon. and learned Friend even now to consider an alternative—the exclusion of the 500,000 taxpayers who have children and who pay the higher rate of tax from eligibility for child benefit, and the restoration of a full increase for the remainder of recipients? That would have widespread approval in the country and bring much-needed relief to many poorer families.
    Sir Geoffrey Howe: I understand my hon. Friend's sincere concern with this topic. I must tell him, first, that any statement on the uprating of benefits will be made

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    shortly in the usual way, and I cannot comment on the matter ahead of it. However, taking account of the principle that my hon. Friend endorses—that there should be some attempt to concentrate help on those in greatest need—he should surely take account of the fact that since 1979, real take-home pay for families on the average wage and with two children has risen by almost a third. In our policy to concentrate help on those most in need through family credit we provided last year about £200 million extra for low-income families, another £100 million extra for non-working families, through income support, and from April this year we have provided for the poorest families an extra £70 million over and above the amount that they would have received through the uprating of benefits. That has been a generous application of the principle that my hon. Friend urges.
    Mr. Bradley: To ask the Prime Minister if she will list her official engagements for Tuesday 24 October.
    Sir Geoffrey Howe: I have been asked to reply.
    I refer the hon. Gentleman to the reply that I gave some moments ago.
    Mr. Bradley: It is clear from the reply that the deputy Prime Minister gave some moments ago that he has no understanding of the anguish expressed by millions of families in this country or of the horror felt on both sides of the House at the news that child benefit is to be frozen. Does he not realise that one in three families in Manchester already lives in poverty, and that 12,000 children are now not entitled to free school meals because of the so-called targeting of benefits? How do the Government justify these relentless attacks on our children in not uprating child benefit? The answer is certainly not means testing.
    Sir Geoffrey Howe: The hon. Gentleman entirely misses the point. The extent to which our social security expenditure of all kinds has risen during the 10 years that we have been in office—by some £17 billion, to a total of some £53 billion, so in real terms, after taking account of inflation, it has risen by more than a third—has been specifically designed to concentrate help on those who most need it, exactly as I described a moment ago. That is the right way to bring help to those in greatest need.
    Mr. Thurnham: To ask the Prime Minister if she will list her official engagements for Tuesday 24 October.
    Sir Geoffrey Howe: I have been asked to reply.
    I refer my hon. Friend to the reply that I gave some moments ago.
    Mr. Thurnham: Will my right hon. and learned Friend accept the congratulations of the House on his bold and wise decision, taken 10 years ago yesterday, to bring great economic benefits to this country by his foresight and daring in abolishing all exchange controls? Now that our EEC partners have decided to follow suit, does he agree that the Labour party can no longer rely on exchange controls to save its economic policies, despite its new-found European enthusiasm?
    Sir Geoffrey Howe: I am grateful to my hon. Friend for his congratulations. He makes an extremely valid point. It is of great importance that the other countries in the European Community will be following the example that we set 10 years ago—contrary to the expectations of the
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    Labour party, which predicted that abolition of exchange controls would be a great disaster. In fact, it has turned out to be a huge success and a disaster for Labour's economic insight.
    Mr. Steel: The right hon. and learned Gentleman is a veteran of Commonwealth conferences. When the Government team returns from Kuala Lumpur will he seek two meetings—one with the new Secretary of State for Foreign and Commonwealth Affairs to console him, as a fellow sufferer, on the way in which he was treated by the Prime Minister, and one with the Prime Minister to try to teach her the difference between free speech and gross discourtesy?
    Sir Geoffrey Howe: I am surprised that the right hon. Gentleman has not expressed satisfaction at the reform measures now under way in South Africa and has been unwilling to acknowledge the part played in bringing that about—not just through the efforts of the Commonwealth as a whole but through the courageous and consistent stance of the British Government, which was always plainly spelt out. My right hon. Friends the Prime Minister and the Foreign Secretary agreed on each of the steps taken, on the communiqué endorsed at the conference, and on the statement issued subsequently. That statement explained clearly the position of the British Government, which has helped to bring about the changes that the whole House should welcome.
    Mr. Bowis: To ask the Prime Minister if she has received recent representations regarding energy conservation.
    Sir Geoffrey Howe: I have been asked to reply.
    My right hon. Friend the Prime Minister has received a number of representations regarding energy conservation and energy efficiency. Over the last four years for which figures are available, the United Kingdom's ratio of energy use to gross domestic product has increased at twice the European Community average.
    Mr. Bowis: Does my right hon. and learned Friend agree that it is good news that the £100 million invested by the Government has resulted in energy savings of some £500 million per year? Does he agree that much more needs to be done—not least in Government Departments. where energy costs are currently running at £300 million per year? Will he take steps to initiate savings in all Departments, and not least in the steamy sauna that passes for a House of Commons?
    Sir Geoffrey Howe: I am grateful to my hon. Friend for reminding me of the need to apply the policy to the Government as a whole. He will recall that on 20 July my right hon. Friend the Secretary of State for Energy announced the framework of a campaign to be applied to Government Departments, aimed at achieving savings of 15 per cent. of the total energy bill over the next five years and at investing 10 per cent. of the energy bill in measures to improve energy efficiency.
    An energy audit of the Palace of Westminster has also been undertaken, but it is more difficult to apply proposals for energy savings to Members of this House than to other parts of Government.
    Mr. Pike: Does the Leader of the House recognise that energy conservation is important and that energy provision should not be left to the private sector? Should

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    we not, therefore, ensure proper control of our energy and stop electricity privatisation so as to guarantee proper energy use and conservation?
    Sir Geoffrey Howe: Among other things, electricity privatisation policies will be directed at maintaining and improving energy conservation. As I have said, for the last four years for which figures are available the United Kingdom's ratio of energy use to GDP has been improving at twice the average of EC countries.
    Mr. Ian Bruce: Does my right hon. and learned Friend agree that privatisation of electricity will ensure that private companies will make profits by reducing the fuel that they burn and that energy conservation will be greatly improved by that means?
    Sir Geoffrey Howe: My hon. Friend is right to remind the House that privatisation induces a much more commercial and cost-conscious attitude throughout all sections of industry, as it will do in the respect that he mentions.

    Interest Rates and Inflation
    Mr. Allen: To ask the Prime Minister which G7 country has (a) the highest interest and (b) the highest inflation rate.
    Sir Geoffrey Howe: I have been asked to reply.
    Interest rates in the United Kingdom are higher than in other G7 countries. Italy has the highest underlying inflation rate. United Kingdom interest rates will stay as high as necessary for as long as necessary to bring inflation down.
    Mr. Allen: In view of that reply, and in view of today's trade figures, I do not wish to ask a supplementary question.
    Mr. Menzies Campbell: To ask the Prime Minister if she will list her official engagements for Tuesday 24 October.
    Sir Geoffrey Howe: I have been asked to reply.
    I refer the hon. and learned Gentleman to the reply that I gave some moments ago.
    Mr. Campbell: I do not share the inability or unwillingness of the hon. Member for Nottingham, North (Mr. Allen) to ask a supplementary question. When the deputy Prime Minister meets the Prime Minister on her return from her triumph at the Commonwealth conference, will he encourage her to condemn the rebel cricket tour of South Africa?
    Sir Geoffrey Howe: The Government will continue, as they have always done, to uphold the provisions of the Gleneagles agreement.

London Ambulance Service (Pay Dispute)
3.30 pm
The Secretary of State for Health (Mr. Kenneth Clarke): With permission, Mr. Speaker, I should like to make a statement about the dispute in the National Health Service, the pay of ambulance staff. I regret to say that the trade unions representing the ambulance men continue to refuse to accept the invitation of Duncan Nichol, the chief executive of the NHS, to resume negotiations in the Whitley council on their pay claim. The 6·5 per cent. offer from April 1989, originally recommended by the unions to their members, has since been improved. In London, the offer is now worth at least 9·3 per cent. for all qualified staff and 20 per cent. on overtime rates. For all ambulance men throughout the country, a review of aspects of the 1986 arrangements, particularly on overtime, has been offered together with talks on local flexibility to deal with recruitment and retention problems. The 1986 arrangements were regarded at the time as a major advance in ambulance men's pay and career structure. [HON. MEMBERS: "And women."' The term "ambulance men" includes women for this purpose. If that is the heaviest point that the Opposition can make, I can understand it in view of their lack of more relevant points. I was speaking about the 1986 arrangements, which were regarded at the time as a major advance in the pay and career structure of ambulance staff.
The latest offer more than maintains the whole of that increase compared with inflation and the men have also, in 1988, had an hour's reduction in their standard working week. I do not think that the unions were in any way justified in taking industrial action against patients when negotiations on the current offer had not come to an end.
For more than five weeks, there has been a ban on overtime and rest day working which has in places damaged the non-emergency but important services offered to the public. Last week, the trade union conveners in the London ambulance service, with the knowledge and approval of their national leaders, invented 14 new rules which they said they would apply to the operation of the service. The plain intention was to create new methods of disrupting the service. It was the opinion of the LAS management that some of the instructions in the 14 points were so disruptive that they would make it impossible to operate a reliable accident and emergency service.
On Monday morning, the ambulance crews were expected to work normally so that a full and proper emergency service could be provided. In many cases the crews refused to do so and it became impossible for the management of the LAS to guarantee a reliable accident and emergency service. The LAS management therefore asked the police and voluntary ambulance services to provide the necessary cover to ensure that the accident and emergency service was maintained in London. I regret that this action needed to be taken, but I fully support the management in its decision.
The LAS management considers that the accident and emergency service that has been maintained is the best that could be provided in the circumstances. At present no undue delays of patients being taken to hospital are being reported. The police and voluntary ambulance men have answered all the emergency calls put through to them. Approximately 130 vehicles are being deployed at the moment by the police, St. John Ambulance Brigade and
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the Red Cross. I am sure that the public owe a very great debt to the policemen and voluntary ambulance men involved for the great efforts that they are making. Plainly, however, it is important that a full accident and emergency service should be resumed. I am told that the trade unions met at 12.30 today to discuss further the 14 points that the conveners have drawn up.
I have kept in close touch with the situation throughout. I have not yet received any reports of action of the London kind spreading to other parts of the country. Neither management nor I will hesitate to take all necessary steps to ensure the continuation of an adequate accident and emergency service. I have been in touch with my right hon. Friend the Secretary of State for Defence and other colleagues. As a result, the Army is now reviewing the state of preparedness of its men and vehicles. I very much hope that common sense on all sides will prevail and that it will not be necessary to call upon their assistance.
Throughout this dispute, the management of the NHS has remained willing to negotiate further with the trade unions. A further meeting between the chief executive of the NHS, Duncan Nichol, and the national officers of the trade unions will be held this afternoon at ACAS. The dispute can ultimately be resolved only if the trade unions agree to return to negotiations in the Whitley council between management and staff sides. The unions should recognise that and not continue to press their claim by taking action that is aimed at harming patients.
Mr. Tony Banks: It is a disgrace. Utter crap.
Mr. Speaker: Order. That is not the kind of language that we should hear in the House.
Mr. Banks: It is utter crap.
Mr. Speaker: Order. I hope that the hon. Gentleman will reflect on what he has said.
Mr. Robin Cook: The Secretary of State began by assuring the House that the management side is willing to resume negotiations in the Whitley council on the pay claim. Is he not aware that every invitation by Duncan Nichol to resume negotiations has specifically excluded negotiations on the offer of 6·5 per cent. on basic pay? So that the House is not misled on this point, will the Secretary of State clarify whether his offer today to reopen negotiations includes negotiations on that basic offer of 6·5 per cent.?
As to the events in London, will the Secretary of State clarify what responsibility he takes for the conduct of management over the past 48 hours? Is he aware that, throughout yesterday, the management deliberately stopped staff from answering calls, that in most stations staff were told that they would get no insurance cover if they left to answer emergencies, and that at some stations where staff were willing to respond, despite the lack of insurance, the management removed the ambulance keys to prevent them from leaving?
Is the Secretary of State aware that at one station yesterday management warned the crew answering an emergency call that they would be charged by the police if they removed an ambulance from the station? Does not that evidence make it clear that the decision not to use London ambulances to answer London emergencies was a decision by management? Therefore, will the right hon.

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and learned Gentleman tell the House whether those were his instructions to management? Did he approve this escalation of the dispute by management? If not, will he now instruct management to put through emergency calls to the ambulance staff who, right now, are at every ambulance station waiting to answer such calls?
The Secretary of State said that there had been no undue delay so far in the police responding to calls. Is it not clear to the Secretary of State and every hon. Member who has seen the television that police vans equipped with duvets and first-aid kits can be no substitute for the skills and equipment of the ambulance service? The solution is not to call in the Army to substitute for the police substituting for the ambulance service but to solve the dispute. Therefore, I welcome the announcement that the management side is to attend talks at ACAS. I press the Secretary of State to clarify which service it is seeking from ACAS. Does it intend to request arbitration, conciliation or advice, or does the management side intend only to repeat a pay offer less than the rate of inflation to an emergency service already so underpaid that it cannot fill its vacancies?
Why is the Secretary of State so afraid of arbitration? Is his case so weak that he cannot risk taking a second opinion on it? Half the staff of the NHS have access to an outside opinion through the pay review body. What is so special about the ambulance men that they are to be denied an outside view?
The dramatic events of the past few days have shown that the dispute could yet end in tragedy. The Secretary of State could end it today by agreeing to arbitration. He should take the opportunity to do so now.
Mr. Clarke: As for the basis on which negotiations might be resumed, plainly it is not sensible for me to negotiate across the Floor of the House. The 6·5 per cent. offer, which was made in the Whitley council, was recommended by the trade unions to their members two or three months ago. There has since been an improvement in the management's position. As far as the management is concerned, those negotiations never ended. I hope that the hon. Member for Livingston (Mr. Cook) will join me in saying that the proper course is to resume the negotiations in the Whitley council and not to press the union's claim in the way that he has.
The hon. Member for Livingston made the extraordinary allegation that it was the activities of the management in London yesterday which withdrew the accident and emergency service. It is plain that that view is accepted by many of his right hon. and hon. Friends. It was the conveners of the trade unions in London who drew up 14 invented points which they would follow in operating the ambulance service. The only purpose of drawing up the 14-point plan was to disrupt the service. Not one of the 14 points was intended to improve the service. The conveners decided to devise 14 new ways of reducing the service to the public.
The hon. Member for Livingston said that yesterday men were stopped answering accident and emergency calls. The hon. Gentleman knows that instructions from the trade unions included such absurdities as not using the radio telephones and not allowing two men sitting in separate stations to get together to take out an ambulance. It was sheer hypocrisy on the part of the trade unions, and
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repeated by the hon. Gentleman this afternoon, to say that they were prepared to operate an accident and emergency service that involved their men sitting around in the stations during the day and refusing to operate the vehicles and the emergency service seriously.
If the hon. Member for Livingston were being responsible, he would join me in paying tribute to the management of the London ambulance service, to the police and to the voluntary ambulance men who stepped in and provided a vital service for the public of London.
I hope that the talks which the trade unions have been holding among themselves since 12.30 pm today will lead to some common sense returning to the situation in London. I am glad to say that, as I have already told the House, there is no evidence that the approach in London is spreading anywhere else in the country. I am sure that the management will get together with the trade unions during the day. I trust that they will work out a basis upon which the accident and emergency service can be restored to the people of London in a proper way.
Of course the police vans are not adequately equipped for the purpose. It was forced upon the police to take part in the service yesterday. The National Union of Public Employees and other unions had decided to step up their action and to place the public at risk. I was kept in touch throughout by the management; I know what it was doing. I think that it was right because I believe that it had no alternative. Its first duty was to ensure that an accident and emergency service of the best sort in the circumstances was provided to the public of London, and it was the unions which were getting in the way of that.
I hope very much that the Army is not used. The Army has not been used in providing an ambulance service since 1979, when the then Labour Government brought it in to provide the ambulance service in the middle of an industrial dispute. I hope that the present dispute will be resolved and that we shall not have to use the Army. At the moment my right hon. Friend the Secretary of State for Defence is merely inquiring into the state of preparedness of the Army, and we await progress today.
There is to be a meeting at ACAS today. Duncan Nichol has agreed to meet national trade union officers to see whether there is a basis upon which talks can be resumed. He is, in effect, resuming talks which he initiated about a week or more ago. They are now being resumed under the auspices of ACAS. The only way in which we can make progress is to return to the negotiating table with a suspension of industrial action. We shall see how we get on this afternoon.
To grant the men arbitration on their claim when the union is refusing to complete negotiations in the Whitley council where everybody else has settled such matters would undermine management's position. Management cannot hand over the control of pay of large groups of people to third parties when it also has a responsibility to spend its money on the provision of patient service.
The only reason that the hon. Gentleman is arguing for arbitration is that these men are taking industrial action and he would respond to that by giving this particular group of workers arbitration as a reward. That is not a reward that the Labour party ever gave when it was in government. I look forward to the day—it has not arrived yet in all my years of experience in the Health Service—when the Labour party will not back to the full any group of Health Service staff who take action against patients for any kind of pay claim whatever.

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The Labour party's support for pay claims and for industrial action against patients contrasts clearly with its record in government. The previous Labour Government never gave arbitration to the ambulance men. They never linked the pay of ambulance men with other groups. In the last four years of the Labour Government, ambulance men's pay fell behind inflation in three years out of four, and in the fourth year it gave ambulance men 9·9 per cent. in a year of 10 per cent. inflation. They referred the issue of comparability to Clegg and, as my right hon. and learned Friend the Lord President of the Council said a moment ago, comparability with the other emergency services was rejected by Clegg.
The Labour party's record in government on ambulance men's pay is shabby and its record in opposition is downright irresponsible in its preparedness to support patients being put at risk by men pursuing industrial action in pursuit of a pay claim.
Dame Jill Knight: Since 94 per cent. of NHS staff have this year settled all their pay claims without any strike action, and since nearly all of those settlements were for increases of 6·5 per cent. or about that figure, would it not be an open invitation to play ducks and drakes with patients' safety if the NHS staff saw that damaging and destructive strike action resulted in an 11 per cent. pay settlement?
Mr. Clarke: My right hon. Friend is right. If those who take industrial action receive higher pay awards as a result, it will obviously encourage others to choose that route. That is exactly how the Labour party contrived eventually to put half the NHS on strike in 1979 and we had a winter of discontent.
The management has demonstrated that it is prepared to be reasonable in negotiations with those many dedicated NHS staff who have a particular claim. Details of the settlements that others have achieved without industrial action show that all operating department assistants received well over 10 per cent. and some received up to 30 per cent. and junior clerical staff received more than 10 per cent. That is because their claims were recognised in negotiations in the Whitley council and a settlement was reached which the Health Service could afford without damaging patient care.
The Labour party is now taking up the cause of people who received a huge pay increase in 1986 which has been more than sustained and it is now saying that because those men are prepared to put patients at risk they should be offered arbitration and it would no doubt support a double figure pay settlement again.
Mr. Nigel Spearing: Will the Secretary of State understand that the unions say that what Mr. Crosby said about radio telephonic communication is just not true? Will he please check that? They say that they were referring to the use of radio telephones in certain circumstances, not as the right hon. and learned Gentleman said. Is the Secretary of State aware that the Balaam street ambulance station in my constituency had an emergency call from an address in the constituency of my hon. Friend the Member for Newham, North-West (Mr. Banks) at 10.20 am yesterday and that the ambulance officer threatened the staff with calling the police if they went to that call?
Will the Secretary of State now reply to the question put by my hon. Friend the Member for Livingston (Mr. Cook)
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about such an industrial management decision? Was it taken by the London ambulance adminstration after consulting the Secretary of State or the NHS administrator, and, if not, why not? Why has he allowed that administration to take such a major step of principle in its reactions without his being consulted, or was he not consulted?
On the matter of ACAS—[Interruption.]
Mr. Speaker: Order. These are important matters.
Mr. Spearing: Can the Secretary of State tell us, even if the provision is not in the Whitley arrangements, what is to prevent the matter being sent to a body designed both to prevent and resolve such matters? When will the Secretary of State remove this civic spectre from our capital city?
Mr. Clarke: The hon. Gentleman is right to say that lives are at stake in this dispute. I hope that he will consider carefully what he is saying. Perhaps he will put himself in the position of someone who has just witnessed a road accident, who thinks that lives might be at stake and who wants to know on what basis the ambulance staff are operating. It would not be very encouraging to such a bystander to hear that there is an argument about the circumstances in which the ambulance men may or may not operate their radio telephones, about whether a two-man crew can be put together and about what contact they will maintain with base while they are operating the ambulances. Certain managers on the ground, who had to deal with that immediate crisis, were faced with men who were sitting in the station and who wanted to take ambulances away, but who were extremely unclear about the circumstances in which they would use those ambulances once they were out of the station.
I am sure that the hon. Gentleman, who is usually a sensitive and humane man, will realise that the management had no choice but to say that it must guarantee a reliable accident and emergency service and that it must, therefore, seek the help of the police, the Red Cross and St. John Ambulance to do so. The management kept me in touch, so I knew exactly what was happening, although I did not know, of course, about day-to-day, hour-to-hour incidents in individual stations. The management of the London ambulance service was given no alternative by the representatives of the ambulance men, who had deliberately drawn up 14 new points with the intention of disrupting the service in London. I hope today that discussions between the London management and the London conveners will resolve that and bring back the accident and emergency service.
The management is, of course, willing to go to ACAS. It is going today and there have been contacts with ACAS before, and between the Whitley chairman and the men. However, everybody should realise that this dispute can be resolved only in negotiation. The union's position is that it will not resume negotiations and that it will not go back to the Whitley council. As long as it maintains that position, it is necessary for the management in all parts of the service to maintain the best possible service it can for the patients in its care.
Several Hon. Members rose——
Mr. Speaker: Order. The House knows that this is an Opposition day, and there is a further important debate in which there is a great deal of interest. I ask for brief questions on this important matter.
Sir George Young: My right hon. and learned Friend will be aware that all Londoners hope that the talks to which he has referred will be productive and that the dispute will shortly be drawn to a close. Is it not the case that the strategy of the National Union of Public Employees over the past few weeks was clearly getting it nowhere and that over the weekend it decided to escalate the action by introducing on Monday the so-called 14 points, which made management of the service quite impossible? Against that background, is it not hypocritical of Mr. Poole to describe the management action as "evil"?
Mr. Clarke: I agree with my hon. Friend. The NUPE position was straightforward. It had five weeks of industrial action, which had not damaged the patient services. Local conveners, therefore, drew up a list of points that they thought would damage the patient services. Mr. Poole then had the utter hypocrisy to say that that was somehow an evil caused by management. It is up to Roger Poole and his colleagues to sort out today how they will get back the accident and emergency service after they took action to disrupt it yesterday.
Mr. Jeremy Corbyn: Is the Secretary of State aware that, after 10 years of Tory Government, morale in the ambulance service is extremely low as a result of cuts in the service and the low pay of ambulance workers? Is he aware that the dispute with management has enormous support from the public? That is why he has authorised this high-handed action of trying to impose a settlement by bringing in the police and now threatening the ambulance workers with bringing in the Army. Should he not take account of the fact that the ambulance workers have never refused to deal with 999 calls, and should he not send the dispute to arbitration, as has been requested by the workers' side, rather than trying to smash the dispute in the high-handed way he has chosen to adopt?
Mr. Clarke: The offer from the management would raise ambulance men's pay by 28 per cent. since 1986, compared with 20 per cent. inflation. I have already contrasted the way in which the ambulance men have been rewarded and seen their earnings increase under this Government compared with under the Labour Government.
In the hon. Gentleman's constituency, the offer to the London ambulance men who have caused all this trouble is at least 9·3 per cent. for all qualified men. They have a better offer in percentage terms than the police have had this year, a better offer than the firemen, and a much better offer than the nurses. They have no justification for agreeing to 14 silly points which were drawn up for them with the intention of disrupting the service.
Sir Ian Lloyd: As the standard of equipment and the ambulances used by the police has been criticised by the Opposition, as the majority of the ambulances in London are, I imagine, public property and do not in any sense belong to NUPE, and as most are built to a standard design—they are built in my constituency and I have seen that this is so—would it not be wholly appropriate, and
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certainly right, that as many of those ambulances as were required by the police were made available to them by the management of the service?
Mr. Clarke: That and other possibilities will have to be considered if the ambulance men in London cannot be persuaded to operate a reliable accident and emergency service. My hope, which I am sure is shared by the majority of hon. Members, is that the talks this afternoon between the London management and the trade unions will so modify these 14 points that, at the very least, we can return to a reliable accident and emergency service on the streets of London being operated by the men.
Mr. Simon Hughes: Will the right hon. and learned Gentleman sound a bit less like the Secretary of State for Employment, the Home Department or Defence or the Chancellor and a bit more like the Secretary of State responsible for the Health Service and support the people, to whom he should have paid a tribute, who for years have done a good job in the Health Service for low pay? Given that the talks are starting at 4 o'clock, will the right hon. and learned Gentleman perhaps pay his tribute by making it abundantly clear that, if necessary, more money will be available? Instead of the pay ranging between £7,000 and £11,000, ambulance personnel whose pay has fallen behind parity with that of workers in other emergency services will then know that they are likely to get more money so that they are rewarded, as the public wish, for a service that deserves money as well as mere words.
Mr. Clarke: As Secretary of State for Health, my prime concern must be for the safety, health and well-being of the public. The hon. Gentleman is obviously most concerned with pursuing a pay claim of a particular group of the staff, which is not quite the same thing. In my opinion, the pay claim can satisfactorily be resolved when the ambulance men return to the negotiations in the Whitley council. I do not accept the hon. Gentleman's idea that somehow, in the interests of the Health Service, we should give them more money until they agree to call off the industrial action. Presumably the hon. Gentleman has no idea how much they want, but he would pay whatever they demanded and then wait for the next group to take industrial action in the Health Service.
I certainly agree with the hon. Gentleman that the bulk of the ambulance men in this country get and deserve a full tribute from the public. They provide an essential service. That work should be properly rewarded, which is the purpose of the pay negotiations that we carry out inside the Health Service. Most other workers in the Health Service provide a vital service and are dedicated. It is only fair that the pay of all of them is resolved through bargaining machinery and that NUPE does not try to get an advantage for one group by taking action against the patients.
Mr. John Wheeler: Will my right hon. and learned Friend confirm that the ambulance staff are Health Service workers and that for many years their pay and conditions of service have been determined within the Whitley council structure? What would the proposed 9·3 per cent. increase for the London service give in terms of salaries?
Mr. Clarke: The 9·3 per cent. increase for London staff, contrary to what was said a moment ago, would give the

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leading ambulance men £13,000, qualified ambulance men £12,100 and an ambulance man or woman £9,020. On top of that, one can expect at least two hours overtime to be worked and we would expect average earnings each week to be about £244. Incidentally, that pay is not very far out of line with that for firefighters in London. This is no doubt why, when drawing comparisons, the union side tends to pluck out of a hat the pay of fifth-year firefighters, who are about £3 a week better off than ambulance men under the present offer.
Mr. Chris Smith: The Secretary of State has twice skirted round the crucial question asked by my hon. Friend the Member for Livingston (Mr. Cook). Will he answer it now? Did he have prior knowledge of and give prior approval to the decisions by London management yesterday to lock out the ambulance staff who were prepared and willing to carry out emergency services?
Mr. Clarke: The managers did not lock out the staff, and it is a travesty of the truth to describe what happened yesterday as a lockout. I had full forewarning of what the London management felt it was obliged to do yesterday. I believe that it was given no sensible choice if, unlike the Opposition, it wanted to continue to put the interests of the public before the interests of a strike in support of a pay claim.
Mr. John Bowis: The people of London who are currently at risk will not have been impressed by the sight of the Leader of the Opposition giggling on the Opposition Front Bench throughout the statement made by my right hon. and learned Friend the Secretary of State. However, they will be impressed if the dispute is brought to a speedy conclusion and they will be even more impressed if, after the dispute, my right hon. and learned Friend will bring forward measures to stop strikes and industrial action in certain essential services where health, life and safety are at risk. Will my right hon. and learned Friend heed my comments?
Mr. Clarke: I listened to the Leader of the Opposition enjoying himself by trying to whip up feeling about a strike in the public service about which he knew little and trying to urge on the union in its pay claim. I hope that I have put the matter into perspective. I have explained that the position in London yesterday was contrived by the trade union conveners, and we hope the position can be rectified today.
I will consider what my hon. Friend the Member for Battersea (Mr. Bowis) has said about strikes in essential services. My right hon. Friend the Secretary of State for Employment is sitting beside me now and the subject comes up for discussion frequently in the House when irresponsible action like that embarked upon by the London ambulance service yesterday occurs and therefore puts public safety at risk. Obviously I do not have responsibility for policies about such strike action. My main aim at the moment is to get the accident and emergency services in London working normally once more.
Mrs. Rosie Barnes: The shortfalls exposed by the overtime ban in London show that there is a shortage of ambulance men in the capital city and that they are poorly paid. It is also clear that the Whitley council has failed in its obligation to the ambulance men
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and to the public. Does the Secretary of State agree that binding pendulum arbitration, which is not inflationary, is the only fair and sensible way of ensuring that the emergency services are always maintained and are not subject to action of this kind.
Mr. Clarke: I concede that there is some evidence of staff shortages. We made an enhanced offer in London so that it is at least 9·3 per cent. for all qualified personnel arid 20 per cent. on some overtime rates because we wanted to try to tackle those recruitment difficulties. The management have made an offer which is higher than the settlement accepted by London Underground workers.
I do not believe that the Whitley council can be said to have failed. It produced a management offer three months ago which NUPE and the other trade unions were then recommending to their members. However, they are now refusing to negotiate about that. When I was a Minister in the Department of Employment I was attracted by the idea of pendulum arbitration in certain circumstances. However, as the hon. Member for Greenwich (Mrs. Barnes) will be aware, that tends to occur within the kind of settlements reached by people such as the electricians in which there is a no-strike agreement, single-union recognition and pendulum arbitration. There is no prospect of getting a no-strike agreement or anything else from NUPE, or the Labour party, with which NUPE is in close alliance on this occasion.
Mr. James Couchman: Will my right hon. and learned Friend confirm that if the dispute ends in tragedy, as the hon. Member for Livingston (Mr. Cook) suggested it might, the responsibility for the tragedy will rest fairly and squarely with the ambulance men and their conveners as a result of the escalation yesterday which threatens people who live in London and those who come in to London to work?
Mr. Clarke: I agree with my hon. Friend. To hear a trade union leader on the radio and television explaining that he is advising his members to take action which puts the public at risk and then saying that he regrets the inconvenience caused and that the fault is not on his side brings back all the worst memories of the 1970s. That is really unacceptable in such an important service as the ambulance service.
Mr. Harry Cohen: Will the Secretary of State consider his own example of the man lying injured after a road accident in Leyton, perhaps? Would he tell him that the ambulance cannot arrive because the management have taken the keys from the vehicles and are not putting through 999 calls? That is what happened in my area of Whipps Cross. How can the Minister justify that action by management, which he said he supported? Of course he supports the management: he is the management. They are jumping to the Minister's tune in escalating this dispute.
Mr. Clarke: I advise the hon. Gentleman to look at the 14 points which were ingeniously devised by the trade union conveners last week. I will mention some of them. They will not use the radio telephone. They will not double up manning. If there are no red blankets at the scene, they wait for them. They will not take out a defective vehicle. They will not take out one with defective brakes—I do not mind that—but if a light bulb is missing, they must wait for a fitter to replace it. The police, St. John Ambulance and

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the Red Cross are doing their utmost to provide a reliable service. The management want to go back to relying on their own men to provide it.
It is not true to say that, yesterday, the union instructions were enabling anybody to provide a reliable accident and emergency service, using only some of those men who were obeying their own union's instructions.
Several Hon. Members rose——
Mr. Speaker: Order. I must have regard to the subsequent debate. As I have already said, there is great demand to take part in it. I will call two more hon. Members from each side and then the Opposition Front Bench spokesman, and then we must move on.
Mr. David Madel: Has my right hon. and learned Friend received a clear assurance from the ambulance men that, if there were a serious incident on British Rail or the London Underground, normal ambulance services would be resumed at once? Should not such a clear assurance apply also if there were a serious incident at a factory, particularly one dealing with hazardous substances?
Mr. Clarke: My confidence in the ambulance men is such that I am quite sure that, if we get news of a major incident this afternoon, everybody will turn out and take part and temporarily ignore the dispute, as they did at the time of the Deal bombing. It will be no thanks to NUPE if they do. We all know that ambulance men can be relied on in such situations. That is why we want a fair settlement, negotiated properly in the Whitley council, which has always dealt with their pay.
Mr. Dave Nellist: How can the Secretary of State tell caring ambulance workers in London and throughout the country to take a pay cut when, on 21 July 1987, in a Division which I forced in the Chamber, he and his two junior Ministers voted themselves a pay increase of between 11 per cent. and 20 per cent.—£80 a week—to take his salary up to £1,000 a week? It is no good praising ambulance workers at the time of the King's Cross and Clapham disasters and treating them like dirt now.
Mr. Clarke: The ambulance men got a settlement of well over 10 per cent. in 1986, and the offers that have been given to them since have more than maintained the value of that settlement. They have also had an hour taken off their normal working week.
We are not dealing unfairly with the ambulance men. They have been dealt with better than some other Health Service staff in recent weeks. This year other Health Service staff are being given priority in negotiations by management negotiators. The offer is fair. The hon. Gentleman's comparisons are ridiculous. I would not dream of comparing my own increase. As it happens, my own increase was 3 per cent. this year, but I am not complaining about that.
Mr. Nicholas Winterton: I commend my right hon. and learned Friend on his excellent statement. I agree that a normal ambulance service should be restored while discussions and negotiations go on at ACAS. Does my right hon. and learned Friend agree that there is increasing concern about the Whitley council procedure? I
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take up the point so excellently made by my hon. Friend the Member for Battersea (Mr. Bowis) that, perhaps, a special system for the future should be considered for those in essential public services such as the ambulance service.
Mr. Clarke: The Whitley council is the system which we have had and which the trade unions always defend. It has weaknesses. I am always surprised that on the staff side of the ambulance Whitley council the Association of Professional Ambulance Personnel, which has a large membership, is not represented at all because that association will not affiliate to the TUC. In my hon. Friend's part of the country, APAP probably has more members than some of the trade unions organising industrial action and, at the moment, parties to negotiations.
The Whitley council is the best we have. It is the agreement with both sides. Normally, NUPE vigorously and vehemently defends Whitley council procedures. It walked out this year only because it decided that it wanted to take industrial action to see whether it could do better than it would otherwise have done by sensible negotiation.
Mrs. Alice Mahon: Is the Secretary of State aware that, for all his bluster, union bashing and petulant behaviour on television last night, the public will blame him if there is a tragedy because they know—it is quite clear—that he has been gearing up all weekend for this confrontation? Indeed, he seems to be enjoying it. I hope that he is aware that the blood will be on his hands and not on those of low-paid ambulance workers.
Mr. Clarke: The dispute has been going on for five weeks, in the course of which I have played very little part in the public debate. Both the management and myself have done our utmost throughout not to inflame feelings or to spread the dispute but to try to get back to negotiation. If the hon. Lady casts her mind back, she will find that continually the statements made by Mr. Roger Poole, on behalf of NUPE, throughout those five weeks have been attempts to inflame feelings and to centre public attention on the claim. Our continued aim is to get people back to the negotiating table and to sort out the dispute. I have no desire to have any dispute with ambulance men and nor has the management of the NHS. We remain confident that, if common sense prevailed, the whole matter could be sorted out through discussion.
Mr. Robin Cook: May I share with the Secretary of State some information which has been passed to me by my hon. Friend the Member for Newham, South (Mr. Spearing)—that within the past half hour management in London has agreed to lift the suspensions immediately and to pay the wages of those suspended? Can the right hon. and learned Gentleman confirm that development? Did he have prior knowledge of it? If so, why did he not share that knowledge with the House? Does he agree that this latest development demonstrates that London ambulance management has adopted such a provocative stance that even it could not sustain it?
Mr. Clarke: The hon. Gentleman will find that the unions have modified the silly attitude that they were taking yesterday and that discussions have taken place—[Interruption.] My information is almost as good as that of the hon. Member for Newham, South (Mr. Spearing). When I rose to make my statement, I was

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passed a note saying that management hoped to be able to reach an agreement this afternoon. That agreement involved facing the conveners with the implications of their 14 points, getting them to reconsider those points, and getting back to a basis on which the service could be resumed. That is what I said I hoped would happen in my original statement, and in all my replies.
I am sorry if the hon. Gentleman is disappointed, but the fact is that the accident and emergency service has now been resumed. I hope that if anybody threatens to put the service to patients at risk again, the hon. Gentleman and his hon. Friends will not leap in excitement to support such action. I hope that if their lines of communication with the unions are so good they will urge that this afternoon at ACAS the unions should agree to return to the Whitley council negotiations, where they should have stayed five weeks ago.

London Ambulance Service (Pay Dispute)
  BILL PRESENTED
    SEXUAL OFWNCES ACT 1967 (AMENDMENT)
    Mr. Tony Benn, supported by Mrs. Audrey Wise, Mr. Jeremy Corbyn, Mrs. Alice Mahon, Mr. Dennis Skinner, Ms. Diane Abbott, Mr. Tony Banks, Ms. Dawn Primarolo, Mr. Harry Cohen and Ms. Mildred Gordon, presented a Bill to secure equality of treatment before the law in respect of sexual behaviour: And the same was read the First time; and ordered to be read a Second time tomorrow and to be printed. [Bill 206.]

  Points of Order
  4.13 pm
  Mr. Harry Ewing: On a point of order, Mr. Speaker. I apologise for raising this point of order, which arises from the exchange that has just taken place. What is the purpose of a statement being made to the House of Commons when the Secretary of State has just admitted that he had information in his possession which he deliberately withheld from the House in order to inflame an already highly inflammable situation? Surely what has happened in the past half hour has been, first, a waste of the time of the House and, secondly, a deliberate misleading of the House by the Secretary of State.
  Mr. Speaker: That is not what I heard the Secretary of State say. As he rose, he said that he had received a message that the management hoped to be able to achieve agreement. I hope that the House will accept that that decision, in the interests of our constituents, is a hopeful one.
  Mr. John P. Smith: On a point of order, Mr. Speaker——
  Mr. Speaker: Order. Today is an Opposition day when many hon. Members wish to speak.
  Mr. Smith: It is not my intention to delay the proceedings of the House, Mr. Speaker, but, as I am a new Member, I wonder whether you can help me. It appears that the Ministry of Defence has refused me permission to hold constituency surgeries on the RAF camp in my constituency, which has a large community. I believe that service families have the right to the same access to their Member of Parliament as other citizens. I also believe that a United States Congress man or woman has the right to take up his or her constituents' complaints on a United States military base in this country. Can you help me, Mr. Speaker, and rule on this matter?
  Mr. Speaker: Order. That is not a decision that I can take. I hope that, since the hon. Gentleman has raised the matter in the Chamber, it has been heard by the Leader of the House and others and that some solution may be found to his problem.
  Mr. Jeremy Corbyn rose——
  Mr. Speaker: I shall call the hon. Gentleman, but. I repeat that a large number of right hon. and hon. Members want to take part in the Opposition day debate.
  Mr. Corbyn: On a point of order, Mr. Speaker. You will be aware that, last Thursday, the Guildford Four were acquitted at the High Court. Could you tell me how I can best raise in the House with the Northern Ireland Secretary, the treatment that Gerard Conlon is receiving? He is being harassed by Royal Ulster Constabulary officers in his street and today he was dragged into a car for questioning because he was acquitted last Thursday at the High Court in England.
  Mr. Speaker: The hon. Gentleman knows that I cannot give him advice of that kind. I am sure that many right hon. and hon. Members on both sides of the House will be able to assist him.

  Points of Order

    STATUTORY INSTRUMENTS, &c.
    Ordered,
    That the draft Apple and Pear Development Council (Dissolution) Order 1989 be referred to a Standing Committee on Statutory Instruments, &c.
    That the draft Apple and Pear Research Council Order 1989 be referred to a Standing Committee on Statutory Instruments, &c.—[Mr. John M. Taylor.]

London Squares Preservation (Amendment)
4.15 pm
Mr. Dudley Fishburn: I beg to move,
That leave be given to bring in a Bill to revise and amend the London Squares Preservation Act 1931.
My Bill modestly builds on the wisdom of our grandfathers and great grandfathers and adds another thin layer to the lacquer of legislation that protects London's heritage.
When London exploded into the world's largest city our predecessors saw the need to infuse a few patches of green into the urban sprawl before anyone had heard of people being environmentally conscious. It is interesting that it was the Victorian developers who bequeathed London its squares, voluntarily giving up building land to improve the urban landscape. Parliament took the lead then, as it should now.
There was the Kensington Improvement Act 1851, the Town Gardens Protection Act 1863 and, in 1927, when London's population was near its height and the city was choking in pea-soup smogs, there was nothing less than a Royal Commission into the protection of garden squares. That led to the London Squares Preservation Act 1931. It was a fine Act for Parliament to have passed in the dark days of depression to make London's green corners safe from overdevelopment. The Act specified some 460 enclosures that were to be permanently preserved as open spaces.
The London Squares Preservation Act 1931 is now more than half a century old and showing its age. That is why I should like to update it and to bring in adequate protection for the half century ahead.
The 1931 Act forbids development on protected garden squares, but, because it was unthinkable at the time, the Act gave no thought to development under or over squares. Today, many squares are threatened with underground car parks, and the new possibilities of cantilevered architecture make development over an open space a commercial prospect.
The 1931 Act, if contravened, carries the "heavy" penalty of £20. I propose to update that to a maximum daily penalty rate of £1,000.
The 1931 Act is particularly inadequate because there were only 460 squares listed at that time—and that number cannot now be added to. The list is closed. New squares are being created all the time in the capital and elsewhere. Such spaces are protected only by the leaky planning laws and not by Acts of Parliament. My Bill would open a new register, to which any enclosure could be added at the behest of its owner. These owners are the successors of the Victorian builders. Sometimes they are local authorities or trusts, or ownership may be divided equally between the residents of the 100 or so dwellings that surround a square.
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Some squares are still owned by a single individual. Good—I have no complaint about such diversity. Owners who wish to set down their squares in the new register would have them protected from any development, on, under or over.
My Bill, if I can get support for it, would try to take the process a stage further. Why should it be only squares relating to London that are given the protection I have described? Does not the great cities of Bristol, Norwich Birmingham and Manchester have "enclosures" too? There should be a national register that extends a national umbrella of protection to the urban garden landscape throughout England and Wales.
The new squares that could be entered are manifold. Some of the better new council housing estates, for example, are built around a garden square. Should not those spaces be protected as their Victorian predecessors were? The Government, however, are not altogether sympathetic to these proposals. One of their objections is that a ban on car parks under garden squares would rob the owners of their property rights. My scheme of a voluntary register would get round that problem. There is indeed a place for underground car parks: it is in new building developments, not under green long-established residential squares.
The Government have yet to work out their community charge provisions on London's semi-private squares. Since the middle of the previous century those squares have, for the most part, been kept up by a special rate levied on the houses around or near them. The residents of those houses then hold the right to use the squares. No such provision has been made under the community charge. Clearly, if everyone in a local authority area pays equally for the upkeep of every garden square, then everybody, in fairness, must have access. That, of course, would mean the end of the squares. Their fragile environments would soon be broken down. Their upkeep, if it came from the general community charge, would soon fall into disrepair—victims of local government politics. Those garden squares would then become the refuge not of the many residents, but of a few strangers: the drug dealer, the vagrant and the mugger.
The Government cannot intend such a thing, so they must do some fresh thinking. I hope that my Bill will help that process and, more importantly, will help the hundreds of London garden squares.
Question put and agreed to.
Bill ordered to be brought in by Mr. Dudley Fishburn, Mr. John Wheeler, Mr. Gerald Bowden, Mr. Matthew Carrington, Mr. John Bowis and Mr. Paul Boateng.

London Squares Preservation (Amendment)
  LONDON SQUARES PRESERVATION (AMENDMENT)
  Mr. Dudley Fishburn accordingly presented a Bill to revise and amend the London Squares Preservation Act 1931: And the same was read the First time; and ordered to be read a Second time upon Friday 10 November and to be printed. [Bill 207.]
Opposition Day
[19TH ALLOTTED DAY]
Opposition Day

  Economic Policy
  4.22 pm
  Mr. John Smith: I beg to move,
  That this House deplores Government economic policies which have resulted in the highest interest rates and the highest level of inflation among the leading industrial nations and have caused the largest balance of payments deficit in this country's history; expresses its deep concern at the impact of the savage increases in mortgage repayments on millions of home buyers and the erosion of living standards of the less well off, including poor families and pensioners; regrets the extra burdens being placed on British businesses and industry as a result of increased borrowing costs and the exclusive reliance on high interest rates as the sole instrument of economic policy; repudiates the absurd claim that a huge balance of payments deficit is not a crucial concern; and calls on the Government to adopt a strategy to reduce the balance of payments deficit by increasing industrial investment and by ending the decade-long neglect of education and training, new technology and regional development.
  Mr. Speaker: I must announce to the House that I have selected the amendment in the name of the Prime Minister. I repeat what I said previously: a large number of right hon. and hon. Members have already notified their wish to participate in the debate. Therefore, I shall need to put a limit of 10 minutes on speeches made between 7 and 9 o'clock. 1 appeal again to those called before that time, particularly to Privy Councillors, to bear that limit in mind.
  Mr. Smith: As we meet today to debate the condition of the British economy, there is a deepening concern throughout the nation at the consequences of 10 years of Thatcherism. The extravagant claims of a so-called economic miracle to which we have been so persistently subjected are compared by our constituents with the facts of the economic situation and the impact of those facts upon their lives.
  The ineluctable and unavoidable facts are that, 10 years on, at the end of a decade during which the Government have had at their disposal £78 billion of North sea oil revenues and all the added strengths that North sea oil resources provided for the trade balance, Britain now has the highest rate of inflation and the highest interest rates among the leading industrial nations and, as the trade figures today sadly confirm, the highest balance of payments deficit in our history. Nor should we forget that unemployment, even using the Government's massaged figures, is 1·7 million and, on the basis of previous calculation which was changed by the present Government, would amount to 2·3 million. It remains a deep-seated problem in many of our regions.
  Throughout the end of the Thatcher decade and in the light of these facts our constituents, not unnaturally, query what sort of strange new form of miracle has led us to such a position. Such consideration brings them face to face with two outstanding characteristics of the Thatcher Administration: its totally non-self critical and wildly extravagant claims to success, and its habitual tendency to
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  blame others for its failures. It was this same Chancellor of the Exchequer, whose candy floss boom is melting before our eyes, who, in the Budget debate of March 1988, said:
  "This country is now experiencing an economic miracle, comparable in significance to that previously enjoyed by West Germany and still enjoyed by Japan."—[Official Report, 21 March 1988; Vol. 130, c. 109.]
  Note the complacent arrogance of the phrase "previously enjoyed by West Germany" and the pretentiousness of the claim to rank with the Japanese level of success.
  In Britain today inflation is 7·6 per cent.; in West Germany it is 3 per cent. In Britain today interest rates are 15 per cent.; in West Germany they are 8 per cent. In Britain today, as we know, we have a huge trade deficit and West Germany has an immense trade surplus. Most revealing of all, when the present Government took office in 1979 our trade deficit with West Germany was £1 billion. In the 10 years since, it has increased by almost nine times to the record and alarming level of nearly £9 billion.
  Earlier this year the Prime Minister saw fit to give some economic advice to the Japanese on a visit to their country. The trade deficit between Britain and Japan when she took office was £1 billion; today it is £5 billion. Until recently it was fashionable for Government members to patronise the West Germans. We were told that their economy was sclerotic, hidebound, over-rigid and badly in need of a touch of the Thatcher market magic. However, who in his or her right mind would trade our economic position with theirs? Who would swap their dedication to education and training, their success in social partnership, their strength and depth in manufacturing industry for the problems which Britain faces today?
  The facts do not fit the hype. Who is to blame? After 10 years of this Government in power, in which the wealth of the North sea has been available to them, in which they have had assured parliamentary majorities and in which they can hardly claim that they have not had sufficient economic and political leeway and opportunity, who is to blame for the failure? Is it the unions, the previous Labour Government or the nasty foreigners? As each year has passed those excuses, so readily on the lips of the Government apologists in the House and elsewhere, have become relentlessly less convincing. The most obvious fact about Britain after 10 years of Thatcherism is that this Government and their economic policies are to blame for our present position.
  The Government can no longer evade or avoid their personal responsibility. The balance of payments deficit is, at heart, for this country, a balance of trade deficit. Throughout this decade, and never more so than under the present Chancellor, the importance of the balance of payments has been persistently underestimated. The Chancellor has a lamentable record on prediction. It is almost as though the wish to avoid the problem suppresses the capacity for intelligent assessment. For 1988 he predicted a deficit of £4 billion. It was over £14 billion. For 1989, by which time he should have become a little wiser., he predicted £14·5 billion for the year as a whole. Today it was announced that for the first nine months of this year we have already passed £15 billion—well past his total for the whole of the year and with a full quarter still to come—so we are probably heading, on those figures, for a deficit of between £19 billion and £20 billion, compared with his prediction of £14·5 billion.

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  The right hon. Gentleman's response is not to seek to reduce the deficit so much as to pretend that it does not matter. Time and again he has told us that a balance of payments deficit, even one of this magnitude, does not matter provided that it is readily financable. The right hon. Member for Henley (Mr. Heseltine), his former Cabinet colleague, observed in his sideshow speech at Blackpool when dealing with this issue:
  "I beg our party"
  referring to the Conservative party—
  "not to argue that a deficit on overseas trade is of incidental importance—self-correcting and easily financed. I do not believe a word of it."
  Nor should we. Our balance of payments deficit has been caused by two principal acts of Government—the appalling recession of 1979 to 1982, when the mismanagement of, among other things, exchange rate policy eliminated about 20 per cent. of British manufacturing capacity, and the credit boom let loose from 1985 onwards, which recklessly expanded demand well beyond the capacity of a weakened industrial sector to supply.
  When the Chancellor said that a balance of payments deficit did not matter if it was readily financable, he did not mention the price of that financing. That price is the price of his priorities. It is interest rates of 15 per cent., and it is being paid not by him but by millions of home buyers, who have faced crippling increases in their mortgage repayments. It is being paid by business and industry, particularly small businesses, which find the cost of investment and the unexpected burdens of repaying loans, often taken out in a totally different climate, intolerably high.
  Consider the cost for mortgage payers. As a result of 11 increases in interest rates from May 1988 until now, a family on average earnings with two children paying off a typical £34,000 mortgage is paying an extra £88 each month. In Greater London, the increase in payments on an average mortgage of £55,000 is a massive £162 each month. Is it any wonder that about 400,000 families have mortgage arrears extending to two months or more?
  Consider the price being paid by businesses. Today the CBI produced its forecast for business, and gloomy reading it is, predicting a fall in orders and a drop in investment. It is one of the gloomiest predictions that the CBI has made for many years. It has been the practice of Ministers constantly to quote CBI figures in these debates. I suspect that that may not happen today.
  Mr. Edward Leigh: As the right hon. and learned Gentleman referred to the balance of payments deficit, may I ask him to say whether he believes in import controls? Will he answer that question yes or no? While he is thinking of how to answer that, will he say, in connection with mortgages, whether he agrees with the hon. Member for Dagenham (Mr. Gould) about the curbing of mortgage credit?
  Mr. Smith: I assure the hon. Gentleman that it need not take me long to think of the answer to his questions, the answer being no. I do not agree with import controls, and I shall deal with the question of how we would impose credit controls when I reach that part of my speech.
  Small businesses and mortgage payers are not the only people who have been hit hard by Government economic
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  policies, which now adversely affect almost the whole population—with the exception of a small group of the well-off, whose bounty under this Government has been so great that they are well protected against the Chancellor's policies, as they probably lend rather than borrow and thus benefit from high interest rates.
  But what of the others, particularly those in the poorer sections of society, who have had to face economic difficulties with no consideration from the Government? Retirement pensioners whose pensions have fallen so badly behind the rise in incomes of others have to face the same price increases as everyone else. We heard only today of the miserable decision once again to freeze child benefit—a shameful denial of essential support for millions of poorer parents.
  So we know all too well the price that is paid for the Chancellor's folly by nearly all sections of society, and people are entitled to feel that they have been deceived. Were they not told that the medium-term financial strategy would put paid to disturbing uncertainties in financial policy? It was only last year that the former Chief Secretary to the Treasury told us:
  "Government policy now operates in the medium-term framework which gives individuals and firms the confidence to plan ahead."
  Let us take an individual or a firm attempting to plan ahead in May 1988 when interest rates were 7·5 per cent. What bit of the medium-term financial strategy told them that over 18 months later, after 11 increases in interest rates, they would be paying 15 per cent. for the loans that they took out in May 1988? How do they know what Government policy will be next?
  I admit that the Chancellor has some problems which are not entirely of his own making. Fairness requires that we take account of some of his difficulties in an understanding way—the present Foreign Secretary is already learning all about how the Prime Minister treats colleagues. The Chancellor could have given him a crash course before he left for Malaysia. The Chancellor was hardly back from Blackpool, where he was portrayed with others as part of the right team of people working together for Britain—[Hon. Members: "Where are they?"] No doubt the chairman will have taken careful note of those of the team who are not present. As I was saying, the Chancellor was hardly back from Blackpool when the man who was missing from Blackpool, Sir Alan Walters, struck again.
  One can be naive, I suppose, about Sir Alan. One can believe that it was an accident that an article that he wrote for an American publication most unfortunately and quite unaccountably appeared in the press—an article, moreover, which described the European monetary system as half-baked. If that were not enough, he went on to deride it as not having even a minimum level of plausibility—I checked this again: he was referring not to the Government's economic policy but to the European monetary system. I do not imagine that the Chancellor thinks that it was an accident, because he has suffered before. He knows how, month after month, the unelected and unappointed alternative Chancellor in No. 10 has thwarted his policies and contradicted his purposes—sometimes an allegedly indiscreet remark, sometimes a word in a City dining room, and on occasion even a friendly reference to the need of the Chancellor to move on to other things.

