Commons Sitting of 31 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 (By Order)
    Order read for consideration of Lords amendments.
    To be considered on Thursday 2 November.

    CITY OF LONDON (VARIOUS POWERS) BILL (By Order)
    Order for consideration, as amended, read.
    To he considered on Wednesday 1 November.

    MEDWAY TUNNEL BILL [Lords] (By Order)
    Order for Second Reading read.
    To be read a Second time on Wednesday 1 November.

    NOTTINGHAM PARK ESTATE BILL [Lords]
    Motion made,
    That the Promoters of the Nottingham Park Estate 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 no 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, if the Bill is brought from the Lords in the next Session, the Agent for the Bill shall deposit in the Private Bill Office a declaration signed by him, 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 read the first and second time and committed (and shall be recorded in the Journal of this House as having been so read and committed);
    That the Petitions relating to 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. [Miss Betty Boothroyd.]
    Hon. Members: Object.
    To be considered on Thursday 2 November.

    VALE OF GLAMORGAN (BARRY HARBOUR) BILL [Lords]
    Motion made,
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    That the Promoters of the Vale of Glamorgan (Barry Harbour) 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 clay 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.—[Miss Betty Boothroyd.]
    Hon. Members: Object.
    To he considered on Thursday 2 November.

    BIRMINGHAM CITY COUNCIL (MISCELLANEOUS PROVISIONS) BILL [LORDS]
    Motion made,
    That the Promoters of the Birmingham City Council (Miscellaneous Provisions) Bill [Lords] shall have leave, except as provided by these Orders, to suspend further 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 Agent for the Bill shall deposit in the Private Bill Office a declaration, signed by him, 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 read the first time and referred to the Examiners of Petitions for Private Bills;
    That, notwithstanding the suspension of other proceedings on the Bill, Standing Order 171A(1) shall apply to the presenting of Petitions against the Bill brought from the Lords in the present Session and only Petitions presented under this Order shall be received as Petitions presented under Standing Order 171A(1);
    That any Petitions presented under the foregoing Order shall stand referred to the Committee on the Bill in the next Session;
    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. —[Miss Betty Boothroyd.]
    Hon. Members: Object.
    To be considered on Thursday 2 November.

    BRITISH RAILWAYS BILL
    Motion made,
    That the Promoters of the British Railways 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.—[Miss Betty Boothroyd.]
    Hon. Members: Object.
    To be considered on Thursday 2 November.

    BROMLEY LONDON BOROUGH COUNCIL (CRYSTAL PALACE) BILL
    Motion made,
    That the Promoters of the Bromley London Borough Council (Crystal Place) 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
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    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.—[Miss Betty Boothroyd.]
    Hon. Members: Object.
    To be considered on Thursday 2 November.

    GREATER MANCHESTER (LIGHT RAPID TRANSIT SYSTEM) (No. 3) BILL [Lords]
    Motion made,
    That the Promoters of the Greater Manchester (Light Rapid Transit System) (No. 3) 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 had been so deposited has been laid upon the Table of the House, the Bill shall be deemed to have been read the first time and referred to the Examiners of Petitions for Private Bills;
    That, no petitions against the Bill having been presented within the time limited within the present Session, no Petitioners shall be heard before any committee on the Bill save those who complain of any amendment as proposed in the filled up Bill or of any matter which arises during the progress of the Bill before the committee;
    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. —[Miss Betty Boothroyd.]
    Hon. Members: Object.
    To be considered on Thursday 2 November.

oral Answer to Questions
  EMPLOYMENT

    Factory Inspections
    Mr. Andrew F. Bennett: To ask the Secretary of State for Employment if, pursuant to his answer of 28 July, Official Report, column 1043, he will publish in the Official Report the figures on factory inspections contained in the letter.
    The Parliamentary Under-Secretary of State for Employment (Mr. Patrick Nicholls): Yes, Sir.
    Mr. Bennett: I congratulate the Minister on trying to hide the figures. Does he accept that the figures show that 20 per cent. of factories and other industrial premises have not been inspected for more than five years? Is that not a disgrace, especially when two people are killed every working day? Under the present Government, the Health and Safety Executive has been cut by about 20 per cent. Is it not high time that the Government gave safety in industry a higher priority, informed management of the existence of the Health and Safety Executive and made the executive really effective?
    Mr. Nicholls: Far from being disgraceful, the hon. Gentleman has shown that he does not know the facts which lie behind his supplementary question. He makes the assumption that all premises should be inspected the same number of times. That seems to assume that the dangers inherent in a chemical engineering factory will be same as those in a dressmaking concern. There is a rating system which ensures that inspectors look for trouble to the greatest extent where they are most likely to find it. Far from trying to hide the figures, I am surprised that the hon. Gentleman did not draw attention to the fact that a letter that I sent to him, containing the information which is to be placed in the Library, showed that the number of preventive inspections had risen by about 20 per cent. since 1985–86.
    Mr. Ian Bruce: Does my hon. Friend agree that the best inspectors of any factory are the employees, and that the inspectorate always responds to a complaint by employees at a work place so as to ensure that safety is paramount? Surely the responsibility should be on employees to alert inspectors.
    Mr. Nicholls: My hon. Friend is right. The primary responsibility for ensuring proper health and safety in the work force lies with employers and employees. Just as we could not solve crime by putting a policeman on every corner, there is no evidence that we could eliminate accidents by putting an inspector in every work place.
    Mr. Strang: Now that I have received a letter from the Secretary of State which it took him three months to write, in which he admits that he has failed to keep his promise to the House to increase the factory and agriculture inspectorates by 40 inspectors by 31 March, will the Minister take the opportunity on behalf of the Government to apologise to the House for failing to keep
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    that promise? When will the Government increase the strength of the factory and agriculture inspectorates by the 40 inspectors promised by 31 March?
    Mr. Nicholls: The only apology due to the House arising from the question would be from the hon. Gentleman for the distorted way in which he has presented the figures. The target was 590 factory inspectors in post by April 1990. That has already been achieved, which is hardly surprising as in the past two years the HSE has received all the money for which it bid from central Government. The only point at issue is why the hon. Gentleman and his hon. Friend the hon. Member for Denton and Reddish (Mr. Bennett) have persisted in choosing not to understand the figures.
    Mr. Strang: Does the Minister deny what he said?
    Mr. Speaker: Order.
    Following is the information:—
    The number of preventive inspection visits paid by the Health and Safety Executive's (HSE) Factory Inspectorate (FI) to fixed premises in each of the last four planning years is as follows:

    Year

    Numbers of Preventive Inspection Visits

    1985–86

    50,434

    1986–87

    54,876

    1987–88

    59,437

    1988–89

    60,708

    In addition, a substantial number of inspections of transient activities were carried out and visits were also paid to all types of workplaces for other purposes such as accident and complaint investigations, to give advice and to check on shortcomings previously identified.
    The HSE records show that of the fixed premises registered with FI in April 1989, 36,234 last had a preventive inspection visit five years ago, 47,974 seven years ago, 17,230 nine years ago and 23,606 11 or more years ago.

    YTS
    Mr. Evennett: To ask the Secretary of State for Employment how many people are currently participating in YTS in Greater London.
    The Minister of State, Department of Employment (Mr. Tim Eggar): The latest available figures show that there were 21,500 young people participating in YTS in Greater London.
    Mr. Evennett: I thank my hon. Friend for his reply. What proportion of YTS completers in London go on to full-time employment? Does my hon. Friend agree that YTS provides valuable training for young people?
    Mr. Eggar: I certainly agree with my hon. Friend. YTS provides extremely valuable training. Some 90 per cent. of all YTS completers in London go on to full-time employment and no fewer than 98 per cent. of all trainees entering the Bexley youth training group in my hon. Friend's constituency have found full-time employment.
    Mr. Clelland: How many youngsters suffer from accidents during their training? Will the Minister confirm that the number of accidents among YTS trainees has risen in the past few years and that as many as seven are killed and 500 injured every year under that scheme?
    Mr. Eggar: It is true that the number of accidents among YTS employees has risen, but that is because the number of youngsters on YTS has risen significantly. It is clear that young people on YTS are at least as safe, if not more so, as young people in employment generally.

    Pay Increases
    Mr. Cousins: To ask the Secretary of State for Employment what has been the trend of pay increases for (a) chairs of major companies and (b) work forces in major manufacturing companies since 1980.
    Mr. Nicholls: The Government do not produce information about pay increases for individual chairmen or work forces of companies. Average earnings of all employees in manufacturing increased by 120 per cent. between August 1980 and August 1989. No reliable information on directors' earnings is readily available. Pay is a matter for businesses to determine in the light of all the relevant circumstances.
    Mr. Cousins: In that case, does the Minister accept that it was unfortunate to publish an article in October's Department of Employment Gazette which appeared to criticise the justification for some of the large salary increases for individual company chairmen, in particular singling out Lord King of British Airways and FKI Babcock who receives more than £550,000 from his two part-time jobs with those companies? Is not that an entirely unwarranted attack on an honest worker doing his best in the marketplace?
    Mr. Nicholls: I am sure that Lord King will take great comfort from what the hon. Gentleman says. The Government, including my right hon. Friends the Prime Minister and the Chancellor of the Exchequer, have constantly made it clear that we are against unjustified pay increases. If, in the circumstances, a pay rise can be justified, so be it.
    Mr. Cran: Does my hon. Friend agree that far too many in the British work force from top to bottom, are besotted with the desire to receive unearned pay increases? Would they not be better employed trying to close the productivity gap which still exists between Britain and some of our major competitors?
    Mr. Nicholls: My hon. Friend has it exactly. It is remarkable that even after 10 years of a Conservative Government it is still possible for Opposition Members to indulge in a sterile class war every time high salaries are mentioned. If a pay rise can be justified in all the circumstances, that pay rise is a proper one.
    Mr. Fatchett: But is it not true that many company directors have this year given themselves increases often running into three figures in percentage points? How can that be justified at a time when the Government insist that ambulance staff, who contribute so much to our society, should have forced upon them an increase below the level of inflation? Why should they take a cut in real wages while the top people are getting such large increases?
    Mr. Nicholls: Any company making a decision about what its directors will be paid has to take into account a number of factors. It will have to consider whether a pay rise is necessary to attract staff of the correct calibre and whether the person will make a contribution which will
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    justify his salary. The hon. Gentleman cannot get to grips with the fact that many of the lowly or lower paid employees, whose interests he claims to represent, are better served by having companies run efficiently, and that that costs money at the highest level.

    Labour Statistics
    Mr. Amess: To ask the Secretary of State for Employment what are the latest unemployment figures for the constituency of Basildon and for the same period in each of the last six years.
    Mr. Eggar: In September 1983 there were 6,532 unemployed claimants in the parliamentary constituency of Basildon compared with 2,439 in September this year. With permission, I will publish the detailed figures in the Official Report
    Mr. Amess: Is my hon. Friend aware that the sign displaying the number of people without work in Basildon has been taken down, although the local Labour party claimed that it fell down as a result of rusty screws? Does he agree that the downward trend of unemployment in Basildon reflects the successes of local businesses, the availability of a willing work force and the underlying strength of the British economy?
    Mr. Eggar: I am pleased to congratulate employers and employees in Basildon on the considerable increase in economic activity that has led to many new jobs. If I may dare to make a recommendation to my hon. Friend, I suggest that he offers the council some new screws so that it can publicise the fact that unemployment in Basildon has fallen by more than 30 per cent. in the past year alone.
    Mr. Tony Lloyd: Is the Minister aware that the Secretary of State recently advised young people in Basildon and other areas who are presently in receipt of income support or unemployment benefit to refuse offers of jobs if they did not contain a significant training element leading to a qualification? The Secretary of State seems to agree that that is accurate. Is the Minister further aware that under the present regulations if young people refuse jobs they will have their benefit suspended? Did the Secretary of State not think through his comments or was he announcing that the regulations would be changed to allow people to refuse jobs on that basis?
    Mr. Eggar: My right hon. Friend the Secretary of State made it clear that in the 1990s we expect that youngsters will have the choice of moving into full-time education or jobs with training. That is the desire of the Government and of employers.
    Following is the information:
    In September 1989 there were 2,439 unemployed claimants in the parliamentary constituency of Basildon. The table shows the number of unemployed claimants in the constituency of Basildon for each September from 1983 to 1988. The figures are affected by the change in the compilation of the count in March 1986 to reduce over-recording and by the change in the coverage of the count from September 1988 due to the introduction of new benefit regulations for young people aged under 18.

    Unemployment in Parliamentary Constituency of Basildon

    September

    Number of unemployed claimants

    1983

    6,532

    1984

    7,050

    1985

    6,634

    1986

    6,157

    1987

    5,032

    1988

    3,495

    School-Industry Compacts
    Mr. Robert B. Jones: To ask the Secretary of State for Employment if he will make a statement on the progress of school-industry compacts.
    The Secretary of State for Employment (Mr. Norman Fowler): Forty compacts are being supported by the Training Agency. To date, some 230 schools and more than 30,000 young people are participating in compact arrangements, actively supported by more than 1,000 employers and training providers. By any standards, the initiative has made a very impressive start.
    Mr. Jones: I am grateful to my right hon. Friend for those encouraging figures. Will he confirm that they apply to urban programme authorities, not to authorities in general, and that there is also merit in compact-like arrangements in other local education authorities, from which employers, schools and businesses may profit?
    Mr. Fowler: Yes, Sir. My hon. Friend makes a good point. Compact arrangements, which were introduced only last year, have been targeted at inner-city areas. That is where the priority is, but I believe that such arrangements can be extended elsewhere.
    Mr. Morley: I welcome compact agreements, but does the Minister agree that they come nowhere near meeting the increasing skills shortage? Is he aware that more and more industries are saying that the Government are not doing enough to provide support in tackling skills shortages? In particular, employment training does not offer the specialised and relevant training that we need in a modern society.
    Mr. Fowler: The question has nothing to do with employment training for the long-term unemployed. We are talking about young people. I hope that the hon. Gentleman will support compact arrangements, which have taken off dramatically and provide good training and, above all, opportunities for young people in inner-city areas.

    Training and Enterprise Councils
    Mr. Couchman: To ask the Secretary of State for Employment how many training and enterprise councils have received development lending; and if he will make a statement.
    Mr. Cran: To ask the Secretary of State for Employment whether he will make a statement on the progress of the establishement of training and enterprise councils.
    Mr. Fowler: Thirty-five prospective training and enterprise councils from all parts of England and Wales
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    have now received development funding, and the first TECs will become operational early next year. When we launched TECs in March, we expected that it would take three to four years to complete the network. We are now far ahead of that schedule—the applications received so far already cover half the working population of England and Wales and the network will be in place by September 1990.
    Mr. Couchman: I am grateful to my right hon. Friend for his answer. Will he give every consideration to an application, which I believe is currently before him, for a TEC to be set up in my constituency—or, at least, in the area that covers it? Will he ensure that the scheme places every possible emphasis on long-term retraining for the future and does not become merely a "make-work" scheme? I understand that there is a felicitous partnership between the local authority, the Department and leading employers in the area.
    Mr. Fowler: Yes, I think that there is a unity among employers, local authorities and all the other groups involved, and I hope that that unity can be maintained. TECs are there to help with training for both the unemployed and those in employment.
    The Kent application to which my hon. Friend has referred was received at the end of October. Our initial reaction is that the proposal is of very high quality, demonstrating a real partnership in the county between leading employers, the local authority and the Training Agency.
    Mr. Cran: Will my right hon. Friend confirm that senior industrialists are contributing time to make the concept of TECs a success? I note that although there are four TECs in Yorkshire, there are none in Humberside. Can my right hon. Friend give me some comfort by telling me that Humberside may have one in the future?
    Mr. Fowler: Yes, I believe that one is in preparation. We certainly hope that that will come about, and we look forward to receiving an application from Humberside.
    My hon. Friend is entirely right—TECs are composed of senior industrialists and there is no question about the quality and commitment that those industrialists are showing.
    Mr. Madden: Can the Secretary of State tell us whether the TECs, or any other such arrangements, are available o help a group of apprenticies in Bradford facing redundancy with a year or more of their apprenticeships to go? They are anxious to complete their training and find themselves in very difficult circumstances. Can the Secretary of State do anything to help those young people?
    Mr. Fowler: I shall look into that. Certainly, in principle, there is everything that a TEC can do in such circumstances. That is one of their advantages—they deal essentially with the local labour market. Perhaps the hon. Gentleman will allow me to study the specific circumstances and come back to him.
    Mr. McAllion: The Secretary of State will be aware that the success of bodies such as the Dundee project in turning around the economy of our city in the 1980s has been based on the granting of representation to local authorities, trade unions, central Government and the

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    business community. Why has the hon. Gentleman departed from that successful formula in the establishment of the new training bodies throughout the country?
    Mr. Fowler: The Scottish arrangements are a matter for my right hon. and learned Friend the Secretary of State for Scotland, and separate legislation will be needed for that country. I have been describing the position in England and Wales. Overall, however, we want a partnership between all interests at local level.
    Mr. Jack: My right hon. Friend is to be congratulated on the training and enterprise initiative. Will he ensure that all the other Government employment services such as jobcentres and training schemes are put fully at the disposal of 200 of my constituents employed at Quality Parts at Fylde who, sadly, have been made redundant and could well benefit from the many services available to enable them to become employed again?
    Mr. Fowler: I will certainly ask the employment service to examine the position, and we shall seek to do what we can to alleviate or, indeed, solve the problem.
    Ms. Short: Has the Secretary of State seen the CBI report, published this morning, which says that Britain's training is way behind that of the rest of Europe and holding back the progress of the economy? Will he review all the rotten training initiatives that the Government have launched and then give us a proper structure of training so that British people can develop proper skills and the economy can flourish?
    Mr. Fowler: It for exactly that kind of reason that the TEC initiative has been launched. I realise that the hon. Lady has been critical of a number of other proposals, but I hope that she will recognise that the TECs involve cross-party agreement and agreement by most people at literally local level. I hope that she will not undertake the kind of activities that she undertook in regard to employment training, which do no service to training or to the unemployed.
    Mr. Hind: Does my right hon. Friend agree that the employers, who are in partnership in the training and enterprise councils, are investing about £15 billion in training? Does he agree that the Government's agreement to implement the social contract, the acceptance of minimum wages and no restriction on strikes would result in a loss of jobs and a cut in the budgets which those employers put into training, to the detriment of British industry and British jobs?
    Mr. Fowler: I very much agree with all that my hon. Friend has said, but I must point out that there is a later question on the Order Paper on that point.