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  These are not the antics of some eccentric outsider; they are the work of a specially appointed insider in No. 10. When assessing this happy bond between Nos. 10 and 11 Downing street, one extracts the true flavour of the team approach and a proper understanding of why no one in his right mind will believe that a team approach to anything is ever possible under the present Prime Minister. Isolated in Europe, isolated in the Commonwealth, at home she is increasingly isolated by the deference and lack of courage of a Cabinet who dare not challenge her overwhelming pretensions. These Ministers know the lessons of the reshuffle: "If you lose your job. you get another house, but if you keep your job, you lose your house."—[Laughter.]
  "If you are not careful, you might lose both."
  Whatever happens, Mr. Bernard Ingham—that other unaccountable source of power in Britain—will be waiting to give a friendly benediction as one moves on. I used to feel sorry for the Chancellor of the Exchequer, but it is time that he did something for himself. It is time for enterprise and individual responsibility. It is time that he told the Prime Minister that the moment has come to end the confusion and disarray in the formulation and explanation of Government economic policy. It is time that he said, "Either back me or sack me."
  Mr. Tim Yeo rose——
  Mr. Smith: The Chancellor should know that at least one volunteer for his job on the Conservative Back Benches is rising to his feet.
  I advise the Chancellor to make an early decision on the important question of whether he will jump or be pushed, because the Prime Minister has a plan for him. It is that he should attract the hostility and contumely of the public for the unpopularity of his economic policies and then be discarded when someone else—perhaps the Secretary of State for Transport—is invited to herald a new approach during the run-up to the next general election. It might be more dignified for the Chancellor to jump before he is pushed. I give him a word of friendly advice before he jumps. He should make sure that his parachute has not been packed by Mr. Bernard Ingham.
  Mr. Ian Taylor: The right hon. and learned Gentleman raises laughter among his right hon. and hon. Friends—[HON. MEMBERS: "Among Conservative Members, too."]—but the laughter should be reserved for his inadequate attempt to explain his own economic policy. Is the battle against inflation part of the Labour party's objectives? How will that battle be conducted if at the same time we are to have lower interest rates and a lower exchange rate against other currencies?
  Mr. Smith: The hon. Member should listen. Occasionally, we are entitled to indulge ourselves in the odd spot of amusement, when we have characters such as Sir Alan Walters, Mr. Bernard Ingham, and others decorating public life—and who would cause endless mischief and annoyance were they but free to speak. Their lips are sealed now by vows of confidentiality, but let us wait until the memoirs are published. Let us see what the Chancellor—a handy man with a pen if not with figures—writes in his memoirs and his views on Sir Alan Walters as serialised in The Sun.
  The Chancellor should take an early initiative to end the muddle over the exchange rate mechanism. Under the terms of the Madrid summit declaration, Britain has
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  apparently agreed to stage one of the Delors report, which envisages full participation in the ERM. We are told that that will happen when the time is ripe, but what if the time is not ripe when the timescale apparently agreed at Madrid has passed? How can the Government's position have any credibility when Sir Alan says that the system does not even have minimum plausibility and writes in an article published only last week that "thus far" he has taken the Prime Minister with him?
  The Chancellor must assert himself to end needless confusion and misery. Our advice is that he should negotiate to join the ERM under the important and prudent conditions that the Labour party has outlined. He should listen, and ask the Prime Minister to listen, to the advice that he received from not only the Confederation of British Industry but the annual conference of the Trades Union Congress. If the Chancellor and his colleagues believe that it is right to join, they should fight for their policies, rather than sit like cowed and frightened schoolboys whenever the farrago frowns in their direction. They should uphold the minimum requirement of proper government that Ministers of the Crown should not tolerate the undermining of their policies by unelected part-time advisers, however highly placed and with whomsoever they are connected. Ministers must face the need for alternative policies to take us forward from the economic morass in which we are stranded.
  It is the height of arrogance for the Government to claim, as they frequently do, that there is no alternative. That is merely another way of saying that the Government cannot be wrong. We believe that the first requirement of an alternative approach is to adopt an industrial strategy that puts the promotion of our wealth-creating manufacturing industry at the top of the national agenda for recovery. It is the weakness of our manufacturing sector—the internationally tradeable part of our economy—that is the fundamental reason for the balance of trade and balance of payments deficits. It is not—this is our fundamental disagreement with the Government—a matter of simply attenuating demand so that the deficit comes round.
  There is a structural problem in the British balance of trade and payments deficits that only determined supply-side policies can improve. I wish that the Government would listen to the growing anxiety being expressed throughout the nation and industry that our manufacturing sector is not well enough placed to face the 1990s or the intense competition, as well as the opportunities, that the single market will create. We have argued that case repeatedly, and we shall continue to do SO.
  I shall content myself today with drawing the attention of the House to a report prepared for the Employment Institute which, from an objective standpoint, endorses our approach. I quote the summary of its conclusions:

  "The British disease stems from a combination of poor workforce skills and slow application of design and technology.

  Upgrading the quality of British products remains an urgent priority; cost reductions alone will not suffice.

  Manufacturing matters, because this sector is the source of the vast majority of innovative products.

  Manufacturing matters also for jobs; despite providing a falling share of total employment, manufacturing's demand for services and intermediate products generates jobs in other sectors.

  The authors conclude that extra spending in the fields of vocational training, research and development and greater

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  support for innovative producers is urgently needed if Britain is not to be relegated to Europe's second division of low wage, low quality producers after 1992."

  Mr. Tony Marlow: I am sorry to take the right hon. and learned Gentleman back, but he was going to tell us the circumstances under which the Opposition would favour joining the exchange rate mechanism. Will the right hon. and learned Gentleman tell the House what those circumstances would be?
  Mr. Smith: I am sure that the hon. Gentleman knows them well. They are conditions relating to proper swap arrangements between the central banks, a policy for growth rather than deflation, and consideration of the right point at which entry to the ERM should be effected. [HON. MEMBERS: "What will that point be?"] It will be at the right and appropriate rate for the success of British industry. I should have thought that that would be blindingly obvious to Conservative Members. I have given the hon. Gentleman the answer to his question.
  The time to start that industrial strategy is now. Every month that we delay is a month in which the risks of 1992 become even greater.
  Sir Peter Hordern: The right hon. and learned Gentleman has just made a most important statement to the House. He said that the Labour party rests for the success of its policies on a very considerable devaluation. His statement cannot conceivably mean anything else. What size of devaluation has he in mind?
  Mr. Smith: The hon. Gentleman is mistaken. I did not propose a considerable devaluation. He should bear in mind the fact that the Chancellor, who said at the Tory party conference that the Government never stood for devaluation, has seen the pound devalue by 10 per cent. in the course of this year. So much for the party of non-devaluation.
  I refer the hon. Gentleman to the interesting speech made by the right hon. Member for Henley.
  Several Hon. Members rose——
  Mr. Smith: I am not giving way—[Interruption.]
  Mr. Deputy Speaker (Sir Paul Dean): Order. The right hon. and learned Gentleman has made it clear that he is not giving way.
  Mr. Smith: I refer the House to an interesting passage in the speech in Blackpool by the right hon. Member for Henley. It is highly relevant—[Interruption.] I am sorry if hon. Gentlemen do not like to hear this information, but I shall give it to them. The right hon. Member for Henley said:
  "We could accept a lower parity as part of a decision to join because it would be coupled with the disciplines of the Exchange Rate Mechanism."
  I interpret that as entering at a rate which is lower than the present rate of exchange. That is a quite understandable point of view.
  Mr. Michael Heseltine: Is not the essence of the challenge how it is possible to satisfy the financial world that the disciplines will be in place to sustain whatever lower parity we accept? Is not the weakness in everything that the right hon. and learned Gentleman says
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  that all the policies in which he believes will undermine the strength of management of the British economy and stoke up inflation, not reduce it?
  Mr. Smith: I am grateful to the right hon. Gentleman for confirming the thrust of the policy contained in his speech. I totally disagree with the qualification in the second part of his question. Our policies to put manufacturing on its feet are ones with which I know he has some sympathy because he mentioned them in that speech. Those policies will strengthen the country, not weaken it. How on earth are we to create the wealth with which to sustain our prosperity, let alone improve our public services, if we do not have a strong and vital manufacturing sector? I thought that the right hon. Gentleman agreed with that.
  Mr. Heseltine: This is at the heart of the matter. I agree that there is a need for public expenditure programmes to deal with education and training of the sort that the right hon. and learned Gentleman mentions, but those programmes have to be paid for. They cannot be paid for by rising levels of public expenditure. What cuts would the right hon. and learned Gentleman introduce?
  Mr. Smith: The right hon. Gentleman knows perfectly well that the crucial decision in government is how much of the extra resources created by economic growth should be allocated to the public sector and how much to the private sector. The Government of which the right hon. Gentleman used to be a Front-Bench member say on every conceivable occasion that a declining proportion of GDP must be allocated to the public sector because public sector investment is inherently unvirtuous while private sector investment is virtuous. It is as though it was virtuous to invest in a casino but somehow malign to invest in a health clinic. That is the approach of the Conservative party. If the right hon. Gentleman were not in a particularly difficult and sophisticated political position, the restraints of which I fully understand, he would agree more fully with the arguments advanced by the Opposition.
  Mr. Heseltine: If the right hon. and learned Gentleman is saying that his policies could be implemented over a significant period only by diverting future and as yet unavailable growth, he is saying that he has no policies today.
  Mr. Smith: I do not know why I should give way so often to the right hon. Gentleman. I do not know whether I should be helping him in his election campaign, but I feel that in all innocence I am being drawn into it. He knows perfectly well that every Government have to take a decision about whether to raise more money by taxation or whether to use funds available because of the buoyancy of the economy. The Government also have to make decisions about how much they should allocate to the public sector.
  The right hon. Gentleman knows perfectly well, because he has written about it, of the decline in our public services. He knows the state of our education system and he knows about the problems in the regions. I understand that he is sympathetic to the Labour party policy on development agencies. I am sorry if that upsets the right hon. Gentleman's campaign, but I can tell the House that he supports many items in the Labour party's policy review. I cannot say that we advertise that when we seek to persuade the public about the merits of the policies, but

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  candour requres me to say that we are on all fours with the right hon. Gentleman on many important subjects. I hope that that puts the right hon. Gentleman's election campaign to bed for a little.
  Mr. Yeo rose——
  Mr. Smith: I am not giving way to that hon. Gentleman.
  The second leg of our approach is to lessen the exclusive reliance on high interest rates by the adoption of sensible controls on the availability of credit. I did not plan to give the right hon. Member for Henley so much attention in my speech. However, in his important Blackpool speech he also said:
  "The central problem is an excessive supply of credit. The money may have been expensive but the public has been more attracted by its availability than it has been deterred by its cost. We are all aware of it. Not a day goes by but someone somewhere is urging us to borrow."
  That is perfectly true. People can hardly open their mail without receiving more invitations to borrow.
  The Chancellor should seek to restrain the amount of credit made available by the banks. First, he should invite their co-operation in restraining lending. I hope that we do not get any horse laughs about that. Why on earth should the Chancellor not invite the banks to co-operate? Only people who are as narrowly partisan as members of the Conservative party would think that such a suggestion was in the remotest degree odd. Any sensible Government would invite such co-operation and sensible bankers would respond. I believe that the banks would co-operate and I shall continue to believe that until I see evidence that they would not. If they do not, what will happen?
  Mr. Philip Oppenheim: When would the banks co-operate?
  Mr. Smith: Is the hon. Gentleman saying that the banks would refuse to co-operate with a Government who sought to place some limit on lending? Which bank is the hon. Gentleman making that accusation about? I wonder whether the Committee of London and Scottish Bankers will be pleased to read that in Hansard. If the banks do not co-operate, the Government can require them to make deposits with the Bank of England, and that would have the effect of limiting the amount available for lending. I do not see anything impractical in such a proposition. I am fortified in that view by the comments of Mr. Christopher Dow, the former economics director of the Bank of England and economic adviser to the Governor, in his recent book "A Critique of Monetary Policy". He said:
  "A call for voluntary restraint by banks could perhaps be effective for a while. It might be worth considering such a proposition."
  An added advantage of this approach would be that it could affect the psychology of borrowing by sending a clear signal that it was intended to be limited. In a nation awash with unnecessary and damaging credit, such a signal could most appropriately come from the Government and I suggest that it would not go amiss.
  Sir William Clark: Will the right hon. and learned Gentleman explain how his formula would work for foreign banks? What would be the lending ratio on the funds that such banks held here and their funds abroad? How would the right hon. and learned Gentleman stop foreign banks continuing to give credit throughout the country?
  Mr. Smith: I do not think that foreign banks would take an irresponsible view if approached by the Government. I do not see why they should. I object to the view advanced by Conservative Members. Who are they to say that such banks would not co-operate with an elected Government trying to implement their policies? The more I listen to such arguments, the more I despair about the sense of responsibility of the Conservative party. No idea that does not come within the narrow vision of Conservative Members is considered, even when it involves insulting the whole of the banking community at home and abroad.
  Several Hon. Members rose——
  Mr. Smith: There are many bankers' friends in the Chamber, but I shall give way to the hon. Member for Stockport (Mr. Favell).
  Mr. Tony Favell: Why should not someone be able to decide for himself about borrowing?
  Mr. Smith: The hon. Gentleman should have a word with the Chancellor because I think that he is trying to send a signal to that man when he proposes interest rates of 15 per cent. On the whole, the Chancellor does not want people to borrow. I conclude that he is opposed to these controls and the possibility of them not on grounds of practicality but on grounds of dogma.
  Mr. Nicholas Budgen: As a lawyer, will the right hon. and learned Gentleman tell the House to what extent he supports unlawful administrative directions to the banks, and to what extent that should be allowed and extended?
  Mr. Smith: The hon. Gentleman is also a lawyer, and I am surprised by what he says. There would be nothing unlawful about making a request to the banks.
  Mr. Budgen: Why should they obey?
  Mr. Smith: Out of a sense of reasonableness and of national duty and a desire to co-operate with the elected Government. I am astonished, once again, that the concept of common good and civic purpose is so lacking among Conservative Members. I shall give way to a distingushed representative of it.
  Mr. Norman Tebbit: I am grateful to the right hon. and learned Gentleman, who has given us such an entertainment. Why does he believe that the banks would be more co-operative with a Labour Government than the trade unions, which the Labour Government owned—or was it the other way round?
  Mr. Smith: I am recommending action by a Conservative Government because there happens to be a Conservative Government in power. They are busy telling me that they do not want to co-operate and that the banks will not co-operate with them. When we have a Labour Government, I can assure the hon. Gentleman that we shall ask for the co-operation of all sections of the community in our economic and social policies.
  Several Hon. Members rose—
  Mr. Smith: No, I have given way many times already, to the point at which I shall take a disproportionate amount of the time available for debate. I hope that hon. Members will understand if I do not give way again.

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  The Chancellor should take the opportuniity to make it crystal clear that there will be no tax cuts in his next Budget. That would be a prudent and timely signal to the Community and to the markets. He should also use the autumn statement, which we shall have shortly, to propose regionally targeted public investment to tackle some of the skills deficiencies and regional disparities which not only impair the working of the economy, but are the source of inflationary influences. He must know that skills bottlenecks and south-east congestion are as inflationary as they are otherwise undesirable. He should act to tackle them.
  There are alternatives, but they are not recognised, and we saw this vividly in the debate today from the reaction of those on the Conservative Benches. There are none so blind as those who will not see. The country yearns for an alternative—not just in the content of policies but for a better style of government. It does not want government by leak or innuendo or by signing agreements that are repudiated before the ink is dry on the paper. We need a Government who say what they mean and mean what they say. I can understand that the Conservative party finds that an odd description of its Government. We need a Government who honestly say what they mean and honestly mean what they say. After a decade of hype and tax-subsidised advertising, a Government nurtured in their own propaganda have difficulty in distinguishing fact from fantasy. That is true in economic affairs and regrettably true across the whole range of Government policies. It is the overwhelming reason why they are so speedily forfeiting the confidence of the entire nation.
  5.4 pm
  The Chancellor of the Exchequer (Mr. Nigel Lawson): I beg to move, to leave out from "House" to the end of the Question and add instead thereof:
  'commends Her Majesty's Government on its economic policies, which have led to faster growth of output, investment, and manufacturing productivity than in any other major European country in the 1980's; applauds the Government's determination to defeat inflation by maintaining tight monetary and fiscal policies; and welcomes the continued underlying strength of the supply side of the economy, evidenced by record levels of business investment and new business start-ups, and an unemployment rate that is well below the European Community average.'.
  The right hon. and learned Member for Monklands, East (Mr. Smith) made, for the most part, a rather jolly speech in which he contrived to say practically nothing, except to reveal that the Labour party's conditions for joining the exchange rate mechanism of the European monetary system consist of devaluation on Britain's part and a commitment to inflation on the part of all the others. I am quite sure that, were there to be a Labour Government, the first of those conditions would readily be fulfilled, but I have to warn him that the second is most unlikely.
  I shall be addressing the issues, which will be something of a contrast with what the right hon. and learned Gentleman said. There is one striking difference between this Government and the Labour party. It did not have the guts to defeat inflation, and we have. It does not have the guts to tell the British people what it takes, and we have.
  Under Labour, inflation averaged 15½ per cent. Excluding the distorting effects of mortgage interest
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  payments, the lowest it ever reached when they were in office, the lowest that it ever reached, was 7·7 per cent. Today, on the very same measure, it is 5·8 per cent.—lower than they ever achieved, but still too high for us.
  Mr. Harry Ewing: I am grateful to the right hon. Member for giving way so early in his speech. When he became Chancellor, inflation was half what it is now. As he has been Chancellor throughout the period, does he accept any responsibility for the doubling of inflation during his period as Chancellor of the Exchequer?
  Mr. Lawson: What I am not going to do is take any lectures about inflation from those on the Benches opposite, when inflation was 15½ per cent. on average. It went up to 27 per cent. and the lowest underlying rate that the Labour Government ever achieved was higher than the rate that we have today.
  To hear the right hon. and learned Member for Monklands, East talk, one might suppose that it is something new that our inflation rate is higher than that of our competitors. In fact, the only thing that is new is that the gap has narrowed. Over the whole of the period that we have been in office, United Kingdom inflation has averaged just half a percentage point more than inflation in the European Community as a whole. It is perfectly true that the latest figures show that the gap has temporarily widened to 2½ per cent., largely because of the distorting effect of mortgage interest payments. Without them—and to make a fair comparison, one has to look without them because of all the other Community countries, only the Republic of Ireland includes them in its index—without them, therefore, to have a more truly comparable basis, the gap would be around 1 per cent. Compare that with the last Labour Government, when British inflation—[HON. MEMBERS: "Oh."] Oh yes, they do not like it. British inflation averaged no less than 4½ percentage points above that of the Community as a whole.
  Inflation remains the greatest single threat to our economic wellbeing at the present time. It has to be the priority of economic policy to get it down. And let there be no doubt about it: under this Government that is the priority.
  Mr. George Foulkes: What political significance does the Chancellor read into the fact that only two of his Cabinet colleagues have turned up to support him in this important debate?
  Mr. Lawson: I should not have allowed the hon. Gentleman to intervene. I should have known him better.
  The main issue that we have to debate today is this: how are we to bring inflation down? The right hon. and learned Member for Monklands, East spoke for more than 40 minutes without once answering this central question. Not once did he say how a Labour Government would bring inflation down. He muttered a bit of wishful thinking about credit controls, designed, no doubt, to steal some clothes from the real shadow Chancellor, the hon. Member for Dagenham (Mr. Gould). I will come back to him later. Otherwise there was nothing, absolutely nothing.
  So what has Labour got to contribute to the debate? What, when it comes to the point, does it really want? Interest rates, it has said on occasion after occasion, are too high and should be lowered. I see that the right hon. and learned Gentleman is nodding now. We are running a

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  Budget surplus. The Labour party is busy dreaming up ways of spending it. The pound, the Labour party has made clear, is too high, so it thinks, for our exporters. They would like to see it lower. In other words, what it boils down to is lower interest rates, a lower Budget surplus—indeed, probably a Budget deficit—and a lower pound. That is Labour's recipe. That is not just what it is urging now. It is what it was urging in 1988 and in 1987, too. It is a recipe not for lower inflation but higher inflation, as, indeed, it always has been when the Labour party has been in office.
  One thing is absolutely clear. Had I taken the Labour party's advice in 1987 or 1988, inflation would be far higher than it is today. The plain fact is that Labour has no credible policies whatever for dealing with inflation—not one. No wonder it received little mention in its 88-page long policy review.
  By contrast, the Government's policy and position is absolutely plain. We already have the tightest fiscal policy in Europe. And by raising interest rates to 15 per cent., I have made it abundantly clear that we will continue to take whatever monetary measures are needed. Of course, I well understand the difficulties this causes to people with mortgages and to many farms and small businesses. I wish it were not necessary—but it is necessary. And unlike the right hon. and learned Member for Monklands, East, we do not seek to deceive the British people into thinking that there is some softer option.
  What we have seen over the past couple of years has been a fall in personal savings and a rise in borrowing and spending on a wholly unprecedented and unexpected scale. It has certainly not been Government borrowing or spending. That was always the story under Labour: let Government spending rip, and force the private sector to pick up the bill. But under this Government public spending is under control and, so far from indulging in heavy borrowing, we are paying off old debts on a substantial scale. No, what we have seen has been borrowing and spending by private companies and private individuals. Nor, incidentally, has it just been for consumption. Again, that was always the story under Labour. But over the past seven years investment has been growing twice as fast as consumption.
  The plain truth is that there has been a step change in private sector behaviour in this country. In part, this reflects the fact that people and companies are now free to lend and borrow whatever they like. When we came into office, people still had to queue up to get a mortgage. In part, too, it reflects the fact that people no longer need to keep adding to their savings to maintain their real value. In the 1970s, the last Labour Government forced the people of this country to fight a losing battle to keep up with crippling inflation. And, at the same time, they made sure that there was no real return on savings at all. I would like the Leader of the Opposition to listen to this, because that is what the last Labour Government did. They wiped out the savings of pensioners. If ever there was a great betrayal, that was it. That world, thank goodness, has gone for good. After 10 years of Conservative Government, people no longer need to keep piling up savings just to stay in the same place.
  Mr. Jeff Rooker: What the pensioners do not understand is that if fighting inflation is the Government's top priority, why are they claiming success for fighting it twice?
  Mr. Lawson: I am silenced. I have to tell the hon. Gentleman that it is not a question of fighting it twice. It is a question of fighting it all the time, whereas when the Labour Government were in office they never fought it properly at all.
  One unexpected result of the new climate that we are in has been an unprecedented fall in the personal savings ratio between 1986 and 1988, which has meant an increase in spending, financed by borrowing, of over £10 billion. That is what the official figures show——
  Mr. Favell: On a point of order, Mr. Deputy Speaker. The Opposition say that they want to hear what the Government's policy is. The occupants of the Opposition Front Bench, including the Leader of the Opposition, have done nothing but chatter and giggle. If they want to learn, they should listen. Will you tell them to behave themselves, Mr. Deputy Speaker?
  Mr. Deputy Speaker: The right hon. and learned Member for Monklands, East (Mr. Smith), who spoke from the Opposition Front Bench, was heard in comparative quiet. I hope—[Interruption.] Order. I hope that the same courtesy will be accorded to the Chancellor of the Exchequer.
  Mr. Frank Haynes: On a point of order, Mr. Deputy Speaker. When my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) was speaking, that lot over there on the Conservative Benches, those public school louts, put into practice what they had orchestrated before they came into the Chamber. When they did that, Mr. Deputy Speaker, you did not do a damn thing about it.
  Mr. Deputy Speaker: Order. Many right hon. and hon. Members wish to participate in the debate. These interruptions waste time.
  Mr. Lawson: As I was saying, the change in attitudes to saving and borrowing has gone hand in hand with a massive growth in living standards. It is that which has given people and companies throughout the country the confidence to use the new freedoms we have given them. So they have been investing and expanding on a massive scale. Indeed, the increase in investment over the last two years has been the highest since the war.
  We can all see the results in our constituencies—new factories, new offices, new supermarkets, free enterprise at work. It is quite a problem, all this activity, is it not? Rising living standards, rising confidence, soaring investment—how many nights' sleep did the right hon. and learned Member for Monklands, East lose about problems of this kind when he was in office? After a decade of revitalisation, British business and industry are taking the opportunities this has offered and are rising to the challenge. Unemployment, I may add, has fallen sharply to well below the European Community average. It is very strange that the right hon. and learned Gentleman had nothing whatever to say about unemployment. Time was when he would talk about nothing else. Indeed, in his own constituency, unemployment has fallen by over a quarter in the past year.
  New businesses are springing up at a rate we have never seen before in this country. Last year's figure was yet another record, with business start-ups, net of closures,

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  running at no less than 1,200 companies a week. Compare that with a decade ago, when there were more closures than there were start-ups.
  All this has meant that productive capacity is growing faster than it used to. But there is clearly no way in which it could expand as rapidly as domestic demand has lately been growing. So the difference has been made up from abroad, and shows up as a current account deficit on the balance of payments.
  That is not, of course, the disaster that the right hon. and learned Gentleman has sought to portray. The right analogy is not with a company running at a loss. It is more like a company that, though profitable, cannot finance its investment programme entirely from its own resources and has to raise external finance to fill the gap. A country in a similar position will draw on the savings of the world, which has been greatly facilitated by today's global markets. [Interruption.] I hear the right hon. and learned Member for Monklands, East expressing scepticism. In a recent publication, the IMF said:
  "inasmuch as they reflect private saving and investment decisions … external imbalances should be seen as efficient and self-correcting."
  But it is clear that a sizeable part of our current account deficit is due to domestic demand growing at an excessive and unsustainable rate, which needs to be corrected and is being corrected.
  Mr. A. J. Beith: The Chancellor, in his conference speech, referred to the old and correct definition of inflation as too much money chasing too few goods. He said that industry had to produce the goods and that the Government's job was to see that there was not too much money. Does he think that he has discharged that obligation satisfactorily in his budgetary measures?
  Mr. Lawson: It is a question not of budgetary measures, but of monetary measures. Why on earth does the hon. Gentleman think that interest rates are at their present level? He really should take a course of instruction.
  As today's trade figures confirm, exports continue to do well—a sure sign of the efficiency and competitiveness of British industry.
  Mr. Giles Radice: Will the right hon. Gentleman give way?
  Mr. Lawson: I have just given way.
  In the third quarter of this year, exports were 13 per cent. up on a year ago and at a new record level. As demand in the economy slows down, that will in due course show up in a marked decline in the recent rapid growth in imports.
  Meanwhile, interest rates will have to stay high for some time to come. But, painful though it may be, I have no doubt that they will do the job. Indeed, without high interest rates the job would be impossible. The evidence on this is there for all to see. For 10 years we have been prepared to raise interest rates whenever it has been necessary to do so to maintain sound monetary conditions. It is that willingness that has brought us success.
  We have had high interest rates before. We had them in 1981 and we had them again in 1985. On both occasions they brought inflation down.
  Mr. Radice: When will the trade figures be in balance?
  Mr. Lawson: I do not know, but I am glad that the hon. Gentleman asked me that. The right hon. and learned Member for Monklands, East said that he did not think that I would be quoting today from the CBI's latest monthly economic survey. Well, I will. According to the CBI's economic survey, there will be a marked improvement in the balance of payments next year.
  Other countries have used interest rates, too, and that has brought inflation down for them as well. It has worked for Socialist Governments in France and for Conservative Governments in Germany. Indeed, it is only the right hon. and learned Gentleman and his right hon. Friends who seem to believe that they can cut themselves off from the real world.
  Mr. Marlow: For a long time Conservative Members have been told, "You cannot buck the market." For how long and to what extent can one buck the market with regard to the exchange rate?
  Mr. Lawson: My hon. Friend will have to define his terms more precisely before I can answer that question.
  I know that there is a seductive view that we could somehow escape from the need for high interest rates if we were simply prepared to let the pound fall and sit idly by. But I have to tell the House that this is a sheer delusion. In the first place, I have already explained why we need a period of high interest rates to bear down on inflation, by encouraging saving and discouraging borrowing and spending. In the second place, a lower exchange rate would raise the price of everything that we buy from abroad. It would also take the pressure off industry to control its costs, including its wage costs. Together, that could only add to the inflationary pressures in the economy.
  But if we stick to the policies that I have described, what then of the prospect? It is already clear that the growth of total spending in the economy is slowing down. As higher interest rates work their way through. it will slow down further. That will gradually bring down inflation and, in time, it will bring down the current account deficit too.
  The economy has already come off the boil, and will come off still further. That will take time to show up in the retail price index for the familiar reason that this statistic includes the mortgage rate. In time, though, even the RPI will reflect what is going on in the real world.
  But, as I have said in previous debates, what matters most is not these short-run fluctuations but the long-term health of the British economy. Here I can at last find some common ground with the right hon. and learned Member for Monklands, East. The real issues are what is happening to productivity, to the quality and quantity of investment, to profitability and to training. Those are the big questions. I agree with the right hon. and learned Gentleman on all that. The difference is that we are bringing about real progress on all those fronts whereas the Labour party never did and never could.
  Mr. John Garrett: The Chancellor must be aware that throughout the western world our competitors are investing heavily in public expenditure on education, training and communications. When will he look ahead and establish how Britain is to address those fundamental problems on which we lag so far behind our competitors?
  Mr. Lawson: We are addressing those problems, and we are addressing them in a way that the previous Labour Government never did and never could.
  In one of our earlier debates last year the right hon. and learned Member for Monklands, East said:
  "I advise Conservative Members that it is extremely instructive to read OECD publications to discover what it says about the British economy and to compare that with what the British Government say".—[Official Report, 14 January 1988; Vol. 125, c. 484.]
  I duly had a look at the latest OECD survey of the United Kingdom and I found that it says:
  "For the first time in three decades, productivity gains were ahead of the G7 average.….growth in labour productivity has been impressive, outstripping by a wide margin both the previous United Kingdom trend rate and the G7 average.… the division of nominal GDP growth between output and inflation was more favourable over the 1979–88 period than during the 1973–79 cycle.… suggesting that there have been policy induced improvements in supply performance."
  I am most grateful to the right hon. and learned Gentlemen for directing my attention to that.
  Mr. John Smith: The right hon. Gentleman has not read it all.
  Mr. Lawson: The right hon. and learned Gentleman clearly did not because the OECD is saying that Britain's former economic performance has been transformed for the better since the Government of which the right hon. and learned Gentleman was a member was in office. That is what the OECD is saying and I am glad that he now agrees with it.
  Mr. John Smith rose——
  Mr. Lawson: Not only has productivity in manufacturing industry throughout the 1980s grown faster in the United Kingdom than in any other major nation, but total investment over the same period has grown faster than in any other major European country, and business investment is a higher proportion of GDP than at any time since records began. Profitability is higher than it has been for the past 20 years, partly reflecting the much improved quality of today's investment. The quality of British management, too, has been transformed. Expenditure on training is rising fast and is now running at well over £20 billion a year. [Interruption] Yes, of course, the base when we came in in 1979 was very low. Of course, the economy was in a bad condition when we came in in 1979. I agree with that. Of course, it will be a long job. There is no secret about that. Of course, there is a great deal further to go. There is no secret about that either. But it is only by persisting with the policies that we have been pursuing these past 10 years that we shall get there.
  Nor will high interest rates frustrate this process. Throughout the time I have been Chancellor, it has proved necessary for our interest rates, in both nominal and real terms, to be well above the average of our main competitors. Yet that has not prevented us from having a faster rate of economic growth, and of investment, than any of them. What destroys business is not high interest rates, but Socialist controls and bureaucracy—plus, of course, the inflation that is inseparable from Labour.
  Mr. Ron Leighton: On a point of order, Mr. Speaker. Why are Conservative Members falling asleep? Is it something to do with the television lights?
  Mr. Deputy Speaker: Order. We must get on with the debate.
  Mr. Lawson: Nor has the party opposite changed. The only thing it cannot agree about is what brand of red tape to use. They know that the red tape which is in vogue at the moment is called credit controls, but they cannot agree on what they mean by credit controls. All is total muddle and confusion.
  According to the hon. Member for Dunfermline, East (Mr. Brown), and I quote from a recent transcript of a radio broadcast:
  "What we are not talking about is control over people's mortgages, but there is genuine concern about the amount of plastic cards and plastic credit in the economy, and credit has been rising very fast."
  That is what he said—this despite the fact, incidentally, that some 85 per cent. of household borrowing is accounted for by mortgages, and only some 5 per cent. by credit cards, for which, in any event, other forms of credit could readily be substituted.
  Within two days, however—it only took two days—the hon. Member for Dunfermline, East was firmly put in his place by his hon. Friend the Member for Dagenham, who told Mr. Brian Walden:
  "We are not talking about familiar aspects of credit control, the hire-purchase restrictions, limiting credit cards and so on: these are not big elements."
  Quite right. He went on:
  "But what we are saying, is that if there is a problem in managing the degree of credit growth in this economy, it has to be at the margin when new mortgages are being granted."
  The truth comes out, but there is a deeper truth and that deeper truth is that they have not the faintest idea what they are talking about.
  Of course, the right hon. and learned Member for Monklands, East is rather cannier than his hon. Friends the Members for Dunfermline, East and for Dagenham. He says as little as he possibly can about what he would do, but he appears, as we heard earlier, to be in favour of leaning on or otherwise curbing the banks. That is what it amounted to. But, as Mr. Gavyn Davies, who was an economic adviser to the last Labour Government throughout its lifetime, wrote in last weekend's The Sunday Correspondent:
  "I trust no one is suggesting a return to this sort of thing. It would be entirely pointless in an environment free of exchange controls, since UK borrowers could simply take their business to foreign banks."
  That is the truth of the matter. That is what the last Labour Government's economic adviser wrote. It is only the naivety of the right hon. and learned Member for Monklands, East, who has not a clue. Nor, incidentally, can the right hon. and learned Gentleman derive any comfort from the German or French practice of reserve asset ratio requirements, which are simply techniques for generating the interest rates needed to conduct monetary policy.
  Mr. John Smith: As the right hon. Gentleman has introduced into the debate an economic adviser to the last Labour Government, may I ask him about the present economic adviser to this Government? Does he agree that the European monetary system is half-baked?
  Mr. Lawson: I have made it absolutely clear. I made it clear at Treasury Questions last week—I do not think that

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  he was in the country at the time—that Sir Alan Walters is a part-time adviser and his views on the EMS are not the views of the Government. I hope that is absolutely plain.
  To return to the question of inflation, the plain fact is that the Labour party has no policy to deal with inflation today, any more than it had one when it was last in office. Over the past 10 years it has been on the wrong side of every single one of the big issues which divide the two parties—whether inflation could be brought down without a prices and incomes policy, whether economic growth could be secured without the stimulus of a Budget deficit, whether the investment we so badly needed could be secured without holding interest rates down and so taking risks with inflation, whether Britain's productivity could be improved without Government intervention in business and industry, whether unemployment could be brought down without a massive public spending spree, whether Britain could survive without the protection of exchange control, whether the economy could keep growing when we lost half our oil revenues overnight and whether the Government could perform their proper function without endless recourse to mini-Budgets. On all the issues—on every single one of them—I put it to the right hon. and learned Member for Monklands, East and the House that we have been right and they have been wrong. On all of these issues, every one of them, we have told the British people the truth.
  Every time we have been asked to say precisely where growth would come from, to say precisely where the new jobs would be, to say precisely when inflation would come down, to name precisely the industries which would pick up the slack left by North sea oil, every time we have said that of course we cannot do that because ours is a free economy. It is individuals and businesses which make the decisions, not the Government. Indeed, it is only if individuals and businesses are free to choose that we can hope to have a successful economy.
  Mr. Dennis Skinner: Will the right hon. Gentleman give way?
  Mr. Lawson: But what we can say, and have said, is this. It is the Government's business to keep total spending in the economy on track, and to keep our economy free and open. That is what we said we would do, and the House can be quite sure that we shall do it. So long as we stick to those policies, inflation will come down, and we shall enjoy strong and sustained growth and prosperity into the 1990s. These are the policies which work. These are the policies which, when the time eventually comes, will once again be endorsed by the British people.
  5.36 pm
  Mr. Robert Sheldon: The Chancellor of the Exchequer presented a rosy pciture of the economy as he has seen it develop over the past few years. He did not mention the words "economic miracle" today, but he talked about soaring investment and the improvement in business. One had only to look at the whole of the House to understand that all hon. Members viewed his comments with complete scepticism and he should be aware of that.
  The crucial question was asked by my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker). He
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  asked a question that the Chancellor did not seem to understand, which was why we had to fight inflation twice. The meaning of the question was simple. From 1979 to 1981, the Government had brought inflation down at enormous cost to our manufacturing industry and with great devastation to jobs, investment and other industrial opportunities. Having done that, one would have thought that with all the disadvantages that flowed subsequently, that was one advantage that would remain. However, it did not remain and we saw the Chancellor's approach bringing inflation up again, giving us this problem for a second time. The Chancellor has not answered the question put by my hon. Friend the Member for Perry Barr.
  The other question that needs to be answered is that of Sir Alan Walters. He said, and it is worth having his exact words:
  "My advice has been for Britain to retain its system of flexible exchange rates and to stay out of the present arrangements of the ERM. So far Mrs. Thatcher has concurred."
  It is no use talking about the future, because the future can be postponed indefinitely, year after year. The advice of Sir Alan Walters has been taken and, as far as we know, judging on actions not words, that is still the policy of the Prime Minister even though it may not be the policy of the Chancellor of the Exchequer. The Chancellor needs to consider his own position on that. After all, a number of people have been humiliated in the economic and political scene and they are in a position to insist that certain standards are maintained—standards that we in the House have long come to expect. Those are the standards that he should be pressing, one hopes with some certainty as to their conclusion.
  We are seeing the final shudders of the Government's monetary convictions. We are now near the beginning of the post-Thatcher years. I recall with incredulity the naivety of the Government's early commitment to monetarism—the way in which prices were going to obey the iron law of M3, the way in which workers would not be able to get pay rises in excess of productivity, the way in which the theory of "rational expectations" would prevent employers from paying more or becoming bankrupt. The only trouble was that not many people involved in manufacturing industry had been to the seminars held by Sir Alan Walters or to the earlier seminars of the Chancellor of the Exchequer. All this monetarist nonsense was believed and held to be an article of faith.
  William Rees-Mogg, the former editor of a one-time important newspaper known as The Times, once held that there was a precise relationship which had shown itself over the past two centuries. He produced some bogus statistics to prove that nonsense. His latest offerings, somewhat altered, are still poured out in The Independent, for those who like to read these fairy tales. We can now see that the relationship between M3 and inflation appears as close as that between any unconnected variables. The monetarists search for the holy grail of the great monetary indicator in the sky which will restore the arrogant certainty that they once held.
  A notable civil servant, whom I knew well, and who went on to distinguish himself in a number of roles—in industry, the City and the academic world—once said:

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  "To every problem there is a single solution
  perfect in its simplicity
  easy to apply
  certain in its effect
  BUT WRONG".
  Never have a British Government impaled themselves on so ridiculous a theory. There was much of a type of religious fervour behind such a belief. Why else could a Government believe that the near doubling of VAT would not cause prices to rise? Why else have we seen the twistings and turnings along M3, M1 and M0 and all the rest? No economic theory should achieve such a level of commitment. Such theories need to be judged on their economic and political convenience. The objectives of our economy should once again command the support of the whole House.
  What are the objectives of our economy? In 1966, Lord Callaghan, then Chancellor of the Exchequer, explained the complications of economic policy by referring to what he called his "triple objective". I would choose quadruple objectives: high and sustained economic growth, which is very important; low unemployment; inflation under control; and a satisfactory balance of payments. These are our basic objectives, and I do not suppose that those on the Treasury Bench would dissent, although they may wish to add others. Of those four objectives, low inflation is the easiest to achieve, if the other aims of economic policy are ignored. How to achieve it has never been a secret—just deflate the economy. Withdraw purchasing power in any way one likes and inflation will come down. However, people will be put out of work and a number of viable companies will be destroyed. There is nothing clever about it. One can deflate by raising taxes or reducing credit. Whichever way it is done, one creates a depression and inflation comes down.
  The Government created the depression—the three years of unparalleled austerity predicted by the right hon. Member for Shropshire, North (Mr. Biffen). We lost sight of two of the quadruple objectives. Unemployment rose to more than 3·5 million and there was a catastrophic fall in manufacturing output in particular. The balance of payments was kept in the black only because of North sea oil.
  We talk a lot about North sea oil. Whatever we say here about it, we always underestimate its importance. It produced for us £100 billion in balance of payments and £70 billion of revenue. If hon. Members had had £100 billion to spend, whether in deutschmarks, yen or dollars, what would they have done with it? Would they not have spent it on trying to do something for our manufacturing industry, to keep the finest machinery and machine tools in our firms, to make use of the best electronic equipment from the far east and to ensure that we had the latest factories, equipment, skills, training and education? Would that not have been a sensible way to use that £100 billion of foreign exchange? What did we do? We went on a spending spree and allowed imports to rise. Now there is a major problem because we do not have that base of manufacturing industry.
  Ashton-under-Lyne is a microcosm of manufacturing industry. It is one of the areas that is most heavily engaged in manufacturing, even though it has lost a great deal. In 1979, there were 20,000 skilled engineers in Tameside and Stockport. They were members of the Amalgamated Engineering Union. In many parts of the country, one is not an engineer unless one is a member of that union.
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  Those workers know the advantages of being a member. At present there are 5,000 skilled engineers. They have had five-year apprenticeships. Only a small handful of people now work through such apprenticeships. In the past, those highly skilled people were on the dole, yet now there is a demand for them. In the past, we had in Ashton-under-Lyne high levels of pay, employment and skills. The major cause of our present problems is the shortage of those skills and of factories. In two years I lost one third of the companies in my constituency. Medium-sized firms closed their doors because they could not stand a pound worth $2·40 and the high interest rates. They were caught between being unable to export and being unable to meet the competition from imports.
  Mr. Oppenheim: If the Labour party now has all the answers to our manufacturing problems, can the right hon. Gentleman explain why manufacturing output fell under the Labour Government, whereas it has risen substantially under this Government?
  Mr. Sheldon: The hon. Gentleman does not seem to have read the figures properly. Manufacturing industry in other countries has done extraordinarily well whereas we have failed miserably. Skills and training, to which my right hon. and learned Friend the Member for Monk land[s, East (Mr. Smith) addressed himself in his magnificent speech, lie at the heart of our problems. At the end of the war, Germany was devastated. Its factories were smashed and there was little working machinery. The Germans had only skills. Give me people with knowledge of skills arid technical training and I will swap that for any kind of economy based just on money. That is what the Germans had and what we do not have.
  Our depression was monetarism in action. Unbelievably, the Chancellor recently said that the exchange rate was one of the two most important monetary indicators. Monetarism seems to embrace more and more economic indicators. Patrick Minford, one of the few unreconstructed monetarists, calls it a return "to the tea leaves". There is no certainty. Of course, we cannot have certainty. In this world, to search for certainty and a solution to our economic problems is to search for nonsense—they do not exist. We must look at a particular area and see what can best be done to meet demand.
  I am waiting for the Chancellor to talk about prices and wages as monetary indicators. When he does that, we will know that monetarism has finally been buried and the obsequies concluded. There will be few such indicators left out of this new interpretation of monetarism if the Chancellor has his way.
  We have the reliance on interest rates. The Chancellor has waited 14 months to see a drop in demand. He wanted that drop in demand last year. He still has not got it. That is unbelievable. Whatever people say about stop-go, at least it produced the results which the Chancellor is trying to achieve. He wants the results that were available under stop-go, but he has failed miserably after 14 months.
  With regard to inflation, the Chancellor seriously underestimated the effect of his interest rate policy. As the European Commission explained, our interest rates fed directly into inflation. Why are there so many wage claims now? The answer is that many people have bought houses and their mortgage payments have increased. Therefore, they are being squeezed far more than if they were

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  experiencing a pay cut. To compensate for that, they make pay claims. The Chancellor's interest rate policy involves an element of inflation.
  I want to refer now to the fundamentals of pay, prices and unemployment. We must always return to them. We may play around with theories, but in the end we return to those three fundamentals. We will need a growth strategy based upon the enhanced skills of our people and upon investment, as my right hon. and learned Friend the Member for Monklands, East said so ably. That alone will bring us lasting prosperity.
  I have been reading recently the debates which took place in 1945 on the nationalisation of the Bank of England. Those were very interesting debates in which, among others, Hugh Gaitskell, Bob Boothby and Nigel Birch participated. Bob Boothby voted with the Labour Government. He said:
  "This Government or any other Government might one day want to go back to a Gold Standard, but if any Government ever committed such an act of insensate folly I should want to attack the Chancellor across the Floor of the House. Further, I should not want him to say that it was really the business of the Bank of England rather than his affair."—[Official Report, 29 October 1945; Vol. 415, c. 116.]
  That is the danger. Bob Boothby and I were worried about the Bank of England. However, we should be more worried about the German Bundesbank. When the Bundesbank put up its interest rates, who questioned that? Was it right to do that? Was there no disagreement among the Bundesbank's board? Should not others be involved in the arguments? Should it at least be accountable to those whom its actions affect? My right hon. and learned Friend the Member for Monklands, East and my hon. Friend the Member for Dunfermline, East (Mr. Brown) are prudent and cautious people and they are right to lay down firm conditions on joining the European exchange rate mechanism.
  Mr. Beith: Is the right hon. Gentleman setting an additional condition that before the Labour party can consent to Britain joining the European monetary system, it must be clear that the Bundesbank and any future European central banks will not be independent of Government?
  Mr. Sheldon: I approve of the formula set out by my right hon. and learned Friend the Member for Monklands, East and I believe that he has got it right.
  We must return to the major problems with pay, prices, and unemployment and achieve growth. Recently, we have been going down a cul-de-sac and we are now approaching its end. The disarray before us is just one sign of that and I believe that the end cannot come too soon.
  5.53 pm
  Mr. Norman Tebbit: As the first Conservative Back Bencher to speak, it would be less than polite of me not to congratulate the right hon. and learned Member for Monklands, East (Mr. Smith) on a most amusing speech. Conservative Members often laugh at Opposition spokesmen, but it is not very often that we laugh at an Opposition spokesman's speech. However, the right hon. and learned Member for Monklands, East, achieved that today, and he had some very good jokes. The right hon. and learned Gentleman took me back 10 or 12
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  years. We all understand why the Opposition want a debate on the economy today—to offer them a chance to complain about high interest rates, high inflation and the trade gap.
  When the Labour Government had exactly the same problems more than 10 years ago, the Opposition of the day wanted a similar debate. I believe that in those days the Opposition's speeches were even better than what we have heard today because they offered an alternative policy. However, the right hon. and learned Member for Monklands, East made some very good jokes. Indeed, perhaps Bob Monkhouse wrote his speech—it certainly was not written by an economist. The right hon. and learned Gentleman had nothing to say about what a Labour Government—should there ever be one—would do.
  Other things, too, are different from what they were 10 or 12 years ago. If inflation had been 7·5 per cent. in those days, it would have been regarded as a triumph, not a disaster. In those days, our rate of inflation was not two, three or four points above the average of our competitors, but 12, 13, 14 or 15 points above. Of course, our trade gap was not so large then, but not all the mischief had come to pass in terms of the trade gap.
  I know that Opposition Members do not like to be reminded of the damage done to our car manufacturing industry in the 1960s and 1970s. The repair work began in the 1980s, but it will not pay off fully until the 1990s. This year, some £6 billion or £7 billion of our adverse balance of trade is in respect of imports of motor cars.
  The House will recollect that I announced in 1981 that Nissan had decided to bring a car plant to Britain—a statement that was not universally well received. There were claims that it would never get beyond the stage of assembling the CKD kits in a screwdriver operation. That was wrong. The local content at Nissan's plant is now between 70 per cent. and 80 per cent. Production in 1990 will be 85,000 vehicles and it will be 200,000 in 1993 with 50 per cent. for export. Toyota has announced its intention of following Nissan's example, not least because of some pretty nimble footwork by the Department of Trade and Industry and a great deal more realism, at any rate until recently, by some of our trade unions.
  Citroen and Peugeot are expanding production here as is General Motors. I hope that Ford will do so as well, although there may be worries and doubts in Dagenham about that.
  Mr. Rhodri Morgan: Has it occurred to the right hon. Gentleman that all the foreign investment in the car industry will require remuneration by dividends, which will return to the country that provided the capital, and through the research and development content of those cars reverting to the centre where that research and development is carried out? Has the right hon. Gentleman considered the adverse effect on the balance of payments of those dividends and capital repayments?
  Mr. Tebbit: Of course I have, and the hon. Gentleman should not be surprised about that. The hon. Gentleman forgets that the trade union movement did so much to destroy the indigenous British car industry and left it open to foreign companies to seize the opportunity to come to this country and replace it. I doubt whether the hon.