    Creche Facilities
    Mr. Wray: To ask the Secretary of State for Employment what research his Department has carried out regarding the impact of the lack of creche and similar facilities for children aged under five years on female unemployment; and if he will make a statement.
    Mr. Eggar: The Department has funded a number of research projects which have looked into child care and
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    female unemployment. We are currently sponsoring research into the many issues that surround women's decisions to return to work after childbirth.
    Mr. Wray: Does the Minister agree that this country has an appalling record and that of the 12 European Community countries we have the lowest level of provision apart from Portugal? Is he aware that a survey of 100 industrial companies carried out last month by The Daily Telegraph, showed that only six provided child care facilities? By 1992, when the Single European Act comes into force, we shall be unable to meet the target.
    Mr. Eggar: I certainly do not agree with the hon. Gentleman. We have the second highest level of female participation in the work force throughout the European Community and 85 per cent. of all children under five have some kind of pre-school provision such as creches, play schools or nursery schools. That is a record of which we can and should be proud.
    Mr. Rowe: Does my hon. Friend accept that I believe, as do many other hon. Members, that it was entirely wise for the Department to wait and see what private sector initiatives would be called into being to provide creche and other facilities for women wishing to enter the employment market? Does he also accept that in view of the wide range of perks and tax-deductible expenses which operate for a large number of other purposes the Department should look closely at the tax position of facilities which make it possible for women to return to the labour market?
    Mr. Eggar: I understand my hon. Friend's concern, but he should not underestimate the considerable amount of child care provision of one kind or another that is already available. I will refer his comments to my right hon. Friend the Chancellor of the Exchequer.
    Ms. Primarolo: When will the Minister accept that we have the worst child care provision for under-fives in the European Community? Why do the Government persist in pretending that they wish women to return to the paid labour market when the biggest barrier to their return is the lack of provision for the under-fives? When will the Minister stop thinking about it and start providing those facilities?
    Mr. Eggar: The hon. Lady obviously was not listening. We have the second highest level of female participation in the work force in the European Community. Almost one in three women with children under five have jobs because they want to have jobs. Other women decide that they do not want to work when they have children under five. They should be free to make that choice.
    Mrs. Peacock: Will my hon. Friend congratulate companies which already provide creche facilities and those which are embarking on the provision of even further creche facilities to welcome back women who wish to return to work, especially the big banks which are very active in this area?
    Mr. Eggar: I entirely agree with my hon. Friend. There have been a number of important initiatives. The Civil Service is also seeking to lead the way with a number of imaginative schemes. It is important that employers should provide facilities for child care for their women employees.

    Wages Councils
    Mr. Michael: To ask the Secretary of State for Employment what initiatives he plans to take to strengthen the work of the wages councils in relation to the enforcement of wage levels.
    Mr. Nicholls: The level of compliance with wages orders is very high and no new initiatives are contemplated.
    Mr. Michael: Does the Minister accept that increasing numbers of people are now unprotected and working for a pittance? Does he not accept that the work of wages councils is supported by responsible employers and responsible employers' organisations? Will he not extend the work of wages councils to deal with irresponsible employers, including those who seem to have the ear of the Government?
    Mr. Nicholls: No. Obviously that is one of the views that has been put to the Government in the review of the wages councils. There is also a substantial body of evidence that the effect of organisations such as the wages councils is to destroy jobs. At the end of the day, the hon. Gentleman has to consider whether low pay is better than no job.
    Mr. Marlow: What effect would the social charter, aptly named in one of today's newspapers as the strikers' charter, have on the bureaucratic interventions which my hon. Friend has done so much to do away with?
    Mr. Nicholls: Its effect would certainly not be beneficial.

    Labour Mobility
    Mr. French: To ask the Secretary of State for Employment if he will make a statement on the measures he has introduced to encourage mobility of labour.
    Mr. Nicholls: My Department is active in encouraging mobility of labour. We are working at improving the supply of information about job vacancies in other areas, for instance with the initiative announced the week before last to publish vacancies on ITV's teletext service. In addition, the travel-to-interview scheme provides assistance to unemployed people who apply for jobs outside their home area.
    Mr. French: What initiatives is my hon. Friend's Department taking to seek to synchronise employment opportunity with housing availability? Is he aware that job applicants from other parts of the country for vacancies in Gloucester are unable to fill those vacancies because of the lack of housing at a price that they can afford?
    Mr. Nicholls: My hon. Friend draws attention to a very real concern. I certainly would not undervalue the travel-to-interview scheme. However, my hon. Friend is right that housing plays a very important part in the disincentive to mobility. My hon. Friend may be aware of the national mobility scheme and the tenants exchange scheme which are operated by my right hon. Friend the Secretary of State for the Environment. Furthermore, the business expansion scheme introduced in the last Budget was used as a vehicle to encourage people to provide more rented accommodation. There are a number of initiatives and my hon. Friend was entirely right to draw attention to the fact that there is no single solution.
    Mr. Beggs: I notice that the Minister accepts no responsibility for encouraging the 45,000 to 50,000 citizens of the Irish Republic who move to Great Britain and elsewhere annually to come over here. Can he tell us what analysis is being carried out of such large numbers of citizens of the Irish Republic moving to the mainland, and their impact, if any, on the unemployment registers?
    Mr. Nicholls: The mobility to which the hon. Gentleman draws attention has been going on for many years. The question concerns the initiatives being taken by the Government to encourage mobility, and that is what we have addressed.
    Mr. Andrew Mitchell: Has not the Government's extremely successful right-to-buy policy been very helpful in assisting mobility of labour? Was not that policy specifically resisted, root and branch, by the Opposition who were converted only very late in the day?
    Mr. Nicholls: Of course my hon. Friend is right, but obviously any sensible initiative on these matters will be opposed by the Opposition. I do not think that my hon. Friend should be too surprised about that.
    Mr. Cryer: Is not the Minister presented with a credibility gap when he tries to claim that the Government are increasing mobility of labour when they cancelled the grant aid system some three years ago so that poor families who want to get off the dole and get a job outside their areas have to depend on money from charity, as a constituent of mine did to cover the costs of removal? When will the Government do something about that?
    Mr. Nicholls: As I have already said to the House, the travel-to-interview scheme provides assistance for those people who need help with interview expenses, including overnight accommodation if that is what they need to take up a particular job possibility. If the hon. Gentleman has a specific case where he feels that the scheme is not working, obviously he can contact me and I shall be more than happy to look into it.

    EC Social Charter
    Mr. Colvin: To ask the Secretary of State for Employment what representations he has received regarding the progress of the European social charter; and if he will make a statement.
    Mr. Fowler: I have received a number of representations.
    At the European Council in Madrid, it was agreed unanimously that the top priority of the Community in the social area should be job creation and development. In addition, any proposals should take full account of different national practice. Action should be taken at national level unless there are demonstrable benefits to be gained from action at Community level. The Government do not believe that the present draft charter takes sufficient account of those agreements.
    Mr. Colvin: Has my right hon. Friend seen the headlines in today's newspapers which say that Britain is isolated over the social charter? Does he agree that that is hardly surprising given that we are so far ahead of our European partners— [Interruption.]—in creating new jobs and reducing unemployment? Should not our European

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    partners be following our lead in not increasing but reducing burdens on employers who want to expand and create new jobs?
    Mr. Fowler: My hon. Friend is correct. At the meeting of the Social Affairs Council yesterday, there was no doubt that a range of countries had reservations about the social charter. There is no question but that unemployment has fallen faster in Britain than in any other European country. It currently stands below the European average, and below that in France, the Netherlands, Belgium, Spain, Ireland, Greece and Italy. We believe that the social dimension should be about jobs and that the social charter simply does not live up to that. [Interruption.]
    Mr. Speaker: Order. There is a background of chatter this afternoon. It is very difficult to hear questions.
    Mr. Campbell-Savours: Is there not a strange inconsistency in the position of Cabinet Ministers, who parade their Euro-virility and credentials around the country while they stand aside and watch the Secretary of State sabotage and undermine the perfectly excellent principles behind the social charter? Is it not about time that some of them developed a little backbone and vision?
    Mr. Fowler: For good reason, the social charter is opposed by the entire Government on the ground that it simply does not live up to the aspirations that it puts forward. The Government are certainly in favour of a social dimension, by which we mean new jobs and the reduction of unemployment. The social charter will not achieve either of those objectives.
    Mr. Bill Walker: Does my right hon. Friend agree that since the end of the second world war we have had enough of this nonsense about signing pieces of paper and charters, most of which came from the last Labour Government but produced little? They resulted in inflation, unemployment and ghastly problems. We do not want such problems from Europe. More people are in work now than under the regime of the last Labour Government.
    Mr. Fowler: The charter covers a range of subjects, such as minimum wages, holiday periods and the unqualified right to strike, all of which will have detrimental effects on employment in Britain. That has not been denied by the European Commissioner in Brussels. The only question is how many jobs it will cost, not whether it will cost jobs.
    Mr. Wallace: Although the social charter may not be entirely perfect, why does not the Secretary of State try to build on its many good aspects and make constructive criticism rather than being negative? He recently made points about provision for young people, so will he explain what is wrong with the prohibition of full-time work for people under 15, the special health and safety regulations for people in work under the age of 18 and the establishing of quotas for employing people with handicaps?
    Mr. Fowler: There are a range of measures, of which health and safety is one, with which we agree. The hon. Gentleman is wrong to say that we have not played a constructive role in the debate. We have played a constructive role, and talks will continue. I should not wish to deceive the House because I believe that there are a number of fundamental defects in the charter, which I hope can be solved.
    Mr. Knapman: Does my right hon. Friend agree that most matters are better left to market forces rather than any social or Socialist charter?
    Mr. Fowler: The regulations set out in the charter will not achieve what all hon. Members want. The House deceives itself if it believes that the social charter will be good for employment or will reduce unemployment in Britain. [Interruption.]
    Mr. Speaker: Order. I again appeal to the House to listen to employment questions, which are important, and are of some concern to other hon. Members.
    Mr. Meacher: Does the right hon. Gentleman still think, like the Prime Minister, that the Euro social charter is the product of Marxism and the class struggle? If so, why has it now been agreed by every other Right-wing Government in Europe? Is the right hon. Gentleman aware that under this Government British workers now have the worst industrial conditions in Europe, with no minimum wage, no protection against arbitrary dismissal and no right to participate in decisions at the workplace? After Madrid and Kuala Lumpur, is this not yet another example of the Government and the Prime Minister being completely isolated and manifestly out of touch with public opinion here and abroad?
    Mr. Fowler: I must point out that only a couple of years ago the hon. Gentleman was running for office by supporting a proposal for Britain to come out of the Common Market altogether. [Interruption.] Yes, he was. If the hon. Gentleman disagrees with that, I shall give him the reference. In the Labour Herald of 24 September 1982, the hon. Gentleman said—[Interruption.] Does the hon. Gentleman change his principles every five years? The fact —[Interruption.]
    Mr. Speaker: Order. The Minister has a right to reply, but I hope that he will be brief.
    Mr. Fowler: The hon. Gentleman knows perfectly well that the social charter will not create jobs. It will destroy jobs and create unemployment. The hon. Gentleman should be opposed to the charter as it stands.
    Mr. Raison: Although I accept that there is much in the social charter as it stands that is questionable, are there not other elements in it that are rather good, for instance, the right not to join a trade union?
    Mr. Fowler: Indeed. There is a basis of proposals which we believe could be used for a social charter. Our objection is not to a social charter in all circumstances but to this kind of social charter.

    Manifold Industries, Leyton
    Mr. Cohen: To ask the Secretary of State for Employment whether he will review current employment laws as they relate to the threatened dismissal of staff without compensation in the light of the dispute at Manifold Industries, Leyton; and if he will make a statement.
    Mr. Nicholls: There is no obligation on any party in an industrial dispute to inform the Government about the dipute, or action which may be taken in connection with it. On the basis of such information as is available about

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    this particular dispute, however, there appears to be no reason to change any aspect of current industrial relations law.
    Mr. Cohen: Does the Minister agree that the management of Manifold Industries has treated its workers shabbily? After its initial intimidatory action, the management has avoided all negotiations, including those via the Advisory, Conciliation and Arbitration Service. The management is using Tory industrial relations law to avoid paying proper compensation, while it clears the decks to make a fortune in a future, speculative sell-out. Is not sacking workers without compensation an appalling use of Tory industrial relations law, which should be changed?
    Mr. Nicholls: It is not up to me to pass judgment on any of the matters which the hon. Gentleman raises. If his allegations are true, the workers have remedies open to them for unfair dismissal, when they may go before an industrial tribunal, or for breach of contract, when they may go before a civil court.

    Training
    Mr. McAvoy: To ask the Secretary of State for Employment how his Department intends to increase the training of workers in the private sector.
    Mr. Eggar: Training and enterprise councils in England and Wales and local enterprise companies in Scotland will ensure that private sector employers lead Britain's training effort into the 1990s. They will increase employer commitment to training and will use private and public resources. In particular, they will support employers through business growth training.
    Mr. McAvoy: That answer is astounding. Given that private sector employers are spending less than £4 billion a year directly on training, is it wise for the Government to hand over the control and direction of training to the very people who have shown no interest in training?
    Mr. Eggar: The hon. Gentleman is taking a blinkered and inaccurate view. Employers are spending £18 billion on training, not the amount that the hon. Gentleman quoted. The move towards TECs in England and Wales and LECs in Scotland has been widely supported by all sectors of the community.

    Tourism
    Mr. Gregory: To ask the Secretary of State for Employment what is his estimate for the numbers employed in the Yorkshire tourism industry and the value generated for the current year; and if he will make a statement.
    Mr. Nicholls: The information is not available in the form requested, but it is estimated that in June 1989 the number of employees in employment in the hotel and catering industry in Yorkshire and Humberside was 96,000. It is estimated that overseas and domestic visitors staying in the Yorkshire and Humberside tourist board region for one night or more spent a total of £654 million in 1988.
    Mr. Gregory: Will my hon. Friend confirm that this is Britain's fastest growth industry and that it is not
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    enhanced by Socialist smears about it being a Mickey Mouse industry? Will he hold urgent discussions with the Secretary of State for Education and Science about the possibility of having more training programmes to enable more youngsters to enter this great industry?
    Mr. Nicholls: My hon. Friend is entirely right in what he says. A sector which can produce £19 billion and 38,000 jobs a year does not justify the description given to it by the Labour party.

  PRIME MINISTER

    Engagements
    Mr. Latham: To ask the Prime Minister if she will list her official engagements for Tuesday 31 October.
    The Prime Minister (Mrs. Margaret Thatcher): This morning I had meetings with ministerial colleagues and others. In addition to my duties in the House, I shall be having further meetings later today. This evening I hope to have an audience of Her Majesty the Queen.
    Mr. Latham: While continuing to implement the policies which have been approved by the electorate on three occasions, will my right hon. Friend confirm that successful Governments must always be responding and listening to the real aspirations of the people?
    The Prime Minister: Yes. That is why under the 10-year policies of Conservative Governments we have created more wealth than ever before, have spread it more widely than ever before, have a higher standard of living than ever before, have higher standards of social services than ever before and have a higher reputation abroad than ever before. Yes, we have indeed been listening. I believe that those are the real aspirations of the British people.
    Mr. Kinnock: Will the Prime Minister now explain why she did not do the one thing that would have kept her Chancellor—sack her adviser?
    The Prime Minister: As I said last week, advisers are there to advise and must advise honestly and freely. Ministers are there to decide. That is the way this Government do things.
    Mr. Kinnock: The Prime Minister is being less than frank with the House and the country—[Interruption.] Does she recall that she said that she did everything possible to dissuade the Chancellor? Is not the real truth that she deliberately refused to do the one thing that would have kept him in office, which was to sack the man who, with her concurrence, was constantly undermining the Chancellor and his policy position on managing the currency?
    The Prime Minister: The Chancellor's position is unassailable—[Interruption.]
    Mr. Speaker: Order.
    The Prime Minister: In this party, Ministers decide and advisers only advise.
    Mr. Kinnock: If what the Prime Minister has said is really true, may I ask her to explain why the former Chancellor had to write:

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    "Recent events have confirmed that this essential requirement cannot be satisfied so long as Alan Walters remains your personal adviser."
    Did he make that up after he had spoken to the Prime Minister?
    The Prime Minister: Nonsense. The position is precisely as I have set it out many times. Advisers are free to advise honestly. Ministers decide —[Interruption.] The right hon. Gentleman will remember that neither Mr. Kaldor nor Mr. Balogh were exactly shrinking violets.
    Mr. Maxwell-Hyslop: Will my right hon. Friend find time today to confirm that although high interest rates are a temporary agony, to have savings destroyed and the financial working capital of every small company destroyed by inflation is a permanent and not a temporary destruction of their ability to live on trade reasonably?
    The Prime Minister: Yes. My hon. Friend has put it perfectly. It was a destruction of savings and investment under the Labour Government that lost them the complete confidence of this country. Under us, savings have kept their value. That is why we put the diminution of inflation as our top priority and we shall continue to do so.
    Mr. Ashdown: Does the Prime Minister realise that her lonely hostility to Europe has cost her four Cabinet Ministers and will cost Britain lost opportunities, lost wealth and lost prosperity in the future? How much more are we all going to have to pay for the triumph of a personal obsession over the national interest?
    The Prime Minister: Perhaps the right hon. Gentleman will read the Bruges speech properly, when he will see that half the history of this country has been bound up with Europe. It is not hostility to Europe. We believe in Europe, but a Europe based on a free economy—a deregulated Europe with freedom under a rule of law, not a regulated bureaucracy dictating to this House from Brussels.
    Mr. Gale: Has my right hon. Friend noticed the underlying confidence of the money markets in her Government's economic policy? Has she had time to contrast that with the best efforts of the Leader of the Opposition to talk sterling down?
    The Prime Minister: Yes. The money markets have remained stable in spite of the efforts of the Leader of the Opposition to talk the pound down. He did not succeed. Confidence in this Government was sufficient to hold the markets.
    Mr. Redmond: To ask the Prime Minister if she will list her official engagements for Tuesday 31 October.
    The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.
    Mr. Redmond: Following the disclosure in the leaked documents about the devastating effects of the privatisation of the electricity industry on the mining industry, will the right hon. Lady reconsider her attitude and not use the payroll vote to force the Bill through?
    The Prime Minister: The contracts between the electricity industry and the coal industry are still under negotiation. The hon. Gentleman is aware that in the past 10 years, we have spent about £2 million every working day on investment in the coal mines. That should enable many of them to be highly competitive in the coal that they
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    produce and to supply highly competitive coal to the electricity industry. I am sure that the hon. Gentleman will not wish to pay more for electricity than necessary and will be keen for coal to be competitive.
    Mr. Butcher: Further to the point made by the right hon. Member for Yeovil (Mr. Ashdown), does my right hon. Friend agree that if Britain were prematurely to join the exchange rate mechanism at a time when German interest rates are 7 per cent. below our own, British borrowers might avoid the domestic constraints and borrow with impunity from Germany, thus increasing the money supply and frustrating the fight against inflation?
    The Prime Minister: I am grateful to my hon. Friend. The conditions under which we shall join the exchange rate mechanism—we already belong to the European monetary system, of course—were laid down and agreed at Madrid. They are specified in stage I of the Delors report—[Interruption.] Of course the Opposition do not want the truth. It gets in their way. [Interruption.]
    Mr. Speaker: Order. The Prime Minister must have an opportunity to reply.
    The Prime Minister: The conditions are specified in stage I of the Delors report which provides for completion of the internal market, abolition of all foreign exchange controls, full implementation of a free market in financial services and the strengthening of the Community's competition policy. In those circumstances and provided that inflation in Britain has been brought down significantly, as we intend, the conditions would clearly exist for sterling to join the exchange rate mechanism. That is precisely what was laid down at Madrid and agreed by everyone.
    Mr. McFall: To ask the Prime Minister if she will list her official engagements for Tuesday 31 October.
    The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.
    Mr. McFall: Despite the traumatic events of last week and the removal of her most formidable opponent from the Cabinet, the Prime Minister has declared business as usual. Can we take it therefore that she will not be recommending to her Cabinet the advice of Mayor Ed Koch of New York who said, "If you agree with me on nine out of 12 issues, support me, but if you agree with me on 12 out of 12 issues, see your psychiatrist"?
    The Prime Minister: We do things rather differently this side of the Atlantic.
    Mr. Roger King: To ask the Prime Minister if she will list her official engagements for Tuesday 31 October.
    The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.
    Mr. King: Can my right hon. Friend cast her mind back to 1979 when after five years of Socialism the Chrysler car business was sold to Peugeot-Talbot for 66p after 700 strikes in 1978? Is my right hon. Friend aware that after the past eight or nine years Peugeot is now making a profit of £100 million a year and producing more cars than ever? Does that not say more for Conservative Governments and nothing at all for Socialism?
    The Prime Minister: Yes. As I said in reply to the first question this afternoon, under this Government wealth has been created and spread ever more widely. Under the last Labour Government, the Labour party took us to the IMF—bankrupt.
    Mr. Healey: Does the Prime Minister agree with Lord Hailsham who said this weekend, speaking with all the authority of a former Lord Chancellor who had served for many years in the Prime Minister's Cabinet, that for the Prime Minister to use her press officers to undermine her colleagues was not only disloyal, but dishonourable? Will she now stop that?
    The Prime Minister: This was a comment from my noble Friend. I was surprised at it and I was very surprised that he made it. It is totally untrue and in any case, I would never take it from the right hon. Member for Leeds, East (Mr. Healey), whose only adviser was the IMF.
    . Mr. Andrew MacKay: To ask the Prime Minister if she will list her official engagements for Tuesday 31 October.
    The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.
    Mr. MacKay: Does my right hon. Friend agree that it would be a cruel deception to suggest that there is some painless way to bring down inflation and that if credit controls were introduced today, they would prove to be quite ineffective due to the international nature of the banking and financial markets?
    The Prime Minister: I agree with my hon. Friend. The point was made effectively in the last debate on economic affairs when my right hon. Friend the Member for Worthing (Mr. Higgins) dealt very well with the issue of credit controls. They will not work in the modern world with a free and open banking system. In an earlier debate, a former Treasury Minister in a Labour Government said:
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    "The Labour Party idea that you can have credit controls is rubbish. There is no way you can control credit except by controlling the price of credit, and the price of credit is Bank Rate."
    Mr. Nellist: To ask the Prime Minister if she will list her official engagements for Tuesday 31 October.
    The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.
    Mr. Nellist: Is the Prime Minister aware that in a tragic car accident last week in Coventry, the firefighters cut the cars apart, the police directed the traffic and an ambulance worker was upside down for two hours in that car infusing blood to the victim? How then this morning can Duncan Nichol say that the ambulance workers do not deserve parity with the other services? When will the Prime Minister stop chasing ambulances down to places like Clapham and King's Cross and praising ambulance workers and then treating them like dirt as she does now?
    The Prime Minister: We all praise ambulance workers for their work and do not use them cheaply as the hon. Gentleman has done. Their pay claim, as the hon. Gentleman is aware, is being negotiated and I most earnestly hope that they will keep emergency cover until the negotiations are complete.
    Mr. Marland: To ask the Prime Minister if she will list her official engagements for Tuesday 31 October.
    The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.
    Mr. Marland: Is my right hon. Friend aware of the valuable contribution that is made to environmental protection by recycling—[Interruption.] Will she ensure that, under the forthcoming environmental protection Bill the work of the recycler is not interrupted by misleading definitions of waste?
    The Prime Minister: Yes. Recycling, in all its forms, makes a great contribution to the economy, and we at No. 10 Downing street have introduced recycled paper.

Jaguar PLC
Mr. Speaker: I call Mr. Ridley.
Mr. Joseph Ashton: On a point of order, Mr. Speaker.
Mr. Speaker: I will take points of order after the statement.
Mr. Ashton: It is on this matter, Mr. Speaker.
3.30 pm
The Secretary of State for Trade and Industry (Mr. Nicholas Ridley): With permission, Mr. Speaker, I wish to make a statement on Jaguar PLC.
Jaguar's articles of association contain clauses preventing any individual or concert party from holding an interest in more than 15 per cent. of the company's shares. This is backed by the Government's special share which requires my written consent for changes in certain parts of the articles until they lapse on 31 December 1990 when the special share itself is due to be redeemed. Any such change in the articles would, besides my consent, also require the passing of a special resolution by shareholders in general meeting.
These provisions of the company's articles were put into place to preserve Jaguar's independence in its formative years as a free-standing company and so allow its management to concentrate on developing the business without the constant distraction of unwelcome takeover bids. In recent months, however, I understand that the chairman of Jaguar has been talking to a number of companies that are interested in forming links with Jaguar. There is a widespread perception that the company's financial and technological base needs strengthening in this way.
The restrictions on shareholdings entrenched by the Government's special share are now clearly causing uncertainties about the company's future by prompting speculation over how my powers may be exercised, so distorting the basis on which all parties involved have to reach their decisions. I have accordingly told the Jaguar management that, if shareholders pass a special resolution by the requisite 75 per cent. majority amending the ownership provisions of the articles, I shall be ready also to give my consent.
I am clear that it is in the best interests of Jaguar's management, shareholders and work force for the company's future to be assured and the present climate of uncertainty resolved as quickly as possible. I have no doubt that the Jaguar board will continue to pursue its discussions with interested parties, and assess proposals, with the aim of recommending to the shareholders the solution that it believes to be in the best interests of the company as a whole.
This statement paves the way for shareholders, with the advice of the board, to reach their own view on the options which may be available. The Government's role will henceforth be confined to consideration in the normal way of the competition policy aspects of any change in Jaguar's ownership.
Mr. Bryan Gould: I begin by welcoming the Secretary of State to the Dispatch Box and to his new responsibilities, but may I link that welcome with an expression of concern that, at his first appearance, he may
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well have lent himself to what looks suspiciously like a tactical device designed to delay the beginning of the important debate which is about to start? I commiserate with him that his first task is to announce the dispatch of yet another major British company—another victim of the Government's destructive policy towards manufacturing. His task is also to signal the disappearance of the last vestige of what had remained of the independent British car industry.
Does the Secretary of State agree that Jaguar remains and must remain a vital centre of engineering excellence of huge importance to the west midlands and that it is essential that it should remain a west midlands-based car manufacturing company with as much operational independence as possible?
Why, then, has the right hon. Gentleman so evidently abdicated his responsibilities in making this statement today? Who asked him to give up the golden share? What does it mean for other golden shares in other privatised companies? Is there now to be an open season on all golden shares? Does he not recognise that the end result of the market free-for-all which, in effect, he has announced will be that the Jaguar badge will be placed on cars designed and engineered elsewhere and that Jaguar will simply be swallowed up by one or other multinational with no guarantees or assurances whatsoever? Why did the Secretary of State not use his golden share to negotiate proper assurances from General Motors, Ford, Daimler or whomever else may be bidding while he still had a negotiating card in his hand? What is the point of putting a golden share into place if he dispenses with it as soon as it might serve a useful purpose?
Does the Secretary of State accept that his statement offers the clearest possible contrast between the irresponsibility of his Government and the proper concern that the next Labour Government will show for Britain's manufacturing base? Does he accept that his statement is a signal that, once again, market forces, for ideological reasons, will be allowed to deliver an important British enterprise to foreign predators? Does he further accept that the golden share is a charade, and that this is a black day for the west midlands and for the British car industry?
Mr. Ridley: I am surprised at the hon. Gentleman's opening remarks. He wrote to me on 20 September, stating:
"If Jaguar do indeed need the financial and investment assistance to be obtained from becoming part of a larger group, does the Government have any other (and better) solution to offer? If not, may it not be better to help to bring the matter to a conclusion as soon as is reasonably possible, rather than insisting on prolonging the uncertainty until the expiry of the golden share?"
Even when I try to respond to the hon. Gentleman's request to bring the uncertainty to an end, he is grudging in his acceptance. The hon. Gentleman also seemed to say that he understands the need for a strong group to go into some form of partnership with Jaguar, which is what I said in my statement. All that I am doing now is to clear the way so that the playing field is level betweeen all contestants and so that there is no doubt or confusion about what the Government might do in the event of a takeover bid or of other proposals being put to the shareholders.
I agree that Jaguar has done remarkably well and that it is a vital centre of engineering in the west midlands. However, I believe that it will continue to do much better

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still if it is allowed to find its future with a strong partner, which is what the board is now discussing with various people. I believe that that is therefore in the interests of the company.
No one has asked me to make this statement. I have made it because I want to make it quite clear what the ground rules are as the board begins to discuss the options before it. It would not be either right or possible for me to use the golden share to negotiate assurances of the sort that the hon. Gentleman has suggested—[HON. MEMBERS: "Why not?"] First, because it is for the board to decide the best way to safeguard the interests of the company and to recommend that to shareholders; secondly, because the golden share comes to an end at the end of next year and I would then be in no position whatsoever if a bid developed in a year or even two months from now.
Sir Dudley Smith: As one who has a fair number of Jaguar workers in his constituency, may I welcome my right hon. Friend's statement? However, although the company needs extra finance—and this is a realistic approach—will my right hon. Friend always bear in mind the need to maintain the integrity of a major name in the British car industry?
Mr. Ridley: I very much agree with what my hon. Friend says. The statement will clear the way for the management to advise its shareholders on the best long-term future for the continued expansion and prosperity of this excellent company.
Mr. Peter Snape: Does the Secretary of State remember. at an earlier stage in his successful career, when it was said at the time of the privatisation of Jaguar that such a course was necessary to free the company from the embrace of a large conglomerate? In the light of today's announcement, how can such an objective be met? Will anyone other than Sir John Egan and his board benefit from this latest betrayal of British manufacturing industry?
Mr. Ridley: I have no memory of what I said then. I would have thought that the large conglomerate to which the hon. Gentleman referred was the highly unsuccessful and bankrupt British Leyland that the Government inherited. Perhaps to fall into partnership with a strong and prosperous company might be much more helpful for the company than its association with its previous partners.
Mr. Iain Mills: Does my right hon. Friend genuinely believe—I seek his reassurance—that this co-operation with another company will lead to more jobs both at Jaguar and, with the knock-on effect, at components manufacturers?
Mr. Ridley: I would be guided by the board in that matter, but I think that the board is talking with several people, all of whom would wish to expand and to improve the company, and to make sure that the company has in future the stability that the board evidently thinks it does not have, and will not have unless some solution is found.
Mr. Robin Corbett: Does the Secretary of State not understand that, by abandoning the independence of Jaguar, he is putting at risk jobs in the car body plant in my constituency, as well as up to 50,000 jobs among the 2,000 local suppliers to the Castle Bromwich
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plant? Does he not understand that, unless this country retains a strong, large and independent car sector, our economy, long term, cannot prosper?
Mr. Ridley: First, nothing that I have said means that the company will not remain independent if that is what the board and the shareholders decide. It is up to them. They have perfectly respectable options that will leave them independent, but it is for them to decide, not me. Secondly I do not agree that this statement does anything to put jobs at risk, as the hon. Gentleman suggests. The statement safeguards existing jobs, and gives the possibility that there will be many more jobs if a successful agreement is reached.
Sir Hal Miller: Are not the Opposition ignoring the facts that the Jaguar board was engaged in negotiation with other companies, and that it could not possibly be in the interests of any purchaser to do other than keep Jaguar as a separate marque and to expand its production to compete with BMW and Mercedes?
Mr. Ridley: My hon. Friend is right. I quote again from the second letter from the hon. Member for Dagenham, of
18 October, when he said:
"The worst thing that could happen would be to create the maximum uncertainty through a Government refusal to express a view, with the result that the situation was put on ice until the end of 1990, but was then followed by a free-for-all in which the outcome would be uncertain and no assurances would be obtained."
That seems to me to be exactly what we are doing and exactly what my hon. Friend asked us to do.
Mr. Dave Nellist: Is the Secretary of State not aware of the heightened insecurity among many of thousands of my constituents who work for Jaguar and associated component suppliers, that will result from his announcement? Does he not realise the danger of the starting pistol that he has just fired for an auction among Ford, General Motors, Daimler-Benz and possibly other companies, which means that the higher the share price to the eventual victor, the higher the rate of return that it will want to squeeze out of the Jaguar work force, in order to make a profit? If the Secretary of Slate does not want the golden share, why does he not give it to the work force so that the workers can decide if, with whom or when they want a merger to take place?
Mr. Ridley: The hon. Gentleman is misinformed. The Jaguar trade unions came to see my hon. Friend the Under-Secretary and pressed on him the importance of clearing up the uncertainty so that they could see the company's future.
Mr. Nellist: They wanted the extension of the golden share.
Mr. Ridley: No, they said the uncertainty was what was worrying them. Today I have removed that uncertainty, so the matter can now be resolved.
Mr. John Butcher: Does my right hon. Friend accept that the period of uncertainty has been unsettling for my constituents, and that they will support his intention to reduce it or eliminate it? is he aware also that, far from this being a black day, it is a clay on which we know that each of the two bidders is prepared to put hundreds of millions of pounds of new investment into Coventry? Is he further aware that each has given