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  Gentleman's constituents worry too much about some of the profits going out of this country when they have good jobs which would not otherwise have been available.
  In the early 1990s, the £6 billion or £7 billion of adverse trade in motor vehicles will be steadily reduced, if not reversed. However, it takes a long time to repair the damage to our manufacturing industries from the late 1970s.
  Of course, there are still difficulties, not least the present industrial action organised by the Amalgamated Union of Engineering Workers in support of a claim for a 35-hour week. For British engineering workers to believe that they can produce in 35 hours what the Japanese and Americans take 40 hours and the Germans 37 hours to produce is unrealistic to put it mildly. If the 35-hour week claim is conceded, to meet the huge order books of firms such as British Aerospace and Rolls-Royce—both infinitely more successful now than in the 1970s—would require a jump of 10 per cent. in productivity or an increase in overtime working, at premium rates which would simply add to our costs, lose business, worsen our deficit and add to our problems. Yet that is what Opposition Members support.
  Neither Bill Jordan nor Gavin Laird are so stupid that they do not know the consequences of the unions' demands. They serve their members ill by forcing on successful companies demands which would reduce the ability of those companies to compete overseas. This may be an appropriate moment to remind my right hon. and hon. Friends of the extraordinary tax treatment of the income which will be received by those on strike in this dispute. They will receive a benefit of £ 150 per week, which apparently is not subject to tax. Because it does not arise from employment and is not a dividend, it does not qualify for income tax. By anyone's standards, it must be income and should surely be taxed. I hope that my right hon. Friend the Chancellor will therefore ensure that it is taxed.
  Mr. Harry Ewing: Will the right hon. Gentleman give way?
  Mr. Tebbit: I am sorry, but I will not give way. Hon. Members have been enjoined to make short speeches and the hon. Gentleman will no doubt wish to make his own speech in due course.
  As I said, not everything is the same as when the Opposition of the day forced debates on the economy more than 10 years ago. In those days, the Government took great pride in informing the IMF, under whose tutelage the right hon. Member for Leeds, East (Mr. Healey) became a monetarist—I am not sure whether he is still a monetarist, particularly in view of what the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) said a few moments ago—that the standard of living in Britain was being reduced and would continue to be reduced to deal with the economic problems facing a Labour Government. Today, the standard of living has never been higher. That has not been disputed by any hon. Member today, and I doubt whether it will be because it is beyond dispute.
  Mr. John Battle: Will the right hon. Gentleman give way?
  Mr. Tebbit: No, I will not give way. The hon. Gentleman may speak later. Hon. Members were enjoined to make short speeches.
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  Prosperity and the availability of credit have greatly increased personal indebtedness. At the same time, however, my right hon. Friend has been paying off public debt and has a substantial negative borrowing requirement—again a change from 10 to 12 years ago. What is more, despite some claims to the contrary, I believe that my right hon. Friend the Chancellor is still a monetarist. [Interruption.] My right hon. Friend is not here, but I think that he would hold his hand up to that one.
  There are many other differences. For example, we have just had our 37th consecutive month in which unemployment has fallen. During the past decade, Britain has acquired an extra £100 billion or so of privately owned overseas assets which, I remind Opposition Members, are generating a flow of income back to this country—exactly the opposite of what the hon. Member for Cardiff, West (Mr. Morgan) criticised about the Nissan and Toyota deal. Industrial and commercial investment are at high levels. Productivity growth and corporate profitability are strong. The drain on the public finances of many of those old money-losing laggards such as British Steel and British Leyland, to name but a couple, has ended. Indeed. those companies are now contributing.
  British Telecom, for example. has not only held its prices—they are well below the rate of inflation—hut, last year, returned more than £1 billion to the public purse in corporation tax dividends and interest, and it has a massive programme of investment of a kind that it never achieved when it was in public ownership.
  In the 1970s, the official Opposition, then led by my right hon. Friend the present Prime Minister, set out alternative policies. Today the Opposition have declined to do so with, of course, two exceptions. We have been told about Labour's new-found enthusiasm for entering the exchange rate mechanism of the EMS. I find the controversy over British entry less than thrilling. I doubt whether being in or out would make much difference one way or the other. It certainly would not exclude us from taking the tough decisions that need to be taken and doing the things that need to be done to run a successful economy.
  Labour Governments and Labour parties have always had to have some sort of mystical solution to economic problems. In the old days which I remember and, indeed, one or two Opposition Members remember, that mystical answer to all our problems was the prices and incomes policy—the social contract. We heard nothing about such matters today. Is there still to be a social contract in Labour's policy, or was that something else that they tried, found not to work and eventually junked? Alas, it has all gone into the waste bin.
  What is the new gimmick? It is industrial training, which is needed and certainly desirable, but I am afraid that the engineering strikes which the Opposition support will more than outweigh any possible gains from any conceivable programme of industrial training. What else have the Opposition to offer today? There are no import controls on offer—they, too, have gone. In the new-found enthusiasm for Brussels there will be no talk of import controls. Indeed, this must be the first debate of this kind in which the Opposition have firmly and officially denounced import controls as unnecessary and impossible. Good old Jacques Delors is having some effect somewhere at least.
  Credit controls are the in thing now, but when we ask how they work the answer is not so much mystical as misty

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  —indeed, it is thoroughly foggy. The right hon. and learned Member for Monklands, East now has another concept—a social contract not with the AUEW and NUPE but with Barclays and NatWest. They are his social partners now. He says that they will be more reliable and responsible than the old trade union leaders. I am sure that is so, but what would it amount to if it did work? It would mean that credit would be rationed not by price but by nudge and wink. How would the Government ensure that the right people got credit if it was rationed? They would need more controls. People would have to be told, "No, you must lend to him, but not lend to him, and if you don't do that we shall somehow do something nasty to you." You, Mr. Speaker, will remember the debates at the end of the Labour Government's period of office. Many hon. Members remember them. The Ford motor company was getting that sort of treatment, and it was one of the contributory factors to the downfall of the last Labour Government. Labour Members do not learn very much.
  I am told, however, that the Labour party has now even abandoned changes in the tax system. The right hon. and learned Gentleman and his hon. Friends are fast boxing themselves in. I take it that the right hon. and learned Gentleman stands by his pledge that if we had a Labour Government we would never have an income tax rate of more than 50 per cent. I take it that that is so—the right hon. and learned Gentleman is a little quiet. I take it also that he backs his hon. Friend the Member for Copeland (Dr. Cunningham), the Opposition spokesman on the environment, who assured me in a television interview with my friend, if I may allude to him thus, the hon. Member for Great Grimsby (Mr. Mitchell), that the 50p would actually include local income tax. The right hon. and learned Gentleman is beginning to box himself in. I take it that he stands by his pledge that a Labour Government would not extend VAT, increase the 15 per cent. rate, or end zero rating. I am happy to allow him to intervene to say whether he stands by those pledges. All the past pledges on social contracts, import controls, high rates of tax, direct control over borrowings and so on have all gone, and the right hon. and learned Gentleman has put nothing in their place.
  Today, in effect, my right hon. Friend the Chancellor once again said that there is no alternative. On today's showing, if there is an alternative, the Opposition are determined that it should remain totally shrouded in mystery. The right hon. and learned Member for Monklands, East was right to make the point that my right hon. Friend the Chancellor let that long unbroken expansion of the economy go too fast last year. Of course, those who blame him are almost without exception those who at the time wanted him to cut interest rates further and to raise public spending, too. Had they been in charge, we would have had a problem not of 7·5 per cent. but of nearer to 17·5 per cent. inflation.
  There have been some changes over this decade—changes that I have described and they are very much for the better. One thing, however, is for sure—that when a long period of growth gets somewhat out of control and becomes a boom which is not sustainable in the long term, the same old unpalatable medicine is the only one that works, and that is interest rates. My right hon. Friend the Chancellor will undoubtedly take a bit of a pummeling
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  today as he has done in recent weeks, and as he will do for some weeks to come, but as growth resumes and inflation and the trade gap fall, as they most certainly will, it will be my right hon. Friends the Chancellor and the Prime Minister who will have the last laugh—and that is indeed different from what happened at the end of the 1970s.
  6.9 pm
  Mr. A. J. Beith: Perhaps it was too much to expect of the right hon. Member for Chingford (Mr. Tebbit), but surely it was not too much to expect that the Chancellor should admit that there is a serious problem and that this country's trade deficit is something about which he is at least embarrassed, because he should be seriously worried. People in the country would think rather more of Conservative Members if they conceded that, and tried to seek the co-operation of the country in doing something about it.
  I noticed that the Chancellor left the Chamber a little while ago, bundling up his papers and disappearing. I wonder whether he had a call from the Prime Minister in Kuala Lumpur and whether a press conference has been hastily arranged to reinterpret something that he failed to get right in his speech this afternoon. Whether in Kuala Lumpur dealing with foreign policy or in Downing street dealing with economic policy, the Prime Minister increasingly resembles a demented football manager who, not content with shouting reprimands from the dug-out, rushes on to the field waving her handbag and attacking the players, changing the rules as she goes along. That makes for an impossible position in which to discern any coherent economic policy.
  It was the present Leader of the House, when he was Chancellor of the Exchequer, who said that the essential condition for maintaining confidence is a Government determined to maintain the right monetary and fiscal policies. Nobody really knows what the monetary and fiscal policies—especially the monetary policies—of the present Government are. The reason we do not know is the standing disagreement between the Prime Minister and Professor Walters, on the one hand, and the Chancellor of the Exchequer, on the other.
  The Prime Minister and Professor Walters, who increasingly resembles Boswell to the Prime Minister's Johnson—interpreting her sayings and advising the world about whether she agrees with his various pieces of advice—do not want to buck the market. They do not want EMS entry and believe that interest rates should change in response to MO. Thus arose the dispute over shadowing the deutschmark, and the recent dispute over the Chancellor's £2 billion intervention to prop up sterling. On the other hand, the Chancellor wants a strong pound and believes that changes in interest rates should be aimed at supporting sterling. He wants to enter the exchange rate mechanism.
  The whole economy is suffering from the Prime Minister's Euro-prejudices. She is determined to keep us out of the exchange rate mechanism for as long as possible. I defy the Chief Secretary to tell us in his reply when, on any reasonable calculation, the conditions that the Prime Minister has set can be satisfied. Those conditions include getting inflation down to the level of our European partners, and not only achieving the removal of exchange controls, for which there is already a timetable, but waiting to see the effect of the removal of those exchange controls.

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  When will we be able to join the exchange rate mechanism? Surely, according to those conditions, it will not be this side of the end of next year. However, Britain could benefit now from lower interest rates if we were inside that mechanism.
  The immediate effect of this dispute is that no one knows whether changes in the money supply, narrowly measured, or changes in the value of sterling will be the trigger for changes in interest rates. There is therefore confusion and a loss of confidence in Government policy generally. When one adds to that the trade deficit, one is led towards a great exposure to risk—a risk for all borrowers, mortgage buyers, home owners and small and medium-size businesses.
  In such an atmosphere there will be more, not fewer, occasions when sterling is tested because of a loss of confidence. Therefore, the Chancellor has to resort to the interest rate weapon again. How many times can he use the interest rate weapon, and how far can he take it in response to the pressures which his policies have helped to generate? While confidence is low, interest rates will only rise. That is the grim message for the British economy and people unless we see some changes.
  During the debate, the Chancellor has been teased about whether he is still a monetarist. Clearly, he is beginning to fail the monetarist test. When I questioned him on Thursday at his own Question Time, he was unable to answer the question whether the money supply or the pound is determining his interest policy. However, he had redefined his policy by the evening in a carefully worded section of his Mansion House speech, stating:
  "We cannot allow the necessary rigour of monetary policy to be undermined by exchange rate weaknesses".
  One can interpret that how one likes, but it seems to mean that the exchange rate and pressure on the exchange rate will determine further rises in the interest rate.
  How can one have confidence in a Chancellor who, in the space of one week, has said that the largest trade deficit in our history is not a problem and that he would never devalue the pound after 10 months when sterling has fallen 1 per cent. per month? How can one have confidence in a Chancellor who says that the economy is simply catching its breath or that the Government's job is to see that there is not too much money, yet who was responsible for all the mistakes of last year's Budget and the compounding of credit expansion through his measures on mortgages? I refer, for example, to his decision to allow a period within which people could take out multiple mortgages, and which would end on a stated date, 1 August. Clearly, that had a vicious effect on the spiralling house market, which started in London, and then went throughout the country and which has only lately come to an end. It had a powerful effect on expanding the private money supply, which has been a major factor in the economy over the past year. One does not need to go through the grim figures of the trade deficit to recognise what a serious problem that represents.
  We have sought to argue that there is an alternative to all this. That alternative requires, first, that we enter the exchange rate mechanism to gain the stability and discipline that it provides. It is my belief that even the announcement that we are determined to join at an early date and that the conditions that I have mentioned will not be used to prevent us from doing so would in themselves bring a degree of stability. If we are successful in that object and in entering the exchange rate mechanism and,
  714
  even in the course of doing so, being enabled to have lower interest rates—because that would be the effect—we cannot leave it there.
  One of the failings of the speech made by the right hon. and learned Member for Monklands, East (Mr. Smith) was that he seemed—it was not entirely clear—to be moving towards membership of the exchange rate mechanism. He did not appear to recognise that one cannot stop there. We need to have other counter-inflationary policies if we are to experience the lower interest rates that so many people want.
  To do that, a tighter fiscal policy will be required at least initially and there are two ways of doing that. The first would be by the Government's favourite method, which is to slash public expenditure. However, that is the last thing that one should do if there are—as I believe there are—important things that could be done to improve our competitiveness by spending money on research, on training and on some of the things listed in the Opposition motion, with part of which I agree. If we begin to cut such expenditure, we will remove our ability to do anything about the trade deficit.
  We must therefore look to taking money from the economy by other means. That is why we have argued that the Government should, if they are able to achieve lower interest rates through EMS membership, remove the ceiling on employees' national insurance contributions because that would remove a significant amount of money from the economy. At the same time, the Government should carry out a number of other tax reforms, such as removing mortgage interest relief at the higher rate. It is absolutely crazy to give the largest housing subsidy to those who are on the highest rate of tax. It makes no sense. Those two measures between them could have a significant counter-inflationary effect. There should also be an announcement that next year's Budget will not be a tax-cutting Budget. The pledge that the rate of income tax will be reduced to 20p in the pound should also be abandoned.
  The Chancellor dwelt heavily on savings, but he has still not devised an instrument that would provide a good tax incentive for saving. Paradoxically, high interest rates by themselves do not provide a sufficient incentive to save. The Chancellor must involve more people in saving. At the end of his Mansion House speech he said that people seemed to have lost the habit of thrift. Why does he not set about encouraging thrift with something more ambitious and exciting than the limited personal equity plan schemes?
  Mr. Tebbit: I wonder how far the hon. Gentleman will go down that road. Does he accept, for example, tha.t allowing dividends and investment income to have a lower rate of tax than is standard would be desirable, or is he thinking of a bureaucratic system, rather than something that could make people feel that it is worth their while to save and invest?
  Mr. Beith: The trouble with the right hon. Gentleman's suggestion is that it would give an uncovenanted benefit to very many existing shareholders without attracting more people in. That is why I have argued that we should build on what the Chancellor has already done with PEPs. We should front-end that scheme. We should make sure that tax relief is available at the point of entry. We have had

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  that argument in previous debates, but I believe that we would have widened the range of people saving through that kind of scheme.
  We have also argued that funding policy should be changed. It is interesting that the Chancellor devoted about a quarter of his Mansion House speech to saying that the Government could not go back to overfunding but then, in the small print, admitted, in a quiet way, that that would be done, in a limited way, month by month, over the rest of this year.
  In present circumstances, it does not make sense for the Government to be repaying debt so heavily and thus maintaining a large gap between short and long-term interest rates. If interest rates are supposed to make industry leaner, tougher and fitter, why is the impact concentrated on smaller businesses which pay higher interest rates? Why are they, and not those businesses that have access to long-term interest rates, bearing the burden?
  The House enjoyed a good speech by the right hon. and learned Member for Monklands, East, but he missed the opportunity to spell out more precisely whether the Labour party would be prepared to join the EMS at an early date. Both parties are trying to accommodate disagreements about whether to join the EMS by setting out conditions to determine when they might join. I have argued that that is true of the Prime Minister's conditions, and it remains true of the conditions set out by the right hon. and learned Member for Monklands, East and it is certainly true of the additional condition set out by the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), who chairs the Public Accounts Committee, who suggested that an independent Bundesbank was an obstacle to British membership of the EMS. There will continue to be an independent Bundesbank, and if we had more central bank independence in this country there might have been more effective discipline than there has been here for the past 20 years.
  Mr. Alex Salmond: Does the hon. Gentleman have any conditions for his policy of joining the exchange rate mechanism?
  Mr. Beith: I believe that this country's interests would have been best served if we had been in the EMS some time ago and it is worth negotiating our way into it now. Any Government will negotiate their way in. I am arguing about the conditions set by the other parties, because they appear to be designed to be obstacles to entry, or intended to appear so to at least some of their supporters. The right hon. and learned Member for Monklands, East speaks as an enthusiast, but there are hon. Members who do not share his enthusiasm.
  Mr. Christopher Gill: Will the hon. Gentleman give way?
  Mr. Beith: No, I am trying to be brief and I have given way twice.
  EMS is not the only area of disagreement. I listened with great interest to what the right hon. and learned Gentleman said today about credit controls because he has almost entirely moved away from them. Initially, we thought we were being offered controls on credit cards, then there was the possibility of special deposit and controls on new mortgages, which were spelled out quite
  716
  clearly by the hon. Member for Dagenham (Mr. Gould). Now we are being offered something resembling a proposal which these Benches argued for more than a year ago—that the Government could seek the co-operation of banks and financial institutions to restrain their lending.
  More than a year ago we argued that the most helpful approach would be for the Government to encourage institutions to restrain high pressure advertising of credit. That could have been done. The Governor of the Bank of England has gone some way towards doing that since then because the pressure that has been put on people to obtain credit has been ludicrous and is inconsistent with the Government's arguments.
  Mrs. Teresa Gorman: Will the hon. Gentleman give way?
  Mr. Beith: No, I must draw to a conclusion. I have given way several times.
  The right hon. and learned Member for Monklands, East has moved rapidly on credit controls because I suspect he realises that most of those advocated are nonsense. They will not work, and they are likely to bear heavily on those most dependent on credit, rather than those who have the discretion and the ability to seek credit elsewhere if controls are introduced.
  A lot of ambiguity about fiscal policy remains. Will it need to be tightened and, if so, how? What about exchange rate policies? Does the Labour party want sterling to fall? If so, how far?
  The motion is full of good stuff; I agree with every word of it. It makes some good suggestions about the steps that we need to take in, for example, training and research, and its analysis is accurate as far as it goes. However, it reminds me of a school maths book. The teacher's copy has all the answers bound in the back, but the pupils never have access to those copies. On the Order Paper we seem to have the version without the answers in the back. I refer particularly not to long-term issues, but to the immediate economic management of the economy and how we deal with the precise problem which Labour has placed before the House today—the effect of interest rates on our economy. High interest rates are very damaging. If we join the EMS properly, we can get interest rates down; but if we do that we must take other steps to ensure that inflation is under control. The absence of any discussion of those issues in the motion calls into question whether the Labour party has addressed those problems at all.
  6.24 pm
  Sir William Clark: There is one danger for the economy in this debate and that is that there are too many people speaking gloom and doom about our economy, whether in the media, the press or the Opposition. They are talking down sterling and that does not do the country any good. We have to show confidence in our economy, and I hope that I can prove that to the House. We have had ups and downs, but the underlying basis of our economy is sound.
  The right hon. and learned Member for Monklands, East (Mr. Smith) made great play of the so-called rift between No. 10 and No. 11 Downing street. This lie must be nailed. If there were a rift, in my opinion—I am sure that my right hon. and hon. Friends will agree with me—in no circumstances would the Prime Minister go along

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  with a policy with which she did not agree. Nor would the Chancellor of the Exchequer. Therefore logically, there can be no rift.
  Sir Alan Walters, who is a part-time adviser to the Prime Minister, holds the position of a senior civil servant. He should conform to the same rules and regulations as a senior civil servant, and he should not make public statements or write articles for the public to read because it confuses politicians and the markets. It is essential that we have stability in the markets and no confusion.
  Mr. Ian Gow: I have been following my hon. Friend's argument closely and I wonder what substance future speeches by the right hon. and learned Member for Monklands, East (Mr. Smith) will have if the professor follows that period of restraint that my hon. Friend has recommended.
  Sir William Clark: That is an interesting point. I shall let my hon. Friend answer that for himself when he makes his speech.
  The Opposition motion rightly draws attention to our present high interest rates. As my right hon. Friend the Chancellor said, all countries have recently put up interest rates. We have had to increase our rates, and are in front in that respect. because our economy was growing too fast and had to be slowed down. High interest rates have curbed spending, which is now on a plateau and will come down. High interest rates, as hon. Members have already said, have stopped the property boom and have helped to keep up the price of sterling. Consequently, they have helped to ease inflationary pressure on imports. It has been said that high interest rates help the saver, but I shall return to that.
  The Opposition motion talks about the 7·6 per cent. inflation rate. As a politician, I have no right to be cynical, but I think that the Opposition have a nerve to criticise a rate of 7·6 per cent. when they were clever enough to get it to 27 per cent. Consider the effect that that had on pensioners and people with small invested incomes. It is disgraceful that, within three years, their savings were decimated.
  The Opposition talk about hardship for home owners. That is a conversion; some years ago they did not like home owners. For example, they talked originally about taking away houses from those who bought them under this Government's successful sale of council houses. Now they have changed their minds because they know that there are millions of votes there. Let us make no mistake—a Socialist Government would still give priority to council housing. Owner-occupiers have independence, and the Opposition do not like that.
  The Opposition criticise the Chancellor for using high interest rates alone to control the economy, but they overlook the fact that public expenditure has been controlled. I welcome the fact that the Exchequer is not taking as much of the GDP as it did in 1979. Such public expenditure control is another way in which the inflation rate has been made to come down.
  The Opposition criticise the level of industrial investment, but this year it is up 15 per cent. Companies are more profitable. If one considers the tax structure of companies today, it is clear that corporation tax is much lower than it was under Labour. Let us consider the liquidity of companies. In 1980 bank borrowing by companies represented some 45 per cent. of those
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  companies' equity in the market. Today, that figure of borrowing is down to 28 per cent. That means that industry has more money to invest and has more money to put into production.
  The economy is buoyant and politicians on all sides should, occasionally, talk about the achievements of the country—not necessarily those of the Government. The economy has turned round. We should avoid talk of the Opposition and the Government. I accept that the Government have set the scene, but the economic buoyancy has been created by the country. My right hon. Friend the Chancellor told us that 1,200 new businesses start up each week. I accept that some businesses fail, but the net figure still stands at 1,200. That must be good.
  Unemployment is down and the number of people employed is the highest that it has ever been. The Labour party has said that if it were in government it would operate credit controls. My right hon. Friend the Member for Chingford (Mr. Tebbit) has already said that the Opposition envisage some sort of social contract with the banks. That may be all right with the British clearers—one may have a reserve lending ratio if one wishes—but one cannot control foreign banks like that. What is their capital? It is easy to say what the capital of British clearers is and what the ratio should be, but how would one evaluate the capital of, for example, Chase Manhattan or the Japanese banks in the City? The credit control advocated by the Opposition is absolute rubbish.
  One of my hon. Friends has already asked why a Government should prevent a citizen from borrowing money. Those who lend the money—banks or other financial institutions—will stop lending money when the bad debt ratio gets so high that they cannot afford to lend.
  Mr. Tebbit: Does my hon. Friend agree that if such banking controls could be imposed in Britain it would be almost inevitable that banks in places such as Gibraltar and other places where we have had little problems with banking organisations would get into the credit market here and would lend to the most vulnerable people in that market on terms entirely outside the control of the Government's legislation to protect consumers?
  Sir William Clark: My right hon. Friend is absolutely right. One would have a proliferation of what is known as offshore funds and Gibraltar could be the centre for such operations.
  My right hon. Friend the Member for Chingford made an extremely good point when he discussed the car industry. He related the history of how that industry went down and how it has now been built up again. The car industry is part of the cause of our balance of payments deficit. My right hon. Friend is right that it will not be until 1990–91 that available cars will come on stream for sale here and for export. It is worth noting that 75 per cent. of our imports are accounted for by capital goods.
  Under the Government our gold and dollar reserves are some £27 billion. My right hon. Friend the Chancellor told us that, last month, our exports went up by 13 per cent. That figure included oil, but if oil is taken out exports still rose by 8·5 per cent. Exports are at an all-time high. It is true that imports went up by just over 4 per cent., but they are flattening out.
  During the past two years the policy followed by my right hon. Friend the Chancellor has resulted in some El 7 billion of the national debt being repaid. In the same

  719
  period nearly £4 billion has been saved in interest. I remind the House that that is equivalent to nearly 3p off the standard rate of tax. That saving will be made not only this year, but in coming years. However, my right hon. Friend should be wary of repaying too much of the national debt. If a future Government did not have the national debt—I am exaggerating slightly—it would be so easy for them to borrow money that a profligate Government would soon lead us into the high spiral of inflation.
  The autumn statement will soon be published. As soon as that happens everyone will become a mini Chancellor of the Exchequer. Everyone will have his own ideas about how the next Budget should be formed. The hon. Member for Berwick-upon-Tweed (Mr. Beith) offered two suggestions: to negotiate to join the EMS immediately and to increase taxation. The Prime Minister and the Chancellor of the Exchequer have made it perfectly clear about our joining the EMS—[Interruption.] I am sometimes worried by the Opposition; they start laughing before they know what I am about to say. Opposition Members should listen to the facts before they distort them.
  My right hon. Friend the Chancellor has made it perfectly clear that we are the only country in the European Community that has complete freedom of exchange control. As soon as all the others have freedom of exchange control the playing fields will be level and, consequently, that might be the time when we should join the EMS.
  I do not believe that the Chancellor should rule out tax cuts in the next Budget. In common with the hon. Member for Berwick-upon-Tweed, however, I would like a super boost to be given to savings. Last year my right hon. Friend increased the personal equity plans—PEPs—which are equivalent to new savings. I would like a tax-cutting Budget together with a savings Budget that would give an incentive to saving. I do not necessarily agree with my right hon. Friend that investment income should be at a lower rate because, as the hon. Member for Berwick-upon-Tweed rightly pointed out, that would affect people now. We want new savings and that can be achieved only by allowing contractual savings to be set off against one's income vis-à-vis the "Loi Monery".
  Although my right hon. Friend the Chancellor and his team are pilloried and criticised by the media—in many cases quite wrongly—no one in the House or in the country can say that the Government do not stick to their policies. There are no panic measures and I assure the House that there will be none in the future. We have been down this road before in 1985 when we had to increase interest rates. That increase was responsible for bringing down the rate of inflation.
  I am convinced that the medicine prescribed by my right hon. Friend is the right sort. My advice to him is, for goodness sake, do not change policy. It will work today as it worked in 1985.
  6.39 pm
  Mr. James Molyneaux: For the benefit of the next speaker whom you, Mr. Speaker, may call, I shall be brief as usual and set a good example to him.
  Leaders of minority opposition parties face the temptation of indulging in the luxury of irresponsibility in
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  the sure knowledge that they will never be called upon to form a Government or serve in a Government. However, in response to what was said earlier, may I say that if we were ever to form a Government we could be depended on to be consistent. In response to what the Opposition spokesman said, let me point out that we would mean what we said.
  The current minority Opposition party leaders can, if they wish, advocate policies which are capable of attracting short-term popularity without worrying about the need to be consistent. A new factor has entered into the equation and the two main forces in Parliament—Government and Opposition—have somewhat relaxed the requirement to be consistent. The party which I lead has seen its consistency rewarded by being branded as inflexible and stubborn. We would plead guilty to such charges on the subject of today's debate.
  Ten years ago we welcomed the Treasury's conversion to the concept of the floating pound. I know that lip service is still paid to that concept. We have to ask why the Treasury and not the Government is trying desperately to control the exchange rate of the pound. Formerly, the manipulation took the form of artificially forcing the pound down to placate the Americans. This autumn we appear to be doing the opposite to please the Germans.
  These contradictory policies seem to have given us the worst possible result, which is hardly surprising. Inflation has been fuelled by flooding the economy with fresh money and we are now crippling industry and business by raising the cost of credit. Unfortunately, it is, as usual, small companies and businesses which suffer most grievously. As a nation we do ourselves a grave disservice by blindly refusing to recognise that these troubles stem directly from a crazy desire to manage the exchange rate of the pound.
  The Treasury simply has to shake off what is no more than a superstition that if the pound floats downwards the consequence will be higher inflation. The Treasury must refrain from cheering on its champion in his duel with the Bundesbank which should be seen as a totally irrelevant tussle and not a test of economic virility. I do not agree that any advantage would accrue from our joining the EMS. Our entry would not prevent wide fluctuations in our economy but would simply necessitate higher than average interest rates. The effect of that would be to punish non-exporting industries and companies, in particular. The Opposition spokesman, the right hon. and learned Member for Monklands, East (Mr. Smith), did not make it clear why, if we joined the EMS, we should expect European banks to take orders from the Treasury. It would, as usual, be the other way round and we would be subservient.
  In recent weeks and days, and today in this Chamber, many have asked what the Chancellor can do to reduce inflation. I do not know whether his attention has been drawn to the advice tendered to him about two weeks ago by another Ulster Unionist, Enoch Powell, who in a speech at Milton Keynes said:
  "The candid answer to that question is: 'nothing whatsoever'. The money splurge created by easy credit eighteen months ago cannot be counteracted by over-tight credit now. We simply have to sweat it out while the flood of new money, of which the creation was permitted and even encouraged by easy credit last year, in the endeavour to rig the sterling exchange rate downwards, will have worked its way gradually through the system into final prices."

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  I would differ from the Chancellor, who seems to have taken a different approach. He seems to be waiting until interest rates have worked their way into the final prices.
  It is depressing to see the recurrence of the industrial disputes of former times. We must face the fact that those are the consequence of inflation and not the cause. It simply will not do for all of us to set out on a course of industrial conflict and contemplate with bogus fortitude endless strikes and disputes. I trust that hon. Members, particularly on both Front Benches, will remember that it was precisely that misguided course which destroyed the Labour Government in the late 1970s.
  6.45 pm
  Mr. Terence L. Higgins: I shall begin by drawing the attention of the House to a mystery: who drafted the Opposition motion? Clearly it was not the shadow Chancellor, the right hon. and learned Member for Monklands, East (Mr. Smith), who made a number of interesting points in his speech, none of which appears in the Opposition motion. He began by saying that we must not forget the unemployed; but that is precisely what the Opposition motion does because it makes no mention of the unemployed. That is scarcely surprising because, happily, the unemployment figures have been improving for a considerable time.
  The shadow Chancellor went on to discuss at some length the European monetary system and its exchange rate mechanism. However, there is no mention of either of those in the Opposition motion. If hon. Members had hoped that he would elucidate the basis on which a Labour Government might join the exchange rate mechanism, they—particularly Government Members—would have found his speech unilluminating, certainly in relation to the rate at which we would join.
  The shadow Chancellor talked at considerable length, and with a degree of innovation, about credit controls, of which there is no mention in the motion. "Credit controls" is not quite the right expression because apparently a Labour Government, if one should ever come to power, would encourage the banks not to expand the amount of credit. In an intervention the legality of this matter was raised. We must consider carefully the responsibility of the banks to their shareholders. If we were to have credit controls in the strict sense, the banks would have some defence against their shareholders saying that the banks were not doing as well as they might for their shareholders. However, the idea that this might be done through back-door persuasion raises difficult questions.
  However, as a number of my colleagues have pointed out, such an idea is completely out of date because in a system of open economies without exchange controls it is simply impossible to achieve that degree of control, or even persuasion, over the international banking community. If nothing else, there would be no means of preventing overseas banks which had no base in this country from refusing to give credit to a person in this country who wanted a loan. Therefore, a mystery surrounds that matter.
  I shall turn to broader issues and put the debate into context. It is clear that we are suffering from a hangover from the stimulus given to the economy as a result of the stock market crash in the autumn of 1987. Finance Ministers throughout the world took the view that in order to prevent a world recession it was necessary to stimulate
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  each individual economy. At that stage no hon. Member, with the exception of my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen), who I do not see in his place, objected to that.
  That stimulus did not extend to the measures which the Chancellor put in the Budgets, both the one following the crash and the next one, which have produced the largest fiscal surplus we have ever had. Unfortunately, no hon. Members perceived the extent to which Britain's economy was already accelerating. After a long period of sustained growth we must bring that growth down to manageable limits. Essentially, that is the problem facing the Chancellor of the Exchequer.
  I do not accept that by using the instrument of interest rates the Chancellor is, in a sense, a one-club golfer. He is also using fiscal policy on a massive scale, and that sets the framework within which monetary policy is operating. To borrow a corny analogy, he is using a rate of interest putter but in the context of having previously used a fiscal policy driver. The effect of his actions in those respects is to slow down the economy in a satisfactory way.
  In a good article, the Economist this week draws attention to the fact that retail sales in the three months to September were only 1·25 per cent. higher than they were a year earlier, which is the smallest increase in the last seven years over a 12-month period. On the other side of the equation, output is rising at about 4 per cent. so the overall result is that output is rising faster than demand is rising.
  That is important for the balance of payments, and combined with the natural overrun when the economy is slowing down—of stocks building up at each level of production and at the point of retail sales—one has reason to believe that the balance of payments situation will come right. The figures today, unacceptably high though they are, give reason to suppose that the peak may have been reached and that, for the reasons I have given, matters are likely to improve in the future.
  It has been important for the Chancellor to act by way of interest rates. Some people, including my right hon. Friend the Member for Shropshire, North (Mr. Biffen), have asked whether interest rates are being used for domestic internal inflation reasons or for international sterling reasons. While there are occasions when those two objectives cannot both be achieved by interest rates, I do not believe that to be the situation now. The domestic and expansion of credit issues to which I have referred, and the fact that higher interest rates keep sterling at a higher level than would otherwise be the case, work together to bring inflation under control. As that is, rightly, the Government's overall objective, the measures on interest rates which the Chancellor has taken have been appropriate.
  Concern has been expressed about the fact that the object of the exercise must be to put a downward pressure on demand and that that, in turn, is bound to have an adverse effect on profits in a situation in which, as the Chancellor pointed out, profits are at their highest level for 20 years. That means that the normal effect of a downward pressure on demand and a building up of resistance to inflationary wage settlements will take a considerable time to work through. It is important for us to bear that in mind.
  I share the concern of my right hon. Friend the Member for Chingford (Mr. Tebbit) about the situation facing the engineering industry. He referred to the claim for a

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  35-hour week, the shortest that would exist in any country. I remind my right hon. Friend—I had experience of this issue some years ago in Europe—that when people in Britain say they want a shorter working week they really mean that they want to be paid at a higher rate for doing more overtime. When, in any other country in Europe, people say that they want a shorter working week, they mean what they say.
  It is important that inflationary wage claims of that sort should be resisted. Otherwise inevitably, and especially in the engineering industry, the repercussions of more profitable firms granting such increases are felt by other parts of the industry, and the effects in the west midlands and elsewhere are traumatic. That would be bound to have an effect on unemployment, a subject which, although it is not mentioned in the Opposition motion, was described by the right hon. and learned Member for Monklands, East as an issue that we should not forget.
  Mr. Thomas McAvoy rose——
  Mr. Higgins: I will not give way because I am under a strict time restraint.
  I come to the issue of the exchange rate mechanism. I do not believe that being members of that would have made a significant difference in the last month or so because the Chancellor took the measures that he would have had to have taken even if we had been members of the ERM at this time. I doubt whether we would have received any more co-operation from the Germans, and it is clear that what happened in that connection had severe repercussions on us.
  Similarly, in terms of the longer term prospects for the exchange rate mechanism, let us not forget the argument for joining, which is that we would have a degree of currency stability within which various currencies would be held in relation to each other. I suggest that this is not the moment when it would be sensible for us to join because exchange controls in other countries have not yet been removed, and we do not know what effect their removal will have, when it occurs.
  The French, despite all their misgivings—they are lagging 10 years behind us, yet they still say that we are not communautaire—are due to take off controls next July, and that would seem to indicate that it would be appropriate to join about next August.
  One cannot predict these matters because, as we are well aware, situations can change and we cannot be sure at this stage what things will look like by that time.
  However, whatever my views might be on stages two and three of the Delors report—there are variations of view about that—there seems now to be a strong case for us joining the exchange rate mechanism. I hope that at the appropriate moment, which is not now but which may be next year, such a step may assist our policy rather than act in the opposite direction. It was extraordinary that the right and learned Member for Monklands, East did not spell out the alternative. Nor is it mentioned in the motion. I suggest that overall, looking at the situation, the Chancellor responded appropriately in autumn 1987, and is responding appropriately now, to get us back to sustainable economic growth.
  6.56 pm
  Mr. Brian Sedgemore: History will heap plaudits on the right hon. Member for Worthing (Mr. Higgins) for having chaired the Treasury and Civil Service Select Committee which produced the report on the Delors issue and which said in paragraph 28 that we should join the exchange rate mechanism of the European monetary system at an early date and go on to work towards the creation of a common European currency. When those plaudits are being given, most people will have forgotten that the right hon. Gentleman voted against the proposal. But I shall not be churlish and remind him of that fact.
  I wish to behave in the debate as a consensus politician, as I usually do, and to make it clear that I go along with the new economic consensus that is arising. It is not a monetarist or neo-monetarist consensus. Nor is it a Keynesian or neo-Keynesian consensus. It is shared by, among others, Sir Alan Walters, the chief economic adviser to the Prime Minister, all the way across the spectrum to Michael Boskin, the chief economic adviser to the President of the United States. That new consensus says that the Chancellor's fiscal and monetary eccentricities can no longer be regarded as economic wisdom. Indeed, the Chancellor—to paraphrase Dr. Samuel Johnson—brings to economics the wisdom of the fool and the folly of the wise.
  With the right hon. Member for Worthing, I have just spent a week in Washington. In private, politicans and economists there constantly asked me what was driving the Chancellor in his dispute with the Prime Minister. The simple answer is that the Chancellor is a fan of Damon Runyon and is very taken with that sexist male chauvinist pig of a character who, in "Take It Easy", explained his dispute with the women who lived nearby by saying:
  "I do not approve of guys using false propositions on dolls, except of course when nothing else will do."
  Many of the Government's problems stem from the fact that they insist that bringing down inflation is the one important goal and that everything can be subordinated to that. It is interesting that in America, Michael Boskin, the chairman of the Council of Economic Advisers, disputed this. When someone made a sotto voce comment in reply to his answers he said, "Do I detect some editorial comment there, because if you are telling me that one should subsume everything to the control of inflation, that is advice that I would never give to the President of the United States." He became agitated and went on to explain that no one in his right mind would give that sort of advice—yet it is what the Government and the Prime Minister are doing. The great and the good across the Atlantic say that it should not be done.
  There are two other problems with inflation. One is the dispute between the Chancellor and the Prime Minister over how we should deal with it. The Prime Minister, egged on by that strange economic guru Sir Alan Walters—every now and then he takes centre stage like some sort of demonic Rasputin—says that domestic monetary conditions are the critical factor. She says that they are tight enough not to have given cause to raise interest rates recently and not to give cause to raise them in the future. The Chancellor, by contrast, says that we must raise interest rates to keep the level of the pound up and import prices down.

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  We must get to the bottom of this. The Treasury and Civil Service Select Committee meets tomorrow, and I suggest that we call Sir Alan Walters before it. We heard today that he is only a part-time economic adviser, not a civil servant, so there is nothing that the Prime Minister or anyone else can do to stop Sir Alan answering our summons and spelling out all the details of his disputes with the Chancellor. I am sure that the right hon. Member for Worthing and other members of the Select Committee, who are smiling benignly, will agree to my proposal.
  The other problem with inflation is that everything that the Chancellor does to deal with it is inconsistent with what needs to he done to improve the balance of payments deficit. I suppose that the Chancellor, who is as capable of contradicting himself as he is of contradicting the truth, believes with Emerson that
  "with consistency a great soul simply has nothing to do."
  Just as some people attempt to rewrite history, the Chancellor attempts to rewrite economics.
  On 27 September this year the right hon. Gentleman made a speech—he referred to it again today—to the IMF and the World Bank. In it, he argued, as he did from the Dispatch Box today, that balance of payments deficits do not matter very much and are in any case self-correcting when the growth of domestic demand falls below the growth of output. I have scoured the western world in vain to find someone who believes that balance of payments deficits of £20 billion—4 per cent. of GDP—are self-correcting and do not matter. Even if that were true—it is not—the Chancellor's statement poses the question: at what level of output and employment would the balance of payments deficit be self-correcting? The answer must be that it would be self-correcting only at a level that involved a considerable recession.
  I do not ask anyone to take my word for this. I am prepared to plead my own mediocrity—[HoN. MEMBERS: "Guilty as charged."]—a lovely phrase that I used to hear in the law courts. I invoke some of the great figures of the Conservative party, beginning with the right hon. Member for Henley (Mr. Hese!tine). I thought that the right hon. Gentleman made a delightful speech at that fringe meeting at conference. I saw him on television; the mane was flowing, the voice was modulated, the adrenalin was running high, and he stood every bit like tomorrow's leader of the Conservative party. He scoffed at, he poured scorn on and he ridiculed the Chancellor's assertion that the balance of payments deficit did not matter and was self-correcting, and he begged the Chancellor to think again. There came a moment when the right hon. Gentleman's pellucid denunciation of the Chancellor became so brilliant that I began to feel sorry for the Chancellor, because, unlike Shelley, the right hon. Member for Henley not only pours venom out of his mouth whenever he speaks, he really can sting.
  Recently I have been asking Conservative Back-Bench Members—I shall not name them because these conversations are confidential—whether they believe it right to say that these balance of payments deficits do not matter and are self-correcting. The standard answer that I have received across the ideological spectrum on the Conservative Back Benches is: "He may say it, but he certainly does not even believe it himself." I am looking at one of these Conservative Back-Bench Members——
  Mr. James Cran: On a point of order, Mr. Deputy Speaker. If the hon. Gentleman was looking at me when he said that, we have not had a conversation about that point today or this week.
  Mr. Sedgemore: As I am in the mood to appeal to ex cathedra figures, I appeal again to Michael Boskin, whom I asked this academic question. I told him that there are arguments to the effect that balance of payments deficits driven by the public sector can be cut only by cutting the budget deficit. The counterposing argument is that balance of payments deficits driven by the private sector—the Chancellor's argument—are self-correcting. Quite rightly, the adviser to the biggest economy in the world opined that the second argument—the Chancellor's—involves the cateris paribus fallacy. All hon. Members will know that every fifth former is told not to fall into the cateris paribus fallacy which, in economic terms, runs as follows: one can produce a savings and investment equation which shows that under some conditions a deficit can start to be self-correcting; but then, things would not be cateris paribus—income, output, employment, revenue and other variables would change.
  So it is nonsense to say that a balance of payments deficit of this size is self-correcting. What can we do about it? I preface my remarks by saying that I believe that such is the scale of the problem now that we can deal with it—under any Government—only with a depreciation of the currency and with at least a mild recession. There is no point in Labour Members seeking to pretend that we can get out of the current mess without at least a mild recession. The problem is how to minimise the recession.
  I began with a consensus; another consensus is growing about what we should do. The City of London, industry and her Majesty's loyal Opposition, including me—the soon-to-be loyal Labour Government—all believe that we should join the exchange rate mechanism of the EMS at an early date as a prelude to working towards a common European currency. We believe that that will give us some external discipline and that it will steady markets and give us some protection against speculators.
  I have suffered barbs and jibes from people who have accused me of changing my mind and said that I am not in a good position to start lecturing them on this. The politician who cannot change his mind as the world crashes around him soon becomes an irrelevant bore. Things have changed. When I was young I was brought up on the theory of comparative advantage and purchasing power parities which worked through changes in the exchange rate, driven by the current account, on the balance of payments and internal domestic price levels. All this has gone and is irrelevant to the modern world. I say that to those on the Left of my party and those on the Right of the Conservative party. We do not live in that world any more and exchange rates are not driven by the current account.
  Foreign currency is no longer primarily a medium of exchange. It is an investment vehicle that provides speculative opportunities. That is why £175 billion crosses the exchange markets every day—one third of it in London. I defy anyone to tell me what those speculators say about sovereignty. They do not care a damn about sovereignty or about what right hon. and hon. Members say. In the modern world, many politicians who preach sovereignty as a noble, democratic ideal are often engaged in base, populist politics.

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  I congratulate my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) and his colleagues on going to Germany to talk to the officials of the Bundesbank and to France, to talk to the members of that country's Government. They engaged in something close to negotiations about the way in which Labour would join the ERM if it were returned to power.
  As British society views the sarcophagus of Thatcherism and looks over its dead bones, it is time for the Labour party to take up the reins of Government with fresh ideas, new hope and some vision.
  Mr. Deputy Speaker (Mr. Harold Walker): I remind right hon. and hon. Members that speeches should now be limited to 10 minutes' duration.
  7.11 pm
  Mr. John Browne: I enjoyed the speech of the right hon. and learned Member for Monklands, East (Mr. Smith). It was extremely entertaining and interesting. Although he did not provide specific details of future Labour economic policy, he gave some interesting pointers.
  For example, he said that a Labour Government would bring in credit controls. That would stifle growth and enterprise. But who is to say that politicians are better equipped than entrepreneurs, business men and professional bankers to decide whether a certain loan is worth while in terms of growth, productivity and enterprise? Who is to say that politicians are better able to choose new products, penetrate international markets and internationalise product lines? Politicians cannot do that and political business experiments have in the past proved disastrous and went completely out of control. As the right hon. and learned Gentleman and my right hon. Friend the Member for Worthing (Mr. Higgins), Chairman of the Treasury Select Committee, both asked, who will umpire and control foreign banks on the basis that they exist in England?
  Another interesting point arising from the right hon. and learned Gentleman's speech is that we would see political rather than market direction of investment. That would mean bolstering sick and dying industries and companies at the cost of healthy ones. That would initially lead to inflation. Under a Labour Government there would be at least a populist drop in interest rates until inflation took hold. The right hon. and learned Gentleman mentioned an "appropriate" rate for sterling for joining the ERM. To me, that means devaluation, again in favour of British industries and companies that are either ailing or very sick.
  In all those policies, we glimpsed the prospect of a return to old-fashioned hyper-inflation. That prospect is not new to the international foreign exchange markets, which regard it as a potential threat to the value of sterling. They view any threat to this Government as a threat to the value of sterling. I term it the "Thatcher factor". The Thatcher factor accounts for between 5 per cent. and 20 per cent. of the spot value of sterling on the exchange markets—at least on an initial basis. If the Prime Minister is under threat for any reason—perhaps because of internal arguments or hyped-up articles in the press—the pressure on sterling increases relentlessly. When German
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  interest rates rise by 1 per cent. we raise ours by 1 per cent.—but it is not enough because people continue to criticise the Government.
  I notice that the people who are most violent in their criticism of the Prime Minister and her economic policy are those who immediately complain that interest rates are too high. Interest rates have had to be raised to defend sterling. The Thatcher factor should be borne in mind by people who, as my right hon. Friend the Member for Guildford (Mr. Howell) said, talk down sterling and our economy. To over-criticise has an enormous downward effect on sterling. The result is that people have to pay higher interest rates on their loans and mortgages. We must take that into account when making speeches, because it does none of us any good.
  Any Government guiding our economy, with its history of inflation and its declining, relative productivity, must walk a tightrope. They must achieve disinflation without creating deflation.
  It is an extremely sensitive tight rope because it involves the psychology of the consumer. To cite a hypothetical example, say that a family with a joint income of £20,000 keeps £12,000 of that net of tax. Say that they have a house valued at £50,000, which is increasing in value by 20 per cent. a year—[Interruption.] Opposition Members may laugh, but houses in many constituencies are worth at least that.
  I venture that house prices in many areas are so high that many newly married couples cannot buy a home. My hypothetical family start to spend their £12,000 as though they had £22,000. They save nothing for a rainy day, thinking that they could always mortgage the house. That results in tremendous property-induced inflation of the money already available. That is not measured in terms of M3 or the money that is already in circulation. On top of that, the inflationary psychology is to spend as much as possible. If the Government changed their philosophy and house prices started to tumble, that family would spend their £12,000 as though it were £6,000—and we would have an enormous slump on our hands.
  Economic management is a delicate business. In October 1987, there was a stock market crash. The Government, together with others, pumped a lot of liquidity into the system. Fortunately, at that time our economy was growing faster than most others. Therefore, there has been a much greater inflationary impact on our economy. We are now paying the price for it with high relative real interest rates.
  High interest rates are tough. They are a blunt instrument, especially on first-time buyers. The main aim is to reduce inflation. However, they have some beneficial side effects. First, they benefit the saver. As my right hon. Friend the Member for Guildford said, we must help savers. I understand that there are about six lenders for every borrower in a building society.
  High interest rates also encourage businesses to reduce excessive wage increases and to invest in increased productivity, rather than merely add to productive capacity.
  I address now the question of whether we should join the exchange rate mechanism of the European monetary system—and if so, when.
  Many supporters of the ERM see it as a panacea to protect sterling, despite inflationary and disruptive economic policies at home. I believe that it is no panacea and that wildly fluctuating exchange rates are an

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  international problem—not only a problem for sterling. Fluctuating exchange rates are caused largely by a crucial flaw in the Bretton Woods agreement of the 1940s. The flaw was that when the United States of America dominated world economics, it had a huge surplus. It was built into the treaty that to run a deficit was an economic sin. To run a surplus was fine. There was a crucial and inherent imbalance in the Bretton Woods agreement.
  Now that the United States is in deficit we hear a different story. It is said that the Germans and the Japanese are doing terrible things by having a surplus. This points to a structural matter that we must get right, and we need to do that urgently. We must make sure that it is seen as evil economically to run a surplus just as much as it is to run a deficit. They have to balance out on an international basis. Someone's surplus is someone else's deficit.
  In that context I see the exchange rate mechanism and even the EMS itself as something of a cartel; even a deutschmark cartel. We have decided that the world has tremendous international problems on exchange rates. Let us form a club of European nations and we will sort it out among ourselves and leave the rest to stew. It is not inherently bad to do what the EMS is doing but it should be done on an international rather than on an isolated, European basis.
  Therefore, the United Kingdom should not join the full exchange rate mechanism until, first, all members have free movements of foreign exchange and capital with no foreign exchange controls. Secondly, we should not join until the single European market of 1992 has been achieved with a free flow of goods, services and labour. Thirdly, we should urge the denationalisation of the central banks of all the member nations.
  In the United States there were many largely autonomous states. Yet they accepted the US dollar. It was largely successful. It was gold-linked in its earlier days, which had an enormously positive effect on its original success.
  Mr. Deputy Speaker: Order. I remind the House that arrangements have been made for hon. Members to be warned in advance about the termination of the 10 minutes allowed for speeches.
  7.21 pm
  Dr. John Reid: I listened to the Chancellor's speech with a mixture of frustration, anger and amazement. I was frustrated by the complacency that he continues to show, angered because he was not prepared to accept any responsibility for the mess that we are in, and amazed that he still appears to believe in what he is saying and, more important, in what he is doing.
  We have heard that the balance of payments deficit continues to grow and now stands at an annual rate of £20 billion, the highest in the United Kingdom's history. Over the past year interest rates have risen inexorably. They have been raised 11 times and now stand at 15 per cent., twice the rate of those in our major competitor, West Germany. The average British mortgage has gone up by £88 a month and in Greater London it has gone up by £162 per month. We have heard that 380,000 home owners are more than two months overdue with their mortgage payments, and that the economy is tottering on the knife edge of a recession and that investment—never high under the Government—is starting to fall.
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  What was the Chancellor's response? He told us that the gap in inflation between us and our major competitors has temporarily widened; it is another blip. The Chancellor has had more blips than Heathrow air traffic control. He told us about rising living standards and rising confidence and said that exports continue to do well. Presumably that is why we have a projected deficit of £20 billion. He said that "in time" inflation and interest rates will come down and that the balance of payments will be self-correcting. To misquote John Maynard Keynes, "In time we are all dead economically and otherwise."
  The Chancellor was complacent and insubstantial. He said nothing about training or skills or about the need for a flexible response to the present crisis. He was so removed from reality when he talked about rising expectations, living standards and confidence that I expected his peroration to end with the words "and they all lived happily ever after." A Japanese financier on "Newsnight" last night and the British public realise that we are tottering on the cliff edge of a recession. Why in God's name does the Chancellor not realise that?
  We cannot allow the Chancellor alone to take the blame because the Prime Minister is just as complacent. At. the Tory party conference in the middle of yet another interest rate crisis and with a chance to address the nation she took the opportunity to give us a cookery lesson. She told us, "You can't get a souffle to rise twice." As a cook she should also understand that we cannot get a wholesome economy out of a half-baked recipe. She should be even more familiar with the old cuisine adage that too many cooks spoil the broth.
  Perhaps the right hon. Lady would like to put us all out of our misery by telling us which chef is responsible for the economic stew that we are in. Is it the resident and much-vaunted chef at No. 11 Downing street, is it the part-time pastry cook in the basement of No. 10, Mr. Walters, or is it old Mrs. Beeton herself, the Prime Minister? As they say in Private Eye editorials, "Surely we have a right to know since it is us who have to eat the damned product in the last instance."
  Nowhere is that product more painful or unpalatable than in my part of Britain. The remedies designed to cool down an over-heated south-east economy are unpalatable enough in the south-east, but they are excruciatingly painful in a Scottish economy that has been, at best, lukewarm. Much of the industry in my constituency and my country has been industrially destroyed and is only just starting to revive. That is why when the Prime Minister comes to Scotland she is willing to talk about almost anything except the effects on Scotland of her economic policies. She came to Edinburgh and told us about the Bible and came to Glasgow and told us about Adam Smith. She came to Perth and told us about that well-known Scottish folk hero Julius Caesar. She said in what must be the most deranged piece of political rhetoric that I have heard for many years:
  "If Julius Caesar were to land on our shore today he would have no hesitation in saying, 'I came, I saw, I invested.'"
  I cannot believe that any of the Prime Minister's speech writers put that in, so she must have put it in herself.
  Mr. Robert Sheldon: That cannot be true.
  Dr. Reid: It is perfectly true; I double checked it.
  I am tempted to observe that if Julius Caesar were to land on our shores today he would be amazed at how rapidly things could deteriorate since his time. If he were