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commitments that research and development, part development and corporate control will remain in Coventry? Will he play his hand to reassure my constituents that the company management's objectives are also his objectives?
Mr. Ridley: When we had a Labour Government, the then Secretary of State for Trade and Industry had to come to the House to announce closures, cuts and major setbacks in our industrial life. The House should be pleased that I am able to report that a highly successful privatised company is making arrangements to provide extra investment and extra jobs for the benefit of the west midlands and the country as a whole. I believe that to be the position, and I am sure that the Jaguar board does too.
Mr. Matthew Taylor: Will the Secretary of State elaborate on his lack of consultation with the board? Did he consult the board and management of Jaguar before taking this decision? He must be aware that they have been attempting to preserve the independence of the Jaguar car company, and that the signal that he will give to the market today will be a go-ahead for a full attempt to achieve a takeover? Does he not recognise the difference between being the best man at a wedding and throwing a car company to the jackals on the stock market?
Mr. Ridley: No, Sir, it would have been wrong for the Government to consult the management. The ultimate decision is for the shareholders. I informed the management so that the statement did not take it by surprise. It is for the Government to decide what it should do in relation to the golden share and to make it clear to all who might be interested in Jaguar what the rules of the game are. I was asked to clear up the uncertainty, and that is what I have done. I do not believe that what I have announced precludes a solution which leaves Jaguar in the hands of its present shareholders. If that is the solution which the board recommends, and the shareholders accept it, it should be adopted.
Mr. Roger King: Is my right hon. Friend aware that General Motors has been in this country for nigh on 65 years, that Ford has been here for over 75 years, and that both companies are excellent United Kingdom citizens that have maintained a steady rate of investment in the United Kingdom? Is he further aware that Ford owns Aston Martin and that General Motors owns Lotus? Both British companies have retained their independence, and Lotus has a brand new sports car that is attracting orders from throughout the world, thus ensuring increased output at its factory in Norfolk. Is this not the way forward in an increasingly world-dominated motor industry? The only way in which Jaguar can gain the resources that are necessary to double and treble production is to work in partnership with some of the large companies.
Mr. Ridley: I believe that my hon. Friend has the spirit of the next decade absolutely right. I do not believe that a narrow xenophobic attitude is the way for the United Kingdom to prosper, especially when it is entering the single market of Europe, when competitiveness will be the key to success. I agree that both Ford and General Motors have had an excellent investment record in Britain over
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many years. Indeed, they kept many jobs going during the difficult years when we had a Labour Government, who brought the country to the brink of bankruptcy.
Mr. Terry Davis: Given that a few years ago the Prime Minister was trying to take the credit for the success of Jaguar, does the Secretary of State accept now that the Prime Minister's economic policies are responsible for the company's difficulties?
Mr. Ridley: No, Sir, I do not. I am glad that my right hon. Friend the Prime Minister is in the Chamber to take the credit for the next stage in the success of Jaguar.
Mr. Anthony Beaumont-Dark: Does my right hon. Friend accept that most of us realise that Jaguar need many hundreds of millions of pounds for the next generation of cars? Does he accept also that Jaguar is one of those names that is tremendously important to the United Kingdom, as Rolls-Royce was, which had to be helped at one time? Will he assure the House that, when a bid is made, which seems highly likely, by one of three people, he will consider when he calls it in what is for the long-term benefit of manufacturing capacity and not only investment in this country?
Mr. Ridley: I am grateful for what my hon. Friend says, but I do not think that I am in a position to call in any bid, let alone all the bids. It will be for the majority of shareholders—75 per cent.—to make any final decision. However, I assure my hon. Friend that I agree entirely with what he said about the importance of the Jaguar badge. Anybody who seeks to buy or to make a partnership with that company will want to preserve that unique asset and to make the most of it and its reputation as a major midlands engineering company.
Mr. Jeff Rooker: Does the right hon. Gentleman think that it is proper for him as Secretary of State to express any views at all on the matter as requested by my hon. Friend the Member for Dagenham (Mr. Gould)? For example, would he express the view that the integrity of Jaguar cannot be maintained if ultimate corporate ownership disappears 3,000 to 5,000 miles away? Now that Jaguar is into play and up for sale, is it right, when he is writing the rules of the game—"the game", as he said—that he should express a view that Jaguar should maintain all its current purchases within the United Kingdom as a percentage, with no further imports from any multinational being brought in to put British workers out of a job?
On a technical point, bearing in mind the fact that the right hon. Gentleman was not asked to make the statement, and so that we know to whom to direct our complaints about what has happened in the past half hour, who gave him permission to take up Opposition day time for the statement?
Mr. Ridley: I am happy to venture a view, as I was asked to do by the hon. Member for Dagenham (Mr. Gould), and my view is that I do not agree. I do not agree that control of the company will necessarily go overseas and, if control of the company does go overseas, it is in the best interests of those who control it to expand and to improve its performance here in Britain.
Mr. Michael Grylls: Does my right hon. Friend agree that enormous credit should go to the management and work force of Jaguar for the great

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progress that they have made since the company was privatised? A company only wants to co-operate with a successful firm, not an unsuccessful one, and the fact that Jaguar is now being courted by two big groups is good for its future. My right hon. Friend is right to remove the uncertainty and let them know what their future is, and I am sure that it will be more secure within a big firm.
Mr. Ridley: I entirely join with my hon. Friend in paying credit to the management and work force for a magnificent revival since they were freed from the shackles of public ownership by privatisation. It is perfectly possible that in the near future some company could make a bid for Jaguar. If that went to general meeting, as it would have to do, and 75 per cent. of the shareholders voted in favour of that bid, the question whether we would waive the golden share would arise in an acute form at that moment. I am sure that my hon. Friend will agree that it is better to make the announcement now, before that happens, rather than to leave everybody in a state of uncertainty, even up to the last minute when the company meets in general meeting.
Mr. Doug Hoyle: Does the Secretary of State appreciate that all those who said at the time that Jaguar was privatised that it was too small to stand on its own have been proved right? Does he also understand that today he has shown loyalty to market forces rather than to the British motor industry and its employees? Having taken away the golden share, he now has no control over whether research and development stay in Britain, and the employees have no voice. Is he not giving a disgraceful first performance at the Dispatch Box?
Mr. Ridley: The golden share never gave any Government control over matters such as the location of plants, research and development and the development of new models, and it would have been quite wrong to use the golden share, as the hon. Gentleman suggests, to try to achieve such a result. That is not at all the case. In any event, the golden share would have expired in a year's time. As the hon. Member for Dagenham (Mr. Gould) suggested, it was pointless to let that year go on with uncertainty and confusion reigning until the Government showed their hand. I am sure that I have done a service in doing that now.
Mr. Robin Maxwell-Hyslop: May a Back Bencher who was once an engineer ask the Secretary of State who is an experienced qualified engineer whether the truth of the matter is not that the Japanese have moved into the market that Jaguar once shared with Porsche and BMW and that it needs the capital which only an enormous American firm can supply if it is not only to hold its position for a few years but to dominate the market that it created by the development of new engines and new models year after year?
Mr. Ridley: As one engineer to another, I strongly agree with my hon. Friend that in this highly competitive world it is necessary to make massive investments to stay ahead of the game. If Jaguar finds a solution which does that, it will be to its advantage.
Several Hon. Members rose—
Mr. Speaker: Order. I have to have regard to the business on the Order Paper, which, as the House knows,
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is an Opposition day debate. I shall call two more hon. Members from each side before the Front Bench spokesman, but then we must move on.
Mr. Bob Cryer: Does not potential foreign ownership inevitably raise the possibility that manufacturing will move away from the United Kingdom, whether from Coventry or elsewhere? What safeguards have been provided or obtained for components suppliers, such as Hepworth and Grandage in Bradford, which is a major piston supplier to Jaguar? Do not all such questions arise from the ownership of the golden share? Is not to abandon the golden share to abandon all safeguards on investment, employment, model development and the retention of jobs in the United Kingdom? Does not the Secretary of State at the Dispatch Box today represent the funeral directors of motor manufacturing in Britain?
Mr. Ridley: No, the golden share does not allow any Government to take account of the matters that the hon. Gentleman has raised. I am convinced that the best prospect for the many components suppliers, including the one he mentioned, will be to have a strong, prosperous and expanding Jaguar. To allow Jaguar to find a solution is the best way of helping it.
Mr. Graham Bright: Although I accept that the decision can be made only in the free market by shareholders, will my right hon. Friend actively consider encouraging shareholders and other people involved in the decision to take into account the components market—many components are supplied to Jaguar by General Motors—and the prospect of General Motors bringing a brand new engine plant to this country which would work with Jaguar and Vauxhall in Luton?
Mr. Ridley: I share my hon. Friend's anxiety that suppliers to Jaguar everywhere should expand and have opportunities to increase sales. That is far more likely to be assured by allowing Jaguar to strengthen itself, if it can find a way of doing so, than by pursuing a narrow, restrictive policy which could not help the company in future.
Mr. Stan Crowther: Despite his insulting remarks about British Leyland, does the Secretary of State recall that, in June 1984, the Trade and Industry Select Committee unanimously recommended against hiving off Jaguar? In the light of all that has happened since then, does he think that the decision to push that small company into the hard competitive world without the resources of a large organisation behind it, has proved to be in the best long-term interests either of Jaguar or of Britain?
Mr. Ridley: Perhaps the hon. Gentleman preferred the position in the 1970s, when British Leyland owned Jaguar in the public sector. If his memory stretches that far, does he remember the gloom and demoralisation then, compared with the good news brought to the House today?
Mr. Jonathan Sayeed: Will my right lion Friend compare the Jaguar company of today with the moribund organisation that existed 10 years ago and tell us what lessons he draws from the comparison?
Mr. Ridley: I am certain that the disciplines of the private sector are the disciplines in which Jaguar has thriven. It has benefited from separation from a parent

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that, far from putting money into investment and research, was dragging it down through debts and burdens that resulted from its other activities.
Mr. Gould: I am sure that the Secretary of State would not wish to mislead the House. Will he therefore confirm that in my correspondence with him I urged him to use the golden share—indeed, possibly extend it—in order to negotiate with it, not to dispense with it without obtaining any guarantees or assurances? Will he also tell the House what is the point of a golden share if it is to be abandoned just when it is most needed?
Mr. Ridley: I quoted the entire sentence in order not to traduce the hon. Gentleman, but I shall quote it again. It reads:
"If Jaguar do indeed need the financial and investment assistance to be obtained from becoming part of a larger group, does the Government have any other (and better) solution to offer?"
It is probably not possible to extend the golden share. That would require a 75 per cent. vote by the shareholders, which might or might not be obtained; it would probably also require clearance from the European Commission, which is by no means a certainty, and from the stock exchange. Grave risks would be involved in any attempt to surmount all those hurdles, and it would be unlikely to succeed.
Moreover, I see no point in pretending that a golden share that expires in just over a year could be used to impose conditions on any purchaser. The purchaser would have the simple alternative of waiting until the golden share had expired before doing what he considered to be in his own interests.
Mr. Speaker: I call the Leader of the House to move the motion on the statutory instrument.
Mr. Rooker: On a point of order, Mr. Speaker. I distinctly heard, and hope that the rest of the House did as well, the Secretary of State openly admit that no one had asked him to make his statement today. We may have a new Government Chief Whip and Leader of the House, but the same sneaky tactics are still being used.
In future, Mr. Speaker, when a Minister asks your permission to make a statement on an Opposition day, can we have a debate and a vote on whether the House should give such permission? It is our time that is being taken, and nothing in today's statement could not have been said yesterday, or be said tomorrow. The statement has been made today for one simple reason—the debate that is to follow.
Mr. Maxwell-Hyslop: Further to that point of order, Mr. Speaker.
Mr. Eric S. Heffer: Further to that point of order, Mr. Speaker.
Mr. Speaker: Order. I am on my feet.
Let me draw the attention of the hon. Member for Birmingham, Perry Barr (Mr. Rooker) and the House to the new 21st edition of "Erskine May", on page 297 of which can be found the sentence that the question whether a statement is made is not a matter for the Chair. It is
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merely a tradition that the Minister who makes the statement begins it with the words "With permission"; Government statements are not made with my permission.
Mr. Joseph Ashton: Is it not a fact that, when the House is televised, there will be nothing to prevent the Government from issuing two or three statements every day to hog the 6 o'clock news broadcasts and to delay the Opposition's time with any propaganda material that the Government are prepared to give out? Surely either you, Mr. Speaker, should make a ruling, or the Procedure Committee should examine what is plainly a deliberate and gross abuse of Opposition time. We look to you, Mr. Speaker, to protect our interests by preventing Ministers from standing up and saying, "With permission" when clearly no permission is necessary, and the statement has been designed and organised solely by Mr. Bernard Ingham to run as a spoiler. You really should put a stop to it, Mr. Speaker.
Mr. John Maxton: Further to that point of order, Mr. Speaker.
Mr. Speaker: Is it on the same matter? I have already said, and the House knows, that today is an Opposition day, and all this takes time.
Mr. Maxton: Further to the point of order raised by my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker), Mr. Speaker. May I draw your attention to the Questions for Written Answer on today's Order Paper? Question No. 89, from the hon. Member for Birmingham, Northfield (Mr. King), reads:
"To ask the Secretary of State for Trade and Industry, whether he will make a statement on Jaguar plc."
It is not obvious that, until he realised that he could make the statement in the House, the Secretary of State intended to make a written statement?
Mr. Heffer: On a point of order, Mr. Speaker. I personally have no objecion to the Secretary of State making statements, but he should make honest statements. The fact of the matter is that the private enterprise system has failed. The Labour Government had to take over from a private enterprise system; we had to take Jaguar into public ownership to defend the jobs of those people. When the Secretary of State makes statements—
Mr. Speaker: Order. This is really a matter for debate, not a point of order for me.
May I say to the House again that it is not a matter for the Chair whether statements are made, but it is very much a matter for the usual channels to ensure that this sort of thing is treated with some consideration.
Mr. Maxwell-Hyslop: Further to what you accepted as three points of order running from the Opposition Benches, Mr. Speaker. Since it was claimed that the Secretary of State's statement had nothing to do with the debate coming today—[Interruption.] Yes, it was. May I put it to you, Mr. Speaker, that the Secretary of State's statement about a very important company in the engineering industry today is indeed appropriate and that the whole of his answer was appropriate to the economy of this country, which we are about to debate?
Mr. Speaker: I say again that statements are not made with my permission. I have already drawn the attention of the House to that point.
Several Hon. Members rose—
Mr. Speaker: Order. I am not going to take any more points of order.

STATUTORY INSTRUMENTS, &c.
Ordered,
That the draft Industrial Training Levy (Hotel and Catering) Order 1989 be referred to a Standing Committee on Statutory Instruments, &c.—[Mr. Dorrell.]

Fuel and Energy Provision
4.6 pm
Mr. John Hughes: I beg to move,
That leave be given to bring in a Bill to require the provision of essential fuel and energy to each home, to guarantee appliances, to prevent the entry to premises without prior recorded legally authorised notice; to prevent the unauthorised removal of a fuel measuring device; to abolish standing charges; to establish local authority monitoring committees; and for connected purposes.
After disasters such as Lockerbie, Piper Alpha and King's Cross, hon. Members from all parties demanded inquiries and measures that would prevent further unnecessary loss of life. My Fuel and Energy Provision Bill incorporates the values that those hon. Members profess. it sets out to save lives by providing a number of statutory rights. It would spread a safety net for the disadvantaged members of the community—the 39,000 elderly citizens who die annually from hypothermia or diseases of the respiratory system, which will be the major killers in the cold winter months ahead.
On the occasion when I have brought the Fuel and Energy Provision Bill before the House I have wondered why those who sit on the Government Benches so resolutely oppose its progress through the House. Is there some strange logic or formula, of which I am not aware, which determines that the lives of the Hillsborough tragedy victims, or those who are dropped from hijacked airliners, are more precious than those of elderly citizens whose ignominious deaths rate merely a statistical reference or classification as "poor old souls"?
Having assessed the reaction of the House, I have to come to that conclusion, as the unnecessarily astronomical death toll of elderly citizens—39,000 each year—has failed to concern the Government or and the Prime Minister. The right hon. Lady has not been induced to dash with alacrity to the bedsides of the elderly that she has made to the hospital bedsides of tragedy victims. Yet the loss of life among the elderly is a national disaster. It is, however, one which fails to move the Government. Their indifference was demonstrated last week when the Secretary of State for Social Security refused to restore pensions immediately to their index-linked value, which would have given an increase of £12 to a single pensioner and £20 to a couple. Pensioners would not then have had to worry about the never-attainable severe weather payment in the cold winter months ahead.
The elderly are not the only people to suffer. The disabled, single mothers, young children and the unemployed also suffer from fuel poverty which an uncaring Government, the unconcerned British Gas and the uncaring electricity industry fail to address. I received a letter from the managing director, finance, at British Gas, Mr. A. Sutcliffe, who attempted to convey the company's concern for the welfare of the customer. The letter concluded:
"I believe our record demonstrates that we are fully committed to excellent service and this includes operating in an open and fair manner."
That statement is in stark contrast with the reality suffered by Mrs. O'Hanlon of 17 Coronation road, Coventry, who, having arranged for British Gas to visit her home to install a token meter, was forced to visit her doctor because her 18-month-old child was ill. When she returned home, she found that in her absence a British Gas