  731
  able to afford the poll tax and could get a safe ferry across the Channel and find a seat on a crowded north-bound commuter train, I am sure that he would turn back at Watford Gap because economically the north of Britain has declined tremendously over the past 10 years.
  I shall give some statistics. In Scotland the effect of the Chancellor's mismanagement has been nothing short of disastrous, not just in mortgage payments, hire-purchase charges or investment, but in jobs. Recently in my constituency the firm of Terex, a thriving go-ahead company with a history of investment, was forced to make redundancies. It publicly laid the blame directly at the door of No. 11 Downing street and interest rate charges.
  The story is the same throughout Scotland. An economy which was bruised, battered and bludgeoned for 10 years was on the verge of revival but has been pushed back into the quagmire. Is it any wonder when every 1 per cent. rise in interest rates puts an additional £40 million burden on the shoulders of Scottish industry? The 10 rises in base rate in the last 12 months mean that by 1990 Scottish business could face an extra £250 million in borrowing costs.
  Mr. Cran: Will the hon. Gentleman give way?
  Dr. Reid: Time is limited.
  Is it any wonder that the latest figures from the CBI—and the Scottish CBI is the equivalent of the fifth column of the Conservative party—show that in the second quarter of this year investment in plant and machinery is down by 15 per cent. compared with the previous year and that investment in building is down by 11 per cent. on the previous year? Such facts speak volumes about the lack of industrial confidence in the Chancellor's handling of the ecomony. The contention that we now have a leaner, fitter economy in Scotland at least is a propaganda myth by someone who cannot distinguish between slimming and starvation.
  We do not need a crystal ball. I shall quote from one of the books that we can consult. It is from "Cambridge Econometrics" and it says:
  "(In Scotland) the bubble bursts in 1990 and both employment and output growth starts to lag behind the United Kingdom average for the rest of the century … Most sectors of Scottish manufacturing … are forecast to under-perform United Kingdom counterparts resulting in 70,000 job losses. Scotland's population is forecast to fall a further 132,000 by the end of the century and consumer spending per head is projected to remain a consistent 6·6 per cent. below the United Kingdom average."
  Every other statistic supports those projections. Regional industrial assistance, worth £242 million three years ago to Scotland, is worth only £15 million this year, and will be worth only £100 million in the next two years. Scotland has gained only 2 per cent. of the jobs created in Britain between 1983 and 1988. Earnings in Scotland have fallen behind. In 1978, a Scottish male earner was earning £7·30 a week less than his counterpart in the south-east. In 1989, he was earning £49·70 a week less. The rate of investment in 1986 in Scotland was £641 million less than it was in 1979. That is a fall of 17·8 per cent., compared to a United Kingdom fall of 3·1 per cent. Rarely have I heard a more damning statistical indictment of the Chancellor's performance.
  In the midst of all this, what have we heard from the Secretary of State for Scotland? Not for him the fighting of
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  his country's corner that his counterpart in Wales has put up, and that shows in the statistics. The census of employment from 1984 to 1987, on which all Government statistics are based, the crucial barometer, showed that every area of the country had an increase of people in employment. Among the highest was Wales, with more than 4·3 per cent., and even Ireland had an increase of 1·4 per cent. The only part of the country that saw a fall in the number of people in employment was Scotland, where there was a fall of 1·2 per cent.
  Admittedly, the Secretary of State for Wales does not have the burden of a Conservative party chairman who wants to do to the Welsh Conservatives what has been done to the Scottish Conservatives. I have sympathy for the Secretary of State for Scotland. It is not easy to speak both for the nation and for the hon. Member for Stirling (Mr. Forsyth) any more than it is easy for the Chancellor to speak for the Government and the Prime Minister's adviser. However, a choice has to be made. After 10 years of the Government's policies and economic miracles, we have a balance of trade crisis, a crisis of inflation, a crisis of confidence and a crisis of credit. If the confidence cannot be restored, the Chancellor should go.
  7.31 pm
  Mr. John Biffen: The Opposition motion is drawn widely. It deals with the economy and the issues that they believe should be part of the developing political conflict over the coming year or so. I shall not say much about that because, within the time constraints, it is important to deal more exhaustively with a more narrow topic.
  The policy of my right hon. Friend the Chancellor, through high interest rates, is showing signs of success. No doubt it will have its difficulties and carry its unpopularities, but that it can succeed I have no doubt. As the debate has proceeded, it has become plain that the exchange rate mechanism is a handy diversion for those who want to concentrate on other aspects of the broader areas of conflict. Those on both of the Front Benches and the hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore) are united in an impressive trilogy of commending early or measured membership. As a devotee of free exchange rates, I do not share that view, but to take part in the spirit of things, I thought that I would discuss some of the conditions that it is suggested should be attached to our prospective membership.
  One can hardly find a business man who, dealing with the European Community, does not complain of the advantages of one sort or another that his competitors have in their operations. Therefore, the search for level playing fields, as is the expression, so that we operate within the exchange rate mechanism on terms of equity and equality with our partners is not only widely desired outside this place but should commend itself immensely to hon. Members.
  It is clearly explicit in the Government's view that there should be the free movement of capital within the Community, and a chance to see how that operates, and that our inflation rate should come down to approximately those of Community partners. That is a fair start to the level playing field approach, and I doubt whether the right hon. and learned Member for Monklands, East (Mr. Smith) would much dissent from that. The Government's position is reasonably clear, although I suspect still

  733
  tentative. There is nothing wrong about that, and continuing debate in these matters is healthy. There is a certain amount of vigorous newspaper speculation and we can live with that.
  However, the right hon. and learned Member for Monklands, East had a chance to make more clear the approach of the Labour party to the level playing fields so that we can be in a fit state to take on this new challenge and responsibility. His speech saw a delightful occasion that will he etched in our memories of the dying days of this Session—the fraternal relationship that he struck up with my right hon. Friend the Member for Henley (Mr. Heseltine). I got a little worried that my right hon. Friend would be asked to address a fringe meeting at the Labour party conference next year, which would have all the frenzy and evangelical excitement that was generated within the Conservative party, because there was such a clear rapport. They agreed on going in at a lower exchange rate and on a great deal of industrial planning as the means of preparing the country for the enterprise. It was clear after a while that there has been a vacuum in the policies of those on the Opposition Front Bench. The team there is stuffed with right hon. and hon. Members of the utmost quality, but of ideas and policies there was a certain absence. After tonight, we know that they follow the Henley school of Socialism.
  One central factor in this is that we have a trade deficit. My right hon. Friend the Chancellor argues that one should not get too emotional about these matters. A different view is taken by the Labour party and my right hon. Friend the Member for Henley, who are anxious about the sums of the trade deficit and presumably the compensating capital inflow. Therefore, I suspect that they believe that the present exchange rate, which is a factor in that, is not an acceptable exchange rate in which to secure membership of the exchange rate mechanism. I believe that a great many people take that view. To join a kind of exchange rate link dominated by the Germans when we have a record trade deficit, 40 per cent. of which is accounted for in trade with that country, is a rather heroic undertaking. Once fixed, the whole of domestic policy will be aimed at the struggle to compel and to cajole British industry to perform within the new disciplines.
  If an exchange rate view is taken as part of the exchange rate mechanism, that is an essential piece of levelling to provide the appropriate groundwork for our membership of the mechanism, but it should not be a rush job. It cannot be secured on the early terms suggested by the Select Committee and endorsed by the Liberal party—it gets worse as one reads through this litany of enthusiasts.
  We have to ask ourselves to what end this enterprise will be undertaken. As a nation of tradesmen, shopkeepers, yuppies and entrepreneurs, we often think that life is all about economics. I do not believe that stage 1 of the exchange rate mechanism, leading to economic and monetary union as elaborated in the Delors plan, is just an economic enterprise. It has political objectives to create a much more centralised western European Community than I think is appropriate for the Europe of tomorrow, which has to be related to the great changes taking place in the Warsaw pact countries and the Soviet Union, which will require a much more flexible response on our part. By all means look at the economic implications of the level playing fields, but never be so concerned to go around with the digger that one fails to set one's eyes on the far further, more fundamental and more
  734
  challenging political objective of trying to create for the next generation a much happier set of European institutions than we have now.
  7.40 pm
  Mr. Alex Salmond: I shall argue, in terms of the amendment that my hon. Friends and I have tabled, that neither a policy of penal interest rates nor the rather old-fashioned deflationary credit squeeze proposed by the Labour party is appropriate to the Scottish economy. As we note in our amendment, the argument applies also, for example, to the north of England, Northern Ireland and Wales. Within the monetary union of the United Kingdom we have, as the deputy Prime Minister reminded us last week, one monetary policy for the entire country—regardless of whether that is appropriate for all the constituent parts of the United. Kingdom. Sky-high interest rates are clearly misplaced in a Scottish context.
  The most that can be said about the state of the Scottish economy at the end of last year is that it was undergoing a painfully slow recovery from the oil price recession of 1986—a recovery which has been aborted by a succession of interest rate rises. The industrial production figures for the first quarter show a further sharp fall of over 2 per cent. following the 1·3 per cent. fall in the final quarter of 1988. Two surveys, prepared by the CBI in Scotland and the Fraser Institute, confirm that recession has arrived in the Scottish economy. No one—not even the absent Minister of State, Scottish Office, with his tremendous experience of advancing hopeless arguments in a deadpan manner—could argue that the Scottish economy is overheating. Everyone accepts—including the Minister of State, who did so in a Radio Scotland interview on 18 July—that the objective of high interest rates is
  "to cool the over-heating in the South East."
  I think that we can safely assume that the Minister was not talking about the south-east of Scotland.
  It is uncomfortable to endure a high interest rate policy when an economy is overheated, but having to endure it with an economy that has barely come out of the fridge adds significant insult to substantial injury. That was commented upon by the hon. Member for Motherwell, North (Dr. Reid). The hon. Gentleman should bear in mind, however, that to be told by the Labour party that the alternative is to implement a credit squeeze is advice which defies explanation, except in the sense that the right hon. and learned Member for Monklands, East (Mr. Smith) is displaying all the excessive zeal of a convert to monetary rectitude.
  The Scottish economy requires neither high Tory interest rates nor Labour's credit squeeze. The damage caused by high interest rates is severe. Interest rates in Scotland are at least 5 per cent. higher than the rate which could be justified by domestic economic conditions. The cost is substantial to home owners, council tenants and Scottish industry in terms of additional borrowing costs amounting to about £200 million per year. The cost to Scottish farmers is about £50 million and for the hard-pressed Scottish fishing industry it is about £7·5 million. The Government owe a substantial explanation to all those individuals, industrialists and farmers.
  I was interested when the Chancellor of the Exchequer said that high interest rates were not of major economic significance. That will come as interesting news to those being forced out of business by the policy of high interest

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  rates. The Government must explain what possible contribution will be made to the defeat of inflation, which is generated in the south-east of England, or to overcoming the United Kingdom balance of payments difficulty by wrecking the finances of, for example, the fishing industry in the north-east of Scotland. What contribution will be made to the defeat of inflation by implementing such a policy in an area of the United Kingdom which manifestly does not need it?
  Much has been said about the exchange rate mechanism. I think that on balance the United Kingdom should join it, but I wish to add one word of caution. Sterling is a major international investment currency. It is highly visible and highly volatile. The United Kingdom's domestic economy is chronically weak and poorly balanced. Sterling's entry into the exchange rate mechanism will turn a system which is currently deutschmark dominated into one with a dual polarity. There is at least as much chance of sterling destabilising the exchange rate mechanism as of the ERM stabilising the price of sterling. The ERM offers no panacea for the United Kingdom's economic problems.
  Since the war, successive Administrations have applied a variety of solutions to the endemic balance of payments problems. Withdrawal east of Suez, dashes for growth, freezes, squeezes, stop-go, indicative planning, the floating of the pound, entry into the EC, social contracts and compacts, monetarism with M3, monetarism without M3, Lawsonism and shadowing the deutschmark—all these policies have been tried and all, without exception, have failed. I was interested to hear some hon. Members express concern about the Bundesbank taking control of United Kingdom economic policy. In defence of the ERM, I should have thought that in view of the litany of failure that I have described the Bundesbank could scarcely do a worse job than the United Kingdom Treasury or the Bank of England.
  There may be some in the EC who realise that sterling's entry into the ERM will create substantial difficulties. There is no stable staging post between the present position and full monetary union. If it comes to that, the House had better bear in mind the Scottish experience of full monetary union within the United Kingdom. The Chancellor of the Exchequer has said that the Tory party has never been one of devaluation, although sterling has depreciated by 10 per cent. during this year alone. The right hon. Gentleman should ponder that the alternative within monetary union could be the Tory party becoming the party of emigration as capital and people flow to the high activity areas of the EC.
  The position could be ameliorated by resource transfers and an active regional policy, but the Government have entirely undermined regional policy and the Chancellor of the Exchequer has set his face against it in a European context. In any event, Scotland's experience within the monetary union of the United Kingdom is that resource transfers almost always operate in the opposite direction—from the periphery to the centre. How else can we explain why, with 30 per cent. of the population, the south of England obtains 50 per cent. of tax relief—a subsidy of more than 1 billion in one area and a sum greater than the regional aid budget for the entire United Kingdom?
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  The Chancellor of the Exchequer should know that there is an alternative to his policy of prescribing the wrong medicine for a disease from which the Scottish economy is not suffering. A Scottish pound within the European monetary system would allow for a monetary policy suitable for Scottish domestic requirements against a framework of European currency stability. In this context, I was struck by a remark made by Professor Tony Thirlwall of the department of applied economics at the university of Kent, which was reported in the Glasgow Herald last month. Professor Thirlwall stated:
  "I have always thought that if I was Scottish and lived in Scotland I would be a Scottish nationalist. Sovereignty is an appealing and attractive prospect for a people rich in history, culture and resources, both human and material. There are also reasons for believing that Scotland might be better off if it was able to pursue an independent economic policy in the fields of taxation, public spending and trade relations with other countries."
  Professor Thirlwall is right. He has advanced an argument which grows in strength daily as the Government's economic policies are misapplied in Scotland.
  7.48 pm
  Sir Peter Hordern: We have learnt from the Opposition this afternoon that a central part of their policy is to devalue the pound against other currencies. I would think that they would seek to devalue it substantially given the large increase in public expenditure that they plan. I do not know what they believe that that will do to inward investment. It would certainly have a major effect on investment as well as providing a substantial spur to outward investment. Consequently, such a policy could only be followed by the usual run on the pound, which would have to be met by extremely high interest rates, the very thing which the Opposition seek to avoid.
  My right hon. Friend the Prime Minister clearly put it on record in Madrid that the United Kingdom should join the exchange rate mechanism when we have inflation under control and when capital controls in other European countries have been lifted. My right hon. Friend's adviser, Professor Sir Alan Walters, differs. He says:
  "My advice would be to retain the system of flexible exchange rates and to stay out of the present arrangements of the ERM."
  The article from which I am quoting states:
  "So far, Mrs. Thatcher has concurred."
  Professor Walters's advice does not accord with what my right hon. Friend the Prime Minister said in Madrid, but I have not referred to all that the professor said. He added:
  "Of course, I would not be opposed, at least not on economic grounds, to the development of a proper European currency administered by a European central bank preceded by absolutely fixed exchange rates."
  That is so far from the position of my right hon. Friend the Prime Minister, let alone that of my right hon. Friend the Chancellor of the Exchequer, that I can assume only that the professor is playing the part of a licensed jester within 10 Downing street. That is not an unknown position. The president of the Horsham Conservative Association was once Lord Egremont, and it was a role which he played extremely well. However, Lord Egremont always played the role in private. He did not jest outside, as the professor is now doing. Whatever policy the professor is espousing, one thing is certain, and that is that he relies absolutely on interest rates. He does not appear to rely on anything else.

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  I prefer the economic policy of Sir Alec Douglas-Home to that of the professor. At least with Sir Alec one could see the matchsticks and count them. But while the professor is busy digging among the entrails of MO and M4, it is uncertain, and hard to tell, what will happen. He could send up the storm cones in the Channel when things are going badly, and when things are going well light beacons on the downs and set the church bells ringing. But it is hard for the outside observer to guess exactly what the professor's policy is if he spends all his time delving among the entrails.
  I regret the professor's entry into the public arena. If he is to hold his position as an official adviser, he should remain silent in the best possible tradition. I think that he sees himself as some kind of Rasputin figure, but it is high time that he was disabused of that view.
  However, the question that the professor raises is one that we all have to answer. Although almost everybody agrees that interest rates play some part—I believe a vital part—in dealing with the economy, are interest rates alone sufficient? What about, as the Opposition suggested today, deposits with a central bank or hire purchase controls? Those arguments were effectively dealt with by my right hon. Friend the Chancellor and others by pointing out that that could apply only to British banks, so what about foreign banks'?
  There is one other matter that I should have thought that my right hon. and hon. Friends would have held dear, and that is that there is something disturbing about referring to credit rationing by decree rather than to credit rationing by price. That surely brings us back to interest rates.
  However, interest rates in themselves are not sufficient. The exchange rate is an additional and necessary weapon. We should align ourselves to the deutschmark and the ERM, and that is the Government's policy. In the best of all possible worlds we would have an independent central bank. In the old days we were tied to the gold standard, and that was regarded as the height of British sovereignty. In those days we depended entirely on South African, Russian and American gold, so we could hardly be called independent. That was not independence at all.
  What are those who oppose our joining the ERM talking about when they talk about sovereignty? They mean the right to let sterling go where it will. That is not policy; it is an abnegation of policy. It is to allow companies to pay their people as they will. It is for the Government to accommodate any wage increase, no matter how large, including directors' salaries, just as they come. It is the sovereignty to let things slide. It is called "keeping our options open", but it means a one-way track leading downwards towards certain inflation.
  We should have joined the ERM 18 months ago and at the same time given clear warning that we would align sterling to the deutschmark and that high wage increases unrelated to productivity would end in disaster because the Government would not bail them out. That was an opportunity that we missed at the time. It is necessary now to explain that the pound will be aligned to the deutschmark and to join the ERM.
  It is necessary to set a standard. We do not need to go any further than to join the ERM. I am against a common currency, a European central bank and all that sort of nonsense. But joining the ERM is not painless, nor is it an alternative, but it is a necessary additional weapon—a standard for all to see.
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  We are committed to reducing inflation. Only one person is directly. responsible for the economy and that is my right hon. Friend the Chancellor. He should be given every possible support, and he deserves it. We cannot have the professor with an official position apparently second-guessing, and we cannot be ambivalent about tackling inflation. We should be allowed to wave goodbye to the professor and to let him go on writing his memoirs.
  I have one final word about the serious statement at Madrid. That was regarded as a commitment which we cannot, with honour, go back upon. It was a commitment and a contract. We sometimes seem in relation to Europe to spend all our time counting the pennies and examining the small print. That is a lawyer's view. I have no doubt that that is all very necessary, but it is not in itself sufficient. Western Europe is changing fast, just as eastern Europe is changing, and we must be part of it. Western Europe is in flux, but it is moving and we should join it in order to keep the balance of power in our interests. Otherwise the train will leave the station while we are still counting our change.
  7.55 pm
  Mr. Thomas McAvoy: I am sorry that the right hon. Members for Chingford (Mr. Tebbit) and for Worthing (Mr. Higgins), who attacked the members of the Amalgamated Engineering Union, are not here to listen to what I have to say. AEU members have taken action with the genuine intention of reducing their working week. It is the height of hypocrisy for the right hon. Member for Chingford, with the number of jobs that he has, to attack people who are trying to reduce their hours. The more the right hon. Gentleman reduces the hours that he works in the House, the more jobs he takes on outside. The same applies to the right hon. Member for Worthing. I should like to hear how many jobs he has outside the House.
  While I waited to speak, I could not help recalling the atmosphere in the House when the Chancellor presented his Budget in 1988. I recall how the Chancellor was the hero of his Back Benchers as they cheered every concession made for the better-off in our society—among whom, of course, they count themselves. The Chancellor must regret his overuse of the word "prudent" that day because, as he was warned by the Labour Front Bench spokesman, he was sowing the seeds of the recession that the British economy is now facing. In addition, he also had the accolade—if that is the right word—of being described by the Prime Minister as "Brilliant, brilliant, brilliant." Later, she stabbed him in the back, undermining his strategy by using the phrase, "You can't buck the market."
  Because of disagreements, the Prime Minister would now like to make her brilliant Chancellor semi-detached, or even consider him as a future Leader of the House. After all, that is the position in which she placed the latest Cabinet Minister who had the guts to disagree with her—replacing him with a toy poodle who, in his first major role as Foreign Secretary, has been publicly humiliated by his Prime Minister.
  The Government and the Chancellor claim that there has been an economic miracle, but let us look at the record. September's balance of payments deficit of £1·6 billion completes the most disastrous quarter in our history. The deficit for the first nine months of 1989 is the worst ever, at more than £15 billion, and suggests that we are heading

  739
  for an annual rate of more than £20 billion. The Chancellor's forecast of a massive £14 billion deficit has already been exceeded. Industry and employment have been mentioned. The level of imports, in both value and volume terms, is at a record high. Britain's performance in manufacturing continues to deteriorate, with September seeing the highest level of manufactured imports ever at more than £8,000 million.
  I take no joy or satisfaction from those figures. It would be irresponsible and counterproductive for anyone to gloat over the position in which Britain finds itself. It is the British people who are suffering from the present situation, and Labour Members are conscious of that. Conservative Members will try to say that any criticism of the Government is tantamount to treason and that in the interests of the country we should remain quiet. That attitude can only be described as the last refuge of those trying to avoid the consequences of their own actions. It is precisely because we have the interests of the people at heart that we are exposing the folly of the Government's policies and calling for a change of direction.
  The behaviour of the Chancellor and the Prime Minister in relation to the public conduct of the dispute between them has been nothing less than grossly irresponsible. They have indulged their baser instincts, not caring about the damage being done to the perceptions of a united front in running the economy. It cannot be credible for the Prime Minister's personal economic adviser to be making public pronouncements undermining the Chancellor of the Exchequer, especially when the adviser claims the endorsement of the Prime Minister. The Chancellor and the Prime Minister should cease their war of the ego trip and act in the interests of the country.
  We all believe that the Chancellor is ready to go and that he is staying on only so as not to damage the economic credibility, as he sees it, of his Government. It is getting to the stage, however, when any damage to the Government's policies—eventually the country suffers or benefits from those policies—involved in his going will be as nothing compared with the damage done by the Prime Minister's economic adviser, especially when she seems to be using that adviser in a war of attrition against her own Chancellor.
  The Chancellor should be made aware of the effect that his policies are having on people in Scotland, for example. In June to July 1989, unemployment rose by 1·8 per cent. in Scotland and by 1·5 per cent. in the United Kindom. In Strathclyde region—the central belt—it rose by 2·8 per cent. If one takes into account the Government's special measures to fiddle the unemployment figures, the unemployment rate in Strathclyde region would be 21·9 per cent. Strathclyde has published its own study of economic trends, taking employment into account. The Opposition have complained that no mention has been made of employment. Since 1979, manufacturing employment in Strathclyde—I continue to stress manufacturing employment because manufacturing is the wealth creator—is estimated to have fallen by 152,000 jobs, or more than 46 per cent. That is the economic miracle from which Scotland is supposed to have benefited since 1979.
  In my own constituency, we have just had the latest instance of the damage caused by the Chancellor's one-club policy. At the Hoover factory in Cambuslang
  740
  there have been more than 200 redundancies, which are directly due to the high interest rates policy. High rates have always damaged the domestic appliance industry. I can vouch for that as I worked at the Hoover factory in Cambuslang for 13 years and I experienced several periods when redundancies followed immediately from the jacking up of interest rates. I may have reservations about how Hoover is responding, but there is no doubt that the company is having to deal with a difficult economic situation which has been caused by the Government.
  I shall quote one part of the statement from the Hoover management announcing redundancies. It said:
  "The market place situation in the United Kingdom has continued to worsen significantly on an over-all basis."
  Hoover is an important manufacturing company uttering what can only be described as a cry of despair about the state of the market place in the United Kingdom—the very market place which is the object of adulation by Conservative Members. In the judgment of that market place, the economy of the United Kingdom has continued to worsen. The statement also says that Hoover
  "cannot predict the economic climate in which we will operate and obviously this has a very major effect on some of the assumptions and proposals that have been made."
  What a position for a major manufacturing company to find itself in!
  Mr. Morgan: Hoover is a major exporter.
  Mr. McAvoy: Is that the best way ahead? Is that the best way to plan investment and to provide employment? Is that the best way to encourage British industry to respond to the challenge of imports, which are not always subjected to the same scrutiny and checks to which our exports are subjected? To depress our own manufacturing industry simply creates easier trading conditions for our competitors. The balance of trade figures have proved that yet again.
  The report from the Confederation of British Industry says clearly that 19 per cent. of firms reported that the cost of finance was likely to limit their authorisation of capital expenditure over the next 12 months, and that figure was up from only 5 per cent. in April 1988.
  I did not receive it in an envelope, but I happen to have a copy of the Tory brief for today's debate. It says:
  "For the most part companies are in a far stronger financial position today than they were in the early 1980s. The resurgence of company profits has enabled firms to fund more investment".
  Let us look at the contrast between what we read in Tory propaganda and the reality that one sees in the statement by the management of Hoover, a major manufacturing industry in the United Kingdom and, as my hon. Friend the Member for Cardiff, West (Mr. Morgan) said, also a major exporter. The reality is wholly different from the propaganda in the Tory brief. It is significant that I am the first contributor to today's debate to have quoted from that brief—Conservative Members did not even trust or quote their own figures.
  I could continue, but having waited so long to speak, I am aware that other hon. Members are waiting, so I will finish now.
  8.4 pm
  Mr. Julian Amery: In the short time allowed, I want to return for a moment to a point that I made in the Budget debate earlier this year. I suggested that it was time that the Government considered restoring

  741
  to the Bank of England some of the old independence it had until 1948. I thought that that was a rather radical proposal for an elderly Privy Councillor to make, but nobody paid it the slightest attention. Perhaps, like tonight, other hon. Members were in the Smoking Room or elsewhere and the Press Gallery was empty.
  Since that debate, many rather eminent people, who are far more qualified than myself, have taken up the idea, not the least of whom is my right hon. Friend the Member for Guildford (Mr. Howell) who has written a powerful letter to The Times.
  The case for separating the Bank from the Treasury is fairly simple. It rests on the belief that fiscal policy is essentially political, whereas monetary policy should be essentially professional. Fiscal policy is obviously political. It is concerned with taxing and borrowing and with which interests in our society we want to encourage at any time and which we want to restrain, whether in the private or the public sectors. All such matters are essentially political and that is the bread and butter of our normal debates in the House. That must be the responsibility of the Chancellor of the Exchequer of the day and of the Government.
  It could be argued—as I would argue—that when the fight against inflation has top priority, monetary policy should be professional and should be run to some extent independently, as it is in the United States and in West Germany, which has the Bundesbank. Of course, it should not be completely independent. Under the old system, the Governor of the Bank of England was appointed by the Government, like the Archbishop of Canterbury or the Lord Chief Justice, but once appointed he was very much his own man.
  The question I asked in the Budget debate and which I ask with a little more insistence now is whether we should not again consider the desirability of moving towards that. Of course, one cannot do that at once. The Treasury and the Bank have become so mixed up that one cannot get matters back overnight to where they were. But should we begin to think about that? Should it be an item in our next manifesto? I do not know.
  Certain advantages would follow from such a change. I do not for a moment doubt the sincerity of my right hon. Friends the Prime Minister and the Chancellor of the Exchequer in saying that the fight against inflation is their first priority, but the markets are suspicious of Britain. The British public do not have the same fear of inflation as the Germans have or as the public have in some other countries that have endured appalling inflation. Those markets are suspicious, but the change that I propose would be a signal to them of our determination to fight inflation and would show them that control of the currency was not wholly in the hands of the Government, but in the hands of a more or less independent Governor of the Bank. Such a development would also protect the Chancellor and the Government, whose position is rather vulnerable today. I am talking about such a reform taking place in the future, but let us look at the position today.
  If I have read the Mansion house and Blackpool speeches aright, my right hon. Friend the Chancellor is saying that he has two weapons against inflation—the interest rate, which he says must be kept high, and maintenance of a high exchange rate. In effect, my right hon. Friend says, "We will not countenance devaluation." These are a couple of rather difficult horses to ride. If there were an attack on sterling, because of poor figures or some
  742
  other unaccountable development, he would have no option left but to increase the exchange rate. This is a speculator's paradise. I wonder whether it might be more helpful for him to restore authority to the Bank of England and so keep the markets guessing which way we are going—to an increase in interest rates, or to a smaller devaluation? I have never been convinced that it might not have been wiser to let sterling fall a point or two rather than increase interest rates from 14 to 15 per cent. However, that is neither here nor there. It does not affect my argument.
  There is another consideration. As we move towards a convergence of European currencies—we will—I wonder whether we would make more successful practical progress if the Bank of England enjoyed the same autonomy as the Bundesbank in Germany and whether between them they might reach agreement more easily than our Government do with a German Government who do not entirely control the Bundesbank. There is much that they could do in common. The deutschmark is the strongest currency, but the City of London is the biggest place after New York and Tokyo—in some respects it is bigger—where transactions are made. We also have extraordinary experience. Unlike any other country, Britain created a reserve currency of its own, the sterling area. We had a single reserve currency, sterling, and a single reserve bank, the Bank of England, but all the other independent members of the sterling area had their own currency and central bank and there was no attempt to dictate to them what their budgets should be.
  There may be lessons to be learnt here in approaching the second stage of the Delors programme. I am convinced that we must join the EMS. I would like our inflation rate to come down first and exchange controls to be lifted by our potential partners. My good friend, Sir Alan Walters, has said that it is a half-baked scheme. He may be right, but if it is, let us get in and do some more of the baking ourselves.
  8.12 pm
  Mr. Denzil Davies: There were not many memorable phrases in the Chancellor's speech, but I noted one. Alluding to the vast sums of what used to be called "hot money", which are now deposited in London—they need interest rates of 15 per cent. to keep them there—he described it as drawing on the savings of the world. The habitués of the bankruptcy courts have been given another argument—"I was merely drawing on the savings of the world, my Lord"—when they are faced with having borrowed so much money.
  Indeed, the Chancellor needs to draw on the savings of the world. Today we were told—the statement was greeted with relief—that the balance of payments deficit this month was merely £1·6 billion, or an annual rate of almost £20 billion. Imports account for a quarter of all domestic spending, including spending on services, which in the main are not and cannot be imported. Inflation is almost 8 per cent. The bank base rate is 15 per cent. This is despite the Chancellor's cry that he is not a devaluer. In his Blackpool speech—my hon. Friend the Member for Glasgow, Rutherglen (Mr. McAvoy) referred to the splendid background briefing from Conservative central office—the Chancellor said that there was
  "salvation in the rakes progress"—
  a good phrase—
  "of perpetual devaluation".

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  The Chancellor did not say "devaluation"; he said "perpetual devaluation". This is not the time to indulge in textual analysis, but I wonder what he means. Does he believe in a stepped devaluation into the EMS? We have had perpetual devaluation over the past year because the pound has depreciated in value by at least 10 per cent. against most other currencies. Unemployment will soon start to rise again as the recession begins to bite. Inflation will come down and unemployment will go up. Unfortunately, that is the structural problem that we have with the British economy. Yes, inflation can be reduced, but at the cost of closing firms and of rising unemployment.
  The Government have no excuse. They can blame only themselves. They must do so because of a couple of horrendous economic misjudgments and the rapid deindustrialisation of Britain over the past 10 years. The economic error started in 1981 when monetary policy was tightened far more than was needed. As my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) said, it has been estimated that about 20 per cent. of our industrial manufacturing capacity was destroyed at that time, never to be replaced.
  In addition, when the Chancellor took office, he suddenly realised that perhaps the tools of monetary control in his hands were not as perfect as he had thought or as he had been led to believe, so he lurched in the opposite direction. He changed his monetary targets and abandoned some. In fact, he loosened monetary targets. On top of that, the election came along and it was necessary to bribe the electors with tax cuts, and substantial tax cuts were put in place. This caused a pent-up demand in the economy, with the result that British industry could not meet demand and imports flowed in.
  If the British economy and our industrial base had been as strong as that of the Germans or the Japanese, we might have been able to withstand even the Government's economic mismanagement. Unfortunately, we know that that did not happen. Over the past 10 years, we have witnessed the deindustrialisation of Britain. The Conservative party, in government or in opposition, has never had any real interest in Britain's manufacturing industry and its industrial base. Those of us—there are a few left—who between 1974 and 1979 sat on the Government Benches during economic debates listening to the then Opposition spokesmen speaking on economic matters could not help but realise their contempt for any attempt to rebuild, rejuvenate and help our industry. Any measures put forward were greeted with contempt and derision by them.
  At that time, the present Chancellor, Leader of the House, Secretary of State for Trade and Industry, the Prime Minister and others were interested merely in a service economy, a financial economy, a rentier Britain living off foreign income and foreign investments, a tax-saving Britain. In a memorable speech, the present Leader of the House called for a low-tax Britain to bring back all the pop stars who had had to go to California because the British tax base was so high. That was an Opposition who were not interested in industry and who came into government with no industrial strategy. The
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  attitude of the Conservative party to industry was completely different from that of even the Right-wing political parties of western Europe.
  We had something called "supply-side economics". It is included in the Government's amendment. The Chancellor did not mention it. I do not think that one Conservative Member mentioned it. That phrase merely meant tax cuts for the rich. With a fistful of money, apparently the Government were going to invest, create wealth and rejuvenate our industry. That has not happened. I believe that the phrase was not even invented by the Tory party. It was invented by a rather loopy Right-wing American Congress man. Supply-side economics has not done the United States any good. Over the past 10 years of supply-side economics the United States of America has been transformed—if that is the right word—from one of the largest creditor nations in the world to the largest debtor nation. So much for Reaganite and supply-side economics in the United States.
  What has happened in Britain with supply-side economics? We have heard the figures for manufacturing industry. However, over the past 10 years there has been only a 12 per cent. increase in manufacturing industry output and that is little more than 1 per cent. a year increase. Manufacturing industry's share of gross fixed capital formation has fallen under supply-side economics from 18 per cent. in 1979—and that figure was far too low—to 13 per cent. last year. The share of manufacturing in the United Kingdom's gross domestic product is lower than in any other major country in the Western world.
  I accept that there have been some increases in productivity, but most of the fruits of those increases have gone to consumption instead of to investment. We must have lower interest rates to assist industry. I believe that we must join the European monetary system, but I do not believe that that is a panacea. However, it is necessary to have some kind of monetary discipline. The Chancellor would agree with me and he would have liked to have joined the EMS a year or 18 months ago to provide the kind of discipline which his monetary targets have failed to provide. We need a better balance between monetary policy and fiscal policy. If that means raising income tax, so be it. There must be a better balance between the two arms of Government economic policy.
  Many of us have sat through debates on the economy and listened to discussion of monetary and fiscal engineering. We always debate macroeconomic matters. However, all the monetary and fiscal engineering in the world will not retard the dangers of the de-industrialisation of Britain which has been happening for the past 10 years. The Government do not have the will to stop that. They do not have the tools and they do not want to acquire the tools. It will be left to the next Labour Government to stop that de-industrialisation and to try to rebuild our industry. That will be a major task.
  8.22 pm
  Mr. James Arbuthnot: It is always a pleasure to listen to the right hon. and learned Member for Monklands, East (Mr. Smith). In the past few days, I seem to have seen little else but the right hon. and learned Gentleman or one of his colleagues telling us how frightfully badly we are all doing. I had always thought that being a Scot meant being reasonably short on words but long on actions. Having listened to the right hon. and

  745
  learned Gentleman as closely as possible today, I must say that his speech was the exception that proves the rule. It reminded me of the froth at the end of a strawberry milkshake—full of air, of little substance, rather sweet and sickly and unremittingly pink.
  Mr. Graham Allen: Such imagination!
  Mr. Arbuthnot: How very kind!
  The right hon. and learned Member for Monklands, East and his right hon. Friend the Leader of the Opposition have no policies to deal with the problems facing the world. Both are turning gently on their kebab sticks, trying to remember the answers of the 1950s to the problems of the 1950s. They have no idea that the world has moved on, but they have suggested three solutions.
  First, the Opposition believe that the problems could be solved by the return of a Labour Government, with their history or successful management of the economy and a relationship with the International Monetary Fund which became so close as to border on the indecent. Secondly, they suggest a return to virtually fixed exchange rates through the exchange rate mechanism. As many hon. Members have already pointed out today, the problem with that is that our European competitors have yet to abandon exchange controls. Thirdly, the right hon. and learned Member for Monklands, East seems to have suggested the return of credit controls. I was not sure whether he was actually backing gently away from credit controls, but in the absence of any other sensible solution one must assume that a leopard does not change its spots and that what the Labour party said two weeks ago remains its policy today.
  The true voice of the Opposition has been revealed in all its glory. When they do not like something, they decide to ban it. If they do not like it, they want to make it illegal. If someone wants to borrow money, even with the present high interest rates, the Opposition will put a stop to it. Socialism throughout the world is in retreat. The only people left who agree with the Opposition seem to be Herr Honecker and Fidel Castro—and one of those two has resigned. The Opposition have no policies apart from the ephemera of credit controls, which they know could not work without the reintroduction of exchange controls.
  Let us consider the experience of our competitors in Europe. My right hon. Friend the Chancellor of the Exchequer quoted from the Organisation for Economic Co-operation and Development economic survey of the United Kingdom. I shall quote from the OECD survey of France:
  "As in many other OECD countries, the instruments and mechanisms of monetary policy in France have changed considerably as a result of the spate of financial innovations and the reform of financial markets. The complete removal of credit controls in January 1987 helped to make adjustment in the Banque de France's official intervention rates on the interbank market the main instrument of monetary policy."
  Germany does not use direct controls on credit. Spain has controls on bank ratios, but they have not been a success and Spanish interest rates are virtually the same as ours. Italy has credit controls, but it also has an uncompetitive banking system. The Italian controls on credit barely work. The more competitive the banking system, the less effective exchange controls will be. Italy has tried the persuasion method of credit controls, which the right hon. and learned Member for Monklands, East sought to wish on us today, but the Italians had virtually no success with
  746
  that. Even the banks in Italy ignored it. To suggest that foreign banks would take any notice of such suggestions from the Italian Government is bordering on the laughable.
  Credit controls do not work unless there are exchange controls. Would the Opposition renounce the possible reintroduction of exchange controls? If they refused to do that—and we are approaching a time when a Labour Government might conceivably be elected—there might be a run on the pound of a kind never seen before except the run on the mark in the Weimar republic. We might end up going to the shops with a wheelbarrow full of money, only to find that the wheelbarrow is worth more than the money it contains. If the right hon. and learned Member for Monklands, East is now prepared to renounce the reintroduction of exchange controls, however, I have a slightly different vision from that of the wheelbarrow—the vision of a Labour Chancellor as a butterfly collector busily chasing the butterfly of credit with a small butterfly net of credit control. As he wanders around falling desperately over his own feet, he will want to use the blunderbuss of exchange controls, although he promised his mother he would not use it. I fear that if a Labour Government were returned to power we should see a return of exchange controls and the economic disaster that that would entail.
  8.29 pm
  Mr. Pat Wall: One of the Chancellor's most endearing characteristics is his lack of any overweening modesty. He best expressed his view cif his achievements at the 1988 Conservative conference, when he said:
  "The people understandably feel more confidence about their future than they have for decades.
  Everywhere a new spirit is alive—a new confidence, with factories humming, new businesses starting up, busy cranes dotting the skyline."
  He received the typical spontaneous standing ovation at the Conservative party conference led by the Prime Minister, but, possibly even at that time, he was not supported by Sir Alan Walters. He added:
  "The growth of the British economy will go on and on."
  Last year the Chancellor probably wrote his speech on the back of half a dozen seaside postcards in his hotel suite. This year, there was the unedifying spectacle of his scuttling back to his constituency to rewrite his speech, which contained less imagery and self-congratulation. No doubt he again received a standing ovation, but he certainly would not have had the support of Sir Alan Walters.
  It is interesting to look at the economic figures over the period of the right hon. Gentleman's Chancellorship and of the Government's time in office. The right hon. Gentleman said that British factories were humming. In the recession of 1979–82, manufacturing production in Britain fell by 32 per cent. As several of my hon. Friends have pointed out, at least 20 per cent. of industry was laid waste. Only in 1987 did manufacturing output regain its 1979 level. In that period, manufacturing output rose by 38 per cent. in Japan, 25 per cent. in America, 16 per cent. in Italy, and 12 per cent. in West Germany. From 1979 to 1988, economic growth in Britain was only 2·1 per cent. a year, which was the slowest in any nine-year period since the end of the second world war, to end wars.
  The key to that crisis and the situation that we now face is a lack of investment. At 1985 prices, in 1979, investment

  747
  was £10·14 billion a year. In 1982 it was down to £6·35 billion, and in 1988 it rose to only £10·01 billion, scarcely recovering the 1979 position—not much higher than in 1973 and, in real terms, little different from the position in 1950.
  Although manufacturing investment has stagnated over the Tory decade, financial and business investment has doubled. At the same time, we have had a 50 per cent. reduction in infrastructure. The Chancellor spoke about the cranes that dotted the skyline. However, those cranes were not building new factories, schools or hospitals; they were building hotels, leisure centres and speculative offices.
  In her Conservative party conference speech this year, the Prime Minister poured scorn on the previous Labour Government going cap-in-hand to the IMF like a Third world country, but, with the horrifying decay of our hospitals, sewers, water, and rail and tube transport, we are approaching Third world levels. Taiwan spends a greater proportion of its gross domestic product on research and development than Britain does. South Korea spends a greater proportion of its gross domestic product on education and training than we do. A recent article in The Political Quarterly described the Chancellor's predicament as
  "a strategic predicament of staggering proportions with the only real alternative to a trade deficit of £40 billion or more a virtual stop to growth or even an absolute decline in total demand and output in the British economy".
  The Chancellor has an unpalatable choice. If he allowed sterling to fall in line with the views of Sir Alan Walters, it would certainly help exports and make imports dearer, but it would increase inflation and eventually lead to a recession. If the Chancellor continues to increase interest rates to protect the pound and reduce inflation, he will lead us to an even earlier recession. The Chancellor is taking a gamble, hoping that he will create a soft landing by reducing the rate of economic growth and inflation, but avoiding bringing the economy to a halt. That gamble depends on the world economy.
  America has not managed to deal in a real sense with its twin problems of balance of trade and budget deficits. Added to that is the $20 billion which the American Treasury had to use to prop up loan banks, and the leverage bids—the over-extended bids—in the American takeover madness. West Germany and Japan have not greatly reduced their balance of trade surpluses over the past few years.
  The gradual rise in interest rates, not only in Britain but in other economies, means that Third world indebtedness is approaching a trillion dollars because of the change in circumstances. The Chancellor talks about going on and on, but he has been a monetarist, an interest rate cutter, and a man who has savagely increased interest rates, but he is still the same Chancellor. We now have a stop-go economy, stagflation and possible recession.
  British labour costs have risen over the past two years twice as high as those of our major competitors. In 1987, consumer credit including mortgages reached £282 billion, which is more than the total disposable income of wage earners in this country. Personal savings, which in 1981 were 15 per cent. of personal income, are now down to 1·3 per cent. of personal income, and the Chancellor talks about encouraging savings. Since 1979, 100,000 mortgage default repossessions have taken place—an 800 per cent.
  748
  increase under the Tory Government. Sixteen thousand individuals have been declared bankrupt and 170,000 companies have been liquidated.
  That is the new spirit of enterprise which the Government have spoken about. There is a new spirit in Britain, but it is among the Opposition and the working people who have fought back over the past few months despite the managerial counter revolution which the Government have encouraged and despite the reactionary and vicious anti-trade union legislation. More workers were prepared to take industrial action in one week in July than in the whole of 1986. There is a new spirit in this country. Many people—40 per cent.—have never received anything from the Government. They have not had an increase in their standard of living, and their housing benefit, pensions and child benefit have been reduced under this Government. Those who once gained have also been savagely attacked. That means that the Chancellor will go and that there will be a change of Government, and the sooner the better.
  8.39 pm
  Mr. Anthony Beaumont-Dark: There is, of course, no doubt that we have some economic problems at present. Indeed, I cannot think of a time in the history of this country when there have not been some economic problems and it would be nonsense to say that all is now going swimmingly. However, at least my right hon. Friends are dealing with the problems of success. In fairness to Labour Governments, I should say that successive Governments after the second world war had no such problems of success. They had to deal with one failure after another.
  I have sat through most of this interesting debate. Whenever people pick on just one name, I always think that that means that there is a paucity of argument. The name of Alan Walters has stalked this debate like a ghostly mist over the moors. His name has been brought up because those who do not know what else to do think that if they can say that Her Majesty's Government, in the shape of the Prime Minister and the Chancellor, are split, it somehow makes it easier for them to define what to do. It may be true that the Chancellor thinks one thing and that Alan Walters thinks another. However, Alan Walters is only an adviser.
  As a Member of Parliament, one does not have the time to be a partner or a director, so I am called a "consultant" to some businesses. That means that I am an adviser. Every now and again I am asked for advice and it is not taken. If we ever reached a position where as soon as an adviser were appointed everything that the adviser said had to be taken as gospel, no one in his right mind would ever have an adviser. The adviser would become Prime Minister and the Prime Minister would become nothing. If Alan Walters feels that he must disagree, he should shut up because he damages what he is trying to advise.
  As my right hon. Friend the Member for Shropshire, North (Mr. Biffen) said, those who talk about the EMS and the Common Market, which Opposition Members now seem to think is a wonderful witches' brew which will take them into office, should beware. As my right hon. Friend said, Britain's balance of payments with West Germany is nine times worse, so why should being in the EMS suddenly make things so much better?