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official had forced entry to her property without a warrant and disconnected her meter, leaving her and her child without any source of heat.
The same kind of indifference and lack of concern for the welfare of customers is shown by the electricity industry, which, in the process of clawing back arrears from low-income groups, requires them to feed between £5 and £7 per week into a meter before they receive any electricity for heating or cooking. A recent survey showed that, in more than 90 per cent. of the cases examined, the electricity boards did not know whether the customer's household included pensioners, benefit recipients, sick or disabled persons or young children. The survey concluded that such information has not been sought by the boards.
Because of the lack of time, my Bill will fail to address those problems in this Session of Parliament. In the meantime, local authorities can demonstrate their concern for the many people who spend most of every 24 hours trapped in homes which they cannot heat because they are too poor, because they fear the bill that the postman may bring or because in their desperation they lose sight of what they are doing and an equally sightless bureaucracy disconnects them. Perhaps those homes with ill-fitting windows and doors and poor insulation, which were designed when fuel was cheap, simply will not hold the heat. The heating appliances used may be old or inefficient or require too much of the wrong fuel. Some people are just too poor. Whatever the reason, I believe that more can be done.
Sometimes it is simply a question of knowing what can be done to help. The labyrinth of social services departments, social security officers and advice centres is simply too much for someone who is struggling to keep warm. It is easier to huddle in front of the warm gas fire radiant or the bars of an electric fire than to face the queues and the smug-faced young people who seem to be too busy and who talk too quickly when they explain that it is not really a matter for their department.
I believe that councils across the country can help to resolve that problem. I suggest that councils, under the auspices of the Lord Mayor should form watchdog committees with representatives from the local offices of the Department of Social Security, the gas board, the electricity supply services, welfare workers and a general practitioner. The committee's purpose would primarily be to examine individual cases to see what assistance could be
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given to people in need. To do that job properly, a freephone helpline would be necessary, so that immediate advice could be sought and so that watchful neighbours could report their worries and be sure of a prompt investigation. I imagine that the committee would need to meet once a week during the critical months. To give the issue the full weight that it deserves, I suggest that the committee should be chaired by the chairman of the local authority, the mayor or his deputy.
Such a service would need publicity, and I am certain that the local media would be only too willing to help. Publicity would have a dual purpose. It would serve people in their homes by involving politicians and local council officials, and it would offer them advice. The advice could be of a general nature, such as stating the principles which govern the help that is available—[Interruption.]
Mr. Speaker: It is 4.16 pm. Will the hon. Gentleman bring now his remarks to a close?
Mr. Hughes: I think that we need the assistance of Dr. Dolittle.
I am not excepting myself from the amount of work that the committees would generate. I shall be available at any time to assist with their development and work.
The Fuel and Energy Provision Bill will offer a life certificate rather than a death certificate to the elderly. I request that while we are in the process of using or examining the use—
Mr. Speaker: Order. I shall now put the Question.
Question put and agreed to.
Bill ordered to be brought in by Mr. John Hughes, Mr. Dave Nellist, Mr. Ronnie Campbell, Mrs. Alice Mahon, Mrs. Audrey Wise, Mr. Don Dixon, Mr. Pat Wall, Mr. Terry Fields, Mr. Bob Cryer, Ms. Mildred Gordon, Mr. Harry Barnes and Mr. Tony Banks.

Fuel and Energy Provision
  FUEL AND ENERGY PROVISION
  Mr. John Hughes accordingly presented a Bill to require the provision of essential fuel and energy to each home, to guarantee appliances, to prevent the entry to premises without prior recorded legally authorised notice; to prevent the unauthorised removal of a fuel measuring device; to abolish standing charges; to establish local authority monitoring committees; and for connected purposes: And the same was read the First time; and ordered to be read a Second time upon Friday 3 November and to be printed. [Bill 210.]
Opposition Day
[20TH ALLOTTED DAY]
Opposition Day

  Economic Policy
  Mr. Speaker: I must announce to the House that I have selected the amendment in the name of the Prime Minister. In view of the number of right hon. and hon. Members who wish to participate, I propose to put a limit on speeches of 10 minutes between 7 and 9 o'clock.
  Mr. Dick Douglas: On a point of order, Mr. Speaker. I hesitate to interrupt the flow of remarks, but when you impose that stricture, will you take cognisance of the fact that on recent occasions Front Bench spokesmen have consumed large proportions of the time allocated? Therefore, if Back Benchers are properly to be constrained by your ruling, Mr. Speaker, the same strictures should apply to Front Bench spokesmen.
  Mr. Speaker: As the House knows, I have no authority at the moment to limit the length of speeches made by Front Bench spokesmen. Nevertheless, I hope that what the hon. Gentleman has said will be borne in mind today.
  4.19 pm
  Mr. John Smith: I beg to move,
  "That this House condemns the continuing confusion and disarray in the content and conduct of government economic policy; notes with deep concern the absence of full agreement on economic policy between the Prime Minister and the former Chancellor of the Exchequer; and deplores the continuing commitment to high interest rates which are causing such harm to industry and to the people of Britain."
  Since we last discussed economic policy in the House only a week ago, there have been some changes—some changes in the team. It was only a few weeks ago that the Chancellor of the Duchy of Lancaster—the chairman of the Conservative party—gave us the theme for the period to the next election. In his speech—the speech before Agincourt—he said:
  "We must work together as a team. A team in the Cabinet: a team in Government."
  That was at the beginning of his speech. More attention appears to have been taken of an ominously prophetic quotation towards the end of his speech—in his peroration. He said:
  "He which hath no stomach to this fight, Let him depart."
  We know that there has been a departure—the departure of the former Chancellor. He departed because he found it impossible to work in a team in which the captain does not support the leading player. In his resignation letter, the right hon. Member for Blaby (Mr. Lawson) said:
  "The successful conduct of economic policy is possible only if there is, and is seen to be, full agreement between the Prime Minister and the Chancellor of the Exchequer."
  We should do the right hon. Gentleman the credit of accepting completely what he said. Although his letter was short, it contained a terse but electric message: no Chancellor can carry out his arduous duties without the full support of the Prime Minister. In the case of the right hon. Gentleman, that support was withheld because of a preference for a part-time unelected adviser who spent only a minority of his time in this country. We are invited
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  to believe—if we are to accept some of the curious answers given in the Prime Minister's Walden interview on Sunday—that the right hon. Member for Blaby resigned because his head had apparently been turned by tittle-tattle got up by the press and that in that confused condition he had unaccountably and quite irrationally abandoned an unassailable position to leave the Government for no good reason.
  The truth—as the former Chancellor told us—was that he was entitled to expect "full agreement" on economic policy and proper support. In this curious Government. he neither got it nor was seen to receive it, and not unnaturally he went—a victim of the confusion and disarray which is, in my submission, the inevitable consequence of the subversion of Cabinet government in which the Prime Minister has been engaged for the past 10 years.
  There are two crucial areas of economic policy in which the acute divisions of policy are all too sadly evident and destructive of the public interest. Those are the approach to the possible accession of Britain to the exchange rate mechanism of the EMS and domestic economic policy, particularly in relation to the management of the exchange rate. For some time, the official stance has been that the Government would join the ERM when the time was right.
  The Deputy Prime Minister restated that in an important speech on Saturday night. He said:
  "Thus the position that we took in Madrid—one which the Prime Minister, Nigel Lawson and I all agreed—was the right one. We said 'yes' we want the existing EMS to be strengthened, 'yes' Britain should join and will join the exchange rate mechanism. We defined the conditions that would make the time right: Liberalisation of capital movements in the Community, headway in the battle against inflation—itself the crucial objective—and substantial progress on the single market."
  He added:
  "We committed ourselves to stage one of the Delors report."
  As we all know, that envisages all member states participating in the exchange rate mechanism.
  The right hon. and learned Gentleman went on:
  "That was the position in June. As the Prime Minister, Nigel Lawson and I have repeatedly stressed in the House of Commons, it remains the position now. It is of the highest importance that Her Majesty's Government is seen to remain committed to that position, clearly and in good faith."
  He added for emphasis:
  "It is important—not just for the credibility of our common European commitment but for the economic health and political strength of Britain".
  Note how important he envisages good faith—crucial to our economic health and our political strength.
  I dare say that that speech in any normal situation would not have attracted as much notice as it did, as many observers would have believed it to be a perhaps enthusiastic, but certainly not inaccurate, statement of what Government policy was thought to be. The Deputy Prime Minister, however, must have felt some twinge that it might be more significant. He apparently consulted the new Foreign Secretary and the new Chancellor of the Exchequer, but he did not consult the Prime Minister; nor did he issue the speech through his Government office or even through the Conservative party news service. He issued it on plain, unheaded notepaper.
  I hazard the guess that the right hon. and learned Gentleman did not consult the Prime Minister or use official or party channels because he did not wish there to be any impediment to the delivery of his message. His

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  instincts were probably correct because, not long before he had spoken the words at 9 pm on Saturday night, on Saturday afternoon the Prime Minister had recorded the interview on the Walden programme, which we saw on television on Sunday.
  As we all know, that interview was an event of enormous political significance, a revelation of the Prime Minister's style and approach to the problems of government, as an example of which it could not be bettered. It will be as indispensable to historians as it is to those of us who view these matters in a more contemporary frame. But it is also acutely relevant to the Prime Minister's, and therefore the Government's approach to accession to the exchange rate mechanism.
  At first the Prime Minister appeared to take the normal line:
  "We shall join the European Monetary System on the conditions we laid down in Madrid. There was nothing fudged about them"—
  curiously, no one alleged that there was anything fudged about them—
  "they were quite clear."
  Let us recollect that the Deputy Prime Minister had told us —and he was Foreign Secretary at the time—that there were three conditions: liberalisation of capital movements, progress on reducing inflation and substantial progress—no more than that—on the single market.
  That was not enough for the Prime Minister. On she went, throughout almost the entire second section of her interview, expanding conditions and extending time scales with gay abandon. Not only are exchange controls to be removed, but investment requirements on pension funds and insurance funds in all member states have to go. What is called—[Interruption.] Hold on. What is called liberal economics—with a small "I"; I suppose that we might call it Manchester school liberal economics—must be practised in all countries. A "higgledy-piggledy" system in which no one else plays by the rules must be transformed.
  It can all be summed up by saying that, if all the other member states have adopted Thatcherite policies and the Prime Minister has personally inspected them all, looked to see that all the economic fingernails are clean, we might, just might, consider joining the exchange rate mechanism.
  I observe in passing that the Prime Minister has noticed that Thatcherism has not crossed the English channel—how fortunate they are—and nor is it likely to do so. Why on earth would the other Community countries want to import the equivalent of a £20 billion balance of payments deficit and rates of inflation and interest rates much higher than obtain in their countries? But the clear message that the Prime Minister is giving is that, so long as she is Prime Minister—and that is until the next general election—Britain will not join the exchange rate mechanism.
  Mr. Tony Marlow: The right hon. and learned Gentleman deservedly has a high reputation. Would he care to enhance that reputation by putting on one side the humour and tittle-tattle and telling the House which of the Government's conditions precedent to joining the ERM—conditions that have been set out at various times by the Government and on Sunday by the Prime Minister—the Labour party accepts and with which it disagrees?
  Mr. Smith: The hon. Gentleman knows well that we have repeatedly set out the conditions—[HON. MEMBERS: "Answer."] He knows perfectly well that time and again we have proposed that Britain should join the ERM on certain prudent conditions which the Labour party—[HON. MEMBERS: "Answer."] The difference between the two sides of the House is that we are clear about what those conditions are, whereas the Government side—[Interruption.]
  Several Hon. Members rose—[Interruption]
  Mr. Speaker: Order. The right hon. and learned Member for Monklands, East (Mr. Smith) is clearly not giving way.
  Mr. Smith: We do not know, on the Government side, what the conditions are, or what time scales are in operation.
  Mr. Robin Maxwell-Hyslop: Answer the question.
  Mr. Smith: I can understand why the Conservative party wants to—[Interruption.]
  Mr. Speaker: Order. There is great pressure to speak in the debate. Hon. Members should allow the right hon. and learned Gentleman to get on with his speech.
  Mr. Neil Hamilton rose—
  Mr. Cranley Onslow rose—
  Mr. Smith: The fundamental problem—[HON. MEMBERS: "Answer."]
  Mr. Speaker: Order. The House knows the rules.
  Several Hon. Members rose—
  Mr. Speaker: Order. I say to the Government Benches that if the right hon. and learned Gentleman does not give way, hon. Members who are attempting to intervene must resume their seats.
  Mr Maxwell-Hyslop: Further to that point of order, Mr. Speaker.
  Mr. Speaker: Order. There was no point of order. I was reinforcing a ruling.
  Mr. Maxwell-Hyslop: Further to the point that was raised with you, Mr. Speaker. May I ask if it is not a fact—
  Mr. Speaker: Order. No point of order was raised with me. I rose to say, and I repeat, that if the right hon. and learned Member for Monklands, East does not give way, hon. Members who are standing must resume their seats.
  Mr. Maxwell-Hyslop: On a point of order, Mr. Speaker. The right hon. and learned Member for Monklands East (Mr. Smith) gave way. Questions were asked and certain answers were given—[Interruption.] You know as well as I do, Mr. Speaker, that if a Front Bench spokesman—[HON. MEMBERS: "Sit Down."]
  Mr. Speaker: Order. The hon. Member for Tiverton (Mr. Maxwell-Hyslop) has been in the House for a long time and knows as well as I do that I am not responsible for questions that are asked, provided they are in order, and answers that are given, provided they also are in order.
  Mr. Maxwell-Hyslop: Further to my point of order, Mr. Speaker—[Interruption.]
  Mr. Speaker: Order. [HON. MEMBERS: "Name him."] I will hear what the hon. Gentleman has to say if it is a point order, but not if it is a point of argument.
  Mr. Maxwell-Hyslop: I assure you that I rise on a point of order, Mr. Speaker—[Interruption]
  Mr. Speaker: Order.
  Mr. Maxwell-Hyslop: I will continue when you can hear me, Mr. Speaker. We are all aware that if an hon. Member is speaking and gives way and is asked a question—[Interruption.] I will wait until you can hear me, Mr. Speaker.
  Mr. Speaker: Order. I get the drift of the point that the hon. Gentleman is making. It does not appear to be a matter of order for me. I suggest that we get on now.
  Mr. Maxwell-Hyslop rose—
  Mr. Speaker: Order. I ask the hon. Gentleman to sit down.
  Mr. Maxwell-Hyslop rose—
  Mr. Speaker: Order. For the final time, I ask the hon. Member for Tiverton (Mr. Maxwell-Hyslop) to resume his seat.
  Mr. Smith: It is a great pity that the House is not currently being televised, so that the whole nation could observe the organised wrecking tactics used by the Conservative party against the Opposition. [Interruption.]
  Sir William Clark rose—
  Mr. Speaker: Order. I repeat to the House—[Interruption.] Leave it to me, please. There is great pressure to speak today. I ask the House to listen without interruption. to what the right hon. Member for Monklands, East (Mr. Smith) is saying.
  Mr. Smith: The hon. Member for Northampton, North (Mr. Marlow) asked me about our conditions. Perhaps I may be allowed the opportunity which I have been trying to take for some time, of addressing that question, despite deliberate wrecking tactics from Conservative Members. The conditions applied by the Government will frustrate our efforts to join the exchange rate mechanism. The conditions that the Labour party attaches, apart from the important question of joining at the effective rate, are that there should be adequate swap arrangements between the central banks, that there must be a well-organised regional policy within the Community, and that the thrust of the economic policies within the Community should be for growth and not for deflation.
  That approach has not only been approved by the other countries in Europe, but was substantially approved by the resolution of the European Parliament last week, for which the Conservative MEPs voted. Those MEPs, of course, have a problem in the European Parliament: no other MEPs will have them as part of their group. They feel a little detached from the Conservative party on this side of the Channel. No wonder! Perhaps "semi-detached" is an expression that may carry more menace for them.
  In her interview, the Prime Minister's clear message was that she had no intention of joining the exchange rate
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  mechanism. She said of the timing that there had to be major changes by our errant partners—all the people who do not play by the rules and who are up to all kinds of dirty tricks. She said:
  "Now all that should happen during … what is called the Delors first stage, the first stage coming towards monetary union. I hope it will but other countries have to catch up a long way before it happens."
  As she knows, there is no time limit to stage I of the Delors plan and she knows that the deadline for the single market is 1 January 1993. In so far as she claims that her conditions relate to completion of the single market, it would hardly be likely that she could make the judgment on their performance—a crucial part of her approach—before 1 January 1993. Let us remember that the last date for the next general election is June 1992.
  I submit that the only reasonable conclusion to be drawn from that seminal interview is that there is no question of the Prime Minister agreeing to join the exchange rate mechanism before the next election. That position is hopelessly at odds with the view of the Deputy Prime Minister. Is it the Prime Minister's policy that the Government do not anticipate joining the exchange rate mechanism? Is that the view of the Deputy Prime Minister, the Foreign Secretary or the new Chancellor of the Exchequer? The new Chancellor has an opportunity today to spell out his policy. If he does not, I fear that confusion will remain.
  Let me remind the House of that crucial sentence in the speech of the Deputy Prime Minister:
  "It is of the highest importance that Her Majesty's Government is seen to remain committed to that position clearly and in good faith."
  The Prime Minister's response may be clearer than the Deputy Prime Minister anticipated. However, does he believe that it can conceivably accord with the good faith that he believes to be of the highest importance and which is so important to our economy and our political strength? If it does not, can he accept what the former Chancellor could not—that a Government policy is undermined, and seen to be undermined, by the Prime Minister on national television?
  When the Deputy Prime Minister refers to good faith, I believe that he has in mind good faith within the Government—rare though such a commodity must be—and good faith in relation to the other member states in the Community. It is worth reflecting on what those member states thought when they considered the patronising tone of the Prime Minister's Walden interview. We can rest assured that there is one person who will not be worried by that. If the Prime Minister can feel sorry for all 48 other countries of the Commonwealth, why bother about a mere 11 in the European Community?
  I referrred earlier to divisions on domestic economic policy. To be fair, I believe that all members of the Government began with much the same position. In those early days, when monetarism was unchallenged within their ranks, the belief was firm that the exchange rate could be left to the market and that just controlling the money supply would keep inflation in check. Even the former Chancellor was in line then.
  In a famous reply on 3 July 1980, when asked by my hon. Friend the Member for Liverpool, Riverside (Mr. Parry) what mechanism existed for medium or long-term alteration of the exchange rate, the former Chancellor replied simply, "Market forces." That was the era of free floating when it was said that there was

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  "no stable or reliable relationship between interest rates and the exchange rate."—[Official Report, 4 November 1980; Vol. 991, c. 537.]
  However, the former Chancellor learned by hard experience. He saw the irrational and wild oscillation in the exchange rates and began to move towards the position that he had adopted by the time of his resignation—that is, managing the exchange rate and participating in international agreements to stabilise exchange rates among the G7 nations through the Plaza and Louvre accords.
  On the basis of his experience, the former Chancellor began increasingly to realise the potential value of participating in the exchange rate mechanism. Clearly he moved a long way, but the Prime Minister has not. The lady did not turn. She believed and she still believes, as she has told the House, "You cannot buck the markets." That was her reason for demolishing the Chancellor's policy of shadowing the deutschmark. It was also the reason why she summoned Sir Alan Walters back from the United States to be her adviser earlier this year. She apprehended that two issues were coming to the forefront on which, if she did not strengthen her position, she might lose out. Those were the arguments over the exchange rate mechanism and the desirability of seeking to manage the exchange rate.
  The Prime Minister also knew, as she told us eight times on Sunday, that the former Chancellor was "unassailable". I could hardly believe it when she said that again today during Prime Minister's Question Time. However, it was precisely because the Prime Minister assessed the Chancellor as unassailable that she set out to undermine him.
  Only the truly innocent believe that Sir Alan Walters was just another adviser—one of those people who advise while Ministers decide. He was more than that. He was a crucial ally of the Prime Minister. In the knowledge of his fierce opposition to joining the exchange rate mechanism, frequently and publicly expressed on both sides of the Atlantic, he was recalled to serve in No. 10. It did not take long for Sir Alan to become the alternative Chancellor, and we know the sad eventual outcome of all that. The new Chancellor will not have Sir Alan around.
  Mr. David Tredinnick: Will the right hon. and learned Gentleman give way?
  Mr. Smith: No; I hope that the hon. Gentleman will forgive me.
  If the new Chancellor seeks to develop a policy of which the Prime Minister does not approve, he will encounter the same problems as were encountered by the former Chancellor. The new Chancellor must make up his mind, and he should tell us today whether he follows the previous Chancellor's policy or whether he takes sides with the Prime Minister and believes that the markets cannot be bucked.
  While the new Chancellor carries out his duties, I urge him to be careful about the Prime Minister's praises. If she calls him brilliant, he should be wary. If he hears the words, "brilliant, brilliant", especially if the call is uttered shrilly, he should be worried. If he is ever described as unassailable, he should start to tidy his desk.
  There are echoes of the Westland affair in all this. Once again, there is a serious dispute over a European policy
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  question. The right hon. Member for Henley (Mr. Heseltine) wanted a European solution to the Westland affair. The Prime Minister did not. The right hon. Member for Henley was undermined by the leaking of a Law Officers' letter—a process assisted by unelected officials in No. 10. Business as usual, one might say.
  In the Westland affair, the Prime Minister lost two Ministers. In the present crisis, she has lost thus far only one, albeit the most senior Minister in her Government. The Deputy Prime Minister, who lost his old job in the reshuffle earlier this year, should take especial care. So should the new Chancellor.
  The new Chancellor's crucial training for his new post was not so much the two years that he spent as Chief Secretary to the Treasury; rather, it was his three months as Foreign Secretary. After he had negotiated an agreed communiqué with the representatives of the other 48 Commonwealth countries at Kuala Lumpur, his efforts were completely overturned by the Prime Minister's lengthy denunciation of the views of those very countries.
  As we approach the Council of Europe meeting to be held in Strasbourg in December, the new Chancellor should be especially vigilant; otherwise he might have been Kuala Lumpured in October only to be Strasbourged in December.
  As the new Chancellor faces the task of steering British economic policy over the next year or so, I beg him to abandon the foolish notion that a balance of payments deficit now running at an annual rate approaching £20 billion does not matter provided that it can be financed. We know to our cost the price of such financing—interest rates of 15 per cent. which are doing such deadly damage to business and industry and causing such misery for home owners from one end of the country to the other.
  Sooner or later—I earnestly hope that it will be sooner—the balance of payments deficit must begin to be reduced. In debate after debate, and only last Tuesday, Labour Members have urged the urgent need for an industrial strategy to begin the task of refashioning and rebuilding manufacturing industry. Manufacturing industry is the indispensable wealth creator and the crucially international tradeable part of our economy.
  It is interesting that, whenever we urge the adoption of an industrial strategy for manufacturing industry, the Conservatives do not believe that that is a policy. That says far more about them than it does about us. Right across the political spectrum, people are deeply worried about the future of our industry. Those who work in it, manage it, and advise it are all deeply worried. The only people who do not seem to worry about the crisis in manufacturing industry—it must be a crisis, if we have a £20 billion balance of payments deficit—are the Conservatives, and the Ministers responsible for the conduct of our economic policy.
  We will urge this alternative again and again until the message gets home—not only the Labour party, but the whole of Britain wants a strategy for manufacturing industry.
  Mr. Tim Smith: Last week the right hon. and learned Gentleman told us that he supported an industrial strategy. Will he be a little more specific? We are all concerned about the prospects. Is the right hon. and learned Gentleman talking about tax incentives or greater public spending? What policies does he have in mind?
  Mr. John Smith: I do not know whether the hon. Gentleman was present during our debate last Tuesday—he probably was—but I am prepared to accept his assurance that he is concerned about manufacturing industry. The Opposition have many more Conservative Members to work on.
  Let me spell out, as I did last Tuesday, the three crucial elements of that industrial strategy—first, the repairing of the ravages of the neglect of education and training by a massive education and training programme; secondly, a policy to introduce new technology by Government support for research and development; thirdly, a strong regional policy to tackle the continuing decline of the under-used regions of this country. Once again, one may be told—
  Several Hon. Members rose—
  Mr. Smith: Conservative Members should allow me to speak. Given what happened earlier, I have been reasonably generous in giving way at all to some Conservative Members.
  As the hon. Member for Beaconsfield (Mr. Smith) will come to realise, perhaps before his colleagues on the Government Front Bench do, that is the essential precondition of any successful economic policy for this country. The Opposition have also urged the abandonment of the one-club golfing of exclusive reliance on interest rates and recommended the limitation of bank lending as a superior alternative to the control of demand, as long as that is necesary.
  In addition, the new Chancellor should take the opportunity today to rule out tax cuts in the next Budget. He should use the Autumn Statement, again as the Opposition recommended only last Tuesday, to initiate regionally targeted public investment to strengthen education and training, and research and development, and to stimulate regional economies.
  That is not only an alternative policy—it is the alternative policy which Britain desperately needs. It is a policy which will secure our prosperity not just for the year or two to come but throughout the 1990s. Let us never forget that the crucial folly of the former Chancellor's policy was to lecture the Federal Republic of West Germany that its economic miracle was over and that ours had just begun.
  When we look at the massive trade deficit and how it has gone throughout the whole of this decade, despite North sea oil revenues, which the Conservative party had and which they frittered away, we see an adequate commentary on the effectiveness of the Government's policy. Let it not be forgotten that other countries of the EC, which, in the Prime Minister's warped view of our continent, are so badly trailing behind, have superior economies and are much better fashioned societies than ours.
  The purposes of economic policy are to be centred on four objectives—steady and balanced economic growth, control of inflation, the attainment of full employment, and reasonable equilibrium in our balance of payments. The last objective—the balance of payments—has been downgraded as we have seen a decade go by in which our North sea oil wealth has been frittered away and our economy and society made the laboratory for Thatcherite
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  experiments in free market economics, social unfairness and the retreat of Government from their proper responsibilities.
  Because of the conduct and content of Government policies, I fear that our economy has been gravely weakened and the social cohesion of our society put at risk. This country desperately needs a change in the style of Government and in the economic policies that have been pursued—a change in both the conduct and content of Government. But we are told that it is business as usual. The country received that statement as a threat, not as a promise. In an interview in the Daily Express, the Prime Minister told us that her convictions had to be seen
  "in every piece of policy."
  That must have sent a shudder through every independent-minded Minister—if there are any left in this Administration. The Prime Minister's convictions "in every piece of policy" tells us more about how the Government are run in this country than almost anything else. If it is business as usual, we will continue with a debilitating balance of payments deficit, and the highest interest rates and the highest inflation rate of leading industrial countries. I fear that, both economically and socially, we will continue to lag behind the rest of Europe.
  This confused and divided Government cannot provide the leadership which Britain needs for the 1990s. They cannot do so, because they cannot change while the Prime Minister remains at their head. As the Financial Times editorial observed on Saturday
  "As she has become pre-eminent her Government has become much more vulnerable."
  What concerns the Opposition is not so much the vulnerability of Government as the vulnerability of our country. What Britain needs is not a new Chancellor but a new Government—a Labour Government.
  4.55 pm
  The Chancellor of the Exchequer (Mr. John Major): I beg to move, to leave out from "House" to the end of the Question and to add instead thereof:
  'congratulates Her Majesty's Government on the determination with which it has pursued policies to bear down on inflation and improve the supply side of the economy; welcomes the sustained growth of output, productivity, investment, employment and living standards which the United Kingdom has enjoyed as a result; and endorses the Government's resolve to continue with the policies which are in the long-term interest of the British economy.'.
  At the outset I wish to say how much I regret the resignation of my right hon. Friend the Member for Blaby (Mr. Lawson). I had the pleasure of serving with him in the Treasury for three years—for one year as Treasury Whip, and for two years as Chief Secretary. I enjoyed that experience enormously. I supported his policies and those of the Government when I was Chief Secretary. I believed that they brought increased prosperity to the country then, and I have not changed my view since then. Whatever the controversies of the day may be or may bring, I believe that history will record that few Chancellors brought about so many fundamental improvements to the economy of this country. Only the grudging and mean-spirited will deny that. My right hon. Friend was a great reforming Chancellor and will be remembered as such.
  The right hon. and learned Member for Monklands, East (Mr. Smith) made his usual forceful speech—both forceful and his usual speech. It was good music hall. He

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  has become the Jasper Carrot of parliamentary debate. For all the humour, however, it was an empty speech. It was empty of policy, it made no serious attempt to diagnose the problem, and it provided no solutions whatsoever. On the one single issue on which he was questioned by my hon. Friend the Member for Northampton, North (Mr. Marlow) it was not until some minutes had passed and someone had whispered to him that he actually provided the answer.
  There is no difficulty at all about a diagnosis of the economic problem that we face at present. As a result of over two years of exceptional growth on a scale which no one expected, least of all the Opposition, we have seen the re-emergence of inflationary pressures. They are evident both in rising domestic prices and in the growth of imports.
  Let me be quite clear about the main priority before us. It is progressively to reduce inflation and bring the economy back to the path of steady growth. There is no doubt about that. I know that inflation is not high by the standards of the 1970s, and it is still as low today as in the best month we ever saw during the period of the last Labour Government. I know, too, that some people argue that a little inflation is no bad thing, that one can live with it, that it induces a feeling of well-being and does no harm. Emphatically I do not share that view.
  I do not share that view because inflation has two particularly destructive effects. First, it damages the economy—it brings uncertainty, it discourages investment, it breeds suspicion and conflict in industrial relations, and it puts a premium on playing safe at all levels of management. It is no coincidence that the past eight years, which have seen the longest period of sustained growth—strong and steady growth—since the war, has also been the period in which inflation has been reduced.
  Ms. Clare Short: Given that inflation is destructive in all the ways that the right hon. Gentleman has described, why have the Government allowed it to rise?
  Mr. Major: The hon. Lady would have done far better to address that problem to her right hon. and learned Friend the Member for Monklands, East. She should also be aware that, if we were to see the implementation of the policies that her right hon. and learned Friend has in mind, inflation would be back in the stratosphere. I shall turn to that particular question in a moment.
  Mr. Tony Banks rose—
  Mr. Major: But the social effect of inflation is even more pernicious, as we saw during the period of office of the last Labour Government. It bears most heavily on those least able to protect themselves. In the last five years of the 1970s, with high inflation and low interest rates, pensioners saw the value of their life's savings halved and their retirement security diminished. Indeed, many pensioners today may be on social security benefits, not because they failed to save and prepare for a secure retirement—often they did so at some hardship and sacrifice—but because the Labour Government lost control of inflation and destroyed their security. That happened because the Labour Government had neither
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  the courage nor the foresight—or both—to pursue the necessary but occasionally unpopular policies to curb inflation.
  The Opposition have learnt nothing since then—as the hon. Member for Birmingham, Ladywood (Ms. Short) should know. Their present policy is clear. They would reduce interest rates prematurely and relax monetary policy. They would increase spending massively, and undermine fiscal policy.
  Mr. Tony Banks rose—
  Mr. Stuart Bell rose—
  Mr. Major rose—
  HON. MEMBERS: Give way.
  Mr. Speaker: Order.
  Mr. Major: Labour would devalue the currency as each and every previous Labour Government have done —[Interruption.]
  Mr. Speaker: Order. I must say to the House again—as I had to say to Conservative Members earlier—that if the hon. Member who has the Floor does not give way, hon. Members must resume their seats. It only wastes time to shout, "Give way, give way."
  Mr. Major: I understand that the Opposition do not like being reminded about how their policies destroyed people's security, but they deserve to be reminded because they are peddling the same policies again. The policies that they operate would not stop inflation. They would unleash hyper-inflation, with all the economic and social consequences that we saw before.
  There is no conviction whatsoever in the Opposition's concern about inflation. Their conviction is against the very policies that would curb inflation and bring it down. That is their concern.
  We need to be quite clear about the need to bring inflation down and I have no doubt whatsoever that we are right to use all the practical levers at our disposal to do so.
  Mr. Bell: I should like the Chancellor to concentrate for a moment on the Government's present policies. The OECD review stated that the Government have been raising interest rates to bear down on inflation and to stabilise the exchange rate. Is that still the policy of Her Majesty's Government?
  Mr. Major: If the hon. Gentleman will wait a moment I shall turn specifically to that point. Indeed, I have already begun to do so.
  In my judgment, we are absolutely right to use all the practical levers at our disposal to bear down on inflation. One of these—an important one, of course—is fiscal policy. One of the great achievements of my right hon. Friend the Member for Blaby has been the transformation of the Government's financial position.
  Public expenditure—[Interruption.] Opposition Members racked up debts day after day when they were in Government—we have repaid the debt that they racked up. Public expenditure remains under firm control, and we are now repaying Government debt—the debt that the Labour Government built up—on a massive scale. By the end of this financial year we shall have repaid roughly one sixth of the public debt accumulated over two centuries, at an annual saving of £3 billion in debt interest costs.