  749
  I come from the midlands and my right hon. Friend the Chancellor sometimes accuses me of being a Brummie industrialist, as though that is an insult—I do not think that he means it that way.
  The Chief Secretary to the Treasury (Mr. Norman Lamont): He does.
  Mr. Beaumont-Dark: When the pound went to $2·40, industry melted and wilted. When in 1985 the pound went to something like $1·20—heading down to almost $1—manufacturing industry began to blossom. Therefore, I do not go all the way with the Government when they seem to think that the panacea of a high pound will somehow solve all the problems of inflation. When one looks at the figures for the deutschmark, which is the Chancellor's favourite currency, or at the dollar, one finds that it is not true that a high pound against the deutschmark or a high pound against the dollar helps inflation. When there were five deutschmark to the pound, inflation was something like 14 per cent., and when there were three deutschmark to the pound it was 10 per cent.
  Economists are the great plague of our time because they get paid so well to say such nonsense. If one takes 500 economists, one gets 700 opinions and 200 computers. I wish that we had never heard of them. If only common sense could rule.
  I turn now to business men. In my view, a trade deficit of £20 billion matters. I come from a manufacturing area and I do not care what clever people say. I know that a trade deficit of £20 billion cannot go on for ever. What I find most disturbing is that the investment views of West Germany and Japan are so different from ours. In West Germany and Japan the mega-rich are those who make things—the industrialists who have built great manufacturing companies. It is even the same in Italy, but in America and, unfortunately, in the United Kingdom at present the mega-rich are those who make money and who make deals. I advise hon. Members not to believe what anybody says about this because the simple truth is, "If you don't make it, you haven't got it." We should not fall for the charismatic chimera that making money is the same as making goods, because it is not. In the end, money must lead to goods, to the things that people buy.
  We in this country must do the same as the West Germans and the Japanese—let us pray that this day comes—and produce goods so that our mega-rich will comprise more than just a few shopkeepers, property dealers and financiers. Our mega-rich should once again be those who make the goods. This country was at its greatest, as Japan and West Germany are now, when the great rich—apart from landowners who are always rich—were those who made something and built businesses.
  Unless we build something for ourselves, all that we are doing is sucking in other people's goods. That is what is happening at present. It is not the problem of Government alone; it is industry's problem and the financiers' problem. It is no good saying that Governments can solve everybody's problems because, of course, they cannot. Why do British financiers regard a long-term investment as being one of six to 12 months when the Japanese and West Germans regard a long-term investment as one of five to 10 years? The Japanese and the West Germans mean to invest and to build.
  By some form of tax concession, the Government should encourage us to be producers, not consumers. If we
  750
  can encourage people to conserve and to preserve our manufacturing wealth, this country has just as much chance as other nations. We have inventiveness, and people who care and those who are economic and financial geniuses. But what good is that without someone who can make the goods? If we invent things but the Japanese and the West Germans make them, we will end up more and more in debt. Let us turn our thoughts, respect and will to those who make things.
  8.47 pm
  Mr. Giles Radice: The hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) accepted that Britain is now facing serious economic difficulties. However, as we heard from his speech, the Chancellor prefers euphemisms. He talks about a temporary blip and about the British economy catching its breath. At the Mansion House last week, he even blamed the short-term vagaries of the economic cycle. However, as everybody now knows, the reality is that the British economy is dangerously out of balance. Our inflation rate is higher than that of any major industrial country and there is little sign so far of any improvement.
  The other glaring symptom of the imbalance in our economy is our huge balance of payments deficit, which is the largest in our history. The Chancellor has consistently sought to play down the significance of the deficit. According to him, it is merely a temporary phenomenon. He says that it is benign because it is the result of British industry re-equipping and reinvesting. He goes on to argue that in an age of massive international capital movements deficits can be easily financed.
  The trouble for the rest of us is that the markets no longer believe the Chancellor. Why should they? In defiance of the Government's forecasts, the deficit has grown from a rough balance two years ago to a deficit of between £19 billion and £20 billion this year, and even the most optimistic forecasters do not believe that there will be a major improvement next year. Indeed, on present trends we will be running a balance of payments deficit of between 2 and 3 per cent. of GDP well into the 1990s.
  The United Kingdom deficit is not just a symptom of reinvestment by British industry, as the Chancellor argues. nor is it merely due to overheating, although the over-rapid growth of the economy in 1987 and 1988 sucked in a massive flow of imports.
  The major structural problems which are increasingly revealed in our balance of payments are what disturb most of us. Growing import penetration, the weakness of our exports and the massive deficit in manufactured products all suggest that British industry is simply not producing enough of the goods that people want to buy.
  Does this failure really matter? As we are finding out, the short answer is that it matters very much indeed. In a world of global markets, we cannot rely upon international capital to go on financing our deficit indefinitely. Money which comes in can go out again and, sadly, as we shall find out to our cost, it can go out again very rapidly.
  Many hon. Members have consistently warned the Chancellor about the dangers of running a massive balance of payments deficit. The main problem is that it takes control over the shape and timing of economic decision making out of the hands of the Chancellor. Instead of being able to adjust in our own time, we are

  751
  likely to be forced into a process of abrupt adjustment, both to levels of demand and the value of sterling, by the markets.
  I predict that the Chancellor's failure to react to the balance of payments deficit in 1988, when it was still manageable, will force the British economy into a hard landing in 1990, and affect employment, output and growth. I predict that the Chancellor's gamble will fail.
  I agree with the right hon. Member for Worthing (Mr. Higgins) on many things, but, contrary to what he said, we warned the Government of what would happen, of the dangers of inflation and the balance of payments problem. We urged the Government not to make drastic cuts in taxes in the March 1988 Budget and to take a grip on consumption. They did not listen, and now the economy is in a mess. I do not want to say, "I told you so"; I want to draw a lesson for the future.
  The conclusion that should be drawn from the failure of the Government's economic policies is that the prime objective of economic management must be to secure and preserve balance in the economy. A Government must keep a balance between their objectives—low inflation, low unemployment, sustainable growth—and an equilibrium between exports and imports. When one of those objectives is pursued at the expense of others, the economy runs into trouble, as we have seen.
  As my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) has often said, good economic managment is a question not just of keeping a balance between objectives, but of ensuring a proper balance, or mix, of economic instruments. The Chancellor's obsessive reliance on interest rates risks getting the worst of both worlds. To work effectively, it has to bear down heavily on mortgage holders and on business and, as we have seen from the survey published by the Confederation of British Industry today, it also clobbers vital investment.
  Because the strategy takes such a long time to work, it risks being derailed by the markets before it achieves its objective of slowing down the economy. That is why the Chancellor should have been employing fiscal methods and control over bank lending as well as an interest rate policy, and why there should have been a balance between nationally and internationally co-ordinated instruments. Hence the case, which I have long supported, and which has been ably argued by my right hon. and hon. Friends, for joining the exchange rate mechanism of the EMS. We should join as soon as possible, as it would provide greater currency and interest rate stability and could add a useful counter-inflationary discipline.
  A better balance is needed between the short term and the long term. One of the most powerful charges against this Government is their neglect of the long term. The Chancellor has often criticised other people for their short-term outlook, but the Government have mortgaged the country's future to a considerable extent with their poor record on education, training, research and development, the labour market and regional policy. A Government committed to a better structural balance in the economy would have to give a higher priority to this issue.
  I doubt whether the Government are capable of providing the leadership necessary to bring the economy
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  back into balance, particularly as they have allowed it to get so out of control. Once again, it will be the Labour party that has to get Britain out of the mess—as it did in 1964 and in 1974. To judge by the excellent performance of my right hon. and hon. Friends, they are well equipped to provide the necessary leadership, in contrast to that of the Government.
  8.55 pm
  Mr. Philip Oppenheim: Every one of the policies urged upon us by the Opposition in the past 10 years would have exacerbated our demand side problems. They have consistently urged that the Government should spend more, which would have pushed up demand and crowded out private sector investment. In October 1987, the Opposition joined the huge chorus of people urging the Government to cut interest rates. In May 1988, when there was a debate as to whether we should cut interest rates to lower the pound, which many people said was uncompetitive against the deutschmark, the Opposition urged the Government to cut interest rates, which the Government eventually did—although I think that they now recognise that that decision unwise.
  The supply side is far more important than short-term demand. It is worth recognising that our problems on the supply side, in manufacturing industry, are not new but go back at least to the turn of the century. Germany and the United States overtook us in manufacturing output before the first world war. Japan almost overtook us in the 1930s and eventually did so in the 1960s. To blame the present Chancellor for Britain's long-term industrial problems is to blame him for history and for the mistakes of the past. Britain's supply side and manufacturing problems are so deep-seated and have been with us for so many years—probably as long as a century—that it will take more than a decade to turn them round. It will be many years before British industry is capable of competing with the best in the world.
  It is easy for Opposition Members to pose as the champions of manufacturing, but it is worth reminding them that this country's manufacturing output fell under the Labour Government. Under this Government it has risen, and last year it rose by 4 per cent. Those figures tend to get lost in the fuss over the mini stock market crash. People may talk about the decline in our manufacturing industry, but it is worth pointing out that large sectors of that industry have done well. Our aerospace industry is booming, and last year it overtook that of France for the first time in many years to become the third largest aerospace industry of the world after America and the Soviet Union.
  Rolls-Royce, a company which operates close to my constituency and was virtually written off as an industrial basket case in the 1970s and early 1980s, is now booming. It is recognised as a major world manufacturer of high technology engineering and jet engines. Our pharmaceutical industry—another high-tech industry—has also done extremely well and in recent years its exports have overtaken those of West Germany, the United States, Japan and Switzerland to become the largest exporting pharmaceutical industry in the world. For the first time in many years, our share of world exports has stabilised.
  With regard to imports, it is worth bearing in mind what is known as the "balancing item", which is a black hole in the world trade balance worth something in the

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  region of £50 billion. If the effect of that is aggregated across the world's trade balances it substantially reduces the trade deficits of those countries in negative balance.
  I cannot take the Labour party's pose as the champion of manufacturing seriously when it has rigorously opposed every policy designed by the Government to improve the supply side of the economy. The Opposition opposed our reform of the trade unions and they have consistently opposed our attempt to end monopolies and subsidies for industry. They have opposed our attempts to increase competition in the economy, they have opposed our cuts in taxes and they have opposed our attempts to lower public spending as a percentage of GDP so that it does not crowd out private investment so much. Now they tell us that education is vital to our industrial performance, but they opposed our reforms designed to make our education system more disciplined and more geared to the vocational needs of our industry. The Opposition sneer at us when we say that education must be so geared.
  What of the Opposition's policies? Today we have heard that they want us to join the ERM, but they have not told us at what rate they would do so. They have told us that they will abandon any pretence that trade protectionism can work. If they plan to abandon trade barriers, does that mean that they will renounce the multi-fibre arrangement? We all know what Opposition Members will do at the first sign of constituents running to tell them that those awful foreigners are making goods with which they cannot compete—they will put up trade barriers. The Opposition have also told us that there will be a new form of administrative guidance for banks, as though anyone believes that the banks would take any more notice of them than their trade union pals and paymasters did in the 1970s.
  It is also important to consider the industrial policy of the right hon. and learned Member for Monklands, East (Mr. Smith), who is, I believe, a lawyer. He was one of those who urged the Government to drop the proposed General Motors takeover of Land Rover in 1986. What was the result of that industrial policy? General Motors effectively pulled out of United Kingdom van manufacture. It made most of its work force redundant and handed the remainder over to the Japanese company, Isuzu. That outcome was partly thanks to Labour's national industrial champion. the right hon. and learned Member for Monklands, East.
  I know that it is fashionable to compare us with the Japanese. Hardly a Labour spokesman stands up without comparing our performance with the Japanese and without telling us that we must adopt the policies adopted by the Japanese since the war. Those Japanese post-war policies can hardly be called Socialist. The Japanese have extremely low levels of taxation and of public spending. They have not been ashamed of encouraging enterprise and business. They have virtually no nationalised industries and they have denationalised the few that were. Above all, the Japanese have always had a high rate of saving and a sound, vocationally-oriented education system. If, when the history books are written, people say that the Government have made one major mistake and if there is a lesson to be learnt from the Japanese, it is that we should have implemented our education reforms much sooner than we did. Despite the firm action that we have taken to improve our education system, unfortunately, the benefits of those reforms will not be seen for many years.
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  In Japanese schools the children are expected to clean out their classrooms. That has a great effect on the level of litter in Japan and on the cleanliness of the workplace. Anyone who has worked in industry will know that that is important. If the Government were ever to propose such a policy for our school children, it would be met with howls from the Opposition saying that it was terribly inhumane to expect children to do that.
  The other leaf that we could take out of the Japanese book is that, traditionally, the Japanese have taxed savings either at a low rate or not at all. They have followed that policy because they want to encourage savings and because high levels of saving mean a good pool of available investment for industry. Virtually every economy in the West has, on the one hand, heavily taxed savings and, on the other, heavily subsidised and given tax reductions towards consumption. I believe that to cut taxation on savings or to abolish it altogether up to a certain level would do us much more good than the currently fashionable panacea of joining the EMS.
  It is fashionable for Opposition Members to say that it would be a good idea to join the EMS and I shall not argue the rights and wrongs of that, but I know full well—as does every Conservative Member—that if we had gone in 18 months ago and still had economic problems; Opposition Members would claim that those problems were a result of our rash and unwise entry into the EMS tying us to the high interest rate policy of the German Government.
  Today we have learnt that, at best, the Opposition have no policy and at worst, at the very time when the Soviets are dropping their Gosplan industrial planning policy and when virtually every Government in the world bar North Korea, Romania, East Germany, China and one or two others are abandoning planning, the Labour party proposes fresh industrial control and a fresh industrial planning strategy for Britain. Have Opposition Members learnt nothing? Do they not recollect the economic planning board of the 1960s and the National Enterprise Board of the 1970s? Have they forgotten the fiasco of the British Leyland merger, the billions of pounds which were pumped into Concorde and the unwise and unnecessary investment in the British Steel Corporation? Have they forgotten their attempts to set up an office equipment company to rival the world which they called Nexos and which has now been consigned to the history books of the office equipment world?
  Those policies are not part of some new postThatcherite agenda, but a return to the old, discredited pre-Thatcherite agenda which is being abandoned right across the world.
  9.6 pm
  Mr. Rhodri Morgan: In the four minutes available to me I shall concentrate—as we should on this supply day or seminar on the state of the economy—on a couple of facts which should be common between us since they are well established. Perhaps we can discuss their implications for the economic conduct of the Government over the next five to 10 years.
  The trade figures for September were published today. They show that we are still running with a trade deficit equivalent to 4 per cent. of our gross national product, which we can no longer regard as an odd statistical freak. That is one of the largest gaps which any country has had

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  in its current trade this decade. It is a sort of San Andreas fault underneath our economy which has opened up in the past two or three years. We lived in a fool's paradise for many years, believing that we were somehow manufacturing the oil which emerged from the ground under its own internal pressure. This hid the weakness in our trade deficit.
  Now that our oil revenues are about one quarter of what they were at the peak of oil production, because oil is worth only half what it was and we produce only half what we did, we are returning to normal. Can we make as much to sell to foreign Governments and consumers as they make to sell to us? It is perfectly clear that in 1989 we cannot. We have an absolutely colossal trade gap which shows a lot of competitiveness of a kind with which we are familiar in a mild form but which we now have in an acute form.
  I can see the Financial Secretary shaking his head as though what I have said is contradicted by the fact that the economy is growing too fast and that we expanded the economy because we did too much to restimulate it when we misunderstood the October 1987 stock market crash. But that is complete baloney. Every other country overstimulated its economy but they do not have a trade deficit equivalent to 4 per cent. of their GNP.
  I hope that I can kill off Government claims that exports are rising strongly. Of course they are. There has never been a better time to export because world trade is rising strongly. In the past couple of years the economies of Japan, Germany and the United States have been importing and consuming as never before. The fact that our exports are rising, but our imports are rising faster is not due to some strange aberration of British economic policy caused by an overstimulation of the British economy alone after the October 1987 crash.
  Every OECD advanced country stimulated its economy because of fears of a recession after the October 1987 stock market crash. Let us never again hear from Conservative Members the excuse that somehow only this country expanded rapidly after October 1987 and that exports generally have been difficult to find, suggesting that the fact that our exports have been going up represents massive credit to the British economy.
  It has never been easier to sell abroad than it has been in the past two years. Economies abroad have been sucking in imports as they have never done before, as the OPEC decade and a half has expired and as the post-OPEC era has been upon us. As I say, it has been easier for OECD Governments to get their economies and manufacturers to expand. It is a unique factor of the British economy that our competitiveness has undoubtedly worsened, as is evident from the 4 per cent. equivalent of GNP in our trade deficit. We are now weaker than we were 10 years ago in the competitiveness of our economy.
  9.10 pm
  Mr. Gordon Brown: The background to this debate is the worry of industry, small businesses, home owners and low-income families that, after 15 months of the highest interest rates, the worst inflation and the biggest trade deficit of our major competitors, inflation has still been rising, the trade deficit is worsening and interest rates have still been going up.
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  The Chancellor devoted a major part of his speech today to the subject of inflation. The issue, he said, was getting it down. We must ask why it went up. The same Chancellor who told us that the battle was with inflation is the Chancellor who has doubled inflation over the last 15 months. The same Chancellor who told us that inflation was a blip presents us today with inflation at 7·6 per cent., the highest of all our major competitors.
  The same Chancellor who told us that his objective was zero inflation now presents us with a situation in which we have 7 per cent. inflation here, 3 per cent. in Germany, 3·5 per cent. in France and 1 per cent. in the Netherlands. This is the Chancellor who said that he would eliminate inflation. It looks just now that inflation will eliminate him.
  Not only have we the highest inflation in our major competitors, but we have the worst interest rates. Interest rates have risen 11 times, yet still the Chancellor persists in denying the reality of the consequences. High interest rates, he told the Tory party conference and repeated at an interview afterwards, were testimony to the vigour of the economy. The Prime Minister said after that that Britain, as a result of those policies, was stronger than ever. The British economic miracle, they still insist, is intact.
  What are the real problems that people are facing? What are business men and industrialists saying about their prospects? The Chancellor quoted from the CBI, but he did not tell us the main impact of the CBI's message—that manufacturing investment will fall, that order books are falling back and that vital investment to correct inefficiencies is being denied.
  Last year's business man of the year, the head of the Coloroll Group, John Ashcroft, is saying that next year investment in his company will be halved. He says that in terms of what is happening in the United Kingdom now, if this is a soft landing, pass him the bruise cream because the present rates of decline are significant.
  Consider what is being said throughout the country. The West Midlands chamber of commerce comments that the cash flow problems for small businesses are worsening. Birmingham chamber of commerce reports that about 40 per cent. of companies have reduced export orders. Investment in Yorkshire and Humberside, reports the chamber of commerce for the area, "is falling quite rapidly." The Scottish Federation of Small Businesses reports that small business is buckling under the strain.
  Despite all of that, the Chancellor is hamstrung by his obsession with high interest rates, like a gambler obsessed with a system that shows no sign of immediately working and who increases the stakes regardless of the damage that is being caused and regardless of the difficulties that industry faces.
  For those reasons, our policy is to end exclusive reliance on interest rates. We would introduce an autumn statement for investment in our future and we would take steps to deal with the supply side problems that the Government have created. We would rule out tax cuts in the Budget so that we can have proper investment in our future. The Chancellor should act directly on the inflation he has created by refusing to allow higher water, electricity and rail prices and the poll tax to be imposed on this country.
  Our complaint against the Government lies not just in the mistakes of the past two years; it lies in the mismanagement of our oil wealth over the past ten. It is not only that they have pushed up interest rates to levels

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  way beyond those of our competitors, yet still failed to curb inflation; or that we have the worst combination of these indicators of any country in Europe; it is that the Government have failed to create, after the one decade of North sea oil, the long-term stable environment that industry needs for a modern economy of the future. To seek to run a consumer boom without the necessary prior investment was bound to he unsustainable and to lead to the problems that we now face. The solution that the Chancellor has chosen—high interest rates—directly damages the investment that we need. And the tragedy of the Chancellor's position is that he has no greater desire in life than to repeat the mistakes that he has made.
  We know that the Budget surplus that the right hon. Gentleman has is never intended to be used for investment, now or in the future, in training, skills, the regions or innovation. The Budget surplus is to be kept in store to finance exactly the same mistakes that we saw in the past—a give-away Budget, a consumer boom on credit and a further deterioration in our trade deficit with all the predictable consequences for interest rates and inflation.
  Nowhere is the Government's failure to be seen more clearly than in what has happened to the trade balance—the worst quarter in our history, the worst month for imports and a trade gap not only in our traditional industries but in the new high-tech industries of information technology and electronics. Imports of consumer goods are up by four or five times the level of imports of capital goods. The volume of imports is up by twice as much as the Chancellor's forecast in the Budget.
  What does the right hon. Gentleman claim now? Does he still claim that a trade deficit approaching £20 billion for the year is a result of freak figures—his first explanation? Does he still define it as of no consequence? Does he still say that it gives no cause for concern? Does he still repeat, now that it is approaching £20 billion, that the trade deficit is a second order problem? Does he still insist that it is self-correcting and easily financed? How many of the Chancellor's previous statements are now inoperative? The truth is that he cannot admit that there is a problem because he has no solution to it, and he cannot admit that the gap has not widened because we have had a supply side transformation, because there has been none.
  Having denied industry the necessary stability and subjected it to the uncertainties of rising borrowing costs, having starved it of essential infrastructure and imposed on it all the inefficiencies and absurdities that flow from the doctrinaire abandonment of regional, training and innovation policies, what is the Government's view now? Their policy is to abandon Government responsibility for industry when we need a Government who will adopt a policy for all the regions. We need a Government with a strategy for science and technology and for innovation, a Government with a competition policy that restricts the use of junk bonds in company takeovers.
  Instead, we have a Department of Trade and Industry presided over by a Minister appointed from the Department of the Environment, not to head it up but to close it down—not a Minister but the Official Receiver. This Department, once the responsibility of Gladstone and of Churchill, is to become the retirement home for the Secretary of State for Trade and Industry. When all those working breakfasts of the previous incumbent have been cancelled and the glossy brochures have been pulped, when the PR men have been sent to the Department of Health for the next campaign, what will be left of the
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  Department of Trade and Industry and of the Government's responsibility to industry? The Secretary of State, the right hon. Member for Cirencester and Tewkesbury (Mr. Ridley), will be seated alone at his desk: no in-tray, no out-tray, just an ash tray.
  If the economy of the 1980s in Great Britain is as Ministers claim it is, if all the countries of the world are following our example, as the Chancellor tells us they are, why are not the Japanese closing down Miti, their department of industry, why are not the French abandoning their policy of encouraging centres of excellence, why are not the Germans abandoning regional policy and leaving the Ruhr to market forces? What other nation on earth runs down regional policy or its policy for science and for innovation? Blind to the needs of industry, deaf to the claims of small business and insensitive to the damage done by high interest rates, the Conservative party—the party of high interest rates—can no longer even pretend to claim to be the party of industry.
  Where is the Chancellor in all this? The man who has been bestriding the world stage for the past few years, boasting of his successes and their applicability to countries abroad, now tells us that the German economic miracle is one of the past but that ours is of the present. How does he see himself now, when his day begins with a begging telephone call to the president of the Bundesbank and continues with telexes to the Bank of Japan and with calls to the Federal Reserve Bank? The Chancellor who once boasted of his economic successes around the world is now reduced to ringing around the central banks for handouts to support his currency at the mercy of speculators.
  What is his policy now? The man who considered every nuance of the M3 figures unceremoniously abandoned their publication this summer after 10 years. The man who said that interest rates were to be set by the markets in 1979 now insists on setting them himself. He is the man who has cast aside all the Right-wing theories of the Adam Smith Institute in which he has successively lost faith. The only invisible hand in which he now believes is that of Professor Sir Alan Walters, who is making the decisions at No. 10 Downing street.
  What do we know of that mysterious figure of influence? He was once a member of the Centre for Policy Studies—the think tank for the Prime Minister—financed by the now Lord Joseph, and is a member of the American Enterprise Institute financed by American business—a think tank for such impressive figures as Vice-President Dan Quayle.
  For a few years Sir Alan was also a member of the standing committee of the Global Economic Action Institute, financed—as The Sunday Times revealed—by the Unification Church of the Reverend Sun Myung Moon; in short, the Moonies. Is it the case that our economic policy is no longer under the influence of monetarism but under that of Moonie monetarism? Have we, in six or seven years, moved from punk monetarism to Moonie monetarism?
  Let us consider the Chancellor's difficulties. Many lonely, sad and embattled people labour under the delusion that their thoughts are being influenced by the. Moonies next door. But, for the Chancellor at No. 11 Downing street, sadly, such fears may be thoroughly well grounded. I assure the right hon. Gentleman that he is not paranoid. They really are out to get him.

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  What does Sir Alan do? Much has emerged from documents from America. Leaving aside the question whether a truimphalist autobiography by Sir Alan Walters is yet in order, the Chancellor will be interested to know that he described himself in his recent article as
  "a natural leader for the monetarist revolution in the United Kingdom."
  The Chancellor may also be pleased to notice his description of the man who brought about
  "immense changes in monetary and fiscal policy."
  That was not the Chancellor, but Sir Alan himself. Not that he is ungenerous in his articles. Although much of the credit goes to himself, the rest goes to what Sir Alan describes as the real architect of Britain's economic renaissance—the Prime Minister.—[HON. MEMBERS: "Go on—smile."] I am sorry that the Chancellor finds none of that amusing, but Sir Alan says of his own role as an economic adviser:
  "My role was defined by the Prime Minister with the words, 'You know what you can do best and you know what needs doing' but the Prime Minister and I agreed that I would be most effective at her elbow in No. 10."
  That is a proximity that the Chancellor might find not only unlikely but quite dangerous.
  Mr. Tebbit: The hon. Gentleman verges on the edge of boring the House by reading extracts from newspapers and articles which any of us could read. In his last 10 minutes, would he like to turn his attention to what we cannot read and do not know about, the Labour party's alternative policy—if there is one?
  Mr. Brown: I do not think that the right hon. Gentleman was here when I outlined the main points of Labour's alternative policy. I can tell the right hon. Gentleman that it might be difficult for him to get hold of the article "A Life Philosophy" by Sir Alan Walters because the institute which has produced it tells us that on the instructions of No. 10 Downing street it is not to issue any more copies.
  Mr. Tebbit: Is the hon. Gentleman allowed to issue any copies of Labour's policy or to tell us how it would impose credit controls?
  Mr. Brown: Perhaps the right hon. Gentleman has not seen the Labour party policy review document. If he cares to pay £2·50 for a copy he will receive one.
  The Chancellor knows that even if Sir Alan goes a bigger problem remains—the Prime Minister. Having signed the Madrid agreement on European monetary co-operation, she obviously spent subsequent months backtracking on it in the same way as she signed the Commonwealth conference agreement and immediately repudiated it. The Chancellor should be warned about what will happen if he goes to Europe for the next summit and reaches agreement on European monetary cooperation. Having successfully negotiated an agreement, he will no doubt find that barely has the ink dried when the Prime Minister will descend from her aircraft at London, call the press together and declare another triumph of diplomacy and another great success in international negotiations. She will say, "In my hands I have two pieces of paper, the official agreement and the official repudiation." Not a Minister will stand up and tell her that she is wrong.
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  The Government are prepared to make the consumer pay with higher prices, the pensioner with an inadequate pension, and whole communities with deteriorating public services. They are prepared to make 7 million mothers and 12 million children pay by freezing child benefit. I can think of no parallel this century. Top salaries have risen and dividends and executive perks are greater than ever, but the Government have done little to mitigate child poverty and the poverty of millions of people. They are destroying the pretence of ever being called the party of the family.
  What about home owners? Two million have lost £80 per month as a result of the increase in the mortgage interest rate and 4 million are worse off by £50 a month. The teacher with the typical mortgage is worse off by about £80 a month and the engineer by about £100. What does the Conservative party say? Why is there no apology, word of regret or sympathy for people with such problems? I have here a copy of the Conservative party's research department document called, "Politics Today". It is about the economy and contains questions and answers. Needless to say there are more questions than are answered in the document.
  The Government say that they are committed to extending home ownership, but the following question caught my eye. It says:
  "Aren't its high interest rate policies crippling countless homeowners especially families and first buyers?"
  After two paragraphs we get to the heart of the answer. It says:
  "Yet though higher interest rates do increase costs for borrowers, including mortgagors, research evidence shows that there is no link between levels of interest rates and the number of people unable to cope with their mortgage payments."
  There is "no link" but the numbers of people in arrears of two months or more have risen from 240,000 to nearly 400,000 this year. When the Governor of the Bank of England has said that there is a link, when the Building Societies Association has produced research showing that there is a link, the Conservative party tells worried home owners that there is no link between high interest rates and the arrears of many people. Can the arrears be blamed on poor housekeeping and bad budgeting? On what does the Conservative party blame the rising amount of arrears over the past year? That is a lie that even the Chancellor might have been unable to sustain in the heady atmosphere of a Blackpool audience in that conference hall.
  These are the people who budgeted on the Government's claim that there was an economic miracle, who were told to believe that there was a transformation, and who were encouraged in the view that Britain's prospects and theirs were transformed. These are the people who are being dismissed by the Chancellor with the words, "Cut back on something else." There is no sympathy, no apology and no regret. People are told that arrears have nothing to do with high interest rates. Now they are being told by Ministers that it is nothing to do with them and there is nothing that they can do about it. Ministers deny all responsibility and will walk by on the other side. That is the prerogative of the Pharisee down the ages.
  First, the Government abandoned the pensioners, then they abandoned the unemployed. Then then neglected the low paid, then they froze child benefit. Now they have betrayed industry, small businesses and home owners. Soon there will be no one left to betray. The Conservative

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  party has had 10 years. It has squandered the oil revenues, wasted the opportunities, mismanaged the economy and failed Britain in the 1980s. The 1990s belong to Labour.
  9.31 pm
  The Chief Secretary to the Treasury (Mr. Norman Lamont): I agree with the hon. Member for Dunfermline, East (Mr. Brown) on one point, and that is that the main issue in the debate is inflation, why it has picked up and what should be done about it. It was interesting that, when inflation should be the main problem in our minds, both he and the right hon. and learned Member for Monklands, East (Mr. Smith) spent only a relatively short time in their speeches dealing with it. We all know why—because they have no policies for inflation. They know that the record of the Labour party in government was catastrophic, and on the evidence of the speeches that we have heard today it has no policy for inflation now.
  Why has inflation increased in the last year? The hon. Member for Dunfermline, East sought to place the blame on top rate tax cuts. According to the Labour party, most of the evils in the world stem from that. However, when we have had a budget surplus for two years running, it is stretching the imagination to suggest that tax cuts worth £3 billion could cause a surge in inflation in an economy with a gross domestic product of some £500 billion. That does not make sense; it does not add up.
  The origins of our inflation must be deeper than that, and part of the explanation lies in the loosening of monetary policy in the wake of the stock market crash. We were facing a situation that had not been seen anywhere for over 50 years, and everybody, including the Labour party, was unanimous in believing that the appropriate thing to do was to lower interest rates. With hindsight, it is clear that the stock market crash had no lasting effect on demand, but that was not clear at the time. Furthermore, even with hindsight, we cannot be sure that there would not have been a severe impact on confidence if we had not reduced interest rates when we did, with the full support of the right hon. and learned Member for Monklands, East.
  Our policy was also part of a co-ordinated international move. That is why there has been a rise in inflation in the United Kingdom and worldwide. If we take the seven major industrial countries as a whole, inflation is around its highest level for five years. That reflects the action that was taken here and elsewhere. It reflects also the acceleration in growth that we have been seeing throughout the world. Opposition Members may not like it, but the true comparison when measuring inflation here and elsewhere is achieved by removing mortgage interest payments That is done in other countries. From February 1988 to May 1989, inflation, excluding mortgage interest payments, rose in the United Kingdom by 2·5 per cent. In the same period, inflation in Germany rose by 2·2 per cent. In Japan, the rise was 2·2 per cent. and in Italy, where inflation both now and then was and is higher than in Britain, the rise was 1·9 per cent.
  The reason why inflation affected Britain somewhat more than other countries is that we had been enjoying growth for seven years. We did so at a higher rate and for a longer period than other countries in the rest of Europe. Our economy was no doubt nearer to capacity and the inflationary pressures were therefore greater. We cannot expect Opposition Members to understand this. They
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  never had to deal with the problems of an economy growing too fast. All that they ever had to deal with were the problems of a thoroughly stagnant economy.
  Mr. Morgan: We all note with interest the Minister's attempt to award the Government innocence by association, by trying to draw in the fact that other countries have experienced an increase in inflation, especially OECD countries. In his attempt to produce innocence by association, can he name any half year, any year or any quarter of any year in which the British inflation rate under this Government has been near or below the OECD average?
  Mr. Lamont: As my right hon. Friend the Chancellor of the Exchequer said, throughout the Government's term of office the inflation differential between Britain and the EEC has been a fraction of what it was when the Labour Government were in power.
  Although inflation is the most pressing problem that we face, we heard no policy advocated by the Opposition to deal with it. That is remarkable. The hon. Member for Dunfermline, East seems to think that investing public money is somehow an anti-inflationary policy. That is the strangest anti-inflationary policy that the world has ever heard of, and one that will not impress the financial markets.
  There are only three ways of dealing with inflation: direct controls on pay and prices, which the Opposition are against; monetary policy, the mere mention of which makes them shiver in their bones; and taxation, which we all know is their anti-inflationary policy. They are always itching, always wanting and always about to increase taxes.
  The right hon. and learned Member for Monklands, East made a tremendous amount of the current account deficit. The deficit is not a reflection, as deficits were in the past, of an uncompetitive economy. It is much more a reflection of the excess demand and inflation which is the main and key problem. As demand slows down, the current account will improve. Inevitably it will take time for the slow-down in the high street to work through to stocks, lower production orders and imports. Likewise it will take time for exporters to divert orders from the easy and expanding home market, as conditions tighten, into the international market. Just as the boom last year diverted orders from abroad to the home market, as our economy slows down we shall see orders diverted overseas.
  That the current account deficit is a product of excess demand is, with great respect to the point made by the hon. Member for Cardiff, West (Mr. Morgan), shown in the export figures. If our current account deficit were largely the result of a loss of competitiveness, we would not be seeing anything like the rise in exports that we are currently seeing and that we have been seeing since the Government tightened monetary policy at home.
  In the three months to September, exports rose by more than 13 per cent. in value and by more than 8·5 per cent. in volume. That shows that British exports are competitive and that the current account deficit is largely a product of excess demand rather than lack of competitiveness.
  My hon. Friend the Member for Amber Valley (Mr. Oppenheim) referred to the statistics for our share of world trade, which Labour Members have mentioned. For decades, our share of world trade has been falling. It stabilised in the 1980s right up to 1987 and deteriorated in

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  1988 as we had excess demand in our economy. But this year the performance of our exports is good and all the signs are that our share of world trade will stabilise again.
  I have talked about the problems that fast growth has created for us, but my hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) was right to remind us that the very fast growth that we have had, the fact that we have been top of the growth league in the 1980s when we were bottom in the 1960s and the 1970s, has been an enormous advantage to the British people. It has meant that we have had more to invest in the public services that so concern the hon. Member for Dunfermline, East, and it has meant that we have had a dramatic rise in living standards.
  The hon. Member for Dunfermline, East made a remarkable claim. He said that the Government have now abandoned the unemployed. Some statistics have just been published which show that in the past year unemployment has fallen faster than in any other major country. We hear a lot about international comparisons on inflation, but we do not hear comparisons on unemployment. We used to hear them a few years ago, but the United Kingdom unemployment rate is now almost two thirds of the EC average and, more importantly, youth unemployment has also fallen sharply. The OECD figures for the United Kingdom show that the United Kingdom unemployment rate for under 25-year-olds is only about half the EC average. Why do not Labour Members welcome that and face the facts?
  Mr. Brian Wilson: Since the Minister had the impertinence to mention youth unemployment, will he recognise that one fifth of the total fall in all unemployment in the past year has been achieved by the simple expedient of removing unemployed 16 and 17-year-olds from the register by depriving them of the right to claim benefit? That is the truth of the matter, and to claim those 16 and 17-year-olds as a trophy is obscene.
  Mr. Lamont: The hon. Gentleman is talking nonsense. The fall in unemployment has been due to the expansion of our economy. We need only to look at a newspaper to see that there is a tightening market for young people and that many employers cannot get young people.
  Labour Members also suggest that the acceleration in inflation and the deterioration in the current account mean that nothing has changed in the British economy; that we have simply moved to a situation where the old familiar constraints apply every time that we try to expand our economy; that nothing has changed in the supply side. It is travesty to say that nothing has changed. An article in The Economist two weeks ago pointed out that the sort of sudden surge in demand that we have had in the past two years would, in previous decades, have caused much higher inflation and that what we have seen in the past year has underlined the flexibility and the ability of British industry to respond to the increase in demand that we have had.
  There has been a change on the supply side and the results of our policy speak for themselves. My right hon. Friend the Member for Chingford (Mr. Tebbit) referred to the dramatic and remarkable changes in the British motor industry, which was written off when the Labour party was in power. My right hon. Friend the Member for Chingford
  764
  and my hon. Friend the Member for Croydon, South (Sir W. Clark) also referred to the remarkable growth in investment. Business investment is now at an all-time high as a proportion of gross domestic product. Is that not a change which the Labour party should welcome? Investment has also been growing twice as fast as consumption. When the Labour party was in government, investment was growing at one eighth of the rate of consumption. Is that not a significant change, and is that not a change that the Labour party should welcome if it is really prepared to face the facts?
  British industrialists and British business men are taking the long view because they have confidence in this country and they have confidence that our growth will continue. It is nonsense to say that nothing has changed. Plenty has changed and our economy is much stronger than it was 10 years ago. That is well recognised outside this country, even if Opposition Members stubbornly refuse to acknowledge it.
  The right hon. and learned Member for Monklands, East put forward the usual arguments today for credit controls. We are told that credit controls would be a painless alternative to increases in interest rates. It is disappointing that the right hon. and learned Gentleman does not know rather better than that. I have read in the newspapers that he and his hon. Friend the Member for Dunfermline, East have been dressed up in their pinstripes by Mr. Mandelson, sent round the central banks of Europe and wined and dined, but unfortunately the wining and dining in the central banks has been a bit too good. The right hon. and learned Member for Monklands, East does not really understand how monetary policy operates, either in Germany or in France. When the hon. Member for Dunfermline, East talks about reserve ratios and the German and French use of them, he should know that that is merely the way in which those countries create the money market shortages to put interest rates up. That is not at all surprising because if credit controls work and make credit scarce they put up interest rates, and that has been the effect.
  We heard a new twist today from the hon. Member for Dunfermline, East, who said that he wanted a voluntary arrangement between the banks and the Government. He seemed shocked that my hon. Friends were no more impressed by this solemn and binding undertaking than they were by the solemn and binding undertakings entered into by previous Labour Governments. A voluntary agreement between the Government and the banks would, of course, have no chance of working in a world in which there were no exchange controls. As my right hon. Friend the Member for Chingford said, to have such an agreement would merely leave people exposed to the blandishments of offshore lenders, and we have quite a number of problems with offshore lenders as it is.
  The right hon. and learned Member for Monklands, East seemed surprised that my hon. Friends thought that the banks were not likely to agree to his proposition. My hon. Friends are entirely realistic. In the competitive international world of the City today, it is sheer lunacy and fantasy to imagine that the City of London could remain competitive and expose itself to competition from offshore lenders in the way that the right hon. and learned Gentleman described.
  Mr. Robert Hughes: I am grateful to the Chief Secretary for giving way. As he has had an

  765
  emotional 10 minutes, I shall give him time to calm down and think carefully about the answer to my question. What is the Chief Secretary actually saying? Is he saying that if the balance of payments and trade position deteriorate, and if there is a run on the pound, all he and the Chancellor will do will be further to increase interest rates?
  Mr. Lamont: The hon. Gentleman does not come to economic debates often. If he did, he would know that we have not only a tight monetary policy but the tightest fiscal policy of any country.
  We have heard much from the Labour party about the plight of home owners. Of course, I accept that higher mortgage rates, although necessary to fight inflation, may cause difficulties for those who have recently taken out mortgages. The figures quoted by the hon. Member for Dunfermline, East and the right hon. and learned Member for Monklands, East on the plight of those with mortgages greatly exaggerated the problem. The hon. Member for Dunfermline, East might have had the grace to mention that the rise in disposable income over the past two years would have dwarfed the increase of £90 a month that he chose to put forward in his distorted example. Over the past two years, take-home pay for an average married couple has risen by over £150 a month. Of course there are problems, but they should be considered in that context.
  Labour's conversion to home ownership would be convincing if we could believe in it, but the Labour party is the party that has fought the right to buy and the party under whose leadership councils daily obstruct tenants' efforts to exercise their rights. It is the Labour party that wants millions of permanent tenants to remain dependent on the Government.
  We know from the comments of the hon. Member for Dagenham (Mr. Gould) on "The Walden Interview" on 15 October what ideas Labour is toying with for home owners. The hon. Gentleman talked about controls on the building societies and on lending in relation to people's incomes. To be fair to him, he made it clear that he would not apply those policies to new home owners, but he went on to say:
  "Oh, this is very clear, the people who would be hit but only in prospect, I mean they would be … fully warned and we would be fully alert to the change that had occurred in the interest of the national economy … would be those who were trading up, those who over recent years and again I say, I've done it myselr—
  that was decent of him—
  "who buy, who move for one reason or another and find that because of asset inflation, the availability of this form of credit that it is possible to buy a more expensive house".
  Now we know: if a person lives in a house he should make sure that he likes it, because it will be difficult to move under the policy put forward by the hon. Gentleman.
  Labour Members have told us that the exchange rate is at the heart of economic policy. The right hon. and learned Member for Monklands, East spent a large part of today talking about Professor Walters. Without him, I do not know what the right hon. and learned Gentleman would manage to make speeches about. If Professor Walters did not exist, he would have to be invented. As the right hon. and learned Gentleman believes that the exchange rate policy is at the heart of economic policy, and as he believes that there is some ambiguity and lack of clarity in the Government's policy, I am sure that he must therefore be confident that the Labour party's policy on EMS is crystal clear.
  766
  What is the Labour party's policy? The hon. Member for Dunfermline, East has been on a tour of the central banks of Europe. He has had discussions with eminent central bankers. He has come back and told us that there is a possibility that Labour will join the EMS. Labour is eager to join the EMS, provided certain conditions are satisfied. The trouble is that those conditions are about as long as the Labour party's constitution and just about as interesting. Labour is prepared to join the EMS provided that, first, there is a strategy for balanced growth in the Community; secondly. there are more structural funds; thirdly, there are more regional funds; fourthly, there are more swaps; fifthly, there is an EEC-wide trade policy; and, sixthly, the deflationary bias of the system is removed. The Labour party's position is crystal clear, is it not?
  The most interesting statement was that the Opposition want more swaps within the EMS. Normally it takes a Labour Government two years before they go to the IM F and line up their creditors. Because the right hon. and learned Member for Monklands, East is prudent and cautious, he is doing that well in advance.
  Most puzzling of all, the Opposition propose the removal of the deflationary bias in the EMS. I thought that the whole purpose of the EMS was that one currency could be tied to another so that inflation rates converged towards those of the low inflation countries. That is the main point of the EMS, and that is what the right hon. and learned Member for Monklands, East wants to remove. He does not want to join the EMS. He wants to drive a coach and horses through it.
  The right hon. and learned Member for Monklands, East spoke at great length about the views of Professor Walters on the EMS. However, he has not contrasted the different views among his fellow Opposition Members who are not part-time advisers, but members of the shadow Cabinet. I will contrast those views now. The right hon and learned Member for Monklands, East said:
  "We see advantages in the stability that membership of EMS could achieve for the currency in a very volatile world."
  The hon. Member for Sedgefield (Mr. Blair) has said:
  "We should treat with extreme caution claims about stability which membership would bring to our currency … I do not believe that there is compelling evidence that long-term stability had been brought to the exchange rate currencies in the EMS."—[Official Report, 29 January 1986; Vol. 90, c. 988–89.]
  The hon. Member for Dagenham said:
  "For sterling, EMS membership would actually mean a reduced ability to maintain a particular parity against the dollar. Nor is there any evidence that exchange rate stability of itself would necessarily be of great help to our economy. It is relatively easy to hedge against short-term volatility."
  The right hon. and learned Member for Monklands, East has had the cheek to tell us that Government policy is disunited because a part-time academic adviser to the Government has expressed a view about the EMS. However, what does the right hon. and learned Gentleman say about the views expressed by his hon. Friend the Member for Dagenham?
  The hon. Member for Dagenham was once an academic, but, as far as I know, he is not now a part-time adviser to the Labour party. He is a fully paid up member of the Labour party and a member of the shadow Cabinet. How can the right hon. and learned Member for Monklands, East maintain the fiction that the Labour party has a policy on the EMS which contrasts with the

  767
  Government's policy or claim unity against disagreement? That is absolute nonsense and rubbish, and the right hon. and learned Gentleman knows it.
  The hon. Member for Dagenham has expressed his total opposition to the EMS. He declined to answer questions when he appeared before the Treasury and Civil Service Select Committee. He said that it would be inappropriate for him to reply, in his words,
  "given my general hostility to the prospect of full membership of EMS."
  How can Opposition Members talk about Professor Walters? Before they do that again, they should sort out their own policies and attitudes.
  We have heard no policies from the Labour party. It was like the Labour party conference—everyone was waiting for the big idea, but we did not get it. The big idea was a little idea. We did not really get any idea at all. All we have seen is the big vacuum. We were told to meet the challenge and to make the change. We know what we would be making the change from. We have certainly been given no indication to what we would be making the change.
  It appears that the Labour party simply stands for what it thinks people will fall for. That is its policy. It reminds me of what used to be said about an unsuccessful Republican candidate for the American presidency—"At least with him you know you don't know where you stand." That is exactly how it is with the Labour party. We know what the big idea is. The big idea is one small step for the right hon. Member for Islwyn (Mr. Kinnock), but it would be one gigantic, catastrophic step for the British people and the British economy.
  Opposition Members have today exposed all the divisions in their shadow Cabinet. We are grateful to the hon. Member for Dagenham. He may be an embarrassment to the Opposition, but he is of service to the country because he is the only one who lets us see anything more than the Mandelson puppet show. The Government have courage. They will bring down inflation, and they deserve the confidence of the House.
  The Parliamentary Secretary to the Treasury (Mr. David Waddington) rose in his place and claimed to move, That the Question be now put.
  Question, That the Question be now put, put and agreed to.
  Question put accordingly, That the original words stand part of the Question:—
  The House divided: Ayes 208, Noes 306.

  Division No. 333]

  [10 pm

  AYES

  Abbott, Ms Diane

  Bell, Stuart

  Allen, Graham

  Benn, Rt Hon Tony

  Alton, David

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

  Anderson, Donald

  Bermingham, Gerald

  Archer, Rt Hon Peter

  Bidwell, Sydney

  Armstrong, Hilary

  Blair, Tony

  Ashley, Rt Hon Jack

  Blunkett, David

  Ashton, Joe

  Boyes, Roland

  Banks, Tony (Newham NW)

  Bradley, Keith

  Barnes, Harry (Derbyshire NE)

  Bray, Dr Jeremy

  Barnes, Mrs Rosie (Greenwich)

  Brown, Gordon (D'mline E)

  Barron, Kevin

  Brown, Nicholas (Newcastle E)

  Battle, John

  Brown, Ron (Edinburgh Leith)

  Beckett, Margaret

  Bruce, Malcolm (Gordon)

  Beith, A. J.

  Buchan, Norman

  768

  Buckley, George J.

  Janner, Greville

  Caborn, Richard

  Johnston, Sir Russell

  Callaghan, Jim

  Jones, Barry (Alyn & Deeside)

  Campbell, Menzies (Fife NE)

  Jones, Ieuan (Ynys Môn)

  Campbell, Ron (Blyth Valley)

  Jones, Martyn (Clwyd S W)

  Campbell-Savours, D. N.

  Kaufman, Rt Hon Gerald

  Canavan, Dennis

  Kennedy, Charles

  Carlile, Alex (Mont'g)

  Kinnock, Rt Hon Neil

  Clark, Dr David (S Shields)

  Kirkwood, Archy

  Clarke, Tom (Monklands W)

  Leadbitter, Ted

  Clay, Bob

  Leighton, Ron

  Clelland, David

  Lestor, Joan (Eccles)

  Clwyd, Mrs Ann

  Lewis, Terry

  Cohen, Harry

  Litherland, Robert

  Cook, Robin (Livingston)

  Livingstone, Ken

  Corbett, Robin

  Livsey, Richard

  Corbyn, Jeremy

  Lloyd, Tony (Stretford)

  Cousins, Jim

  Lofthouse, Geoffrey

  Cox, Tom

  Loyden, Eddie

  Crowther, Stan

  McAllion, John

  Cryer, Bob

  McAvoy, Thomas

  Cummings, John

  McCartney, Ian

  Cunliffe, Lawrence

  Macdonald, Calum A.

  Cunningham, Dr John

  McKelvey, William

  Dalyell, Tam

  McLeish, Henry

  Darling, Alistair

  Maclennan, Robert

  Davies, Rt Hon Denzil (Llanelli)

  McNamara, Kevin

  Davies, Ron (Caerphilly)

  Madden, Max

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

  Mahon, Mrs Alice

  Dewar, Donald

  Marek, Dr John

  Dixon, Don

  Marshall, Jim (Leicester S)

  Dobson, Frank

  Martlew, Eric

  Doran, Frank

  Maxton, John

  Dunwoody, Hon Mrs Gwyneth

  Meacher, Michael

  Eadie, Alexander

  Meale, Alan

  Eastham, Ken

  Michael, Alun

  Evans, John (St Helens N)

  Michie, Bill (Sheffield Heeley)

  Ewing, Harry (Falkirk E)

  Michie, Mrs Ray (Arg'l & Bute)

  Ewing, Mrs Margaret (Moray)

  Moonie, Dr Lewis

  Fatchett, Derek

  Morgan, Rhodri

  Fearn, Ronald

  Morley, Elliot

  Field, Frank (Birkenhead)

  Morris, Rt Hon A. (W'shawe)

  Fisher, Mark

  Mowlam, Marjorie

  Flannery, Martin

  Mullin, Chris

  Flynn, Paul

  Nellist, Dave

  Foot, Rt Hon Michael

  Oakes, Rt Hon Gordon

  Foster, Derek

  O'Neill, Martin

  Foulkes, George

  Orme, Rt Hon Stanley

  Fraser, John

  Owen, Rt Hon Dr David

  Fyfe, Maria

  Parry, Robert

  Galloway, George

  Patchett, Terry

  Garrett, John (Norwich South)

  Pendry, Tom

  Garrett, Ted (Wallsend)

  Pike, Peter L.

  George, Bruce

  Powell, Ray (Ogmore)

  Gilbert, Rt Hon Dr John

  Prescott, John

  Godman, Dr Norman A.

  Quin, Ms Joyce

  Golding, Mrs Llin

  Radice, Giles

  Gordon, Mildred

  Rees, Rt Hon Merlyn

  Gould, Bryan

  Reid, Dr John

  Grant, Bernie (Tottenham)

  Robertson, George

  Griffiths, Nigel (Edinburgh S)

  Robinson, Geoffrey

  Griffiths, Win (Bridgend)

  Rogers, Allan

  Hardy, Peter

  Rooker, Jeff

  Harman, Ms Harriet

  Ross, Ernie (Dundee W)

  Hattersley, Rt Hon Roy

  Ruddock, Joan

  Healey, Rt Hon Denis

  Salmond, Alex

  Heffer, Eric S.

  Sedgemore, Brian

  Hinchliffe, David

  Sheerman, Barry

  Hoey, Ms Kate (Vauxhall)

  Sheldon, Rt Hon Robert

  Hogg, N. (C'nauld & Kilsyth)

  Short, Clare

  Home Robertson, John

  Sillars, Jim

  Howarth, George (Knowsley N)

  Skinner, Dennis

  Howell, Rt Hon D. (S'heath)

  Smith, Andrew (Oxford E)

  Howells, Geraint

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

  Howells, Dr. Kim (Pontypridd)

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

  Hughes, John (Coventry NE)

  Smith, J. P. (Vale of Glam)

  Hughes, Robert (Aberdeen N)

  Snape, Peter

  Hughes, Sean (Knowsley S)

  Spearing, Nigel

  Illsley, Eric

  Steinberg, Gerry

  Ingram, Adam

  Strang, Gavin

  769

  Straw, Jack

  Williams, Rt Hon Alan

  Taylor, Mrs Ann (Dewsbury)

  Wilson, Brian

  Taylor, Matthew (Truro)

  Winnick, David

  Thompson, Jack (Wansbeck)

  Wise, Mrs Audrey

  Turner, Dennis

  Worthington, Tony

  Vaz, Keith

  Wray, Jimmy

  Wall, Pat

  Young, David (Bolton SE)

  Wareing, Robert N.

  Watson, Mike (Glasgow, C)

  Tellers for the Ayes:

  Welsh, Andrew (Angus E)

  Mr. Frank Haynes and Mr. Allen Adams

  Welsh, Michael (Doncaster N)

  NOES

  Aitken, Jonathan

  Curry, David

  Alexander, Richard

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

  Alison, Rt Hon Michael

  Davis, David (Boothferry)

  Allason, Rupert

  Devlin, Tim

  Amery, Rt Hon Julian

  Dorrell, Stephen

  Amess, David

  Douglas-Hamilton, Lord James

  Amos, Alan

  Dover, Den

  Arbuthnot, James

  Dunn, Bob

  Arnold, Jacques (Gravesham)

  Eggar, Tim

  Ashby, David

  Evans, David (Welwyn Hatf'd)

  Atkins, Robert

  Evennett, David

  Baker, Nicholas (Dorset N)

  Fallon, Michael

  Baldry, Tony

  Favell, Tony

  Banks, Robert (Harrogate)

  Fenner, Dame Peggy

  Batiste, Spencer

  Field, Barry (Isle of Wight)

  Beaumont-Dark, Anthony

  Finsberg, Sir Geoffrey

  Bellingham, Henry

  Fishburn, John Dudley

  Bendall, Vivian

  Fookes, Dame Janet

  Bennett, Nicholas (Pembroke)

  Forman, Nigel

  Benyon, W.

  Forsyth, Michael (Stirling)

  Bevan, David Gilroy

  Forsythe, Clifford (Antrim S)

  Biffen, Rt Hon John

  Forth, Eric

  Blackburn, Dr John G.

  Fowler, Rt Hon Norman

  Blaker, Rt Hon Sir Peter

  Fox, Sir Marcus

  Body, Sir Richard

  Freeman, Roger

  Bonsor, Sir Nicholas

  French, Douglas

  Boscawen, Hon Robert

  Gale, Roger

  Boswell, Tim

  Gardiner, George

  Bottomley, Mrs Virginia

  Garel-Jones, Tristan

  Bowden, A (Brighton K'pto'n)

  Gill, Christopher

  Bowden, Gerald (Dulwich)

  Gilmour, Rt Hon Sir Ian

  Bowis, John

  Glyn, Dr Alan

  Boyson, Rt Hon Dr Sir Rhodes

  Goodhart, Sir Philip

  Braine, Rt Hon Sir Bernard

  Goodson-Wickes, Dr Charles

  Brandon-Bravo, Martin

  Gorman, Mrs Teresa

  Brazier, Julian

  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)

  Buck, Sir Antony

  Greenway, John (Ryedale)

  Budgen, Nicholas

  Gregory, Conal

  Burns, Simon

  Griffiths, Peter (Portsmouth N)

  Burt, Alistair

  Grist, Ian

  Butcher, John

  Ground, Patrick

  Butler, Chris

  Grylls, Michael

  Butterfill, John

  Hague, William

  Carlisle, John, (Luton N)

  Hamilton, Neil (Tatton)

  Carlisle, Kenneth (Lincoln)

  Hampson, Dr Keith

  Carrington, Matthew

  Hanley, Jeremy

  Carttiss, Michael

  Hannam, John

  Cash, William

  Hargreaves, Ken (Hyndburn)

  Chalker, Rt Hon Mrs Lynda

  Harris, David

  Channon, Rt Hon Paul

  Haselhurst, Alan

  Chapman, Sydney

  Hawkins, Christopher

  Chope, Christopher

  Hayes, Jerry

  Clark, Dr Michael (Rochford)

  Hayhoe, Rt Hon Sir Barney

  Clark, Sir W. (Croydon S)

  Hayward, Robert

  Clarke, Rt Hon K. (Rushcliffe)

  Heathcoat-Amory, David

  Colvin, Michael

  Heddle, John

  Conway, Derek

  Hicks, Mrs Maureen (Wolv' NE)

  Coombs, Anthony (Wyre F'rest)

  Higgins, Rt Hon Terence L.