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  No one should doubt that my right hon. Friend the Member for Blaby had a tight fiscal policy, and no one should doubt that I intend to keep it equally tight.
  The key lever on inflation is monetary policy—the use of interest rates. I understand very clearly that high interest rates are often unwelcome and often painful, but they are effective and they are having their intended effect now. Spending is slowing down, with retail sales in particular falling over the past three months; so are house prices, which rose much too fast over the past two years; and so is monetary growth, which is now moving close to its target range.
  I understand very well that present levels of interest rates make things very difficult for some home owners, particularly young people who have large mortgages in relation to their incomes, but there are others who should also concern us. We also have to be concerned about those young people who could not afford to buy in the first place, because of the pace of rising prices—[Interruption.] If only for their sakes, there had to be a correction to rising house prices to prevent them being priced right out of the market. That correction is now happening—[Interruption.] It is clear that Opposition Members hate the thought of home ownership and the independence that it brings. The harsh truth is that too many people have been borrowing too much and saving too little, and high interest rates provide a direct incentive to redress that balance.
  Interest rates have other important effects, however— not least on the exchange rate. A falling exchange rate directly raises the prices of things that we buy from abroad and reduces the discipline on British industry. That can only feed inflation. A firm exchange rate helps underpin the policy to stop inflation, and for these reasons it should be clear that I favour a firm exchange rate.
  Mr. Eric S. Heffer: The right hon. Gentleman talks about the housing problem. Is he aware that the Government have been responsible for cutting council housing? They have encouraged the idea that people should buy their own homes and now they have implemented a policy of high mortgage rates, which means that the very people whom they encouraged to buy are suffering under their policies. How can the right hon. Gentleman explain why the Government should be so cruel to the people whom they encouraged to buy homes and why they are also leaving people without any houses at all?
  Mr. Major: The hon. Gentleman should bear in mind that under this Government this country has seen its greatest ever growth in home ownership—[Interruption.]—and that will continue.
  Not surprisingly, exchange markets were unsettled last Thursday, but less so than many imagined and far less than the Leader of the Opposition predicted. On Friday he said, "today when the pound plummets"—[HON. MEMBERS: "Disgraceful!"] But it did not plummet. And I hope that in future the right hon. Gentleman will keep his market predictions to himself and not seek to talk sterling down. Markets can see for themselves that policy has not been changed and will not be changed.
  Mr. John Smith: If the right hon. Gentleman believes that markets sustain the Government's policy, is he aware that a year ago today the pound was valued at DM 3.15, but today it is valued at DM 2.90? Is he also aware that
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  interest rates were then 13 per cent., but today they are 15 per cent.? What kind of market verdict is that on the Government's economic policy?
  Mr. Major: Two years ago, markets were at almost precisely the same level as they are today, a point that the right hon. and learned Gentleman has overlooked. Markets can see that policy has not been changed and will not be changed, and no change in policy means just this. It means that I will set interest rates as high as is needed for as long as is needed to bring down inflation, and in this I will continue to be guided by a range of monetary indicators, including the exchange rate.
  I will deal comprehensively with the Government's approach to economic and monetary union and the Delors report in the debate on Thursday, but I shall say something now about the exchange rate mechanism of the European monetary system.
  Mr. Jack Straw: Has she seen this speech?
  Mr. Major: As a matter of fact, my right hon. Friend has not seen the speech.
  HON. MEMBERS: Oh.
  Mr. Speaker: Order.
  Mr. Major: I am sorry to disappoint the Opposition on that point.
  The exchange rate mechanism, as its name implies, is no more than a contrivance, a means for promoting a greater stability of exchange rate between Community currencies and greater price stability. However, it is not a recipe for problem-free economic management, and it should not be seen as such. We should recognise that it does not change the economic fundamentals. It does not reduce the pain of bringing down inflation. It does not mean that a country does not need reserves and can forgo intervention in the exchange market—far from it. It does not, and cannot, absolve a country from an adequately tight monetary policy. It does not insulate a country from high interest rates. Anyone who believes that early British membership would bring interest rates in the United Kingdom tumbling down would be sadly disappointed. Indeed, the very essence of the exchange rate mechanism is a strong commitment to set interest rates at whatever level is needed to keep the exchange rate within its bands.
  Although it is no panacea, experience in recent years suggests that the exchange rate mechanism has helped participants both to bring about greater stability in exchange rates and to reduce inflation. I am in no doubt that in the right circumstances it would help us, too. But the circumstances have to be right if it is to be in our interest to join. The exchange rate mechanism will face new tests as exchange controls are abolished throughout the Community, and as the single financial market develops. In these circumstances, it would be very risky both for the United Kingdom and the present participants to introduce sterling—a currency which is traded much more widely than any other in Europe with the single exception of the deutschmark—when there is such a large differential between our inflation and interest rates and those in Germany.
  Following the Madrid summit, the Government reaffirmed their commitment to join the ERM and specified precisely the conditions under which we will do so. The question is not whether we should join, but when. I repeat the conditions now for the avoidance of doubt.

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  We will join the exchange rate mechanism when the level of United Kingdom inflation is significantly lower, when there is capital liberalisation in the Community, and real progress has been made towards completion of the single market, freedom of financial services and strengthened competition policy. That was the position that was set out at the Madrid summit and it remains the position today. There should be no doubt: when these conditions are met we will join—clearly and in good faith. Were it not a question of good faith, my right hon. Friend the Prime Minister would not have set out the conditions so clearly some time ago.
  Mr. A. J. Beith: How long does the right hon. Gentleman think will be a reasonable period of time within which to assess whether these things have come to pass?
  Mr. Major: As the hon. Gentleman will have understood from what I have just said, that is not wholly within our hands, for much of the action needs to be taken by other people, rather than us, so how speedily that will be done is in other people's hands as well as ours.
  Without those conditions being met, entry into the exchange rate mechanism would be neither in our interest nor in that of Europe. With them, membership of the exchange rate mechanism will bring benefits to this country as it has, in my judgment, to its present members. That is a further reason why economic policy must be addressed to bringing inflation down—both for wider economic reasons and as the necessary preliminary for entry into the exchange rate mechanism. We have set out our conditions for entry clearly. We are not hiding behind "certain prudent conditions", as the Opposition sought to do.
  Bringing inflation down is an important task, but it will be neither easy nor speedy. Inevitably, anti-inflation policy is bound to slow the economy down for a time. Therefore, I do not expect to see domestic demand growing anything like as fast next year as it has in recent years. Nor would I expect anything more than a fairly modest rate of output growth. With spending slowing down, businesses will have to take a hard look at ways to keep down their costs, including wages. If they do not succeed in that, the harsh truth is that jobs may be lost, needlessly. I hope that management and unions will ensure that that does not happen, and that Opposition Members will reinforce that message.
  In recent months, much has been made of the rapid growth of our trade deficit, not least by the right hon. and learned Member for Monklands, East. It has grown.
  Mr. Robert Sheldon: Does what the right hon. Gentleman is saying confirm that he does not believe that the exchange rate mechanism is a half-baked scheme?
  Mr. Major: The right hon. Gentleman may reflect on what I have just said. I have said that when the conditions are right we shall enter into the scheme. That is self-evident.
  In recent months, the right hon. and learned Member for Monklands, East has made much of the rapid growth of our trade deficit. It has grown, and by far more than is
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  comfortable. It cannot continue at present levels and it will not, as we have always said. In due course, it will come down as demand growth slows.
  But the Opposition paint far too black a picture of the trade deficit. What they have never been prepared to admit is that much of it reflects investment and not consumption. Over the past two years, investment has grown by 23 per cent.—the fastest two years of investment growth on record—and over the whole life of this Government investment has grown far faster than consumption. This investment does suck in imports—often capital equipment—and it may widen the trade gap in the short term. That effect is clearly unwelcome. What must be understood is that in the medium term, to the extent that these capital imports build up extra productive capacity, that will play a part in reducing future deficits. Much of today's problem is a preliminary to better performance tomorrow, and exports have been performing better and now stand at an all-time record level.
  I suppose that it was a little optimistic to expect the right hon. and learned Member for Monklands, East to acknowledge the facts on investment. Business investment is a higher proportion of gross domestic product than ever before, but as far as the Opposition are concerned, that does not count. Why not?
  In their view, it does not count because investment is not investment unless it is paid for by the taxpayer, because training is not training unless it is publicly financed by the taxpayer, and because the supply side of the economy cannot possibly be right unless it is managed from the centre. It would be a tragedy for industry if that form of thinking ever returned to the government of this country.
  Over the last decade, under our economic policies, the underlying strength of the economy has improved and British industry is in fundamentally good shape. Our approach is working. In the past two years profitability has been higher than at any time since the 1960s. There is a record rate of new business start-ups—more than 1,600 per week so far this year, by far a new record. Productivity in manufacturing has grown faster in the 1980s in the United Kingdom than in all the other major industrialised countries. And that is after two decades in which we were bottom of the league, much of the time governed by a Labour Government. Moreover, employment has risen faster over the past five years than at any time since the war and by more in this country than in any other European country.
  Mr. Graham Allen: As the new Chancellor of the Exchequer has put forward such a convincing view of how rosy the economy is, will he tell the House why in such circumstances his predecessor resigned?
  Mr. Major: I should have thought that the hon. Gentleman could do a good deal better than that. I suspect that my right hon. Friend the Member for Blaby (Mr. Lawson) will be able to speak for himself on that matter.
  None of those improvements is accidental. Each and every one of them is a direct result of the policies that we have pursued over recent years. It may be that we shall face a difficult year ahead, but if that is to be so, industry is far better motivated and equipped to handle it than at any time in the 1970s.

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  Only the Opposition refuse to recognise the changes that have occurred in the past 10 years. Their persistent denigration of the economy bears no relation to reality. Business men, both here and abroad, are well aware of the improvements that have taken place. They know that this country's economy is strong. That is why they are investing in this country at record levels. Work forces know this too. That is why workers, more involved than ever before in the success of their companies, have increased their productivity faster than in any other major industrial nation—and we have more people in work than at any time before in our history.
  I believe that people recognise that we must deal with the short-term difficulties before us, and they expect us to do so. They know that our economic prospects have been improved out of all recognition in the past decade, and they expect us to build on that. The fact that the right hon. and learned Member for Monklands, East does not recognise it is a sign of how out of touch he is now and will be shown to be at the next general election. I have no doubt that the policies that we have been following are the right ones and I propose to continue them. I see no need for radical changes in policy.
  We must never go back to the policies which nearly destroyed our economy in the 1970s and led to the inflation rate of a banana republic under the Labour Government. The Labour party is well aware of that. That is why it has invented Mr. Mandelson and his public relations gloss and disinvented Socialism. Socialism is rarely mentioned from the Opposition Front Bench except to deny that it exists. The Labour party knows what poison it is for most of the people in this country. Occasionally, even—[interruption]
  Mr. David Shaw: Listen, Kinnock!
  Mr. Major: If the Leader of the Opposition is back with us, I shall continue.
  Occasionally, even BBC interveiwers ask what Labour would do. The Leader of the Opposition tells them with delicious frankness that he has not a clue. But the Labour party's policies, however it tries to hide them, seep out one by one. The Labour party is in favour of credit controls—just as everyone else is abandoning them. It would renationalise wherever it could. It would increase taxes on companies and individuals. It would abolish the trade union legislation. The Leader of the Opposition would reinvent sector working parties. A Labour Government would spend more—[Interruption.]
  Mr. Speaker: Order. I do not need to remind the House of the pressure that there is to participate in the debate. I ask the House to give the Chancellor of the Exchequer a fair hearing for the rest of his speech.
  Mr. Major: The right hon. and learned Member for Monklands, East said a few minutes ago that he wished television were here in the Chamber. I wish that the public could see the behaviour of Opposition Members. They cannot bear the fact that over the past few years the levels of prosperity in this country have risen by an unprecedented amount and the people are well aware that that is the case. They know very well that the policies of the Opposition would take us back precisely to where we were in the 1960s. A Labour Government would spend more, borrow more and, yet again, they would devalue, as each and every successive Labour Government have done. The
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  policies that they espouse are the failed policies of the 1960s. The electorate rejected them before and it will do so again. I invite my right hon. and hon. Friends to reject the motion and to support the amendment.
  5.26 pm
  Mr. Nigel Lawson: I am old-fashioned enough to believe that my first comment on recent events should be made to this House. This is not an easy speech for me to make, and I am sure that the House will understand that. I shall do my best to be brief, and I hope that the House will assist me in this.
  I am most grateful for what my right hon. Friend the new Chancellor of the Exchequer has said about me, and I wish to take this further opportunity to wish him every success in the task that lies ahead of him. As he reminded the House, we worked closely together for just over two years, and he has my full and unstinting support.
  As for my own record, I have no doubt that I have made my share of mistakes; but I am content to be judged when the passage of time has provided a greater sense of perspective than is possible today.
  No one, however long he has held the post, lightly gives up the great office of Chancellor of the Exchequer. Certainly I did not. As as the resignation letter that I wrote to my right hon. Friend the Prime Minister clearly implies, it was not the outcome I sought. But it is one that I accept without rancour—despite what might be described as the hard landing involved. I would only add that the article written by my right hon. Friend's former economic adviser was of significance only inasmuch as it represented the tip of a singularly ill-concealed iceberg, with all the destructive potential that icebergs possess.
  I have long been convinced that the only successful basis for the conduct of economic policy is to seek the greatest practicable degree of market freedom within an over-arching framework of financial discipline to bear down on inflation. That being so, a key question is where the exchange rate fits in. Is it to be part of the maximum practicable market freedom, or is it to be part—indeed, a central part—of the necessary financial discipline?
  I recognise that a case can be made for either approach. No case can be made for seeming confusion or for apparent vacillation between these two positions. Morever, for our system of Cabinet government to work effectively, the Prime Minister of the day must appoint Ministers whom he or she trusts and then leave them to carry out the policy. When differences of view emerge, as they are bound to do from time to time, they should be resolved privately and, whenever appropriate, collectively.
  But to return to the exchange rate. Faced with the question that I posed a moment ago, my answer is, unhesitatingly, that it should be seen as an essential element of financial discipline, with the rider, incidentally, that exchange rate stability is itself an economic benefit.
  There is nothing novel, of course, in any of this. The House will recall the classical period of the gold standard before the first world war, the Bretton Woods system after the second world war, and, of course, over the past 10 years, within the European context, the EMS.
  None of these systems were or are panaceas or soft options. Tough decisions still have to be made. None of them were or are without difficulties. But those difficulties, in my judgment, are very much less than the practical diffculties and disadvantages which the world has

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  experienced during periods of freely floating exchange rates. Nor, incidentally, can there be any doubt that the less credible the exchange rate discipline is, the greater the weight that interest rates will have to bear, and the higher they need to be to maintain the necessary anti-inflationary pressure.
  Full United Kingdom membership of the EMS—I was glad to hear much of what my right hon. Friend the Chancellor said—to which, again, as my right hon. Friend the Prime Minister made clear at Madrid, this Government are committed, would signally enhance the credibility of our anti-inflationary resolve in general and the role of the exchange rate discipline in particular, and thus underpin the medium-term financial strategy. Indeed, given the existence of the EMS, our continuing non-participation in the exchange rate mechanism cannot fail to cast practical doubt on that resolve, however ill-founded such doubt may be.
  There is, I believe, one other way in which anti-inflationary credibility might be enhanced in the eyes of the market and that is why, a year ago, I proposed to my right hon. Friend the Prime Minister a fully worked-out scheme for the independence of the Bank of England. But that would be a buttress; it would not be a substitute for what I was saying earlier.
  But if full United Kingdom membership of the EMS, although not indispensable, would facilitate the conduct of economic policy in general and the battle against inflation in particular, as those already participating have demonstrated, there is also a vital political dimension.
  As my right hon. Friend the Prime Minister made clear in her Bruges speech, Britain's destiny lies in Europe as a member of the European Community—and let me be clear that I am speaking, as she speaks, of a Europe of nation states. Within that context, it is vital that we maximise Britain's influence in the Community so as to ensure that it becomes the liberal free-market Europe in which we on the Conservative Benches so firmly believe. I have little doubt that we will not be able to exert that influence effectively, and successfully provide the leadership, as long as we remain largely outside the EMS. So, for economic and political reasons alike, it is important that we seek the earliest practicable time to join, rather than the latest for which a colourable case can be made.
  Finally, a word about the short-term prospects for the British economy. There always has been, and there always will be, an economic cycle. During our period of office so far, we experienced a sharp downturn between 1979 and 1981, followed by a remarkably vigorous and prolonged upswing which lasted from 1981 right through to 1988. We are now once again on the downswing, and I see no need for a further policy tightening. While this downswing will not be as sharp as the previous downturn, not least given the very much lower level of inflation that we now have, a dull 1989 is bound to be followed by a difficult 1990.
  But from then on, I have every confidence that, with the policies that the Government have been pursuing and will continue to pursue, as we heard from the Chancellor today, the long-term upswing will continue, based on lower inflation and on the unprecedented underlying strength that the British economy now possesses.
  I have every confidence, too, that this will lead at the end of the day to a fourth election victory under the
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  leadership of my right hon. Friend the Prime Minister, whose outstanding contribution to the renaissance of Britain over these past 10 years I am proud to have been able to assist.
  Several Hon. Members rose—
  Mr. Speaker: Will those hon. Members who are not remaining please leave the Chamber quietly?
  5.36 pm
  Mr. Peter Shore: The House listened with close attention to what the right hon. Member for Blaby (Mr. Lawson) had to say. He was frank. There were no obfuscations, no skating over the reality of his disagreements and the reality of his disappointment that he felt obliged to resign his high post. As he said, he did not lightly give up being Chancellor of the Exchequer, nor was it an outcome that he sought.
  Furthermore, the right hon. Gentleman focused upon what I believe was the major and continuing source of disagreement between himself and the Prime Minister in economic policy—that is, the relative weight that they have given and continue to give to the use of exchange rate policy in the general mix of Government policy and counter-inflation strategy.
  The right hon. Gentleman has not in the past sought, or conducted himself in a way that encouraged, the affection of the House. But, if I may say to him, those of us who have disagreed with him most strongly have always respected his intellectual ability and his great intellectual candour. We have not always enjoyed it, but we have respected it. He has done himself no harm at all on either side of the House in what he has had to say in his very frank speech today.
  The right hon. Gentleman's resignation last Thursday raised for all of us three serious issues of economic policy. First is the question of the authority over economic policy of the Chancellor of the Exchequer in relation to the Prime Minister and to her advisers. Second is the question of the Government's policy towards joining the exchange rate mechanism of the EMS. Third is the question—the most important of all—of the continued and massive deterioration in our economic prospects and what the Government intend to do about it.
  The first issue has inevitably received much attention in the debate, and no doubt will continue to do so after the right hon. Gentleman's speech. I say "inevitably" because it was the right hon. Gentleman who, in his resignation letter, put clearly, as he saw them, his reasons for going. Having listened to the right hon. Gentleman, surely no hon. Member can doubt that for the best part of the past 18 months he has had major disagreements with the Prime Minister on both interest rate and exchange rate policy.
  Not only were there major disagreements, but they were made highly visible by comments both from the Prime Minister and her former economic adviser, Sir Alan Walters. When the Prime Minister told Mr. Brian Walden in a television interview on Sunday:
  "I fully backed and supported the Chancellor … somehow Nigel had made up his mind that he was going",
  she was being exceptionally economical with the truth. Today's debate would never have been staged if the Prime Minister had really wanted to keep the right hon. Member for Blaby as her Chancellor. Without further ado, she would have sacked her part-time adviser. She did not do so, and she continued to refuse to do so even when she