  Coombs, Simon (Swindon)

  Hind, Kenneth

  Cormack, Patrick

  Hogg, Hon Douglas (Gr'th'm)

  Couchman, James

  Holt, Richard

  Cran, James

  Hordern, Sir Peter

  Critchley, Julian

  Howard, Michael

  Currie, Mrs Edwina

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

  770

  Howarth, G. (Cannock & B'wd)

  Patten, John (Oxford W)

  Howe, Rt Hon Sir Geoffrey

  Pattie, Rt Hon Sir Geoffrey

  Hughes, Robert G. (Harrow W)

  Pawsey, James

  Hunt, David (Wirral W)

  Peacock, Mrs Elizabeth

  Hunt, Sir John (Ravensbourne)

  Porter, Barry (Wirral S)

  Hunter, Andrew

  Porter, David (Waveney)

  Hurd, Rt Hon Douglas

  Portillo, Michael

  Irvine, Michael

  Powell, William (Corby)

  Jack, Michael

  Raison, Rt Hon Timothy

  Janman, Tim

  Redwood, John

  Jessel, Toby

  Renton, Tim

  Johnson Smith, Sir Geoffrey

  Rhodes James, Robert

  Jones, Gwilym (Cardiff N)

  Riddick, Graham

  Kellett-Bowman, Dame Elaine

  Ridley, Rt Hon Nicholas

  Key, Robert

  Ridsdale, Sir Julian

  Kilfedder, James

  Rifkind, Rt Hon Malcolm

  Kirkhope, Timothy

  Roberts, Wyn (Conwy)

  Knapman, Roger

  Rossi, Sir Hugh

  Knight, Greg (Derby North)

  Rost, Peter

  Knight, Dame Jill (Edgbaston)

  Rowe, Andrew

  Knowles, Michael

  Rumbold, Mrs Angela

  Knox, David

  Sackville, Hon Tom

  Lamont, Rt Hon Norman

  Sainsbury, Hon Tim

  Lang, Ian

  Scott, Rt Hon Nicholas

  Latham, Michael

  Shaw, David (Dover)

  Lawson, Rt Hon Nigel

  Shaw, Sir Giles (Pudsey)

  Leigh, Edward (Gainsbor'gh)

  Shaw, Sir Michael (Scarb')

  Lennox-Boyd, Hon Mark

  Shephard, Mrs G. (Norfolk SW)

  Lester, Jim (Broxtowe)

  Shepherd, Richard (Aldridge)

  Lloyd, Sir Ian (Havant)

  Shersby, Michael

  Lloyd, Peter (Fareham)

  Sims, Roger

  Lord, Michael

  Smith, Sir Dudley (Warwick)

  Luce, Rt Hon Richard

  Smith, Tim (Beaconsfield)

  Lyell, Sir Nicholas

  Smyth, Rev Martin (Belfast S)

  Macfarlane, Sir Neil

  Soames, Hon Nicholas

  MacGregor, Rt Hon John

  Speed, Keith

  MacKay, Andrew (E Berkshire)

  Speller, Tony

  Maclean, David

  Spicer, Sir Jim (Dorset W)

  McLoughlin, Patrick

  Spicer, Michael (S Worcs)

  McNair-Wilson, Sir Michael

  Squire, Robin

  McNair-Wilson, Sir Patrick

  Stanbrook, Ivor

  Madel, David

  Stanley, Rt Hon Sir John

  Malins, Humfrey

  Steen, Anthony

  Mans, Keith

  Stern, Michael

  Maples, John

  Stevens, Lewis

  Marland, Paul

  Stewart, Allan (Eastwood)

  Marlow, Tony

  Stewart, Andy (Sherwood)

  Marshall, John (Hendon S)

  Stewart, Rt Hon Ian (Herts N)

  Marshall, Michael (Arundel)

  Stokes, Sir John

  Martin, David (Portsmouth S)

  Stradling Thomas, Sir John

  Maude, Hon Francis

  Sumberg, David

  Maxwell-Hyslop, Robin

  Summerson, Hugo

  Mayhew, Rt Hon Sir Patrick

  Tapsell, Sir Peter

  Mellor, David

  Taylor, Rt Hon J. D. (S'ford)

  Meyer, Sir Anthony

  Taylor, John M (Solihull)

  Mills, Iain

  Taylor, Teddy (S'end E)

  Miscampbell, Norman

  Tebbit, Rt Hon Norman

  Mitchell, Sir David

  Thompson, D. (Calder Valley)

  Molyneaux, Rt Hon James

  Thompson, Patrick (Norwich N}

  Moore, Rt Hon John

  Thorne, Neil

  Morris, M (N'hampton S)

  Thornton, Malcolm

  Morrison, Sir Charles

  Thurnham, Peter

  Morrison, Rt Hon P (Chester)

  Townend, John (Bridlington)

  Moss, Malcolm

  Townsend, Cyril D. (B'heath)

  Moynihan, Hon Colin

  Tracey, Richard

  Mudd, David

  Tredinnick, David

  Neale, Gerrard

  Trippier, David

  Nelson, Anthony

  Twinn, Dr Ian

  Neubert, Michael

  Vaughan, Sir Gerard

  Newton, Rt Hon Tony

  Viggers, Peter

  Nicholls, Patrick

  Waddington, Rt Hon David

  Nicholson, David (Taunton)

  Wakeham, Rt Hon John

  Nicholson, Emma (Devon West)

  Waldegrave, Hon William

  Norris, Steve

  Walden, George

  Onslow, Rt Hon Cranley

  Walker, Bill (T'side North)

  Oppenheim, Phillip

  Waller, Gary

  Page, Richard

  Walters, Sir Dennis

  Paice, James

  Ward, John

  Parkinson, Rt Hon Cecil

  Wardle, Charles (Bexhill)

  Patnick, Irvine

  Warren, Kenneth

  771

  Watts, John

  Wood, Timothy

  Wheeler, John

  Yeo, Tim

  Whitney, Ray

  Young, Sir George (Acton)

  Widdecombe, Ann

  Younger, Rt Hon George

  Wiggin, Jerry

  Winterton, Mrs Ann

  Tellers for the Noes:

  Winterton, Nicholas

  Mr. Alastair Goodlad and Mr. Tony Durant.

  Wolfson, Mark

  Question accordingly negatived.
  Question, That the proposed words be there added, put forthwith pursuant to Standing Order No. 30 (Questions on amendments):—
  The House divided: Ayes 302, Noes 205.

  Division No. 334]

  [10.15 pm

  Aitken, Jonathan

  Couchman, James

  Alexander, Richard

  Cran, James

  Alison, Rt Hon Michael

  Critchley, Julian

  Allason, Rupert

  Currie, Mrs Edwina

  Amery, Rt Hon Julian

  Curry, David

  Amess, David

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

  Amos, Alan

  Davis, David (Boothferry)

  Arbuthnot, James

  Devlin, Tim

  Arnold, Jacques (Gravesham)

  Dorrell, Stephen

  Ashby, David

  Douglas-Hamilton, Lord James

  Atkins, Robert

  Dover, Den

  Baker, Nicholas (Dorset N)

  Dunn, Bob

  Baldry, Tony

  Eggar, Tim

  Banks, Robert (Harrogate)

  Evans, David (Welwyn Hatf'd)

  Batiste, Spencer

  Evennett, David

  Beaumont-Dark, Anthony

  Fallon, Michael

  Bellingham, Henry

  Favell, Tony

  Bendall, Vivian

  Fenner, Dame Peggy

  Bennett, Nicholas (Pembroke)

  Field, Barry (Isle of Wight)

  Benyon, W.

  Finsberg, Sir Geoffrey

  Bevan, David Gilroy

  Fishburn, John Dudley

  Bitten, Rt Hon John

  Fookes, Dame Janet

  Blackburn, Dr John G.

  Forman, Nigel

  Blaker, Rt Hon Sir Peter

  Forsyth, Michael (Stirling)

  Body, Sir Richard

  Forth, Eric

  Bonsor, Sir Nicholas

  Fowler, Rt Hon Norman

  Boscawen, Hon Robert

  Fox, Sir Marcus

  Boswell, Tim

  Freeman, Roger

  Bottomley, Mrs Virginia

  French, Douglas

  Bowden, A (Brighton K'pto'n)

  Gale, Roger

  Bowden, Gerald (Dulwich)

  Gardiner, George

  Bowis. John

  Garel-Jones, Tristan

  Boyson, Rt Hon Dr Sir Rhodes

  Gill, Christopher

  Braine, Rt Hon Sir Bernard

  Gilmour, Rt Hon Sir Ian

  Brandon-Bravo, Martin

  Glyn, Dr Alan

  Brazier, Julian

  Goodhart, Sir Philip

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

  Goodson-Wickes, Dr Charles

  Browne, John (Winchester)

  Gorman, Mrs Teresa

  Bruce, Ian (Dorset South)

  Gorst, John

  Buck, Sir Antony

  Gow, Ian

  Budgen, Nicholas

  Grant, Sir Anthony (CambsSW)

  Burns, Simon

  Greenway, Harry (Ealing N)

  Burt, Alistair

  Greenway, John (Ryedale)

  Butcher, John

  Gregory, Conal

  Butler, Chris

  Griffiths, Peter (Portsmouth N)

  Butterfill, John

  Grist, Ian

  Carlisle, John, (Luton N)

  Ground, Patrick

  Carlisle, Kenneth (Lincoln)

  Grylls, Michael

  Carrington, Matthew

  Hague, William

  Carttiss, Michael

  Hamilton, Neil (Tatton)

  Cash, William

  Hampson, Dr Keith

  Chalker, Rt Hon Mrs Lynda

  Hanley, Jeremy

  Channon, Rt Hon Paul

  Hannam,John

  Chapman, Sydney

  Hargreaves, Ken (Hyndburn)

  Chope, Christopher

  Harris, David

  Clark, Hon Alan (Plym'th S'n)

  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

  Coombs, Simon (Swindon)

  Hicks, Mrs Maureen (Wolv' NE)

  Cormack, Patrick

  Higgins, Rt Hon Terence L.

  772

  Hind, Kenneth

  Oppenheim, Phillip

  Hogg, Hon Douglas (Gr'th'm)

  Page, Richard

  Holt, Richard

  Paice, James

  Hordern, Sir Peter

  Parkinson, Rt Hon Cecil

  Howard, Michael

  Patnick, Irvine

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

  Patten, John (Oxford W)

  Howarth, G. (Cannock & B'wd)

  Pattie, Rt Hon Sir Geoffrey

  Howe, Rt Hon Sir Geoffrey

  Pawsey, James

  Hughes, Robert G. (Harrow W)

  Peacock, Mrs Elizabeth

  Hunt, David (Wirral W)

  Porter, Barry (Wirral S)

  Hunt, Sir John (Ravensbourne)

  Porter, David (Waveney)

  Hunter, Andrew

  Portillo, Michael

  Hurd, Rt Hon Douglas

  Powell, William (Corby)

  Irvine, Michael

  Raison, Rt Hon Timothy

  Jack, Michael

  Redwood, John

  Janman, Tim

  Renton, Tim

  Jessel, Toby

  Rhodes James, Robert

  Johnson Smith, Sir Geoffrey

  Riddick, Graham

  Jones, Gwilym (Cardiff N)

  Ridley, Rt Hon Nicholas

  Kellett-Bowman, Dame Elaine

  Ridsdale, Sir Julian

  Key, Robert

  Rifkind, Rt Hon Malcolm

  Kilfedder, James

  Roberts, Wyn (Conwy)

  Kirkhope, Timothy

  Rossi, Sir Hugh

  Knapman, Roger

  Rost, Peter

  Knight, Greg (Derby North)

  Rowe, Andrew

  Knight, Dame Jill (Edgbaston)

  Rumbold, Mrs Angela

  Knowles, Michael

  Sackville, Hon Tom

  Knox, David

  Sainsbury, Hon Tim

  Lamont, Rt Hon Norman

  Scott, Rt Hon Nicholas

  Lang, Ian

  Shaw, David (Dover)

  Latham, Michael

  Shaw, Sir Giles (Pudsey)

  Lawson, Rt Hon Nigel

  Shaw, Sir Michael (Scarb')

  Leigh, Edward (Gainsbor'gh)

  Shephard, Mrs G. (Norfolk SW)

  Lennox-Boyd, Hon Mark

  Shepherd, Richard (Aldridge)

  Lester, Jim (Broxtowe)

  Shersby, Michael

  Lloyd, Sir Ian (Havant)

  Sims, Roger

  Lloyd, Peter (Fareham)

  Smith, Sir Dudley (Warwick)

  Lord, Michael

  Smith, Tim (Beaconsfield)

  Luce, Rt Hon Richard

  Soames, Hon Nicholas

  Lyell, Sir Nicholas

  Speed, Keith

  Macfarlane, Sir Neil

  Speller, Tony

  MacGregor, Rt Hon John

  Spicer, Sir Jim (Dorset W)

  MacKay, Andrew (E Berkshire)

  Spicer, Michael (S Worcs)

  Maclean, David

  Squire, Robin

  McLoughlin, Patrick

  Stanbrook, Ivor

  McNair-Wilson, Sir Michael

  Stanley, Rt Hon Sir John

  McNair-Wilson, Sir Patrick

  Steen, Anthony

  Madel, David

  Stern, Michael

  Malins, Humfrey

  Stevens, Lewis

  Mans, Keith

  Stewart, Allan (Eastwood)

  Maples, John

  Stewart, Andy (Sherwood)

  Marland, Paul

  Stewart, Rt Hon Ian (Herts N)

  Marlow, Tony

  Stokes, Sir John

  Marshall, John (Hendon S)

  Sumberg, David

  Marshall, Michael (Arundel)

  Summerson, Hugo

  Martin, David (Portsmouth S)

  Tapsell, Sir Peter

  Maude, Hon Francis

  Taylor, John M (Solihull)

  Maxwell-Hyslop, Robin

  Taylor, Teddy (S'end E)

  Mayhew, Rt Hon Sir Patrick

  Tebbit, Rt Hon Norman

  Mellor, David

  Thompson, D. (Calder Valley)

  Meyer, Sir Anthony

  Thompson, Patrick (Norwich N)

  Mills, Iain

  Thorne, Neil

  Miscampbell, Norman

  Thornton, Malcolm

  Mitchell, Sir David

  Thurnham, Peter

  Moore, Rt Hon John

  Townend, John (Bridlington)

  Morris, M (N'hampton S)

  Townsend, Cyril D. (B'heath)

  Morrison, Sir Charles

  Tracey, Richard

  Morrison, Rt Hon P (Chester)

  Tredinnick, David

  Moss, Malcolm

  Trippier, David

  Moynihan, Hon Colin

  Twinn, Dr Ian

  Mudd, David

  Vaughan, Sir Gerard

  Neale, Gerrard

  Viggers, Peter

  Nelson, Anthony

  Waddington, Rt Hon David

  Neubert, Michael

  Wakeham, Rt Hon John

  Newton, Rt Hon Tony

  Waldegrave, Hon William

  Nicholls, Patrick

  Walden, George

  Nicholson, David (Taunton)

  Walker, Bill (T'side North)

  Nicholson, Emma (Devon West)

  Waller, Gary

  Norris, Steve

  Walters, Sir Dennis

  Onslow, Rt Hon Cranley

  Ward, John

  773

  Wardle, Charles (Bexhill)

  Wolfson, Mark

  Warren, Kenneth

  Wood, Timothy

  Watts, John

  Yeo, Tim

  Wheeler, John

  Young, Sir George (Acton)

  Whitney, Ray

  Younger, Rt Hon George

  Widdecombe, Ann

  Wiggin, Jerry

  Tellers for the Ayes:

  Winterton, Mrs Ann

  Mr. Alistair Goodlad and Mr. Tony Durant.

  Winterton, Nicholas

  NOES

  Abbott, Ms Diane

  Davies, Ron (Caerphilly)

  Allen, Graham

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

  Alton, David

  Dewar, Donald

  Anderson, Donald

  Dixon, Don

  Archer, Rt Hon Peter

  Dobson, Frank

  Armstrong, Hilary

  Doran, Frank

  Ashley, Rt Hon Jack

  Dunwoody, Hon Mrs Gwyneth

  Ashton, Joe

  Eadie, Alexander

  Banks, Tony (Newham NW)

  Eastham, Ken

  Barnes, Harry (Derbyshire NE)

  Evans, John (St Helens N)

  Barnes, Mrs Rosie (Greenwich)

  Ewing, Harry (Falkirk E)

  Barron, Kevin

  Ewing, Mrs Margaret (Moray)

  Battle, John

  Fatchett, Derek

  Beckett, Margaret

  Fearn, Ronald

  Beith, A. J.

  Field, Frank (Birkenhead)

  Bell, Stuart

  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

  Foster, Derek

  Blair, Tony

  Foulkes, George

  Blunkett, David

  Fraser, John

  Boyes, Roland

  Fyfe, Maria

  Bradley, Keith

  Galloway, George

  Bray, Dr Jeremy

  Garrett, John (Norwich South)

  Brown, Gordon (D'mline E)

  Garrett, Ted (Wallsend)

  Brown, Nicholas (Newcastle E)

  George, Bruce

  Brown, Ron (Edinburgh Leith)

  Gilbert, Rt Hon Dr John

  Bruce, Malcolm (Gordon)

  Godman, Dr Norman A.

  Buchan, Norman

  Golding, Mrs Llin

  Buckley, George J.

  Gordon, Mildred

  Caborn, Richard

  Grant, Bernie (Tottenham)

  Callaghan, Jim

  Griffiths, Nigel (Edinburgh S)

  Campbell, Menzies (Fife NE)

  Griffiths, Win (Bridgend)

  Campbell, Ron (Blyth Valley)

  Hardy, Peter

  Campbell-Savours, D. N.

  Harman, Ms Harriet

  Canavan, Dennis

  Hattersley, Rt Hon Roy

  Carlile, Alex (Mont'g)

  Healey, Rt Hon Denis

  Clark, Dr David (S Shields)

  Heffer, Eric S.

  Clarke, Tom (Monklands W)

  Hinchliffe, David

  Clay, Bob

  Hoey, Ms Kate (Vauxhall)

  Clelland, David

  Hogg, N. (C'nauld & Kilsyth)

  Clwyd, Mrs Ann

  Home Robertson, John

  Cohen, Harry

  Howarth, George (Knowsley N)

  Cook, Robin (Livingston)

  Howell, Rt Hon D. (S'heath)

  Corbett, Robin

  Howells, Geraint

  Corbyn, Jeremy

  Howells, Dr. Kim (Pontypridd)

  Cousins, Jim

  Hughes, John (Coventry NE)

  Cox, Tom

  Hughes, Robert (Aberdeen N)

  Crowther, Stan

  Hughes, Sean (Knowsley S)

  Cryer, Bob

  Illsley, Eric

  Cummings, John

  Ingram, Adam

  Cunliffe, Lawrence

  Janner, Greville

  Cunningham, Dr John

  Johnston, Sir Russell

  Dalyell, Tam

  Jones, Barry (Alyn & Deeside)

  Darling, Alistair

  Jones, Ieuan (Ynys Môn)

  Davies, Rt Hon Denzil (Llanelli)

  Jones, Martyn (Clwyd S W)

  774

  Kaufman, Rt Hon Gerald

  Quin, Ms Joyce

  Kennedy, Charles

  Radice, Giles

  Kinnock, Rt Hon Neil

  Rees, Rt Hon Merlyn

  Kirkwood, Archy

  Reid, Dr John

  Leadbitter, Ted

  Robertson, George

  Leighton, Ron

  Robinson, Geoffrey

  Lestor, Joan (Eccles)

  Rogers, Allan

  Lewis, Terry

  Rooker, Jeff

  Litherland, Robert

  Ross, Ernie (Dundee W)

  Livsey, Richard

  Ruddock, Joan

  Lloyd, Tony (Stretford)

  Salmond, Alex

  Lofthouse, Geoffrey

  Sedgemore, Brian

  Loyden, Eddie

  Sheerman, Barry

  McAllion, John

  Sheldon, Rt Hon Robert

  McAvoy, Thomas

  Short, Clare

  McCartney, Ian

  Sillars, Jim

  Macdonald, Calum A.

  Skinner, Dennis

  McKelvey, William

  Smith, Andrew (Oxford E)

  McLeish, Henry

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

  McNamara, Kevin

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

  Madden, Max

  Smith, J. P. (Vale of Glam)

  Mahon, Mrs Alice

  Snape, Peter

  Marek, Dr John

  Soley, Clive

  Marshall, Jim (Leicester S)

  Spearing, Nigel

  Martlew, Eric

  Steinberg, Gerry

  Maxton, John

  Strang, Gavin

  Meacher, Michael

  Straw, Jack

  Meale, Alan

  Taylor, Mrs Ann (Dewsbury)

  Michael, Alun

  Thompson, Jack (Wansbeck)

  Michie, Bill (Sheffield Heeley)

  Turner, Dennis

  Michie, Mrs Ray (Arg'l & Bute)

  Vaz, Keith

  Moonie, Dr Lewis

  Wall, Pat

  Morgan, Rhodri

  Wareing, Robert N.

  Morley, Elliot

  Watson, Mike (Glasgow, C)

  Morris, Rt Hon A. (W'shawe)

  Welsh, Andrew (Angus E)

  Mowlam, Marjorie

  Welsh, Michael (Doncaster N)

  Mullin, Chris

  Williams, Rt Hon Alan

  Nellist, Dave

  Wilson, Brian

  Oakes, Rt Hon Gordon

  Winnick, David

  O'Neill, Martin

  Wise, Mrs Audrey

  Orme, Rt Hon Stanley

  Worthington, Tony

  Owen, Rt Hon Dr David

  Wray, Jimmy

  Parry, Robert

  Young, David (Bolton SE)

  Patchett, Terry

  Pendry, Tom

  Tellers for the Noes:

  Pike, Peter L.

  Mr. Frank Haynes and Mr. Allen Adams.

  Powell, Ray (Ogmore)

  Prescott, John

  Question accordingly agreed to.
  MR. SPEAKER forthwith declared the main Question, as amended, to be agreed to.
  Resolved,
  That this House commends Her Majesty's Government on its economic policies, which have led to faster growth of output, investment, and manufacturing productivity than in any other major European country in the 1980's; applauds the Government's determination to defeat inflation by maintaining tight monetary and fiscal policies: and welcomes the continued underlying strength of the supply side of the economy, evidenced by record levels of business investment and new business start-ups, and an unemployment rate that is well below the European Community average.

  Economic Policy

    BUSINESS OF THE HOUSE
    Ordered,
    That, at this day's sitting, the Children Bill [Lords] may be proceeded with, though opposed, until any hour.—[Mr. Dorrell.]

Orders of the Day
  Children Bill [Lords]
  As amended (in the Standing Committee), further considered.
  Children Bill [Lords]
    New Clause 32

      EVIDENCE GIVEN BY, OR WITH RESPECT TO, CHILDREN
      '.—(1) Subsection (2) applies where a child who is called as a witness in any civil proceedings does not, in the opinion of the court, understand the nature of an oath.
      (2) The child's evidence may be heard by the court if, in its opinion—

      (a) he understands that it is his duty to speak the truth; and

      (b) he has sufficient understanding to justify his evidence being heard.

      (3) The Lord Chancellor may by order make provision for the admissibility of evidence which would otherwise be inadmissible under any rule of law relating to hearsay.
      (4) An order under subsection (3) may only be made with respect to—

      (a) civil proceedings in general or such civil proceedings, or class of civil proceedings, as may be prescribed; and

      (b) evidence in connection with the upbringing, maintenance or welfare of a child.

      (5) An order under subsection (3)—

      (a) may, in particular, provide for the admissibility of statements which are made orally or in a prescribed form or which are recorded by any prescribed method of recording;

      (b) may make different provision for different purposes and in relation to different descriptions of court; and

      (c) may make such amendments and repeals in any enactment relating to evidence (other than in this Act) as the Lord Chancellor considers necessary or expedient in consequence of the provision made by the order.

      (6) Subsection (5)(b) is without prejudice to section 88(4).
      (7) In this section—
      "civil proceedings" and "court" have the same meaning as they have in the Civil Evidence Act 1968 by virtue of section 18 of that Act; and
      "prescribed" means prescribed by an order under subsection (3).'.—[The Solicitor-General.]
      Brought up, and read the First time.
      10.30 pm
      The Solicitor-General (Sir Nicholas Lyell): I beg to move, That the clause be read a Second time.
      The new clause concerns the evidence to be given by children or which may be given or received in respect of children. Subsection (2) of the new clause will bring about a welcome reform in the law of evidence relating to civil proceedings. It will allow the unsworn evidence of a child of tender years to be received in evidence in such proceedings where, in the court's opinion, he does not understand the nature of the oath but is of sufficient understanding to justify the reception of his evidence and understands the duty to tell the truth. The provisions will bring the law in this respect into line with the position in criminal proceedings.
      Subsections (3) onwards deal with a separate topic. Subsections (3) and (4) will give the Lord Chancellor power to make orders overriding rules relating to hearsay in civil proceedings in respect of evidence in connection with the upbringing, maintenance or welfare of a child. We consider it necessary to give the Lord Chancellor that
      776
      power because until very recently it had been the practice of courts to moderate the strict rules of evidence in civil proceedings concerning children, especially with regard to admitting hearsay evidence of a child's statement.
      However, the effect of the recent court of appeal decisions in the cases of Re. H and Re. K. is that this flexible approach is mistaken and that, except in wardship, hearsay evidence can be admitted only in accordance with the exceptions to the general rule which is recognised by law. Accordingly, as hearsay of children's statements used to be admitted in evidence, that decision will effectively remove a source of evidence that was available to courts or will result in children having to undergo more often the trauma of giving direct oral evidence. It may cause cases to drift into wardship, given the exception in that jurisdiction, to avoid the effect of the decision.
      In order to remedy the situation, the power in subsection (3) will enable the Lord Chancellor to make orders overriding the rules relating to hearsay in any or all civil proceedings in respect of evidence in connection with the upbringing, maintenance or welfare of a child.
      Government amendment No. 368 will ensure that subsections (3) to (7) of the new clause will come into effect on Royal Assent and the Lord Chancellor will exercise his power by making an appropriate order as soon as possible thereafter. Subsections (5) and (6) will provide the necessary flexibility. The Lord Chancellor's power will thus be exercisable to provide for the admissibility of statements made orally, in writing in any form prescribed by the order, or by means of any form of recording—for example, audio or video tape.
      Further, the power will allow the overriding of evidential rules entirely or, in respect of certain types of evidence only—for example, children's statements—or in respect of certain types of case only. It will allow for different provisions to be made for different courts and tiers of courts.
      The substance of the new clause will be welcomed by the House.
      Mrs. Llin Golding: I welcome most of the provisions in the new clause. However, I have serious misgivings about the inclusion of subsection (2)(a) which says:
      "he understands that it is his duty to speak the truth".
      Surely that is absurd. We should listen to children. This is a Bill for children and we are trying to give children additional rights. It is absurd to exclude them because they cannot understand the concept of duty to speak the truth. Surely we should not expect children to understand the concept behind the words "duty" and "truth". Many adults understand the concept of a duty to speak the truth but do not do so, yet we listen to them. We should allow children to give evidence in court if they appear capable of giving truthful evidence.
      Subsection (2)(a) should be deleted. The only criterion that we need for listening to children is contained in subsection (2)(b) which says:
      "he has sufficient understanding to justify his evidence being heard."
      I hope that the Solicitor-General will reconsider this part of the new clause.
      Mr. Roger Sims: I welcome the new clause, inasmuch as it clarifies the law, and makes it what the practice was thought to be until a few months ago. I also welcome the other means by which evidence can be

      777
      given. As I understand the clause, that means that, in the fullness of time, the Government could decide that video evidence of an interview with a child taken soon after an offence had come to light could be admitted as evidence in court. My hon. and learned Friend will be aware that a number of us have been pressing for this for some time.
      What progress is the Pigott committee making? When is it likely to report'? When will we hear from the Government what their reaction to that report is likely to be? Some of us hope that the outcome will be that the Government will feel that, on principle, such video recordings of interviews should be allowed. For once, when the Government announce such a decision, instead of saying that they will make it possible under legislation as soon as possible, the legislation will already be in place and the Secretary of State will have powers to make the appropriated regulations. I would be grateful if my hon. and learned Friend would say whether that assumption is correct.
      Mr. Peter Hardy: I support the case advanced by the hon. Member for Chislehurst (Mr. Sims). As the Solicitor-General knows. the hon. Gentleman plays a significant part in the central executive of the National Society for the Prevention of Cruelty to Children, and the Solicitor-General is aware of the view of the NSPCC, with which I am connected. I hope that he will give the hon. Gentleman a positive and acceptable response.
      I agree with my hon. Friend the Member for Newcastle-under-Lyme (Mrs. Golding) about subsection 2(a). My hon. Friend was right to say that if one maintains subsection 2(b) in the new clause, the purpose embodied in subsection 2(a) would be inadequately served. I can see that a great deal of time and energy will be expended on defining the words "duty" and "truth" and in arguing whether a child can or cannot understand those concepts. It is unnecessary to have subsection 2(a) because the court would have to accept that the child had a sufficient understanding of the situation to be allowed to give evidence in any case. I appeal to the Solicitor-General to read that reasonable proposition, and to accept that subsection 2(a) should not stand part of the Bill.
      The Solicitor-General: I understand the point that the hon. Member for Newcastle-under-Lyme (Mrs. Golding) made, and that the hon. Member for Wentworth (Mr. Hardy) reinforced. However, what they are seeking and what is embodied in the Bill match better than they give credit for. I have appeared in a number of cases concerning children when the question of understanding the oath had to be dealt with. That has now been done away with. In reality, the court looked at whether the child understood the meaning of speaking the truth, and this will open up more cases, which will be welcome to the House. If the child is to understand sufficient to justify his evidence being given, that, as the hon. Gentleman said, subsumes subsection 2(a). While it could be argued that the wording is tautologous, it cannot be argued that it is to be unclear.
      I cannot at the moment give my hon. Friend the Member for Chislehurst (Mr. Sims) a definite answer about the timing of our response to the Pigott committee, but if I am in a position to do so, I will write to him and to the hon. Member for Wentworth.
      Question put, That the clause be read a Second time:—
      The House divided: Ayes 183, Noes 0.

      Division No. 335]

      [10.39 pm

      AYES

      Alexander, Richard

      Greenway, John (Ryedale)

      Alison, Rt Hon Michael

      Gregory, Conal

      Amery, Rt Hon Julian

      Griffiths, Peter (Portsmouth N)

      Amess, David

      Ground, Patrick

      Amos, Alan

      Hague, William

      Arbuthnot, James

      Hamilton, Neil (Tatton)

      Arnold, Jacques (Gravesham)

      Hampson, Dr Keith

      Ashby, David

      Hanley, Jeremy

      Atkins, Robert

      Hargreaves, Ken (Hyndburn)

      Baldry, Tony

      Harris, David

      Banks, Robert (Harrogate)

      Haselhurst, Alan

      Barnes, Mrs Rosie (Greenwich)

      Hayhoe, Rt Hon Sir Barney

      Batiste, Spencer

      Hayward, Robert

      Beaumont-Dark, Anthony

      Heddle, John

      Beith, A. J.

      Hind, Kenneth

      Bellingham, Henry

      Howarth, G. (Cannock & B'wd)

      Bennett, Nicholas (Pembroke)

      Howe, Rt Hon Sir Geoffrey

      Benyon, W.

      Howells, Geraint

      Bevan, David Gilroy

      Hughes, Robert G. (Harrow W)

      Blackburn, Dr John G.

      Hunt, Sir John (Ravensbournn)

      Boscawen, Hon Robert

      Hunter, Andrew

      Boswell, Tim

      Irvine, Michael

      Bowis, John

      Jack, Michael

      Brazier, Julian

      Janman, Tim

      Browne, John (Winchester)

      Jessel, Toby

      Bruce, Ian (Dorset South)

      Johnson Smith, Sir Geoffrey

      Bruce, Malcolm (Gordon)

      Johnston, Sir Russell

      Buck, Sir Antony

      Jones, Gwilym (Cardiff N)

      Burns, Simon

      Key, Robert

      Burt, Alistair

      Kirkwood, Archy

      Butcher, John

      Knapman, Roger

      Butler, Chris

      Lester, Jim (Broxtowe)

      Butterfill, John

      Livsey, Richard

      Campbell, Menzies (Fife NE)

      Lord, Michael

      Carlile, Alex (Mont'g)

      Lyell, Sir Nicholas

      Carlisle, John, (Luton N)

      MacKay, Andrew (E Berkshire)

      Carlisle, Kenneth (Lincoln)

      Maclean, David

      Carrington, Matthew

      McLoughlin, Patrick

      Carttiss, Michael

      Mans, Keith

      Chalker, Rt Hon Mrs Lynda

      Marlow, Tony

      Chapman, Sydney

      Maude, Hon Francis

      Chope, Christopher

      Mayhew, Rt Hon Sir Patrick

      Clark, Sir W. (Croydon S)

      Mellor, David

      Clarke, Rt Hon K. (Rushcliffe)

      Mitchell, Sir David

      Colvin, Michael

      Morris, M (N'hampton S)

      Coombs, Anthony (Wyre F'rest)

      Morrison, Sir Charles

      Coombs, Simon (Swindon)

      Moss, Malcolm

      Cran, James

      Neale, Gerrard

      Currie, Mrs Edwina

      Nelson, Anthony

      Curry, David

      Neubert, Michael

      Dorrell, Stephen

      Nicholls, Patrick

      Douglas-Hamilton, Lord James

      Nicholson, David (Taunton)

      Dover, Den

      Norris, Steve

      Dunn, Bob

      Onslow, Rt Hon Cranley

      Durant, Tony

      Oppenheim, Phillip

      Eggar, Tim

      Paice, James

      Evennett, David

      Parkinson, Rt Hon Cecil

      Fallon, Michael

      Patnick, Irvine

      Favell, Tony

      Pattie, Rt Hon Sir Geoffrey

      Fearn, Ronald

      Pawsey, James

      Fenner, Dame Peggy

      Peacock, Mrs Elizabeth

      Fishburn, John Dudley

      Porter, David (Waveney)

      Forman, Nigel

      Powell, Wiliiam (Corby)

      Forsyth, Michael (Stirling)

      Raison, Rt Hon Timothy

      Forth, Eric

      Redwood, John

      Fox, Sir Marcus

      Riddick, Graham

      Freeman, Roger

      Roberts, Wyn (Conwy)

      French, Douglas

      Rowe, Andrew

      Gale, Roger

      Rumbold, Mrs Angela

      Garel-Jones, Tristan

      Sackville, Hon Tom

      Gill, Christopher

      Shaw, Sir Giles (Pudsey)

      Glyn, Dr Alan

      Shaw, Sir Michael (Scarb')

      Goodlad, Alastair

      Shersby, Michael

      Goodson-Wickes, Dr Charles

      Sims, Roger

      Gorman, Mrs Teresa

      Speed, Keith

      Gow, Ian

      Spicer, Sir Jim (Dorset W)

      Greenway, Harry (Baling N)

      Stern, Michael

      779

      Stevens, Lewis

      Ward, John

      Stewart, Andy (Sherwood)

      Wardle, Charles (Bexhill)

      Stradling Thomas, Sir John

      Watts, John

      Summerson, Hugo

      Wheeler, John

      Taylor, John M (Solihull)

      Whitney, Ray

      Tebbit, Rt Hon Norman

      Widdecombe, Ann

      Thompson, D. (Calder Valley)

      Wiggin, Jerry

      Thompson, Patrick (Norwich N)

      Winterton, Mrs Ann

      Thornton, Malcolm

      Winterton, Nicholas

      Thurnham, Peter

      Wood, Timothy

      Townsend, Cyril D. (B'heath)

      Yeo, Tim

      Tracey, Richard

      Young, Sir George (Acton)

      Trippier, David

      Twinn, Dr Ian

      Tellers for the Ayes:

      Waddington, Rt Hon David

      Mr. David Heathcoat-Amory and Mr. Greg Knight.

      Walden, George

      Walker, Bill (T'side North)

      NOES

      Nil

      Tellers for the Noes:

      Mr. Michael Welsh and Mr. Dennis Skinner.

      Question accordingly agreed to.
      Clause read a Second time, and added to the Bill.
      Mr. James Paice: On a point of order, Mr. Deputy Speaker. I served in Committee and listened to all the proceedings on Report. I was under the impression that the Bill had wide support across the House and that all parties wanted to see the Bill on the statute book. Is it in order for a tiny group of hon. Members, who have taken no part in the proceedings in Committee or on the Floor of the House, to delay the Bill for some Machiavellian purposes of their own, which are unknown to me?
      Mr. Deputy Speaker (Sir Paul Dean): Order. There has been nothing out of order. We had better get on.
      Mr. Michael Welsh: On a point of order, Mr. Deputy Speaker. I ask for your advice, Mr. Deputy Speaker. There are a number of issues involved in the next group of amendments. Hon. Members may desire to vote on each. Shall we have the prerogative to vote on each amendment so that those who desire to vote on a particular amendment will be allowed to do so?
      Mr. Deputy Speaker: We shall have to look at each amendment as it comes. It is a hypothetical question at the moment.

    New Clause 2

      DAY CARE PLAN AND REVIEW
      '—(1) Every local authority, together with the appropriate local education authority, shall prepare a plan which shall—

      (a) ensure the development of day care and education facilities for all children under five who require them; and

      (b) include provision for children aged between five and fourteen before and after school hours and during school holidays.

      (2) Every local authority, together with the appropriate local education authority, shall review child care provision within its locality every three years. Such a review shall include

      (a) the training needs of persons working with children

      (b) the requirement for child-care provision in the area.

      (3) In assessing the requirement for child care under 2(b) above, the authority shall have regard to the wishes of parents in its area.
      (4) Every review prepared under subsection (2) above shall be published, and shall be submitted to the Secretary of State, who shall publish a response to the review within three months of the date on which he receives it.
      (5) In the course any plan or undertaking any review under this section, the local authority shall consult—

      (a) existing voluntary providers of nurseries and playgroups;

      (b) existing childminders;

      (c) the local Health Authority;

      (d) enployers;

      (e) relevant trade unions;.'.—[Ms. Armstrong.]

      Brought up, and read the First time.
      Ms. Hilary Armstrong: I beg to move, That the clause be read a Second time.
      Mr. Deputy Speaker: With this it will be convenient to take new clause 3—Code of Practice—
      '—(1) The Secretary of State, shall issue a code of practice to be used by local authorities when deciding whether to register an applicant for registration under section (Child minding and day care for young children: registration), which shall include standards which should be met in the provision of care.
      (2) The Secretary of State shall not issue any code of practice under section (1) above unless—

      (a) he has consulted appropriate voluntary and statutory organisations on its provisions; and

      (b) a draft of it has been laid before and approved by a resolution of each House of Parliament.'.

      New clause 4—Childminding and day care for young children registration—
      '(1) A local authority may refuse to register an applicant for registration under this Act if the care to be provided by that person when looking after any child as a childminder, or persons who provide day care for children on premises within that area, is in the opinion of the authority, likely to be seriously inadequate having regards to the needs of the children concerned.
      (2) In assessing the adequacy of care for the purpose of this section, regard shall be had to the Code of Practice set out in this Act.'.
      Government new clause 25—Orders pending appeals in cases about care or supervision orders.
      Government amendment No. 388.
      Amendment No. 30, in page 61, line 32, at end insert—

      '(e) require him to take out public liability insurance for his work as a childminder.

      (f) require him to attend a local authority approved course of pre-registration training.'.

      Government amendment No. 484.
      Amendment No. 31, in page 62, line 39, leave out 'seriously'.
      Government amendment No. 130.
      Amendment No. 33, in page 64, line 23, leave out
      'at least once every year'
      and insert
      'at least once every three months'.
      Amendment No. 480, in page 64, line 23, leave out 'year' and insert 'six months'.
      Amendment No. 27, in page 121, leave out lines 31 and 32.
      Amendment No. 29, in page 123, leave out lines 35 to 43.
      Amendment No. 361, in page 123, line 40, leave out
      'and requiring him to pay to them such fee as may be prescribed'.
      Amendment No. 360, in page 123, line 40, at end insert
      'However the local authority may waive fees in such cases as it deems necessary and any prescribed fee shall not exceed £10 per annum'.
      Ms. Armstrong: We now come to provisions in the Bill which, in some senses, do not have the consensus around

      781
      them about which we heard earlier. The Government are missing a major opportunity here, despite all the rhetoric that we have heard from Ministers in the past few months. The issue of registration and regulation of day care facilities is central to the protection of children and the Government have missed an incredible opportunity.
      New clause 2 sets out a broad framework for the way in which we should like to see registration carried out. I say from the beginning that there are significant omissions from the new clause. One is that there is no mention of any idea of charging for registration—an aspect with which I shall deal later in my speech.
      I am anxious that the Government and the House should recognise that the Opposition believe that the registration and regulation of day care is a public responsibility and should, therefore, be an aspect of public policy and public spending. New clause 2, if adopted, would be one of the most important clauses in this important Bill. It calls for a regular public local authority review and a response by the Secretary of State to that review which will involve all the people concerned with child care provision. The new clause demonstrates the importance that the Opposition see for the future of child care and leads us to debate the entire provision of child care in our society.
      People inside and outside the House see child care as one of the essential political issues of the next few years. It is the most important issue to women between 20 and 35 and is at the top of their political agenda. We know from their representations that many of them are worried about the level of quality that may prevail without good regulation of child care. We also know that they have little confidence in the manner in which the Government have addressed the issue.
      This clause more than any other demonstrates the need for a new Labour Government to introduce child care regulations. We shall propose new legislation because we believe that central Government have a responsibility to all the nation's children, not just to those children who come before a court or who come within the Government's definition of children in need.
      Since the Committee stage, Opposition Members who were critical of the Government's inadequate approach to child care have been joined by some important allies. I hardly dare quote one of them as I do not often see that organ of the press as an ally. On Thursday, the Daily Mail said that it had carried out a survey which had found that Britain had the worst child care services in Europe. That is important evidence. I hope that the Government will take note of that newspaper's findings, as they keep telling us that many of their supporters read it. Until the publication of that article, I had believed that Britain had only the second worst child care services in Europe.
      The Government must realise that the crisis in child care will not go away. With the measures in the Bill it will only get worse. The clause providing for a local authority review is inadequate in a number of ways. That is hardly surprising, as it was placed in the Bill late in the Committee stage. In subsequent contacts with local authorities, I have not been able to find anyone who was consulted about the nature of that additional duty before the Government's new clause was tabled. Consulting everyone involved in child care is a central role that the Government should undertake, but they have chosen to ignore the consensus about what is needed.
      782
      Two vital additions in new clause 2 raise the subject of the national crisis in child care provision and the Government's abdication of responsibility. First, subsection (2)(b) lays a duty on local authorities and local education authorities to review the requirements for child care in their areas. It is vital for a local authority to know and understand the needs in its area. Secondly, subsection (4) requires the Secretary of State to publish a response to all those reviews within three months. It is not surprising that the Government have no wish to have an analysis of the need for child care. I suspect that they are frightened of what they would find if they tried to assess the need properly.
      It is not surprising that a Government who have shown no inclination to take any responsibility for child care make no mention of their obligations. Their attitudes to their responsibility for child care make no mention of their obligations. Their attitudes to their responsibility towards child care are best summed up in the words of the Home Office Minister who chairs the ministerial group on women's issues. He summed up his view of Government responsibility by saying:
      "I don't think that the State should step in to help the working mother unless her life has collapsed."
      The Government will only help with child care when a mother's life has collapsed. The message for mothers is that when they are on their knees they can go to the Government for help and the Government will consider giving it. The leak about child benefit confirms the worries people have about the extent of the Government's real concern for the children of Britain.
      11 pm
      The Government's attitude towards helping women return to work comes at a time when the rest of Europe is gearing up their work forces for the single market in 1992. I assure the House that Governments in other European countries are interested in helping mothers to return to work before their lives collapse. The social dimension of the market in other European nations is causing Governments to recognise their responsibilities to child care.
      The European Commissioner Madam Papandreou has commented on the woeful record of this country in providing child care. Like other national Governments, she recognises how our national economy will be undermined by the Government's failure to take on the responsibility outlined in the new clause.
      The Bill begins with a clause that the Opposition wholeheartedly support, which declares that the welfare of the child shall be paramount. The Opposition strongly support that. We believe that the same duty laid on courts in clause I should be laid on the Secretary of State in this section of the Bill with regard to child care.
      New clause 2 raises three important issues of detail which are missing from the existing clause 17. Our new clause lays the duty for carrying out the review jointly with the local authority and the local education authority. It also lays the duty to ascertain the needs of the locality on the two authorities. That may seem technical and minor. However, new clause 2 applies to Scotland.
      In Scotland the authority with responsibility for half the children in Scotland has already co-ordinated child care under the local education authority. It would be nonsense if one of the very few authorities to have co-ordinated and integrated child care were to be in

      783
      difficulty. Many of the London authorities have made representations that under the reorganisation of education they want to place child care within the local education authority. We want to ensure that they can do that as they have recognised their responsibilities.
      When the Select Committee on Social Services reported earlier this year, it recognised the importance of close co-operation. It stated:
      "From our visits we have concluded that where there is a will to work together significant progress can be made in co-ordination and we reiterate that there are no easy answers to improving co-ordination. We therefore suggest the current progress towards the establishment of joint sub-committees in local authorities."
      Co-ordination and integration are central to the future opportunities of children in child care and it is important that the Bill offers the framework that enables and supports that rather than frustrating it.
      Mr. Tony Marlow: Will the hon. Lady give way?
      Ms. Armstrong: No, I will not give way now.
      The next issue concerns consultation with voluntary bodies. The Opposition have constantly stressed the importance of co-ordinating statutory, voluntary and private child care provision. This new clause is no exception. Given the importance of the voluntary sector, it is necessary for the primary legislation to specify the fact that consultations will take place and that there will be central involvement. The reality of child care is that, as parents desperately look for the best situation for their child, they must frequently put together a patchwork of provision. If anything happens, the patchwork comes apart, so co-ordination is essential.
      Mr. Marlow: Will the hon. Lady give way?
      Ms. Armstrong: I will give way to the expert on child care.
      Mr. Marlow: I apologise to the hon. Lady if she has answered the question that I am about to ask, because I had to go outside to get this piece of paper. If she did not do so, could she do so now? This is a very exciting and interesting provision that the hon. Lady has put forward in new clause 2. Could she tell the House how much it is likely to cost and who would be paying for it?
      Ms. Armstrong: The hon. Gentleman should read the Government new clauses, because there is a similar proposal from the Government. Hon. Members have not had a costing, nor have we heard how the measure will be paid for. I shall be interested to hear the relevant information from the Government. I am talking about the differences that my new clause raises.
      Mr. Ian McCartney: My hon. Friend should ask the hon. Member for Northampton, North (Mr. Marlow) what value the Tory party places on child care and the prevention of abuse. That is the real issue. I should have thought that all hon. Members would be concerned not with cost but with the effects on children—that is, children first and costs second.
      Ms. Armstrong: My hon. Friend makes an important point.
      784
      The next issue which is contained in our new clause and not in the Government's new clause is the importance of considering parents' wishes when drawing up plans. The omission of parents from the Government's plans for review is significant. They know what parents are saying about child care. Parents do not expect their lives to have to be in a state of collapse before the Government come to their aid. They believe that the provision of child care is right and that people in this country should at least have equal opportunity with their European cousins. Great numbers of people have been saying and will continue to say, as they did last weekend, that they expect and will look for a Labour Government who will actually take child care seriously. I can assure them that they will not be disappointed.
      New clause 3 outlines the importance of a code of practice developed by the Secretary of State, and again demonstrates the importance of consulting bodies. On Friday, the Government announced the new child care accreditation scheme. They said that they were keen to encourage high standards of child care, but then said that they would hand the responsibility to a new body which they hope will be created and which we assume will be the nursery equivalent of the chamber of commerce. The Government also said that they wanted a new national body of private nursery providers to give information about availability in local areas and develop its own code of practice to which its members would subscribe. We have had plenty of experience of that. We discussed some of that experience last night when we discussed some of the vile practices that have been going on in some independent schools. The private market cannot and never has delivered high quality.
      For the Government to abandon their responsibility and to transfer it to the private market is a tragedy for children and an indictment of the Government. The Government's approach is totally inadequate. We need a code of practice to be incorporated in the Bill, or at least a commitment from the Government, recognising their responsibility to develop a code of practice which would then be applicable across the board, in each authority.
      This meek and mild new clause was tabled in the hope that the Government would take hold of the principle and work on it. It is not doctrinaire. It recognises that the Government have a public responsibility which they should not shirk.
      New clause 4 underlines the importance of registration and a code of practice. Again, it simply seeks to ensure that we establish national guidelines by which local authorities can operate. I have been to local authority after local authority in England, Scotland and Wales, and each has said that it needs guidelines that it can adapt to its local situation, but which will give it power if challenged. They fear that many of the new private nurseries will wish to challenge their decisions and they want to know that they can go to court, with clarification as to the basic minimum standards they must demand. They want to know that they will be able to defend those standards in court. At the moment no local authority feels confident about going to court and saying, "We refuse to register this nursery because we do not feel that the staff are sufficiently well trained or qualified to care for children." It is a great indictment of the House that we have not given local authorities that commitment.
      Amendment No. 30 gives the Government a clue as to how they could get near the basic minimum. We have said

      785
      that each child must have a carer who matches the minimum criteria. The criteria that we have identified in the amendment are insurance and training. We want to be sure that every child minder, play group and private nursery has insurance so that if a child is injured on its premises there will at least be some compensation. We feel that that provision will in itself ensure that those who care for children will be mindful of the health and safety needs of the child and will ensure that those needs are addressed.
      The second issue, which is of great importance, is training. I have discussed this matter with an authority which is trying to establish the practice outlined in these provisions as part of its registration process. Preregistration training should be a requisite for any person or group applying to be registered. Apart from anything else, where this has been tried, it has meant a self-cancelling-out process. When people who want to be child minders attend short courses—the Open University has developed some good course material—and go through what it means to be a child minder in terms of one's own family, one's responsibilities and one's relationships with the child's parents and the child minder support network, there tends to be a self-weeding-out process. When some people realise what the job really entails, they say, "This is not for me—my family and I cannot match those needs." Pre-registration training also means that local authorities can discover what motivates those who put themselves forward as potential child minders.
      We cannot overestimate the importance of this matter. This part of the Bill will touch many more children than the rest of it because it deals with the many thousands of children whose parents want them to have child care opportunities before they go to school and, when they are of school age, after school and in school holidays.
      11.15 pm
      If we want to protect children, what is the point of developing a structure to protect them from abuse, or to help us to identify abuse and protect them? We want children to be in a protected and supportive environment from the beginning.
      Amendment No. 31 removes the word "seriously" from the phrase "seriously inadequate" as the reason why a local authority can cancel registration. Local authorities are worried that "seriously inadequate" will be difficult to sustain. I do not believe that any hon. Member would be happy to leave his or her child or grandchild with someone who is inadequate, let alone seriously inadequate. The House ought not to be satisfied with such a definition.
      Amendment No. 33 decreases the span between inspection from one year to three months. We believe that we ought to encourage best practice, not minimum standards. Many local authorities already inspect more regularly than once a year, and we want to ensure that that best practice is encouraged.
      Charging is the issue which worries voluntary groups most. I am bewildered by the Government's attitude on the subject. I listened carefully in Committee and I have re-read the Hansard reports of our debates, but I am unable to detect why the Government have introduced this part of the Bill.
      Last night, we discussed the contradiction between charging voluntary groups and child minders for registration but not, for reasons I understand, public and independent schools. The contradiction may be apparent
      786
      to us in the House, but it will seem an enormous political blunder to the people who run voluntary play groups. More than that, it will demonstrate to them that the Government simply do not understand or care what happens to them and their attempt to provide a public service.
      How can the Government talk seriously about charging child minders and pre-school play groups, for example, when they recognise the problems of trying to charge independent schools? Do the Government understand what they are suggesting? The Pre-School Playgroups Association has 14,000 registered groups, which have 600,000 children. Parents already contribute, through fund-raising and charges made for the running of such groups, the sum of £50 million a year. The association's groups receive the magnificent sum of £4 million per year in grants from local authorities and industry. Already, they have to raise money just to stand still. Those groups do not want to bear additional burdens—they want to be involved in training and to ensure that their employees receive a decent rate of pay. At the moment those working for the PPA receive, on average, 70p per hour. Far from being able to bear the additional costs, the PPA is looking for support. It fears that its existence is threatened by the amendments, especially in areas such as mine where parents' resources are already stretched to the limit.
      The House should recognise and value the voluntary play groups and community nurseries as part of a group of services from which parents can choose the most appropriate care for their children. We should be supporting those groups and should consider them as part of the public services provided for our children. Those groups have fought for better regulations and support. They have pressed the Government to give them greater involvement and closer working with local authorities. They want to be part of the national structure, but they are now under threat of closure.
      We are simply unable to understand why the Government are pushing the issue of charging. In Committee and in the House the Minister assured us that he was minded to fix the charge at a low rate, but that he needs time to consult groups and authorities about the level of charge. If the charge is to be so low that it will not threaten the existence of play groups or community nurseries and will not discourage child minders from registering, it will be lower than the cost of collecting it. Such is the nonsense with which we are now involved.
      The Minister also assured me that the charge was not meant to raise revenue for improving services, so why impose it? I can think of no other reason than political dogma. I have searched Hansard and the Government press statements—there are plenty of those—and I have searched my head, but I cannot come up with any rationale apart from Government dogma.
      During the summer many press statements were made about child care. The Minister of State at the Department of Education and Science has told us that we are about to see the biggest push for child care since the second world war. We have had the famous five-point plan from the ministerial group on women's issues which was to sort out all the child care problems, but where is the substance? Where is the Government commitment to provide anything? The Government have said that they expect the market to provide.
      The rest of the Bill is designed to limit the market and private exploitation of children, but what we are discussing

      787
      will touch more children than the rest of the Bill. The Government, however, are stuck with the ministerial group saying that market forces should meet the needs of child care.
      The market cannot protect children, we know that. It is our determination to demonstrate to the country and to the voluntary organisations that we recognise a central vote for Government in co-ordinating and regulating the quality of child care so that it is the best possible. We are determined that all children, not just those classified as in need, should have the best opportunity for quality child care. That is why we have said that it is the duty of local authorities to assess the need of all children in their area when they review the services for children.
      The Government have a role and I beg them, for the future opportunities of children in Britain, to recognise that they are missing a chance to take that central and important role. The clauses, particularly when taken together with the statement about the new group on voluntary accreditation, will lead to confusion, with everyone paddling their own canoe, instead of co-ordination.
      Let us recognise that it is the duty of the House to lay down guidelines which will enable local authorities to ensure that every child in their area has the best possible opportunity. That should be done in co-ordination with voluntary organisations and parents. It is our responsibility to ensure that.
      Mr. A. J. Beith: The issue of charging has caused a great deal of anxiety in the voluntary play group movement. It is my view and that of my party that we should seek to expand the grossly inadequate provision of day care and nursery education by working together with local education authority nursery provision, workplace nurseries and the voluntary play group movement. Charging is likely to present an obstacle to successfully achieving the registration and inspection system which, in itself, is desirable. Many play groups are already closely involved with their local education authorities in registration systems and some local authorities, including my own, seek to provide advice and support to play groups when possible.
      In many areas introducing a charging system will drive parents towards back-street child minders instead of proper organised groups and will drive many good play groups out of business. That problem will be acute in urban and rural areas. My right hon. and hon. Friends and I have received representations from many different kinds of areas including urban and rural.
      I quote from a letter from Bradford which states:
      "Without doubt this new levy would result in the closure of many playgroups in Bradford. mainly those in the inner city areas where the state nursery provision is failing to cope with demands by parents."
      That is certainly a serious threat in many inner-city areas.
      I know and represent rural areas in which my wife used to work for a play group. I too have been associated with quite a few such groups. In many cases they are the only form of day care provision available to children in the area. They are not the preserve of a small coterie of middle class parents, but are the only provision available and are used by the poorest families in rural areas. Rural poverty
      788
      is particularly acute because it is usually associated with high-cost transport to the facilities which are available in urban areas, or no transport at all.
      Many play groups in the scattered rural areas are extremely worried by the threat of charging and are uncertain about what levels of charges might be introduced. They fear that they could run into hundreds of pounds. Will the Minister look again at this aspect and say more about it tonight? If he is unable to do so, he must not be surprised if a note of controversy, which has been absent from much of the Bill, arises at this stage.
      The Minister has an ally in voluntary play groups if it is his ambition to expand day care and make use of voluntary help. However, he will prevent his major ally from doing its current job if new charges are imposed which discourage groups from being formed and parents from making use of them. Therefore, I urge the Minister to look again at the issue.
      11.30 pm
      Mr. Hardy: In Committee, Government amendments on the subject with which we are now concerned were tabled late, making it difficult for the voluntary organisations to react. Nor was the matter debated fully in the other place. For that reason it is appropriate for the House to discuss the issue in considerable detail now. It also provides hon. Members who were not fortunate enough to be members of the Committee with an opportunity to express observations on behalf of themselves and some voluntary organisations. For example, the NSPCC welcomes the opportunity that we have at this stage of the Bill to discuss certain issues at greater length.
      About 11 years ago I initiated an Adjournment debate on the subject of child minding and on that occasion I made a number of recommendations, some of which are embodieds in the Bill, while others appear in various amendments. For example, while registration is necessary, that process is not assisted by the imposition of a charge, and I urge the Government to review that aspect of the measure.
      I echo the remarks of the hon. Member for Berwick-upon-Tweed (Mr. Beith) about play groups. My hon. Friend the Member for Durham, North-West (Ms. Armstrong) said there were 14,000 such groups in Britain, and I have a few in my constituency. They do a good job. If, in addition to their existing responsibilities, they must raise money to pay a fee, the people running the groups will bitterly resent that imposition.
      I hope that the Government will accept our amendments. The proposed cut-off age of eight is not reasonable. Children between eight and 14 merit consideration and there should be adequate provision and safeguards for children of that age. Some voluntary bodies will no doubt be prepared, given the approach of the Government. to accept a cut-off at the age of 12 rather than 14, but few outside the House would agree that care of this type should cease at age eight.
      Some of the proposals in the Bill are of a historic nature and the Government have made some concessions. Indeed, this is the first major piece of legislation concerned with nurses and child minders since the Nurseries and Child-Minders Regulation Act 1948. Should future electoral fortunes turn out to be different from what my hon. Friends and I expect, the Bill may stand as the major

      789
      basis of law and practice for generations to come. That makes it even more important for the Government to take a more forward-looking view of the area we are discussing. If the measure is to be relevant for, say, the coming 20 or 30 years, more generosity should be shown by the Government to the issue of day care for young children.
      Registration fees must not he imposed in such a way that unsavoury or inadequate practice might be encouraged. The argument that I adduced 11 years ago was relevant then and, unfortunately, remains relevant today. More progress should have been made in the intervening years. The Government now have an opportunity to make progress, particularly in view of the co-operation and bipartisan approach that, I understand was evident in Committee. I hope that the Minister will assure the House that, if there is to be a charge, it will be minimal—minimal as the Opposition might think of it, not as Tory Members might. In many of the poorest areas of Britain what might sound modest sums to Conservative Members can seem penal——
      Mr. Michael Welsh: This point is vital in mining areas in which a great deal of unemployment has occurred in recent years. My oldest child goes to a play group; if there was a charge for it, the group would close. Where would we go from there? It exists now only because of the kindness of the Boy Scouts and the Catholic Church. If there were a charge, what would happen to the young people who are being prepared, during their formative years, for when they start going to school seriously?
      Mr. Hardy: My hon. Friend is right. I have been compiling details of cases of low pay in my constituency. Only four days ago I encountered a case of an adult who is working full time, from 8 am to 5.30 pm with half an hour off for lunch, and being paid £39 a week gross. Another is being paid £43 a week gross. When that sort of wage is being paid and people are facing the stark horror of poverty, there is no scope for their children to attend groups for which there is even the "nominal" contribution that Conservative Members may want. I am extremely anxious that children from ordinary and poor homes shall not forfeit the opportunity and educational advantage that membership of and activity in these groups and schemes provide.
      It is essential, if the Government want in any way to remain the one-nation party that their party once sought to be, that they re-examine these fees. If, in addition to their application to pre-school play groups, fees are to persuade child minders to operate unlawfully and improperly, the Government will do great deal to undermine the many good aspects of this Bill. To maintain bipartisan support and to command the respect of the voluntary bodies which have developed a considerable regard for this area of Government endeavour, the Minister must reveal a little more generosity than we have been led to expect from the Bill that emerged from the Committee.
      I did not intend to make a long speech, but this matter is important enough for us to call on the Minister to offer a response that will relieve some of the anxieties that have grown up about this part of the Bill.
      Mr. Andrew Rowe (Mid-Kent): I apologise for having missed a small part of the speech by the hon. Member for Durham, North-West (Ms. Armstrong), but I did hear most of it.
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      I have no doubt that child care will become one of the most important political issues of the next five or six years. It is central to equality of opportunity, to the aim of getting more women into and back to the work force, and to keeping them there if that is where they want to be. It has all sorts of connotations in relation to preparing children for education. It is a major subject and there is no doubt that the House will return to it. The Bill is not the instrument in which to set out a whole new policy for pre-school child care.
      I was recently lobbied by play groups in my constituency and they expressed considerable anxiety about the effect of a registration fee. I have no doubt that my hon. and learned Friend the Minister has the best possible motives for introducing such a fee. I am not trying to put words in his mouth, but I am sure that he will think that there is great security to be derived from creating a contractual relationship between local authorities and groups and child minders so that there is a mutual obligation for groups to register and for local authorities to inspect the groups to see that standards are sufficiently high.
      In my county play groups are inspected as often as three times a year and that is done without a fee. The one matter on which I find myself in agreement with the hon. Member for Durham, North-West is that if the fee is set low so that it is not a burden it may well prove to be too expensive to collect. I am uneasy about that matter.
      I am certain that we cannot continue with pre-school play groups outside the voluntary organisations that are nationally recognised. We cannot have haphazard, casual groups being set up and accepting standards that none of us would accept as appropriate. I have no doubt that the Minister's proposals are intended to correct that, but I ask him to think carefully before he demands a registration fee.
      Mr. John Home Robertson: The hon. Member for Mid-Kent (Mr. Rowe) was wringing his hands both figuratively and physically during his speech. I am not surprised because I am sure that he feels a little uneasy about what the Minister has proposed.
      I am grateful to my hon. Friend the Member for Durham, North-West (Ms. Armstrong) for proposing the new clause and the group of amendments which refer to the valuable work carried out by pre-school play groups throughout the United Kingdom. I understand that the amendments apply to my country of Scotland as well as to the other nations of the United Kingdom.
      As always, the hon. Member for Northampton, North (Mr. Marlow) helped to concentrate our minds when he intervened in the debate. He asked my hon. Friend the Member for Durham, North-West how much it would cost if the amendments were incorporated in the Bill. May I turn that question around and ask him how much it would cost the nation if it failed to make adequate provision for our youngsters? The children of the nation are its future and if we neglect them it will cost the whole nation dear.
      Pre-school play groups do a valuable job. From time to time I meet the members of such groups in my constituency and, happily, they are well supported by Lothian regional council. It is Labour controlled and generously supports voluntary organisations in terms of finance and in the provision of premises. It is right for the authority to do that. Would it not be ridiculous if the

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      Scottish Office were to be required under this legislation to require local authorities to give grants to play groups and then to take money back in the form of fees? Such a provision does not make sense.
      The hon. Member for Berwick-upon-Tweed (Mr. Beith) highlighted the importance of such nursery provision in rural areas. While it should be the objective of any responsible Government—that rules out this bunch—to provide nursery education to the best possible standards of pre-school education, that will not be possible in the remote rural areas. Therefore, it must make sense to encourage the voluntary sector to carry on with its valuable work. I fail to see how that will be possible if we tax these people for the work that they are doing.
      11.45 pm
      I should declare an interest as my wife has, for a long time, been a member of the executive committee of the Scottish Pre-School Playgroups Association, so I get lobbied on this subject. She has often made the point that it is galling for mothers who have to make costly arrangements to attend the education and training sessions and the meetings of groups, deal with highly paid civil servants, have to do so in their own time, often with considerable travel expenses. Here we are considering the imposition of yet another burden on people who do such voluntary work, and there can be no justification for such an imposition on that voluntary sector.
      The Minister may recall that the Prime Minister, on numerous occasions, has sung the praises of the voluntary sector. I suppose she is trying to kick over the traces in regard to the undertakings that she has given about nursery places for every child. She has spoken of the great job that the pre-school group movement is doing, but this provision will kick that movement in the teeth by imposing a tax on it. I hope that the Minister will think again.
      Mr. Paice: I am in somewhat of a quandry in that I had expected the debate on charges to come on a later amendment, but as it has been raised now, perhaps the debate should be complete now.
      One aspect of charging has not yet been mentioned. The role of the pre-school play groups is recognised and endorsed by both sides of the House. Concern for their welfare is not the sole domain of the Opposition, and I recognise their value, particularly in the rural areas described by the hon. Member for Berwick-upon-Tweed (Mr. Beith). They have a vital role to play and are often the only provision in such areas. I do not want them to be jeopardised by the implementation of anything that would be to their disadvantage. However, some play groups are run on a commercial basis. A number of organisations covered by the schedule to which these new clauses refer set out to make a profit from their operations. I should be surprised if the hon. Member for Durham, North-West (Ms. Armstrong) and her colleagues did not believe, as I do, that such organisations should pay a realistic fee for the necessary registration and inspection of their premises.
      That is important, but it has to be set against the larger number of play school groups which are run on a charitable basis and on a shoe string, with voluntary help. We should not dismiss charging, as the Opposition suggest, but my hon. and learned Friend must devise a charging mechanism flexible enough to recognise that
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      those organisations which set out to make a profit from their operations should pay a full cost recovery based fee but that all the others working on a charitable basis should pay a nominal fee, in the order of £5 per year. I appreciate that that is hardly worth collecting, but such a charge should not prejudice the excellent work that is being done. We must try to distinguish between the different operations that are undertaken. Accordingly, I could not support the proposal to abandon the idea of a fee. I hope that my hon. and learned Friend the Minister will recognise the need for a mechanism which is sufficiently flexible to cover the various forms of provision.
      Mr. Max Madden: The Government's proposal to levy a registration and inspection fee on pre-school play groups has sparked considerable controversy in Bradford. The hon. Member for Berwick-on-Tweed (Mr. Beith) told us that he had received representations from people in Bradford. During June and July I received petitions signed by more than 400 of my constituents who are involved with various play groups, including the Trinity Methodist church play group, Thornton play group, the Manningham Asian Women's Centre play group, the Horton Bank Top play group and the Millan Centre play group. In Bradford, there are 30,000 children under five years of age and there are no more than 500 public nursery places.
      One of the petitions that I received stated:
      "We should like to draw to your attention that this group is a charity, run by volunteers, to meet the needs of children under the age of five in our community. Play groups provide a vital educational service to the community, using volunteers, and we strongly oppose the suggestion that a financial penalty should be imposed on this service.
      Despite constant, regular fund raising—jumble sales sponsored events, etc.—it is still necessary to charge a fee in order to pay the rent, provide equipment (paint, paper, glue, climbing frame, books etc) and pay expenses. The imposition of a registration fee could lead to the closure of our group with grave implications for the children of our community."
      My hon. Friend the Member for Durham, North-West (Ms. Armstrong) said that she had searched high and low for an explanation from the Government of why they were pressing for the introduction of a registration and inspection fee for pre-school play groups.
      Mr. Ian Bruce: On a point of order, Mr. Deputy Speaker. I have searched the group of amendments that we are discussing and I cannot find any reference to charging or not charging. I ask you to advise me whether the issue comes within the group. I do not believe that voluntary play groups should be charged, but I seek your advice.
      Mr. Bob Cryer: Further to that point of order, Mr. Deputy Speaker. I can tell the hon. Member for Dorset, South (Mr. Bruce), who is signally ignorant about these matters, that amendment No. 27, and the two amendments which I have tabled, Nos. 361 and 360, deal specifically with charging. I have no doubt that in the early future I shall be given the opportunity to elaborate on these amendments.
      Mr. Deputy Speaker: We have before us a wide group of amendments, but amendment No. 27 refers especially to the issue of charging. It is in order, therefore, to refer to charging.
      Mr. Madden: I am speaking in support of amendments Nos. 27 and 29.

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      I was about to say, before I was interrupted by the hon. Member for Dorset, South (Mr. Bruce), who has only recently entered the Chamber—it is no wonder that he has no grip or understanding of these matters—that the Minister, who replied on 23 August to a letter which I sent him on 17 August, wrote:
      "I know that there is a lot of anxiety about this change to the registration system. Local authorities are already faced with an enormous increase in requests for registration, particularly from the private sector. They need to be able to provide an efficient and reasonable quick registration service and I think they should be able to charge for this. It seems to me that anyone proposing to provide a service where there is a statutory registration requirement should look on a fee as part of the setting up and running cost. I believe that in time these fees will be seen in that way."
      It is clear that the Minister and the Government are seeking to introduce the fees because they look around and see a burgeoning private sector which, as the hon. Member for Cambridgeshire, South-East (Mr. Paice) said earlier, are organisations charging fees and seeking to make a profit on a commercial basis.
      I, along with the majority of those hon. Members who have spoken tonight, are worried about the voluntary organisations, in many cases charities, who provide an important service in working class areas for working class children whose parents find great difficulty in making ends meet. The introduction of a registration and inspection fee will, as the petitions to which I have referred show, force the closure of many groups in my constituency and will put others in considerable financial difficulty.
      It is extraordinary that the Minister should come to the House proposing such a fee without having the foggiest idea of what its effect would be. On 20 July I asked the Minister:
      "what research he has undertaken about the likely impact of registration and inspection fees being imposed on pre-school playgroups (a) in Bradford and (b) elsewhere."
      His answer was brief. He said:
      "None."
      It is extraordinary that the Government should be proposing to introduce such fees without having any idea of, or without having undertaken any research into, what the effects would be.
      I also asked the Minister:
      "if he will take steps to provide grants for pre-school playgroups in areas where there is no public nursery provision."
      Again, the Minister's answer was brief. He said:
      "No. This is a matter for local decision."—[Official Report, 20 July 1989; Vol. 157, c. 297.]
      Rather than suggesting the introduction of a fee, which will inevitably cause the closure of many groups and create even more financial difficulties for many others, the Minister would have been well advised to provide extra money for local authorities so that they could fund existing pre-school play groups in areas such as mine, which are doing an excellent job. That would be far more welcome to the groups than the proposal that he has put before the House tonight.
      A constituent of mine who has been involved in play groups for a long time has written to me saying:
      "Most playgroups get no financial assistance, make no profit, run on a shoestring—do not pay their workers anything or if they do only £1–£2 per session and endeavour to keep costs for parents to a minimum—they are not middle class institutions and very often serve as the beginning of the road back to employment/training,'further education for working class women. They are used not only by parents but by childminders grannies etc. in areas where no state facility whatsoever exist—how anyone (the government) can suggest
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      that such groups pay a (yearly) registration fee makes my blood boil—they should be making grants to playgroups riot the other way about."
      We are told that we are now confronted by a listening Government. If the Minister has been listening to the contributions made in this short debate, he will be clearly of the view that there is no support for the introduction of fees for inspection or registration. Even those Conservative Members who have spoken have not supported the proposal. The sensible action for a listening Minister from a listening Government who wishes to respond to the genuine concerns and anxieties of the voluntary sector and charities doing vital educational work, preparing young children for their state education, would be to take the proposal away and say that he will seriously reconsider it. Let us all hope that he will throw it in the ministerial dustbin as soon as he possibly can. If he is not prepared to do that, I urge those Conservative Members who have expressed their deep reservations about the proposal to join us in the Lobby and vote down this silly and regressive proposition.
      Mr. David Hinchliffe: I am pleased to see so many hon. Members present at this time of night to discuss an important issue. I am grateful for the support that those of us who have worked on the Bill have been given tonight by others who share our concern about day care and provision for children.
      12 midnight
      I have always been worried that the issue of day care has been regarded very much as a Cinderella service within social services. It is important to make the point that the new clause relates to Cinderella provisions which are the worst in the Bill. One or two of us vigorously opposed certain aspects of the Bill last night, but our worries then were as nothing compared with our worries about the provisions we are discussing now.
      I have long been concerned about day care, and I have been worried by the fact that many local authorities have not given sufficiently serious thought to the importance of day care. I discussed with one of my colleagues a few minutes ago the position in Wakefield in 1983 when, as my hon. Friend the Member for Hemsworth (Mr. Buckley) who was on the council with me will recall, the then leader of the council, Mr. Jack Smart, came up with the proposal that we close the entire day nursery provision in Wakefield district to meet the Conservative Government's targets on spending. Many of us in the group felt strongly about that, so we took the issue to the High Court. Eventually Mr. Smart, who was given a knighthood by the Government for the work he was doing on behalf of the Tories at the time, was replaced, not before time, as the leader of the Labour group in Wakefield. I am pleased to say that in my own area we are now rebuilding the day care provision for vulnerable young people.
      The Bill gives only scant consideration to a fundamentally important part of child care provision. I listened carefully to my hon. Friend the Member for Wentworth (Mr. Hardy) a few minutes ago when he talked about his worries on day care. It struck me at the time that I was not alive when the Act that currently regulates day care was passed by the House in 1948, which was shortly before I was born. My hon. Friend probably remembered the Bill going through the House and he may have taken part in the debate, if he was here at the time.

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      The regulations that currently govern day care stem from the Nurseries and Child-Minders Regulation Act 1948 and they are wholly inappropriate to day care in 1989. When I worked in social services, I had to administer the regulations and put them into practice and I am worried because they are incredibly loose and insufficiently clear. One worrying factor is that it is obvious that they are interpreted in widely differing ways by different authorities, so the arrangements in the Act are not applied consistently throughout the country.
      An area of great concern to me and, I suspect, to many others involved in social work is what is called the "fit person" clause, which is the definition of a person who is fit to offer services as a child minder or day carer, or to run a nursery. That provision leaves much to be desired in assisting those who have the task of registering people concerned with day care.
      It is also important to make the point that the current regulations mean that the physical arrangements for the children involved are vague. The criteria on matters such as the suitability of the premises offered, the amount of play space and the ratio of staff to children are left, under the regulations, entirely in the hands of the relevant local authorities. People who move from one local authority probably find wholly different interpretations of the regulations in another.
      It is not surprising that our present problems were not anticipated in 1948. The Act failed to lay down any form of national standards, resulting in patchy and viable provision among local authorities. Some split responsibility for nurseries, play groups and child minders between three departments. There is no coherent policy among local authorities. Recently I found that the designated officers involved in day care in Kent work in six separate areas, lacking any common approach. That is nonsense in a service that should justify a coherent approach and common standards.
      The Opposition are attempting to tighten the legislation and provide for proper regulation of services. I am worried because, unless the Government have amended the Bill in a way that I have not picked up—I have studied the amendments carefully—there will be complete deregulation of the provision of care for children over eight. That conflicts with the rest of the Bill's provisions, which set clear standards for child care and which will ensure that we promote the welfare of children in different circumstances.
      I should like to know the thinking behind this measure. I am worried about the Government's reasoning. I suspect that they want to remove the need for them to provide local authorities with more funding for registration and inspection. Undertaking registration and inspection costs local authorities money. Knowing the Government's philosophy, I suspect that they also want to free the market to make it easier for people to provide. I am not happy with that. We had a free market in the independent sector in education, to which my hon. Friend the Member for Durham, North-West (Ms. Armstrong) referred. It allowed the serious abuse of young children. To their credit, the Government have dealt with that problem, but why did it take so long for that serious issue to be tackled? I am worried about the Government following the free market approach to the welfare of children and easing the regulations to attract more people into the business.
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      I take seriously some of the comments made by people with detailed knowledge of day care. The National Childminding Association has done a great deal in pressing for national regulations. Sue Owen of the NCA said:
      "They've tried to exempt as many things as possible because they're concerned at the resource implications". She predicted that change would mean
      "that we'll probably see armies of unregistered child minders. which we've been trying to prevent for years."
      There are still many unregistered child minders. I suspect that the majority in certain cities are unregistered. Rather than tackling the issue, the Government are making things worse through the Bill's provisions. The chief executive of Gingerbread said that deregulation was "absolutely horrendous" and completely against the rest of the Bill's provisions.
      My hon. Friend the Member for Durham, North-West referred to training. I am concerned that the Bill does not do anything to assist with the training of those who work with young children. My four-year-old son recently started at a nursery school. I see at first hand the care that the teachers provide. Their skill has come about not by accident but because they have been properly trained. We should accept the need to train people beyond the level that they willingly undertake in the excellent courses offered by the Open University. It is vital that we establish proper training, but the Bill does nothing to move us in that direction.
      As has been said already, the Government are offering a bias in favour of the private sector and against the public sector. The Bill requires local authorities to provide only for children who are defined as in need. That is a very narrow definition which will cause no end of argument. It restricts authorities in what they can do. That is a bias against the public sector while the private sector can provide for children who may not be in need or require the limited service available in a particular area.
      My hon. Friend the Member for Bradford, West (Mr. Madden) referred to the effect of the charging particularly on the voluntary schemes. The voluntary day care schemes offer a fundamentally important service which is often lacking in many local authorities. Those schemes will be hammered by the financial constraints being placed on local authorities which at the moment offer grant assistance. The Government are changing the regulations laid down by the Health Services and Public Health Act 1968. Organisations which previously received grant assistance on a year-by-year basis will be restricted to five years after which the core funding will end. That will directly affect the provision of many voluntary play groups in areas like mine.
      Hon. Members have come here to argue in favour of charging. It is astonishing that hon. Members can consider costing issues like this while they disregard the welfare aspects with which Opposition Members have been concerned throughout the passage of the Bill. I am worried that the charges for registration and inspection will particularly affect the voluntary sector which, in many areas, is doing an excellent job. Charging could well mean the end of many local voluntary groups that operate on extremely tight budgets.
      Reform is long overdue. In a sense it is 40 years overdue. We should have grasped the issue many years ago in the interests of thousands of children who have not had the deal that they should have received. The burial of the

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      Nurseries and Child-Minders Regulation Act 1948 and the regulations stemming from that Act should have coincided with bringing forward new regulations and a radical improvement in the present provisions. That opportunity, sadly, has been missed.
      There have not been many scandals involving day care. When I consider the scandal about private schools which caused the Government to react in some parts of this Bill, I suspect that we will have to return to the House and claim that we should have done something in this Bill to prevent a similar scandal occuring in day care. I hope to God that such a scandal involving children being interfered with in day care does not occur, but I am worried about the possibility of that happening.
      Mr. Cryer: A query was raised earlier about charging and the relevant amendments dealing with that issue. A cursory examination of the Amendment Paper will disclose that amendment No. 27 proposes to remove paragraph 1(3) of schedule 8, which states:
      "An application under section 64 shall be accompanied by such fee as may be prescribed"—
      that is, for the registration of child minding and day care for young children.
      Amendments Nos 360 and 361 stand in my name and they provide an alternative for hon. Members to vote upon. The charging would be twofold: there would be a charge for registration and a charge for inspection. Schedule 8 7(1) states:
      "where … they shall serve on that person a notice informing him that the inspection is to be carried out and requiring him to pay to them such fee as may be prescribed."
      Amendments Nos 360 and 361 either leave out the requirement to pay
      "such fee as may be prescribed"
      or add at the end
      "However the local authority may waive fees in such cases as it deems necessary and any prescribed fee shall not exceed £10 per annum."
      My amendment would be helpful and would meet the point about having a nominal fee. I hope that, when the House divides on amendment No. 360, Conservative Members will join the Opposition in the Lobby and ensure that there is a nominal fee. The amendment would also enable local authorities such as several in my constituency that are in particular financial difficulties—that is, if the Minister argues, for example, that the fee is absolutely essential for the good conduct and running of pre-school groups—to help particular groups. The local authority has knowledge of what is going on in the relevant area and will be able to select groups on that basis.
      12.15 am
      I provide that discretion in my amendment, in spite of the knowledge that Bradford is under the temporary control of a group of as vicious and hard-hearted Tories as one is likely to come across. However, one should not necessarily legislate in the knowledge that there are such grim-faced tyrants in Bradford city hall. One should give discretion to Labour-controlled authorities, who would use it sensibly. In any case, Pickles and his cronies will not last very long in Bradford city hall, and we shall want to make use of this legislation, if my amendment is passed, to ensure that pre-school play group associations are given the help that hon. Members say they richly deserve.
      I have about 18 letters and a petition containing nearly 100 names from Bierley community centre pre-school playgroup association. It is genuinely concerned about
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      registration and inspection fees. It points out that it is a charity which offers a vital education service. It operates on an estate in my constituency of nearly 1,000 dwellings, so it is a large community by any standards. It is much opposed to any financial penalty. That is how it regards the charges, whatever the Minster might say about regulation and a service being provided. The association regards the charges as a financial penalty.
      Mr. Dennis Skinner: It is in Bradford, South.
      Mr. Cryer: It is in Bradford, South, as my hon. Friend points out.
      Despite constant regular fund-raising, the association would find it extremely difficult to pay any additional fees because it must charge parents for its services in any event. We are talking about parents, many of whom do not enjoy an adequate income in the first place, who made the point that registration fees could lead to the closure of their group. No hon. Member would want that to happen.
      I have also had letters from Ambler Thorn play group and from St. John's church in Great Horten, which organises the St. John's under-fives playgroup association. The Bradford branch of the pre-school playgroup association has also written to me to express support for my amendments. People who actually organise and run pre-school playgroup associations welcome the amendments. I hope that the Government do the same.
      Woodside play group in my constituency has also expressed serious concern at the proposal for registration and inspection fees. It says that it needs regular fund-raising to survive. It has a whirl of jumble sales and socials to raise £20, £30, £40 or £50 at a time, and is struggling week in, week out to pay the fees that community centres must charge for heating, which is vital for such young children, and lighting, general caretaking and so on. The provision of facilities or premises does not come cheap, but, at the same time, large sums are not involved. I emphasise that even if the Minister were to charge a modest fee—apparently he is minded to fix the charge at a low rate—an extra £50 per year might well mean the end of some pre-school playgroup association.
      It is all very well for the Minister to say that he is minded to fix the charge at a low rate—we do not question his determination to do that—but, as he knows only too well, Ministers do not stay in their jobs for ever. Indeed, there is constant chopping and changing of Ministers by this Conservative Government. I do not blame them because they are trying, in a desperate situation, to give a new gloss to their wilting Government and, in moving Ministers around, are attempting to give a better impression. However, the Minister of State cannot bind future Ministers. If he has power to prescribe fees, so have his successors. Although he may prescribe them at what he considers to be a low rate, his successor—a Right-wing extremist—might decide that market forces——
      Mr. Hinchliffe: The Minister is a Right-wing extremist.
      Mr. Mellor indicated assent.
      Mr. Cryer: From what I can gather, the Minister has confessed to being a Right-wing extremist, but another even more Right-wing extremist may take his place and the fees may well soar. We know that the hon. Member for Northampton, North (Mr. Marlow) has ambition to move

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      further down on to the Treasury Bench—it is gleaming out of his eyes—and we know the astronomical fees that he might charge.
      Therefore, I am not satisfied by the assurance that a particular Minister will be reasonable because, although he or she may carry out that assurance, Ministers change and the next one would not be bound to prescribe only modest fees.
      In the 1960s when my wife and I were involved in the formation of a pre-school play group association at Oakworth in Keighley, the premises were inspected by the local authority and, at the request of the local authority, the committee had to undergo a medical inspection. All that was carried out without charge by the Conservative-controlled local authority. In those days, before the Right-wing extremism of the present Government had spread its tentacles over the land, that authority would have been shaken at any suggestion that a service for the protection of children should be the subject of charging.
      It is important that we note that this proposal comes from a Government who are supposed to recognise the value of the voluntary sector—
      Mr. Skinner: And the family.
      Mr. Cryer: Yes, as my hon. Friend says, of the family also. "The family" and "the voluntary sector" are phrases that the Government are prone to use, yet they are proposing to penalise the voluntary sector.
      Earlier today we had defence questions and we learnt that about 21 Tornado aircraft have crashed. The Government expressed their mild platitudinous concern, but I remind them that that figure represents nearly £400 million-worth of aircraft, and that is quite apart from the several hundred thousands of pounds spent on training the pilots and aircrew. The Government seem prepared to lavish money on activities such as the provision of Tornados—indeed, the purchase of Tornados is the largest defence procurement in our history, totalling about £13 billion—yet when it comes to small children, taking their first few steps in the world, the Government propose to heap penal charges on the organisers—on volunteers. I recall that only last week we spent two days—obviously partly in prime time—on the defence estimates. Of course, they are important because they involve the expenditure of £21,000 million and yet only now, late at night, are we spending time on something vastly more important—our future generations. It strikes me that a better illustration of decent human priorities, with concern for our children coming first, would be for the Government, since they are so keen on market forces, to subject Trident to those market forces. They should give some small proportion of the money that they are lavishing on Trident to pre-school play groups.
      It could all be left to market forces. The Government could have gone around collecting for Trident with charity boxes and seen how the market responded. If they could get the £10 billion from street collections, they could build it. That would be a splendid test of their philosophy. In the meantime, they could use some of the money they already have on provision for new generations. That would symbolise a determination to provide for a peaceful future, as opposed to one of an ever-growing threat of mass extermination.
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      My attention was caught by the disparity between those two priorities. When the Labour party conference passed a resolution suggesting that some of our present defence expenditure should be put into education and pre-school play groups, for example, what did we get from Conservative Members? Sneer after sneer that anyone should aspire to such a priority.
      My proposals are modest. There should not be charging or, if there is, it should be at the discretion of the local authority not to charge if it thinks that there is a particular need. If a pre-school play group in my constituency is unable to keep going, its organisers will not be able to afford to go to Whitehall to see the Minister to ask for assistance; they will go to the local authority. It therefore makes good sense to provide local authorities with discretion so that they can say, "We shall inspect the premises but waive the fee because we know that you are in financial difficulty. We have looked at your accounts. That is the right and sensible thing to do."
      The House has an opportunity to remove registration inspection fees. It can say, "We recognise the importance of pre-school play groups and believe that voluntary work in the community should be recognised. We shall not penalise these people and send them out on even more fund-raising events to the point where they spend more time on raising money than they do on developing facilities and caring for children."
      Pre-school play groups fulfil an important need in rural and urban areas such as mine, where nursery facilities are less than adequate. We would be foolish and misguided if we imposed a charge on such organisations. I very much hope that the House will reject charges. I hope that it will recognise that local authorities have to make some provision. That is what they are there for, but that function should be recognised through the rate support grant. The cost of providing such facilities should not be borne by the people who do the hard work of providing them.
      I hope that the Minister will accept our amendments. His assurance about low charges is not likely to carry much weight with me. I chair the Joint Committee on Statutory Instruments and, every 12 months, we have the round of 150 or 200 statutory instruments raising charges, sometimes by as much as 100 or 150 per cent. When that happens, we ask whether it is an unusual use of powers. In every case, when we raise the matter with the Department concerned, we have to accept that the power for the Minister to prescribe fees exists in legislation. So we retire defeated as what the Minister has done does not constitute an unusual use of powers.
      I recognise the good intent of Ministers in some cases, who say that they will keep fees low. That assurance is not adequate as they have the power to prescribe fees. We are dealing with primary legislation and once that legislation is out of our hands we are left with a cumbersome and inadequate method by which to try to redress the damage.
      If the Minister prescribes fees that we do not like they will be subject to the negative procedure. Someone must then put down a prayer to annul the instrument. The debate on that may or may not be held as there is no guarantee that a prayer put down to annul an instrument will be debated. There is no Standing Order—itself a minor disgrace—requiring that a prayer which is tabled should be debated and a decision taken. The only thing that we can cling on to is that if an instrument is produced by the Minister which the House does not like, we may

      801
      have a debate and, possibly, a vote. The chances are, however, that it will not get that far. That debate would be, in any case, limited to an hour and a half. That means that a few minutes would be available for about eight hon. Members, followed by the Front-Bench spokesmen, and that would be it.
      I am unhappy about giving Ministers powers through negative procedure instruments and therefore I am not much taken with any assurances that the Minister may give.
      Mr. Jeremy Corbyn: My hon. Friend has described the Government's abuse of statutory instruments. Does he recall that the budget for the Inner London education authority, which included its preschool provision, of almost £1 billion was decided on a vote after a debate lasting less than an hour and a half during which a minority of hon. Members representing London were able to participate?
      Mr. Cryer: My hon. Friend has illustrated the point that I was making.
      The Government make good use of the statutory instrument procedure. Conservative Members should recall that this is the Government who were going to take legislation off our backs. The number of statutory instruments, rules, regulations and orders produced by the Government is rising each year they are in office. They make use of the statutory instrument procedure and therefore it would be far better to get the primary legislation correct to ensure that we decide in straight forward cases. I accept that, in some instances, there may be technicalities and that Ministers must take into account so many variables that it is difficult for hon. Members to reach a decision.
      In this case, however, the issue is clear. The voluntary organisations are making provision for young children and providing a magnificent service. They have limited financial means at their disposal, but it is proposed that charges should be imposed at the Minister's discretion. The House should say that it accepts the argument, but that there should not be charges and that it will not give the Minister the power to prescribe the fees as it does not want such fees prescribed, especially in view of the uncertain nature of the prescription.
      In view of the argument deployed overwhelmingly from the Labour Benches, I hope that the Minister will accept it and will withdraw the relevant sections.
      Mr. Keith Vaz: In Committee I had to declare—I do so again to the House—that I am not a parent. During exchanges in the frivolous time that we spent in Committee the hon. Lady the Member for Billericay (Mrs. Gorman) made me an offer that I could refuse. Shortly afterwards she was dispatched to Beijing to prevent our relationship flourishing.
      I support the new clause that has been moved by my hon. Friend the Member for Durham, North-West (Ms. Armstrong)—[Interruption.] Perhaps the hon. Lady is in Beijing. The issues she has raised are of great importance to the Bill's progress. When I introduced a ten-minute Bill on 13 July 1988 I recall that I was contacted, shortly before the Bill was to be read the First time, by two parliamentary private secretaries for two different Ministers because there was then, and there remains, confusion among Government Departments about who is responsible for dealing with these matters. I felt then, and feel now having
      802
      listened to contributions from my hon. Friends, that there is a clear need to clarify this aspect of the law. New clause 2 is, therefore, an attempt by Opposition Members to ensure that there is a clear plan and strategy about the way in which we approach these matters.
      The inconsistencies and differences between Government Departments are mirrored at local authority level. Hon. Members have rightly said that there are differences between the way in which different local authorities appear to support the idea of child care. Those inconsistencies cause great hardship and distress to those who wish to be part of that system.
      My Bill, which unfortunately did not become law, sought to put these changes into effect. I gave a long history going back to 1936 and cited the report of the board of education on nursery schools and classes as our authority for ensuring that all children under the age of five should have the right to education. I said then, and repeat now, that the Opposition believe that education begins at birth. The legislation and the intentions that followed the board of education's report endorsed that view.
      I also mentioned the Education Act 1944, which originally placed the discretion on local authorities to provide such education, the 1965 Plowden report, which strongly supported the idea of nursery education and the 1972 White Paper on education, which was introduced by the Prime Minister in her previous incarnation. In those days, 48 to one was regarded as a defeat. The White Paper stated that the
      "aim is that within the next 10 years nursery education should become available without charge … "
      The Prime Minister's words never became law.
      I mentioned the Treasury Committee's White Paper called "Better Schools" and the Select Committee's report., which endorsed the views of so many hon. Members that the right to nursery education should be supported.
      The plan, which is essential to new clause 2, recognises the changing role of women in our society. I remind hon. Members of Mr. Malcolm Wicks' report, "Families and the State", which was published at the end of last year. It states:
      "Certainly it remains the case today that the lives of many families, particularly mothers, are dogged by the sheer difficulty of finding, and retaining child care."
      Mr. Wicks added that, although 47 per cent. of children aged three and four were receiving pre-school provision in 1985, there was evidence of inadequacy in the quantity and quality of it. In 1931, only 13 per cent. of married women aged between 25 and 34 were working, but by 1986 64 per cent. of married women were economically active. Those are appropriate words—"economically active"—with which to announce the return to her place of the hon. Member for Billericay, who I hope will take part in the debate and support my hon. Friends and me. On the other hand, I may be wrong and find that she will disappoint us.
      The importance of recognising the changing role of women is essential to the new clause. It is an essential part of the way in which the Government have approached other aspects of the Bill that we should have planning and appropriate training. Yesterday, the Solicitor-General, when moving amendment No. 37, spoke of the need for planning and timetabling in respect of courts dealing with child care matters. We say that if it is good enough for the courts to timetable, it is good enough for local authorities, in those circumstances, to plan.

      803
      My hon. Friends have referred to the position in their constituencies and have appealed for more resources. I endorse their comments. Before introducing my Bill last year, I spent a considerable time speaking to people who ran mothers and toddlers groups, who were involved with pre-school education societies and who were active in promoting provision for the under-fives.
      As I visited neighbourhood centres in my constituency—at, for example, Netherhall, Northfields and Coleman—I met women who were active in the campaign. They pointed out that they could not play their full role in society unless provision was made for their children. I watched with anxiety the ways in which they tried to raise money for their causes and felt then, as I feel now, that central Government should make the money available.
      Were the hon. Member for Northampton, North (Mr. Marlow) in his place, he would probably ask, "What about the cost?" He always asks that question. It is important for us to show that Parliament is prepared to invest in the nation's children, recognising that the mark of a civilised society is the way in which it treats its most vulnerable members, its children.
      That is why we on the Committee spent many hours deliberating various aspects of this historic Bill. Mothers and others in my constituency are forced to rely on jumble sales and raffles to raise funds for what we recognise—as was recognised in 1936—to be an extremely important measure. As my hon. Friend the Member for Bradford, South (Mr. Cryer) said, they are forced to spend their time on fund-raising exercises when it would be better spent on activities concerned with the children.
      They must go from one local authority to another, from charitable trusts to other bodies, trying to raise funds. I congratulate my authority, Leicester city council, and its chair of recreation, Derek Fryett, and its director of recreation, Alun Llewellyn, on picking up the tab for many of the activities which should be paid for by Leicestershire county council.
      So often groups and individuals have gone to the county council to seek financial support. The county council, like so many other local authorities, has faced enormous difficulties because of the Government's restrictions on local government expenditure, but it has been mean about this issue, to such an extent that only 23 per cent. of the under-fives in Leicestershire receive education of this sort. Often these individuals and groups have had to go to Leicester city council, which I am happy to say is Labour-controlled, and ask its recreation department to supply the grants necessary to ensure that their organisations are successful. That is a pathetic way for central Government to treat such an important matter.
      I agree wholeheartedly with my hon. Friend the Member for Durham, North-West about the need for a multi-agency approach and for other organisations to be consulted. The Minister of State was described yesterday as Mr. Nice—or was it Mr. Nasty?—and I am sure that he will consider my hon. Friend's points. These organisations must be consulted because they are working at the grass roots.
      12.45 am
      I should have liked the Bill to contain considerably more than it does. I would have liked much more about the need to treat child care as part of a wider package to
      804
      encourage women's equal access to jobs. I should have liked provisions to allow all pregnant women the right to maternity leave, and to introduce maternity and family leave in all areas of work. I would like increased opportunities for part-time work—for job sharing and so on. I want credits for child care allowances for employers, and the abolition of the iniquitous employers' tax on work-based nurseries—an issue that has been the subject of many parliamentary questions to the Chancellor and the Chief Secretary to the Treasury. I should have liked tax relief on child care in the Bill.
      Opposition Members would have liked all these measures in the Bill, but, alas, they have not been included. The debate on the new clause gives us the chance to put our case in good faith to a Minister who has shown in recent negotiations that he is prepared to listen and to meet the objections of those with experience. Here is an opportunity for him to show that he is prepared to put his faith in children and to recognise that child care facilities and opportunities should be available for all. This is a unique chance to put the law right. I urge the Minister to seize it and enfranchise the children of our country.
      Mr. Corbyn: Like my hon. Friends the Members for Leicester, East (Mr. Vaz) and for Wakefield (Mr. Hinchliffe), I am sponsored in the House by the National Union of Public Employees. We have a particular interest in the debate as our members provide a large proportion of the pre-school facilities in this country.
      I find it strange that we are here at nearly one o'clock in the morning discussing the care of children. In this place there are no facilities for that and the hours of work here are not conducive to looking after children.
      The new clause adds up to a charter which would revolutionise the treatment of children and the opportunities for parents—especially women—to go to work and take up fulfilling careers. My constituency is probably one of the most densely populated in the country. It has the least amount of open space and it has some very bad housing, as bad as in almost any part of London. There is much overcrowding. Many children live in high-rise flats or in overcrowded flats in converted Victorian houses with no garden space and there is limited and inadequate provision of pre-school facilities. The chances of those children being able to develop their personalities, abilities, interests and excitement to the same extent as children growing up in a wealthier, more suburban environment with greater access to open space are limited. The House should be concerned about that.
      The lack of pre-school facilities discriminates against the children of working-class parents and against the parents themselves and denies such people many of the opportunities for achievement that are available to others. The new clause brings to our attention the way in which children would be able to develop much better and shows how this country should treat its children.
      The provision of pre-school facilities in Britain is very uneven. However, that unevenness is not based on wealth or on areas or counties but largely on the political complexion of local authorities. Labour local authorities, such as the one in the area that I represent, do everything that they can to provide pre-school facilities. They provide children's day centres, day centres, nurseries, play groups and training for child minders.
      What is the response of central Government to the provision of such facilities? Since 1980 there has been an

      805
      unremitting press and political attack on our local authority with allegations of gross overspending. It has been suggested that we should cut expenditure on pre-school facilities. Councils which refused to do that were rate capped. Local authorities in areas such as mine have been penalised for attempting to provide some of the facilities that my hon. Friend the Member for Durham, North-West (Ms. Armstrong) suggested when she moved the new clause. I hope that the House recognises the importance of that.
      We are also debating the range of child care facilities that should be on offer. The Labour party strongly believes that there should be statutory provision of pre-school facilities for parents who want to use them. It is a matter not of forcing people to use such facilities but of ensuring that a choice is available so that parents may have their children looked after safely in an educational environment which will ensure their development or may look after them themselves. They should not be forced, as are many people in my constituency, to live in grossly overcrowded flats with limited access to pre-school facilities because that is detrimental to the development of children. It is a serious issue.
      I am always amazed at how badly Britain provides for pre-school-age children. We compare badly with every other country in Europe, east or west, and with many countries elsewhere which have taken seriously the question of pre-school provision. When overseas visitors visit the House or my constituency they often ask about pre-school facilities. I tell them that in my constituency the facilities are good compared with the national average but that they are still inadequate, as the local authority would be the first to recognise.
      We are also debating registration and regulation. The provision of pre-school facilities should be subject to tight regulation. The facilities should he safe and should not be overcrowded. Staff should know what they are doing and be properly trained and the children should be properly looked after.
      If the Government pursue their line of charging any voluntary organisation, whether it is a playgroup, a child minder or anyone else, for those facilities and for registration, that will be an incentive not to register and to dodge the register. If there is an incentive to do that, and to make as much money as possible, many people will do that. These provisions will encourage child minders not to register, and to take on more children. Those who will suffer will he the child minders and, of course, the children.
      I recognise that the vast majority of child minders are good, do a good job, work extremely hard and are dedicated and loving to the children for whom they care. However, it is important for the security and benefit of those who mind children that there should be proper registration and regulation. The Government appear to believe totally in the free market economy. If that were taken to its logical conclusion, anyone could take on the care of children of pre-school age for whatever amount of money they could get. Those who will suffer will be the poorest children in the poorest areas. They will be the most exploited.
      We have an appalling mess and mish-mash of pre-school facilities. In the west end of London, there are private nurseries for the children of business people which charge between £150 and £200 per week—up to £10,000 per year. That is way beyond the ability of many people to pay. At the other end of the scale there is a lack of local
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      authority provision at a cost which anyone can bear. Such provision should be free. As a result of that lack, there are only the private nurseries, and many people cannot afford them, so both children and parents suffer.
      I hope that the House will recognise that the 1948 regulations, advanced though they were for 1948, are inadequate and that the proposals in new clauses 2, 3 and 4 are very much in line with Labour party policy. They set out a system under which children could be properly cared for and given proper opportunities for development, and their parents could be given real opportunities for working with the security of knowing that their children will be properly looked after. All that comes under the charter in the new clauses.
      The lack of adequate pre-school facilities for children is damaging to children, but also to parents. Usually, women have to stay at home to look after the children where there is no public provision. Many of those women lose their career prospects as a result, and few facilities are available for education at a later stage for women who have had to stay at home to look after children, so they lose out on fulfilment. Often the children lose out, too, because of the difficulty of the housing conditions in which such families live.
      We are proposing a radical change to the lives of those people. If we allow this crazy free market philosophy to envelope everything and to take over the provision of pre-school facilities, the losers will be the children of the poor, the parents who are not wealthy. The gainers will be those who can afford to send their children to expensive private schools and those who can make money out of them.
      Education should be universally available and free at all ages—not just at the school starting age but well before that, when the crucial stages of child development take place. It is a scandal that the House is debating this at this time of the night. The subject is too important to be debated at this time, and in this atmosphere. I hope that the Government will recognise the importance of this and support our new clauses.
      1 am
      The Minister for Health (Mr. David Mellor): I shall begin by referring to the three Government amendments that are part of the group of new clauses and amendments that are before us. Amendments Nos. 388 and 484 provide a power to make regulations about the requirements that local authorities have to attach to the registration of a person providing day care and prescribe requirements which authorities must not attach. Amendment No. 130 is a drafting amendment which is intended to correct a mistake in clause 67(2)(c)(ii) in relation to persons providing day care.
      I shall deal with the substantive matters that we have been discussing and the range of new clauses which have been proposed by the hon. Member for Durham, North-West (Ms. Armstrong). The hon. Member for Leicester, East (Mr. Vaz) and others have been kind enough to observe that where it was possible to make changes in Committee and at other stages of the Bill's consideration to ensure that there was a substantial—indeed, overwhelming—measure of cross-party support for the Bill, I endeavoured to do so. The Amendment Paper is littered with amendments that pick up agreements to reconsider as a result of the Bill's examination in

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      Committee. The hon. Lady and her hon. Friends will know that the issue that has been the subject of this debate, which we discussed fully in Committee, reveals a philosophical difference between the two sides of the House which I fear that it will not be possible to bridge tonight. I shall, however, say a few words about the new clauses 2, 3 and 4, beginning with clause 2.
      Government policy is based on the philosophy that parents are responsible for bringing up their children. If they need or want help with this task, they should make the necessary arrangements and meet the cost where they are able to do so. We believe that it is up to parents to decide, in the light of their own circumstances, whether both should work, for instance, while their children are young. We consider that the state should not be involved in that decision and that the welfare of the child must be of paramount consideration in reaching such a decision. We believe, however, that assistance should be given to children who are in need, and that is the thread that runs through the Bill.
      Unfortunately, new clause 2 goes further than the duty that is provided for in clause 17, and avowedly so. The hon. Member for Durham, North-West makes that point. The new clause would require every local authority to plan for the development of day care and education facilities for all children under the age of five who require such facilities, and "requirement" appears to mean, in effect, all those who ask for these facilities.
      Ms. Armstrong: Yes.
      Mr. Mellor: The hon. Lady confirms that. There is an honest disagreement between us. The new clause goes too far and I fear that I am not able to move further in that direction tonight.
      New clause 3 provides a statutory code of practice to which local authorities would have to have regard when deciding whether to register an intending child minder or day-care provider under part X. A code of practice would set down standards to be met by child minders and others providing day care for young children.
      I do not think that there is much difference between us in this instance. We recognise that local authorities are likely to find guidance helpful in exercising their registration function efficiently and effectively. We shall be issuing guidance in the form of a departmental circular to local authorities on this and many other provisions in the Bill. In preparing the guidance we shall consult widely with statutory and voluntary bodies. We shall have regard to matters that are raised in this debate.
      I hope that in the light of what I have said the hon. Member for Durham, North-West will not feel it necessary to push new clause 3 to a Division. If the clause were to form part of the Bill, a formal code of practice would be invoked for one item alone. We have accepted that for other parts of the Bill it is appropriate that there should be guidance under regulations. I hope that the hon. Lady will not consider—I can see no basis for it—that there is a need to establish a special way of dealing with guidance under this part of the Bill when, arguably, some even more significant areas are subject to guidance under regulations in the normal way.
      Let me deal now with new clause 4. Good quality day care is crucial. Clause 69 asks for an annual inspection.
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      That is a duty on local authorities and they have the power to enter the premises in question at any reasonable time and, if appropriate on the evidence then gathered, to cancel registration.
      It is only after an institution has been established that it is possible to determine whether it is working appropriately. To give a local authority the powers in new clause 4 at the time of registration would place an invidious burden on local authorities because it would be difficult for them to make an objective judgment about whether the care to be given to an individual child was likely to be seriously inadequate until the institution was running. However, if the person concerned was not regarded as a fit person there is power to exclude such a person under the Bill.
      The real meat of this is that, provided the institution is being run by a fit person, there cannot be a fair opportunity to judge standards before an organisation is up and running. Therefore, I regret that I am unable to accept any of the new clauses or amendments that have been proposed in the group.
      An important issue in the debate has concerned pre-school play groups registrations and fees. My hon. Friend the Member for Cambridgeshire, South-East (Mr. Paice) made an important point when he said that an increasing number of commercial organisations are providing child-minding or play group facilities. Many of them are of a high standard and I am glad that they are there. But there is no reason why they should not pay a proper fee for the cost of the registration arrangements under the Bill. After all, the Opposition rightly point out that when we place burdens on local authorities there is a cost attached. There is no reason why those who are registered should not pay a reasonable fee, not one that would involve the making of any profit, but one that would cover the costs involved.
      Let me dispose of one serious point that ran throughout the debate. It would be wrong to place any unfair burden on voluntary organisations, such as the Pre-school Playgroups Association, running play group facilities on a shoestring, as I recognise they do. I want to make two points clear. First, if, in order to levy a registration charge on the commercial or semi-commercial organisations, it is necessary to make a charge on Pre-school Playgroups Association play groups, that charge will be purely nominal. I give an undertaking that it would not be more than £10 per annum. There is also power under clause 88(4) for regulations to be made to provide exceptions from the requirement to charge at all. As part of the consultations that will take place, I should like to consider whether it would be possible to ring-fence that category of play groups in order to remove any obligation to make any charge. At worst, there will be a maximum charge of £10; at best, it may be possible, after consultation under the regulations, to find a way to create a ring fence.
      I hope that that will meet any legitimate concern about this. Whatever else may divide us in this group of amendments I hope that there will be no more suggestions that we shall put Pre-school Playgroups Association play groups out of business by making any unfair charge.
      In conclusion, I hope that the House will not mind me making one other remark. It was a matter of sadness to me that there was an unnecessary Division on new clause 32, the first new clause to be debated tonight. I regret that. The Division was forced by the hon. Member for Doncaster, North (Mr. Welsh)—for whom I have the highest personal

      809
      regard—who had not previously played a part in the proceedings on the Bill. I hope that at this late stage such Divisions will not become a trend. We went through 16 sittings in Committee and had only seven Divisions.
      I appreciate that there is a genuine division of opinion on new clause 2 and I fully accept that the Opposition will want to divide on that. However, I hope that, in view of my undertakings on charging in relation to pre-school play groups and other matters, it will not be necessary to force a Division. The proceedings on the Bill have been a happy experience for all of us and I wholly exempt the Opposition Front Bench from any suggestion that there is an attempt to go back on any arrangements into which we entered. It has been a happy experience to take the Bill through with give and take and with a genuine alliance with Opposition views, as those who served in Committee know, which have been incorporated in the Bill as far as possible.
      I hope that the Bill will not now be hijacked by hon. Members who have other intentions, and who may force unnecessary Divisions and prevent progress on a Bill that is important to the welfare of children. I hope that it will be possible to do what we have always intended to do, which is to continue to debate the Bill fairly and properly, having Divisions only when they reveal real differences of principle between the Opposition and the Government, so that we can make a fair attempt to complete progress on the Bill this evening. I hope, therefore, that common sense will prevail, as it has done otherwise throughout the Bill.
      Ms. Armstrong: The Minister was right in his remarks about the new clauses. His understanding of our motives in tabling new clause 2 is exactly right. We think that there is a public responsibility for the care and protection of all children under the age of five and for children involved in child care up to the age of 14. We shall come later to the debate about the age level. I know that hon. Members of all parties are worried because the Minister has set the level at eight. We make it clear in the new clause that our age limit would be 14. We think that the local authority has a duty to review and regulate the child care opportunities and nursery education opportunities for all children.
      When the Prime Minister was Secretary of State for Education, she made a commitment that nursery education would be available for all children who wanted it. We want to ensure that it is available for all children who want it and that it is included in the review of day care and education, so we shall divide the House on new clause 2. I hope that the House will see the Division on new clause 2 as symbolising the Opposition's concern about the manner in which the Government have dealt with the provisions that we have been discussing. We make it clear by omission that charges would be no part of our plans and I shall return to that in a moment.
      New clause 3 concerns the area that local authorities have made clear in their representations that they feel is necessary. As a result of their experiences with the existing legislation, they believe that there should be a statutory code of practice. The essential element of new clause 3 is that it would ensure that, whatever the code of practice, it would come to the House and would be subject to a resolution of the House. We must monitor the code of practice, especially as we know that there will be expansion in the private sector. It is necessary that we have a view on that and that we are able to regulate and to know what is happening.
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      On new clause 4, we have had numerous representations from local authority associations and the voluntary sector because they do not feel that the Bill deals adequately with the question of who is a fit person. New clause 4 makes minimal additions to the definition. I am not able to accept the Minister's assurances.
      1.15 am
      We have clearly and consistently said throughout the Bill's passage that registration is a public responsibility. Therefore, the issues are not charges on the market mechanism. I do not believe that people are motivated by the cash nexus. This may be the difference between the two sides of the House.
      It is as important to have public responsibility for regulating the private sector as to have it for regulating the voluntary sector. The National Childminding Association, for example, has told the Minister that it would be worried if differential charges were introduced. It believes that some hard-pressed local authorities would feel that they had to take account of the views of the people from whom they got their income first. Some authorities already have great waiting lists for registration of child minders. Part of our aim was to ensure that those lists were reduced. Some authorities have argued strongly with the Government that differential charges would bring problems into the processes of registration and inspection.
      The Government have failed to address this issue. In any case, if independent schools are not to be charged, how does one justify charging even private nurseries? I have yet to meet representatives of any such nurseries who claim to deliver quality care with trained workers and can make a profit. I have visited a private nursery which employ's only five qualified workers. Its minimum charge, operating on a non-profit basis, is £105 per week. Anyone who is making a profit can be doing so only at the expense of quality, and we want to ensure that that does not happen.
      Registration is a public issue which affects all of us. No matter where a child is placed—in the public, the private or the voluntary domain—I want to be able to say to the parent, "The regulations are such that we are confident about the quality of the service on offer in this establishment."
      I am sorry that I cannot respond to the Minister's entreaties——
      Mr. Nicholas Soames: Blandishments.
      Ms. Armstrong:—and I will not accept his
      blandishments.
      Question put, That the clause be read a Second time:—
      The House divided: Ayes 49, Noes 126.

      Division No. 336]

      [1.18 am

      AYES

      Armstrong, Hilary

      Cousins, Jim

      Barnes, Harry (Derbyshire NE)

      Cryer, Bob

      Battle, John

      Cummings, John

      Beckett, Margaret

      Cunliffe, Lawrence

      Beith, A. J.

      Dixon, Don

      Bell, Stuart

      Fearn, Ronald

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

      Flynn, Paul

      Bruce, Malcolm (Gordon)

      Foster, Derek

      Buckley, George J.

      Gordon, Mildred

      Campbell, Menzies (Fife NE)

      Hardy, Peter

      Clarke, Tom (Monklands W)

      Hinchliffe, David

      Clay, Bob

      Home Robertson, John

      Clelland, David

      Hughes, John (Coventry NE)

      Cohen, Harry

      Illsley, Eric

      Corbyn, Jeremy

      Jones, Ieuan (Ynys Môn)

      811

      Kirkwood, Archy

      Turner, Dennis

      Leadbitter, Ted

      Vaz, Keith

      Lofthouse, Geoffrey

      Wall, Pat

      McCartney, Ian

      Wareing, Robert N.

      Madden, Max

      Welsh, Andrew (Angus E)

      Meale, Alan

      Welsh, Michael (Doncaster N)

      Michie, Bill (Sheffield Heeley)

      Wise, Mrs Audrey

      Pike, Peter L.

      Powell, Ray (Ogmore)

      Tellers for the Ayes:

      Skinner, Dennis

      Mr. Frank Haynes, and Mrs. Llin Golding.

      Taylor, Mrs Ann (Dewsbury)

      Thompson, Jack (Wansbeck)

      NOES

      Alexander, Richard

      Irvine, Michael

      Alison, Rt Hon Michael

      Jack, Michael

      Amess, David

      Janman, Tim

      Amos, Alan

      Jessel, Toby

      Arbuthnot, James

      Johnson Smith, Sir Geoffrey

      Arnold, Jacques (Gravesham)

      Jones, Gwilym (Cardiff N)

      Ashby, David

      Knapman, Roger

      Baker, Nicholas (Dorset N)

      Lyell, Sir Nicholas

      Baldry, Tony

      Mellor, David

      Batiste, Spencer

      Morris, M (N'hampton S)

      Bennett, Nicholas (Pembroke)

      Morrison, Sir Charles

      Blackburn, Dr John G.

      Moss, Malcolm

      Boswell, Tim

      Neubert, Michael

      Brazier, Julian

      Norris, Steve

      Burns, Simon

      Onslow, Rt Hon Cranley

      Burt, Alistair

      Oppenheim, Phillip

      Butler, Chris

      Paice, James

      Carlisle, John, (Luton N)

      Patnick, Irvine

      Carlisle, Kenneth (Lincoln)

      Pattie, Rt Hon Sir Geoffrey

      Carrington, Matthew

      Pawsey, James

      Carttiss, Michael

      Peacock, Mrs Elizabeth

      Chalker, Rt Hon Mrs Lynda

      Porter, David (Waveney)

      Chapman, Sydney

      Riddick, Graham

      Chope, Christopher

      Roberts, Wyn (Conwy)

      Colvin, Michael

      Rowe, Andrew

      Coombs, Simon (Swindon)

      Rumbold, Mrs Angela

      Cran, James

      Sackville, Hon Tom

      Currie, Mrs Edwina

      Shaw, David (Dover)

      Curry, David

      Shaw, Sir Michael (Scarb')

      Dorrell, Stephen

      Shersby, Michael

      Douglas-Hamilton, Lord James

      Sims, Roger

      Dover, Den

      Soames, Hon Nicholas

      Durant, Tony

      Speed, Keith

      Fallon, Michael

      Speller, Tony

      Favell, Tony

      Spicer, Sir Jim (Dorset W)

      Fenner, Dame Peggy

      Stern, Michael

      Fishburn, John Dudley

      Stevens, Lewis

      Forsyth, Michael (Stirling)

      Stewart, Andy (Sherwood)

      Forth, Eric

      Stradling Thomas, Sir John

      Freeman, Roger

      Summerson, Hugo

      French, Douglas

      Taylor, John M (Solihull)

      Gale, Roger

      Thompson, D. (Calder Valley)

      Garel-Jones, Tristan

      Thompson, Patrick (Norwich N)

      Gill, Christopher

      Thornton, Malcolm

      Glyn, Dr Alan

      Thurnham, Peter

      Goodlad, Alastair

      Townsend, Cyril D. (B'heath)

      Goodson-Wickes, Dr Charles

      Tracey, Richard

      Gorman, Mrs Teresa

      Twinn, Dr Ian

      Gow, Ian

      Waddington, Rt Hon David

      Greenway, John (Ryedale)

      Walden, George

      Gregory, Conal

      Waller, Gary

      Griffiths, Peter (Portsmouth N)

      Ward, John

      Ground, Patrick

      Warren, Kenneth

      Hague, William

      Watts, John

      Hamilton, Neil (Tatton)

      Wheeler, John

      Hanley, Jeremy

      Widdecombe, Ann

      Harris, David

      Winterton, Mrs Ann

      Haselhurst, Alan

      Winterton, Nicholas

      Hayhoe, Rt Hon Sir Barney

      Wood, Timothy

      Hayward, Robert

      Yeo, Tim

      Heddle, John

      Howarth, G. (Cannock & B'wd)

      Tellers for the Noes:

      Howe, Rt Hon Sir Geoffrey

      Mr. David Heathcoat-Amory and Mr. Greg Knight.

      Hughes, Robert G. (Harrow W)

      Hunt, Sir John (Ravensbourne)

      Hunter, Andrew

      Question accordingly negatived.
      1.30 am
      Mr. Mellor: I beg to move, That further consideration of the Bill be now adjourned.
      Mr. Tom Clarke: It is important that I put on record and reaffirm the view of the official Opposition on this Bill. The Opposition have attempted to co-operate with the progress of the Bill—[Interruption.] I shall not attempt to respond to the ill-informed interventions of Conservative Back Benchers, whose views I am sure are not reflected on the Government Front Bench. The fact is—I am delighted and not surprised that the Minister has agreed with this—that the Front Benches have endeavoured to co-operate to ensure that the Bill reaches the statute book. That remains our position. I hope, of course, that time will be found in which to continue the Bill's remaining stages. I repeat that our position is that we shall not seek to oppose the Bill. We want to see it on the statute book.
      That said, however—I say this especially in the presence of the Leader of the House, the Deputy Prime Minister, who is, of course, a reasonable man—when other reasonable hon. Members representing mining areas feel it necessary to demonstrate, as they have done, because they genuinely feel that they have a grievance about Associated British Ports——
      Mr. Deputy Speaker (Mr. Harold Walker): Order. The hon. Gentleman should resume his seat. We cannot discuss those matters now.
      Mr. Clarke: I conclude by saying that I am sure that an honourable man, such as the Leader of the House, will take on board the sincere and genuine views that have been expressed.
      Mr. Sims: Although I am encouraged by what we have just heard, I find myself, as a Back Bencher who has been closely involved with the Bill, somewhat perplexed by the turn of events this evening. I have been given to understand that there was a clear understanding in all parts of the House that we would seek to complete the Bill's passage this evening. As it was, our proceedings were delayed by accommodating the Opposition in the special debate on the economy for which they asked.
      All hon. Members should recognise that many organisations outside the House are following the Bill's passage closely and are concerned that it should come to a successful conclusion. They will be extremely worried when they hear that we have apparently adjourned proceedings when we all know that the amount of parliamentary time available for completing such legislation is extremely limited. If we are to adjourn proceedings on the Bill this evening, I hope that time can be found as soon as possible so that, on a proper normal parliamentary basis, the Bill can be brought to its conclusion.
      Mr. McCartney: Although I am a Back-Bench Member who was not directly involved in the Bill's Committee stage, I was involved in details relating to it for much of its Committee stage and spent all yesterday—and all our three and a half hours this evening—participating positively in the debate. Indeed, I agreed to submit in writing to the Minister my detailed positive suggestions on the amendments that we discussed yesterday in our

      813
      personal time. My hon. Friends and I therefore greatly resent the accusation made by some Conservative Members that some Opposition Back-bench Members have attempted to disrupt the business this evening. We have had less than three hours of debate on legislation which, if the debate had started in the afternoon, would have continued for at least six and a half hours.
      Of their own volition, the Government have tabled more than 400 amendments but at this hour have chosen not to deal with important provisions on grandparents' rights, which were due to be considered next. I hope, therefore, that the Government will allow appropriate time for Back Benchers to participate positively in fashioning the Bill before it becomes an Act.
      Mr. Cryer: The Bill has run into difficulties simply because the Government have overloaded the timetable. They have produced the most mammoth Bills on record, dealing with issues such as water privatisation, in such a way that it has been difficult for the House to deal with them. The Clerks have been inundated with work and now, in the spill-over period, we are considering a Bill which, by and large, has a fair measure of cross-party support, as was demonstrated tonight by the wealth of detailed knowledge that hon. Members have exhibited. The debate on the clauses that we have considered tonight demonstrates that our debates have not been excessive.
      If anyone is to be blamed, it is the Government—not for this Bill, but for occupying so much parliamentary time. Everyone knows that they have presented massive Bills, some of which are highly controversial, such as that on water privatisation, which is not wanted outside. They have been so incompetent that they have often had to come back with two or three money resolutions because they have not been able to draft the first one sufficiently comprehensively to deal with the legislation. That is a measure of their incompetence, and it is entirely their responsibility.
      Mr. Mellor: A number of hon. Members have spent a great deal of time on a measure vital for the welfare of children, which is not party-political. I am distressed that, after arrangements were entered into which should have enabled the Bill to complete its passage through the House tonight, that is no longer possible.
      I entirely acquit the hon. Member for Monklands, West (Mr. Clarke) of any blame. I believe that he sincerely wanted, as I did, to finish consideration of the Bill tonight but, as he said in all candour and honesty, a group of hon. Members who are aggrieved about other matters have chosen to use this debate as a vehicle to express their dissatisfaction on other matters. In effect, they have tried to hold the rest of the House and the Bill to ransom by pressing a wholly unnecessary Division.
      Mr. Eric Illsley: On a point of order, Mr. Deputy Speaker. It is worth recording the fact that not one member of the miners parliamentary group has attempted to speak in the debate on the Children Bill tonight. One, or perhaps two at most, hon. Members who are members of that group have been present throughout the debate. We did not force a Division. [HON. MEMBERS: "Yes, you did."] Not one member of the group has spoken. It is wholly inappropriate——
      Mr. Deputy Speaker: Order. The hon. Gentleman will realise that he has raised a highly dubious matter. He has
      814
      made his point. The Minister was very unwise to open up this type of discussion as the Chair must inevitably allow hon. Members an opportunity to defend themselves if they have been charged. It is unwise to pursue this argument.
      Mr. Mellor: I am obliged merely to state the facts. A Division on clause 32 was forced by the hon. Member for Doncaster, North (Mr. Welsh) but no hon. Member entered the Division Lobby. It is an open secret around the Palace of Westminster that that tactic was to be pursued on this entirely innocent Bill because of grievances about a private Bill which is to be considered next week.
      Mr. Deputy Speaker: Order. I have told the hon. Member for Monklands, West (Mr. Clarke) that this is a matter on which we should not open a discussion. The Minister is inviting a much wider debate than is appropriate on matters which are totally unrelated to the issue before the House.
      Mr. Mellor: Of course I accept your guidance, Mr. Deputy Speaker, so I shall say only this. It is a matter of deep regret that this Bill should not be able to make progress because of matters quite beyond the control of those who care about it and because some have been determined not to permit progress in the normal way. I regret that.
      Mr. Stuart Bell: I do not want to incur your ire, Mr. Deputy Speaker, but we who have been involved with the Bill for several months have worked in close co-operation in the interests of children.
      I have a little phrase here which runs, children have been the great unsung losers in the change in social attitudes and morality. Children have always lost out. I have a short quotation:
      "These crowds and crowds of little children are strangely absent from the the written record."
      We have spent much time on the Bill. We are writing children into the record. We are doing something to help children.
      My hon. Friends and I agreed to be here and were prepared to stay here until the Bill had completed its proceedings tonight through to Third Reading. We are still willing, regardless of any outside events, to stay here to complete the remaining stages of the Bill.
      I urge two courses of action upon the Minister. First, that we stay here tonight and continue until the Bill is finished. If we are unable to do so, however, for reasons that are without our control we should have a clear commitment from the Government that the Bill will come back immediately so that we can complete its remaining stages.
      We are all aware of the pressure of time on the other place as well as on the House and the risks that are incumbent upon the proceedings tonight and that, therefore, the Bill may not complete all its stages by the time the House prorogues.
      I urge the Minister and his Front-Bench colleagues to reflect seriously, before we put the motion to a vote, that we may, because it is the wish of the House, stay here until we complete the Bill.
      Mr. Paice: I agree with what my hon. Friend the Member for Chislehurst (Mr. Sims) said. The hon. Member for Middlesbrough (Mr. Bell) also made some

      815
      pertinent points about the importance of the Bill for all children and about the amicable way in which all the debates have taken place.
      Earlier the hon. Member for Makerfield (Mr. McCartney) suggested that it was the Government's fault that we had not made sufficient progress because they had tabled so many amendments. If he had followed the entire proceedings of the Committee, he would know that the Government approached the Bill in an open manner. They were prepared to listen to the debate and to introduce amendments following the results of those Committee debates. A substantial number of amendments have already been passed without any dissent from the Opposition. The hon. Member for Monklands, West (Mr. Clarke) has been outstanding in his support of many of the amendments tabled by the Government as part of their bipartisan policy.
      Sadly, the hon. Member for Monklands, West blew the gaffe. given the manner in which you intervened, Mr. Deputy Speaker, as to the true cause of our dilemma tonight. I am sure that many hon. Members would happily sit here with me for the rest of the night if we believed that we would make progress on the Bill. Rumours throughout the House, however, as well as the comments of the hon. Member for Monklands, West have led us to believe that that is not possible. I am afraid that the hon. Member for Barnsley, Central (Mr. Illsley) was missing when his hon. Friend the Member for Doncaster, North (Mr. Welsh) intervened at great length in the speech of his hon. Friend the Member for Wentworth (Mr. Hardy). The hon. Member for Barnsley, Central therefore missed the speech of a Member representing mining interests.
      We now understand clearly why it is necessary to adjourn the debate tonight. It has nothing to do with the Bill, or with what has happended in the past; it is to do what is likely to happen. That delay is a matter of regret, but we cannot do anything else but adjourn the debate. It would be tragic if the Bill were guillotined at this late stage.
      The only answer is for the Opposition to ensure that their colleagues do not impede the sensible debate on the Bill and that we proceed with the amendments in a manner befitting the future of our children.
      1.45 am
      Mr. Peter L. Pike: I had no intention of speaking in this debate until the Minister made his second speech. His comments were outrageous.
      I have not taken part in any of the proceedings on the Bill, but I have stayed here, deliberately, to vote for certain proposals debated tonight—first, new clause 2. I also intended to vote on the next group of amendments relating to the rights of grandparents, about which my hon. Friend the Member for Ogmore (Mr. Powell) has campaigned strongly for many years.
      It was wrong for the Minister to speak as he did as it was the Government who chose to adjourn further consideration. If they want to make progreess, these issues could be concluded tonight and the Bill could get its Third Reading. It is outrageous. The Minister referred to a Bill which he believed some Opposition Members might try to influence next week. The Government could withdraw a nonsensical Bill which is down for debate next Monday,
      816
      the Football Spectators Bill. They could return in the next Session of Parliament with a more sensible proposal to deal with the football problems.
      I regret the trend of Government Members who seem, like the Prime Minister, to believe that the only people who know what is right for this country are the Prime Minister and Government Members. They want to stifle democracy and debate. We have a right to debate and divide on issues in the House, and I regret that the Government have chosen to try to stop discussion of this issue tonight.
      Mr. Frank Haynes: I do not know why Tory Members are getting themselves in a tizzy. They put themselves up as candidates to fight an election and it is the Government who have given us the problem we face tonight.
      I resent some of the remarks being made by Government Members, particularly the hon. Member for Watford (Mr. Garel-Jones), the Government's Deputy Chief Whip, who suggested that Scargill had something to do with this. I can tell the Deputy Chief Whip and the Chief Whip, who has a big grin on his face, that Scargill has not contacted me about the Bill.
      I have a particular interest in new clause 10 and I and my hon. Friend the Member for Ogmore (Mr. Powell) have prepared ourselves for today's debate. I, like my hon. Friend, am a grandad. I know that you, Mr. Deputy Speaker, are amused but this is a serious matter.
      Mr. Deputy Speaker: Order. I have hardly said anything or moved a muscle.
      Mr. Haynes: With respect, Mr. Deputy Speaker, there was a little grin on your face when I talked about being a grandad.
      Mr. Deputy Speaker: The hon. Gentleman did not refer to the fact that I am a grandad, too.
      Mr. Haynes: I do not know anything about that, but I am proud to be a grandfather and I wanted to participate with my hon. Friend the Member for Ogmore on the grandparent clause. We are being denied that opportunity. What sort of guarantee will we have that this Bill will come before the House again? The Government have so much business to get through in the overspill period that they will be in difficulty. They will have to drop something, otherwise we shall have to go through the night to finish the business.
      The Government have caused the problem because of the number of amendments they have tabled. I am prepared to go through the night if necessary because I am interested in the Bill. Conservative Members have suggested that they, too, are interested in it. This sort of thing has happened many, many times in years gone by. Some hon. Members had nappies on when it was taking place. Many of them are only young lads and they do not understand the procedure of the House. We are an Opposition. Are Conservative Members trying to tell me that if they were the Opposition they would not do what we are doing tonight, and have done on other nights? Who do they think they are kidding, especially the hon. Member for Crawley (Mr. Soames) who indicated that he wanted to speak just now. I have not seen him here on nights of this sort. He has been tucked up in bed in Crawley while we have been doing the work. When we have had this sort of difficulty I have seen regularly the same faces among the Conservative Benches, and they are there now. However,

      817
      on previous occasions, some right hon. and hon. Members have been tucked up in bed. I listened to the right hon. Member for Chingford (Mr. Tebbit) earlier on. He will be tucked up in bed now. He was not pleased about today's debate and if he were here now he probably would not be pleased about what was happening.
      Conservative Members are not really interested in the Bill—[Interruption.] Not in the way in which my hon. Friends are interested in it. We want to continue debating it so that it can reach the statute book because we agree with some of it. We want an opportunity to speak on, for example, new clause 10.
      Mr. Nicholas Bennett: The hon. Member for Ashfield (Mr. Haynes) said that my hon. Friends and I would be doing the same as Labour Members are doing now if we were on the Opposition Benches. I assure him that we would not be obstructing a Bill which is designed to prevent child abuse simply to promote a different measure that is not the subject of discussion tonight. The Government would be in order in introducing a timetable motion to get this important Bill through as soon as possible.
      We have been told that a private Bill is to be debated next week and it seems that several Opposition Members know that. You will be aware, Mr. Deputy Speaker, that that Bill has not been brought to the attention of the House and that business for next week has not yet been published. May I ask you to inquire how those Members have prior knowledge of that Bill?
      Mr. Deputy Speaker: That does not arise on the motion that is before the House. Hon. Members speculate about such matters. I assure the House that the Chairman of Ways and Means is well aware of the concern about the Bill which should not be discussed now.
      Mr. Vaz: Having been a member of the Standing Committee, I am concerned at the way in which the Bill is likely to end its parliamentary stages—in what appears to be a mess from the point of view of the business of the House. The situation in which we now find ourselves was predictable.
      When we met the Minister of State and his officials last Wednesday in the Cathedral room of the Department of Health, we were told that we would not be getting the two full days that we had been promised to discuss this important measure. I agree with the hon. Members who have pointed out that a record number of amendments have been tabled. I am glad of that because it shows that the Minister was true to his word and was prepared to heed the reasonable arguments that were adduced in Committee.
      At that stage, several Members, including the hon Members for Batley and Spen (Mrs. Peacock) and for Mid-Kent (Mr. Rowe), were as concerned as my hon. Friends lest the amount of time allocated would not be sufficient. It has been said time and again that the Bill is of crucial importance in that it has taken 100 years to reach the position when we can radically reform the law of child care.
      We are prepared to go on debating it through the night—[Interruption.] The deputy Chief Whip, the hon. Member for Watford (Mr. Garel-Jones), seems to be indicating dissent at that. Because hon. Members who were members of the Standing Committee spent many hours debating these issues, we are prepared to go on
      818
      discussing the Bill through the night to reach a conclusion on it. Many organisations in the voluntary sector are looking to us to reach that conclusion.
      If the Minister is not minded to proceed with it tonight, the Leader of the House, who is in his place, must give an assurance that he will provide a full day in which to discuss the important issues involved. It is not sufficient to begin the resumed debate at 10 o'clock at night and continue into the early hours without reaching a conclusion.
      Let us have a full day in which to discuss the Bill. Let us not discuss simply the amendments that have been tabled by the hon. Member for Ogmore (Mr. Powell) and others concerning grandparents' rights. After all, in clause 91 we shall be considering the abolition of the ancient jurisdiction of wardship that has been part of our legal system since the 15th century. Adequate time must be provided to discuss such issues. Will the Leader of the House give us that assurance? If he will, I am sure that some Opposition Members will support the motion.
      Mrs. Elizabeth Peacock: Many of us who sat for many hours on the Committee considering the Bill are worried that we have degenerated into this shambles. When we met the Minister of State last week, we were disappointed to find that we were not to have two full days of debate on the Bill. It is quite wrong for Opposition Members to try to make capital out of that, because it was their debate on the economy today which prevented the start of the business earlier.
      After the long hours of consensus discussion on the Bill, steps should now be taken to ensure that time is provided for the Bill to finish its passage through the House and to go to the other place in time to arrive on the statute book. We would be failing in our duty to all the children who need this Bill if that did not happen. We should now try to resolve the problem and avoid this shambles.
      Question put:—
      The House divided: Ayes 110. Noes 20.

      Division No. 337]

      [1.55 am

      AYES

      Alexander, Richard

      Fishburn, John Dudley

      Alison, Rt Hon Michael

      Forsyth, Michael (Stirling)

      Amess, David

      Forth, Eric

      Amos, Alan

      Freeman, Roger

      Arbuthnot, James

      French, Douglas

      Arnold, Jacques (Gravesham)

      Gale, Roger

      Ashby, David

      Garel-Jones, Tristan

      Baker, Nicholas (Dorset N)

      Gill, Christopher

      Baldry, Tony

      Glyn, Dr Alan

      Batiste, Spencer

      Goodlad, Alastair

      Bennett, Nicholas (Pembroke)

      Goodson-Wickes, Dr Charles

      Blackburn, Dr John G.

      Gorman, Mrs Teresa

      Boswell, Tim

      Gow, Ian

      Brazier, Julian

      Greenway, John (Ryedale)

      Burns, Simon

      Gregory, Conal

      Burt, Alistair

      Griffiths, Peter (Portsmouth N)

      Butler, Chris

      Ground, Patrick

      Carlisle, John, (Luton N)

      Hague, William

      Carlisle, Kenneth (Lincoln)

      Hamilton, Neil (Tatton)

      Carrington, Matthew

      Hanley, Jeremy

      Carttiss, Michael

      Harris, David

      Chapman, Sydney

      Haselhurst, Alan

      Chope, Christopher

      Hayhoe, Rt Hon Sir Barney

      Coombs, Simon (Swindon)

      Hayward, Robert

      Currie, Mrs Edwina

      Heathcoat-Amory, David

      Curry, David

      Howarth, G. (Cannock & B'wd)

      Dorrell, Stephen

      Howe, Rt Hon Sir Geoffrey

      Douglas-Hamilton, Lord James

      Hughes, Robert G. (Harrow W)

      Dover, Den

      Hunter, Andrew

      Durant, Tony

      Irvine, Michael

      Fallon, Michael

      Jack, Michael

      819

      Janman, Tim

      Stevens, Lewis

      Jessel, Toby

      Stewart, Andy (Sherwood)

      Jones, Gwilym (Cardiff N)

      Stradling Thomas, Sir John

      Knapman, Roger

      Summerson, Hugo

      Lyell, Sir Nicholas

      Taylor, John M (Solihull)

      Mellor, David

      Thompson, D. (Calder Valley)

      Morrison, Sir Charles

      Thompson, Patrick (Norwich N)

      Moss, Malcolm

      Thurnham, Peter

      Neubert, Michael

      Townsend, Cyril D. (B'heath)

      Norris, Steve

      Tracey, Richard

      Oppenheim, Phillip

      Twinn, Dr Ian

      Paice, James

      Waddington, Rt Hon David

      Patnick, Irvine

      Walden, George

      Pattie, Rt Hon Sir Geoffrey

      Waller, Gary

      Pawsey, James

      Ward, John

      Peacock, Mrs Elizabeth

      Warren, Kenneth

      Porter, David (Waveney)

      Watts, John

      Riddick, Graham

      Wheeler, John

      Roberts, Wyn (Conwy)

      Widdecombe, Ann

      Rowe, Andrew

      Winterton, Mrs Ann

      Shaw, David (Dover)

      Winterton, Nicholas

      Shaw, Sir Michael (Scarb')

      Wood, Timothy

      Shersby, Michael

      Sims, Roger

      Tellers for the Ayes:

      Spicer, Sir Jim (Dorset W)

      Mr. Tom Sackville and Mr. Greg Knight.

      Stern, Michael

      NOES

      Clay, Bob

      Meale, Alan

      Clelland, David

      Michie, Bill (Sheffield Heeley)

      Cohen, Harry

      Skinner, Dennis

      Corbyn, Jeremy

      Thompson, Jack (Wansbeck)

      Cousins, Jim

      Turner, Dennis

      Cryer, Bob

      Vaz, Keith

      Cummings, John

      Wall, Pat

      Cunliffe, Lawrence

      Wise, Mrs Audrey

      Dixon, Don

      Fearn, Ronald

      Tellers for the Noes:

      Hughes, John (Coventry NE)

      Mr. Ian McCartney and Mr. Harry Barnes.

      Madden, Max

      Question accordingly agreed to.
      Bill (as amended in the Standing Committee), to be further considered this day.

    PETITION

      Tuition Fees and Loans
      2.5 am
      Mrs. Llin Golding: I am pleased to present a petition signed by some 820 university students and others in my constituency on a subject that concerns them, and me, greatly. It ends by saying:
      Wherefore your Petitioners Pray that your Honourable House do reject any proposals to introduce the payment by students of tuition fees or student loans.
      To lie upon the Table.

  Zoonoses Order
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Chapman.]
  2.6 am
  Mrs. Teresa Gorman: I shall address myself to the Zoonoses order of March 1989, which gave the Government draconian powers to slaughter chickens particularly, with inadequate compensation for farmers whose flocks were slaughtered. Despite the fact that domestic chickens are still being slaughtered under the order, foreign chickens and their eggs are allowed in without testing. The order is based on what I hope to show is tenuous scientific evidence that eggs are responsible for food poisoning. I am a biologist by training and have been in the profession for more than 20 years, so my interest in the subject, and in the attitude to eggs, comes from a scientific background.
  The Zoonoses order applies to vertebrate animals allegedly carrying diseases which can be transmitted to man. Man is usually excluded from the slaughter order, which is surprising as this is largely a people problem rather than a chicken or an egg problem. The majority of alleged salmonella food poisoning cases relate to people and the way in which they handle food rather than to the fact that there is salmonella present in chickens. That is a long-established fact. Everyone has known about that. Salmonella is endemic in chickens as it is in other animals, including people. There are about 2,000 different species of salmonella, which are quite common in many places. We are largely concerned here with salmonella enteritidis and typhimurium, the two forms held to be responsible for outbreaks of salmonella food poisoning.
  Since March 1989, almost 750,000 chickens have been slaughtered—most of them from the flocks of small farmers. As a result of this policy, small farmers' flocks are being decimated, their income has been destroyed, and the compensation that they are receiving is grossly inadequate. If there were reason to believe that the policy of slaughter was having an effect on the number of food poisoning cases reported and alleged to be associated with salmonella, there might be some sense in it. Despite the slaughter, however, which is on a large scale, despite the fact that we have all been educated to cook eggs much more carefully—the results of national surveys show that precautions are being taken—and despite the fact that the Government have introduced quite draconian measures, the number of food poisoning cases being reported is much the same as it was before. We might reasonably ask, therefore, whether the policy is having the desired effect and whether the diagnosis on which it is based—that eggs are responsible for outbreaks of food poisoning—is correct.
  The domestic production and consumption of eggs has decreased considerably—sales of British eggs are down by about 12 per cent.—but total sales are down by only about 5 per cent. That is because foreign eggs are being imported and sold in Britain. Those eggs come from flocks which are not subjected to the type of tests to which we are submitting our domestic flocks. As a result, it is cynical for the Ministry to allege, as it does, that it is concerned that the problem of salmonella and eggs is being dealt with properly.
  The Ministry has stated that salmonella organisms are widespread and that their complete elimination from the

  821
  environment cannot be expected. Yet we continue to adopt a policy which suggests that if we slaughter chickens in which there is some trace of salmonella we shall reduce the outbreak of food poisoning. I am sure that the Minister knows, however, that in Sweden a draconian policy of slaughter has been implemented and that chicken flocks are largely free of salmonella, yet salmonella food poisoning is still commonplace in the population. It is brought in from abroad and transmitted from person to person through the food chain. The logic of that is that if we were seriously to go about eliminating salmonella, we would slaughter people as well as chickens. That would be ridiculous, but that flows from the so-called logic which seems to underlie the exercise.
  About three quarters of a million chickens have been slaughtered, most of them from small farmers' flocks because outbreaks of food poisoning are often allegedly traced to small farms. A small farm will have a relatively small flock, and it is often easy to say that such a flock must be responsible for the outbreak. Farmers who deal with large and disparate flocks are often immune in the sense that it is not possible specifically to trace an outbreak of food poisoning to a particular flock. Furthermore, the larger egg producers and distributors have access to, and are involved in importing, foreign eggs to make up a shortfall. By and large, the problem is related to small farms.
  If a farmer's flock is identified as possibly having traces of salmonella, the flock is virtually isolated. The farmer is not allowed to bring in an independent expert to test the flock to confirm the evidence that the Ministry alleges that it has found. As many species of salmonella are transient—they can be said to be the equivalent of flu—as they come and go and last only for short periods, it is doubly unjust that flocks are slaughtered when by the time the slaughter order is invoked they may already be clear of salmonella in the natural way of things. That is why the Daventry sisters felt strongly that they were not allowed to have their flock tested to ascertain whether salmonella, as alleged, was present. Even the Ministry's assessment of the flock suggested only tenuously, having slaughtered about 50 chickens, minced their guts, tested them in batches of five and failed to trace in one batch, that salmonella was present. On that evidence, the whole flock was slaughtered.
  Compensation is inadequate. It is sometimes 60 per cent. of the value of the chickens, but it does not take into account the cost of replacing a flock or the loss of business, to say nothing of the farmer's reputation.
  As a result, as the nuns' story illustrates, small farmers will receive about £2,000 in compensation, but to replace the flock and start all over again may cost 10 times that amount—£20,000 or even £30,000. The order is grossly unjust and, as I have already pointed out, there is no evidence to suggest that that ruthless policy is effective.
  Perhaps we should look at the evidence produced in the past to suggest that eggs are responsible for the problem. Is the egg really the guilty party?
  As I have said before in the House, eggs are a complex system of mechanisms specifically designed by nature, or by evolution, to prevent bacteria developing inside. There is a relative lack of oxygen within the egg, but salmonella requires oxygen to develop in numbers which can become a health hazard for human beings.
  There are a number of substances within an egg to restrain the growth of bacteria. The albumen of an egg contains enzymes which are bacteriocides and cannot in
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  the normal way tolerate the growth of bacteria. The egg underneath the shell is contained in a semi-permeable membrane which, again, is designed by nature to prevent the free passage of substances such as oxygen.
  The only permeable part of an egg that would allow bacteria in from outside is the shell itself. But once bacteria get through the shell there are plenty of obstacles designed by nature. Furthermore, unless the egg is fertilised and the embryo begins to develop, there is no other mechanism for gaining oxygen from the outside world.
  I know that my hon. Friend the Minister does not believe me. The biologists advising the Minister are extremely poor in their scientific knowledge. In a letter to my hon. Friend the Member for Ludlow (Mr. Gill) on this subject, my hon. Friend the Minister said:
  "As to the point raised by Teresa Gorman an egg is not anaerobic. Its shell is perforated by millions of pores which allow the embryo to breathe and to achieve moisture balance. That is why eggs are susceptible to salmonella."
  He seems to be trying to suggest that, because there are minute pores in an egg shell, salmonella can enter through the shell, multiply and become dangerous. If that were the case, a rotten egg would not smell of hydrogen sulphide when broken open, as it does. That is produced by anaerobic respiration. An egg is an anaerobic capsule. There is no free oxygen, so even if salmonella were present inside the egg it would not have the oxygen that it requires to reproduce.
  Therefore, there is no good evidence to suggest that eggs have the capacity to produce large quantities of salmonella. Yet it is on that flimsy biological evidence that an industry is being condemned, flocks are being slaughtered with inadequate compensation and people's livelihoods are being jeopardised. Where the Ministry of Agriculture, Fisheries and Food has sought to show that salmonella bacteria can grow within an egg, it has artifically inoculated the egg and thus disrupted the complex natural anti-bacterial system which is part and parcel of the structure of an egg. Those experiments in no way imitate the true conditions that exist in nature.
  Radical measures have been adopted on very poor evidence. I ask the Minister today to go back to basics and to re-examine the evidence before we have literally destroyed our domestic egg-producing industry while at the same time, and quite illogically, allowing eggs into this country from flocks that are not so tested.
  In the Select Committee debate on this, the Government's Chief Medical Officer gave good advice which would be a sensible holding method. He advised that people should not eat raw eggs until we had decided whether raw eggs were dangerous, that eggs should be cooked, and that people who were susceptible to disease, such as the elderly or pregnant women, should be more careful about what they ate. That was all good advice. Yet the Ministry went on to develop a slaughter policy which is expensive, cruel and quite unnecessary because there is no evidence of a reduction in alleged food poisoning by salmonella as a result.
  I am asking the Minister in the interests of common sense to go back to the beginning, to carry out some real scientific investigation of eggs and to discover whether they can biologically be contaminated with salmonella at such a level as to threaten human health, which is what the debate is all about. With the greatest respect to my hon. Friend, I suggest that the biological knowledge that hi; Ministry officials are giving him in their briefings is

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  extremely suspect. If it is not suspect and he really believes that eggs can be dangerous in that way, why has he not banned foreign imports?
  The implication of the Minister's policy, carried to its logical conclusion, is that eggs will become a luxury item in this country, that they will be an expensive food to produce and that people will have to move on to other foodstuffs, while small farmers have to move into other forms of food production.
  We had been eating eggs and chickens for centuries before this scare became part of our national folklore. I believe that the scare was a media hype to which the Government over-reacted. I ask my hon. Friend the Minister to reconsider the evidence and, most particularly and in the short term, to think seriously about what he is doing to our domestic poultry industry by the enactment of the Zoonoses order.
  2.22 am
  The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. David Curry): I find it one of the ironic facts of political life that a few months ago we were being ferociously attacked because we had not taken enough action, whereas now we are being ferociously attacked because we have taken too much action. The action we are taking is correct. We shall continue to take it and continue to have public health as the foremost of our priorities at the Ministry of Agriculture, Fisheries and Food.
  The Zoonoses order came into effect in March 1989. It gave us power to slaughter poultry infected with salmonella and to pay compensation. So far—and I am sure that the House will be interested in the statistics—64 flocks have been slaughtered because we found either salmonella enteritidis or salmonella typhimurium. Getting those two words out at 2.30 am is no mean achievement for an historian, as opposed to a biologist. We have found it in those flocks and about 700,000 birds have been slaughtered. We have paid about £530,000 in compensation. We intend to extend compulsory slaughter soon to the breeding flocks, layers and broilers, to take the battle against infection higher up the chain, especially into grandparent and layer breeders.
  The Zoonoses order complements other legislation that requires the testing of flocks and the control of feed. The extension of testing to hatcheries and the requirement to register the flocks comes into force tomorrow. I took the precaution of writing "tomorrow" in the expectation that this would be a late debate, and I fear that I may have the same problem tomorrow when I deal with Scottish haddock in an Adjournment debate.
  We have brought the typical costs for the testing for a small flock down from about £110 plus value added tax to £24 plus VAT. We have been attentive to the problems of the small producers. We have recognised the difficulty that they have faced, but we have done our best to ensure that the necessary burden that we impose is not intolerable to them. Nothing would destroy the industry more than any reputation that it gained—merited or not—that it was producing a product that the consumer did not think was safe.
  There are 2,000-plus types of salmonella. We require slaughter only when an invasive salmonella—enteritidis
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  and typhimurium—is found. These can penetrate the egg in two principal ways, and here, I am afraid, we have a dispute about the biology of the process: by contamination through the eggshell by faeces, and by transovarian infection, which causes the hen to lay infected eggs. We are confident that our evidence for that is solid. When this is found, the whole of the unit—whether it is a hen house or a whole flock—must go. It is simply not feasible to test every bird and to remove those infected.
  We take the most meticulous steps to verify and identify the infection. It is worth remembering that the owner is already required to do his or her own testing. In the first instance, an investigation is conducted by the local centre of the Ministry of Agriculture, Fisheries and Food to isolate the salmonella organism. That isolate is forwarded to the central veterinary laboratory at Weybridge for a second opinion and confirmation of the serial type. Then the public health laboratory at Colindale in north London is required to identify the exact type of salmonella by phage typing of enteritidis and typhimurium. In other words, there is a tri-level confirmation on top of the owner's own checks.
  My hon. Friend mentioned the recent case in Daventry. I am delighted to see here my hon. Friends the Members for Daventry (Mr. Boswell), for Fylde (Mr. Jack), for Ludlow (Mr. Gill) and for Cambridgeshire, South-East (Mr. Paice). That constitutes quite a large audience for an Adjournment debate. I compliment my hon. Friend the Member for Daventry on the extremely constructive and helpful way in which he dealt with a case that occurred in his constituency. It was clearly a difficult case, as it was conducted in the glare of publicity.
  I am sure that my hon. Friend knows the sequence of events. Two families were taken ill after eating a baked Alaska. The doctor was called in. The environmental health officer for Nuneaton traced the eggs which were used back to the nunnery. The Ministry laboratories in Cambridge identified the salmonella. That was confirmed by the central veterinary laboratory. The public health laboratory identified salmonella typhimurium phage type 49a. It was the exact type that was found in the humans and in the chickens through the chain of the baked Alaska, down to the last decimal point.
  It is also worth spelling out how we test. In this case, 59 birds were taken. This was done according to a scale that shows the number of birds to be taken. A figure is not just dreamed up as officials arrive. The material is grouped into batches constituting batches from five birds. They are tested for three things: infection in the gut, infection in the reproductive tract, and infection in the lung and liver. This method—I defer to the statistical superiority of my hon. Friend the Member for Billericay (Mrs. Gorman) in these matters—gives a 95 per cent. probability of picking up one infected bird if the level of infection in the flock is about 5 per cent. In this case, we found the infection in the intestines.
  Even if—this is a vital point—there had been no outbreak of food poisoning and if the nuns had tested the flock, as they were required by law to do, it is likely that they would have found an infection. When an infection is found, we are obliged in the interests of public health to deal with that flock, whether at that point the link can be traced back irrevocably to a food poisoning case or not. I must emphasise that our behaviour in this case towards the nuns, whose concern and passion we understood, was characterised by restraint, courtesy, consideration and, if I

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  may say so in the case of my right hon. Friend the Minister of Agriculture, Fisheries and Food, a certain religious empathy.
  I want to place it on the record that the nuns' flock had not been tested as the law required. During the height of the dispute, frozen shelled-eggs from an infected house had been sold. No harm was caused and we regarded the mistake as genuine and, fortunately, the consignment was intercepted and its products destroyed.
  My hon. Friend the Member for Billericay asked about compensation. I recognise that that is a difficult issue. We are bound by the Animal Health Act 1981 to pay the market value for birds at the time of slaughter. That clearly depends on the age of the flock and its laying cycle and it is subject to arbitration. At the time that that occurred in the case of the nuns' flock, the flock had been put into forced moult to generate a second laying cycle. We are examining the question of compensation for older flocks.
  My hon. Friend asked me to comment on two specific points. First, she asked why we require birds which lay eggs that are deemed to be infected—she would dispute whether they were actually infected—to be slaughtered when we do not require the chickens which might have salmonella to be slaughtered. The answer is that the Government have targeted eggs as the main health risk because they are eaten raw and part-cooked while it is generally accepted and understood that thorough cooking kills salmonella in chickens. As I have said, we are planning to extend slaughter policy to broiler breeding flocks in a phased fashion to ensure that there is no major market disruption.
  My hon. Friend also asked about imports. The situation is not so apocalyptical as she suggested. Imports are not flooding in and we still supply 97 per cent. of our own market for eggs. My latest figures indicate that 500,000 boxes of eggs have been imported against 420,000 over the same period last year. We have doubled the export of our eggs over the same period, from 420,000 to 850,000 boxes. It is also worth noting that we cannot draw a direct arithmetical line between our action and the impact on public health. However, we have had a long hot summer when there was a genuine anticipation that there would be a significant increase in the incidence of illnesses of this kind. There was no big increase, and the number of cases is running at roughly last year's level. Of course there is a problem with imports. We cannot hold the imports while we conduct the tests because the tests take too long to
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  carry out. Under Community regulations, we cannot ban imports and I must state that, at the height of our crisis, none of our Community partners banned the import of eggs from the United Kingdom. A significant number of eggs were exported from the United Kingdom to the continent at that time.
  If there is a problem with imports, we take up the issue immediately with the member state from where the production originated, and we are seeking European Community controls up to the standard of the controls that we have now imposed in the United Kingdom.
  At a time when we are going in to bat in the Community, to maintain the high status that we enjoy in animal health in the context of the 1992 negotiations, it is absolutely essential that we show that we are willing to take the measures required to maintain that status in the United Kingdom, otherwise it will be increasingly difficult to argue with our negotiators on the continent that we have a special case and that we should not go to a Community system which we fear would not have the rigour of the systems that we would want for the United Kingdom.
  Of course testing 60 eggs per consignment is not as effective as testing the birds themselves. However, we are doing as much as we can to control the level of infection in imports. We are pursuing that with the greatest vigour in the European Community, and those health issues figured on the agenda of the Luxembourg Council—not eggs in this case, but veterinary checks in general—from where I returned today to reply to this debate.
  I do not believe that the Ministry of Agriculture, Fisheries and Food is required to start from the drawing board again. We are constantly looking to ensure that our actions are effective and appropriate. We will never turn our backs on evidence presented to us which suggests a better way. We will constantly ensure that we are acting in the best interests of public health.
  I must make it absolutely clear that our prime interest lies in public health. There must be no exceptions, qualifications or evasions when it comes to public health. That is our fundamental obligation. We will honour that obligation in the Ministry of Agriculture, Fisheries and Food, and I am confident that that is an obligation in the pursuance of which we will have the full backing of the House.
  Question put and agreed to.
  Adjourned accordingly at twenty-five minutes to Three o'clock.