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  knew for certain that to retain Sir Alan would mean the departure of the Chancellor of the Exchequer. Faced with the choice of backing or sacking the right hon. Gentleman, the Prime Minister simply waited for his resignation. Sir Alan Walters's resignation settled nothing. It simply removed the surface manifestation of disagreements between the Prime Minister, her former Chancellor and her present Deputy Prime Minister.
  The result is confusion and uncertainty, or, to use the words of the right hon. Member for Chingford (Mr. Tebbit) only yesterday, "an appalling muddle" about the real thrust of Government policy and in particular their attitude to joining the exchange rate mechanism of the European monetary system. It is no good the new Chancellor making statements, partly propagandistic and partly designed to reassure people, that there is no real change in Government policy, because the nation knows that two different policies were pursued in parallel, the consequences of which we are all aware of today.
  The problem that the Government must face is the result of their long-term mismanagement of the British economy. They have presided over years of under-investment, high and costly unemployment, squandering of North sea oil reserves and, in the past three years, the growth of excessive purchasing power swollen by a falling savings ratio, a massive increase in personal borrowing and large cuts in taxation. That excess purchasing power has been reflected in both rising inflation and a horrific current account deficit.
  That is the economic background against which proposals for joining the ERM must be judged. The argument about joining the ERM in the next two or three years is now largely academic. Whether or not the Prime Minister's condition that other European countries free the movement of capital is met, and whether or not United Kingdom inflation comes down from its present rate of 7·6 per cent. to the Community average, we are in no position to join so long as our vast current account deficit pertains.
  Our £20 billion deficit on current account this year is almost 5 per cent. of our gross domestic product and the largest deficit that any major country has experienced since the end of the second world war. At its peak, the American deficit was less than 3·5 per cent. of GDP and its gradual diminution required several massive devaluations of the dollar before noticeable progress could be made. Today, no one has the faintest idea what the level of sterling should be in relation to the deutschmark and other European currencies.
  I am aware that many other conditions would need to be satisfied before Britain could contemplate membership of the ERM. My right hon. Friend the Leader of the Opposition and my right hon. and learned Friend the shadow Chancellor of the Exchequer frequently refer to the need for adequate swap arrangements between the central banks, for a co-ordinated growth strategy throughout the European Community and for enhanced regional support. All those points are important, as is the ending of exchange controls in European Community countries, but it is inconceivable that we should enter the ERM and fix our exchange rate while our huge deficit remains and we have literally no idea what the rate should be.
  Mr. Beith: Will the right hon. Gentleman give way?
  Mr. Shore: No, not for the moment.
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  If we were so foolish as to join the ERM before the problem of our deficit were resolved, we should be forced to make successive adjustments in the rate—with all the ill will that that would create—or to suffer the penalties of rising unemployment and lower output, as we became increasingly uncompetitive.
  Mr. Beith: I had formed the impression that the right hon. and learned Member for Monklands, East (Mr. Smith) would join the ERM now if his four conditions were met. Is that not the right hon. Gentleman's view?
  Mr. Shore: I am simply drawing attention to the problem of fixing a current, practicable and sustainable rate for sterling. It cannot be done now, given the horrendous size of our current account deficit.
  Our long and far from happy experience of fixed exchange rates between 1945 and 1972 in the International Monetary Fund system should also counsel caution. Two problems were repeatedly experienced. First, there were large, short-term speculative movements, with the constant danger of exhausting our reserves. Secondly, there was medium-term loss of competitiveness, due to our slower rate of growth of productivity and our tendency to higher inflation than many of our major competitors. The result was strong pressure on us throughout that period to maintain an uncompetitive rate for sterling long after we should have devalued. That forced successive Governments in the post-war period to engage in stop-go policies and made the United Kingdom growth rate unsatisfactory compared with other, faster-moving, competitor economies.
  There can be no real stability in exchange rates while there are large differences in productivity and inflation between member countries. Large differences remain today between ourselves and both Germany and France. Furthermore, as the case for periodic realignments in exchange rates becomes ever stronger, the pressure for adjustments falls on the weaker currencies and is hardly felt by the stronger ones. That lack of symmetry in the adjustment process exerts deflationary pressure on all weaker economies in fixed exchange rate systems.
  The ERM, which has been the focus of much of the debate, is no exception. Those who claim the virtues of the ERM should look at the performance of the economies of the member states. Unemployment in France has remained virtually static for the past four years and was running at 10 per cent., or 2·6 million men and women, in May this year. During the same four-year period, unemployment in Italy has risen from 9·2 per cent. to 10·7 per cent., reaching a total of nearly 2·9 million people. Unemployment of 10 per cent. in the Netherlands and Belgium has shown only a marginal improvement in the past four years.
  Those figures of 10 per cent.-plus unemployment in major European economies within the ERM compare with 6·8 per cent. unemployment in May 1989 in the United Kingdom. Most of us believe that that is still much too high, but it is well below the levels of our European neighbours.
  The only country in Europe that has seen a near return to full employment and a substantial decrease in the numbers of unemployed in the past four years is Germany, where the unemployment rate was only 5·9 per cent. in May 1989. Far from achieving convergence since the

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  formation of the ERM in 1979, the German trade surplus with other EC countries has massively increased in terms of both money and import-export ratios.
  Our experience of fixed exchange rates in the IMF—which was far from the happy one that some seem to recall—took place against a background of strong controls over the movement of capital from the United Kingdom into the outside world. We no longer have those controls; we no longer have any exchange controls. The cost of maintaining a fixed rate for sterling is bound to be much more onerous in the future than it has been in the past.
  Mr. Giles Radice: My right hon. Friend has not mentioned the way in which the inflation rates of the countries that he has named have come together. I should have thought that, if we are to discuss the convergence of the economies of those countries, we should consider that factor.
  Mr. Shore: It is one of the mix of matters that should concern all who wish to see a balanced, effective and successful macro-economic policy; but to posit the overriding importance of counter-inflation against our other major interests—growth in the economy, and the provision of jobs—is far more a Conservative philosophy than one that has commended itself to Opposition Members. All those matters need to be debated and evaluated seriously before any decision is made to return to a fixed exchange rate system.
  In my view—I address this remark particularly to the right hon. Member for Blaby—it would be both dangerous and wrong for Britain to make its decision about joining the exchange rate mechanism not on economic grounds, but as a political act—either as a gesture to demonstrate our European bona fides or, still more disastrous, as a prelude to the full-blown economic and monetary union described in stages 2 and 3 of the Delors report. We must judge such issues in the economic interests of our people, not simply as part of a madcap rush towards federalism in western Europe.
  5.51 pm
  Mr. John Townend: I am surprised that the Opposition decided to have a second Supply day to debate the economy within seven days of the first. Nothing in the economy has changed since last week: it is as strong as it was then, and has the same troublesome but, I hope, short-term problems. The only difference is that we have a new Chancellor of the Exchequer. I congratulate my right hon. Friend on his new appointment, and wish him every success in his post. He has come in at a difficult time, but his background as a banker and former Chief Secretary to the Treasury will provide him with invaluable experience, and I am sure that he will fill the position with distinction.
  Like my hon. Friends—and, indeed, many Opposition Members—I think that the former Chancellor, my right hon. Friend the Member for Blaby (Mr. Lawson), will go down in history as a great reformer. The country will, I believe, benefit greatly over the years from his reforms, particularly his reform of company taxation and the part that he played in creating the enterprise economy by reducing direct taxation dramatically and encouraging the talented in every sphere to work in this country. I find it odd that the Opposition, who were so critical of the former
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  Chancellor last week, are now turning him into their hero, although both my right hon. Friend the Prime Minister and the new Chancellor have said that there will be no change of policy, and that the Government's priority will continue to be the defeat of inflation.
  If any justifiable criticism could be made of the previous Chancellor and his policies, it would be that the Government, having brought inflation down to its lowest level for decades, have allowed it to rise again. It is easy to be wise after the event, and I think that, understandably, the former Chancellor underestimated the extent to which the economy was overheating in the first half of 1988. To be fair, I must point out that the statistics on which he and the Bank of England must work could be much better, as has been pointed out several times by the Treasury Select Committee.
  Most people, I think, agree in retrospect that monetary conditions in the first half of 1988 were too lax, and that it was a mistake to try to shadow the deutschmark at a level of DM3 to the pound when market pressures were forcing the pound up.
  Mr. John Butcher: Did my hon. Friend hear the former Chancellor say that he recommended according the Bank of England similar status to that of the German Bundesbank, and that the Bundesbank had enjoyed constitutional independence and been both a brake on inflation and a prudent guardian of the money supply in the Federal Republic, thus providing the benefits that we have seen in that country? Will my hon. Friend say a little more about what may be the ex-Chancellor's final legacy to the House, in that he has moved us in the same direction—I hope inexorably?
  Mr. Townend: I noted what the former Chancellor said with great interest, and have made a note to refer to it later in my speech.
  To shadow the deutschmark, the Chancellor reduced interest rates several times, and I think that that error played a major part in the overheating of the economy. If it had not been made, our trade deficit would now be lower, as would inflation, and interest rates would not have been able to rise so much. Taking that into account, I find it strange that so many hon. Members on both sides of the House are so enthusiastic about joining the exchange rate mechanism. When my right hon. Friend the Member for Blaby was shadowing the deutschmark, the United Kingdom was a de facto member of the ERM, and we are now paying a heavy price for that.
  Mr. Bell: The hon. Gentleman is quite right: at that time we were a de facto member of the ERM. That was the entire policy, although it certainly was not elaborated by the Treasury.
  The hon. Gentleman has criticised the former Chancellor for shadowing the deutschmark. The real reason why the economy went into disequilibrium was not that, however, but the fact that the right hon. Gentleman reduced income tax so much that he put £6,000 million into the economy.
  Mr. Townend: There is another reason, which I shall come to in a minute.
  If there was a disagreement between the former Chancellor and the Prime Minister at that time—as many commentators have said—time has proved that, once again, the Prime Minister was right. It is not often that I

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  agree with the right hon. Member for Bethnal Green and Stepney (Mr. Shore), but I thought that he made some relevant points. We are not yet fully aware of the strain that will be put on the system when the other members of the ERM abolish exchange controls.
  I also find it strange that those on the Opposition Front Bench are so keen to join a mechanism that depends on the dictate of the Bundesbank. Let me now deal with the point made by my hon. Friend the Member for Coventry, South-West (Mr. Butcher). I thought that one of the ex-Chancellor's most significant statements today was his suggestion that he had advanced to the Prime Minister proposals to make the Bank of England independent and more like the Bundesbank. That may indeed be one of his great legacies: an independent Bank of England would give us even less reason to join the ERM and experience the discipline of the Bundesbank.
  I hope that my right hon. Friend the new Chancellor will not slavishly follow an exchange rate policy, and increase interest rates to a level that will force us into a major recession. Interest rates are very high at present, and, while I accept that such rates are necessary, they are bearing down very hard on the small businesses that are the seedcorn of our future success.
  The hon. Member for Middlesbrough (Mr. Bell) referred to the shadowing of the deutschmark. Although the shadowing of the deutschmark, and the low interest rates that went with it, was partly responsible for the upsurge in inflation, the seeds of the inflation that we are now having to deal with were sown in 1986, when the Chancellor of the Exchequer stopped targeting broad money. I accept all the difficulties that in measuring broad money, but the argument in its favour was put cogently by William Rees-Mogg in a press article yesterday. His argument was most convincing. Whatever the problems of measuring broad money may be—and I accept that there are problems—may I ask the new Chancellor not to ignore it.
  The trade deficit is too high for comfort. However, it is not mirrored, as is the case with most trade deficits, by a budget deficit. The deficit is caused by the private sector spending too much, running down savings too much and borrowing too much. Over time, the trade deficit should right itself, but the position will improve more quickly if we improve the supply side of the economy.
  The major cause of the trade deficit is said to be the decline in our manufacturing base. The figures for the motor car industry show that there is a deficit of £6 billion, so the point is well made. We must ask ourselves why the United Kingdom ceased to be a car exporting country in surplus and became a car importing country in deficit. The answer is that we did not make the right cars at the right price and of the right quality, with the right after-sales service that the market wanted. Without doubt, a large part of the blame for that lies at the door of the Opposition paymasters, the trade unions.
  Mr. Austin Mitchell: Does it not have any connection with the fact that one quarter of our manufacturing capacity and 28 per cent. of our manufacturing jobs were closed down between 1979 and 1983?
  Mr. Townend: That has nothing to do with the car industry. Just look back to the 1970s—to the disruption in the car industry. At open-air meetings, there were no secret
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  ballots, and out the workers went on unofficial strike. Just look at the restrictive practices, the go-slows, the refusal to accept new technology. Management was unable to manage and the industry was dominated by militant shop stewards.
  We should cast our minds back to what happened to the Rootes family business, a fine British motor car firm that tried to stand up to crypto-Communist, Left-wing shop stewards. A strike at Acton went on for week after week. The company was financially crippled and had to sell out to Chrysler in America. British Leyland would have gone broke had it not been for the millions of pounds of taxpayers' money that were poured into it. In some factories, quality control managers were ordered to limit the number of cars that they sent back for poor quality because there would have been a strike if more than a certain number had gone back. Those cars went to the customer. That is what destroyed the British car industry.
  This Government, under the Prime Minister, have dealt with those problems. We have stopped the rot by reforming industrial legislation and by bringing the trade unions within the law. We have severely restricted picketing, blacking and sympathy strikes. The British motor car industry is beginning to rise like a phoenix from the ashes. Investment is pouring in, but sadly much of it is Japanese. Beggars, however, cannot be choosers. The Opposition's friends destroyed the industry; we need help to rebuild it. Nissan will be producing 400,000 cars within five years, Toyota 200,000 cars and Honda 200,000 cars. In the mid-1990s, that will have a significant effect on our balance of trade. We shall reduce our imports and we shall reconquer the European car market.
  All of us agree that British industry must keep down unit costs. Is it not tragic, when we have this balance of trade deficit, that the engineers are demanding a reduction in the working week to 35 hours and threatening to go on strike? If they win, that will increase our unit labour costs, at a time when we cannot afford to do so. If the Opposition want to be considered able to form a responsible alternative Government, they should tell the engineers to settle and condemn their ridiculous action.
  A reduction in the working week at this time would do more damage than at any other time in the last 10 years. The labour market is very tight. If we reduced the working week, we should reduce the number of hours of skilled labour that are available. That would lead to inflationary pressures on the skilled work force. The reason for the shortage of skilled workers is the decline in apprenticeships—again partly due to the ridiculous attitude during the last 10 years of the unions that have forced up apprentices' wages. The only place where there has been an increase in apprenticeships is the electrical industry. The union leaders have been sensible. They have decided to reform apprenticeships by reducing the length of apprenticeships and the level of pay. Therefore, apprenticeships in the electrical industry are now expanding.
  I wish the new Chancellor every success. It is quite clear that it is business as usual, that there will be no let-up in the Government's determination to solve the short-term economic problems. My hon. Friends and I are fully behind the Chancellor and the Prime Minister.
  6.6 pm
  Mr. A. J. Beith: I wish the Chancellor well and welcome him to his new job, to which he brings particular qualities, relevant experience and the courtesy that we have all come to expect from him. It is a very odd course of career that has brought him to the job at this time. If I were in the furniture removing business, I would get to know him well. His effects must have been careering up and down Whitehall at an alarming rate. As I heard the cheers of his hon. Friends, I thought that they ought to press him to their bosom while they still can, before he is moved on to something else.
  If, for example, the new Foreign Secretary is thought after a week or two to have gone native—there is a considerable risk of that, after his previous experience at the Foreign Office—the Prime Minister would be on the phone to the Chancellor, saying, "John, I need you back in the Foreign Office." It may be that the new Home Secretary will be moved yet again to another post to fill the gap that the Prime Minister creates by her manner of conducting business.
  Mr. Harry Ewing: The Chancellor has had as many job changes as the party of the hon. Member for Berwick-upon-Tweed (Mr. Beith) has had name changes.
  Mr. Beith: I am very happy with my party's name. The hon. Gentleman must be careful what he says. It is all coming out this afternoon. We now see the differences on the Government side over the European monetary system. It is impossible for Ministers to say that the policy remains unchanged after the clear assertion of the former Chancellor, the right hon. Member for Blaby (Mr. Lawson), that he believes that we should join the European monetary system in the shortest possible time. We have heard his successor pronounce a formula that is closer to the Prime Minister's words, one that we understand will have to be interpreted in the light of her words, which means that it will take an unconscionably long time to join the European monetary system.
  We have also heard from the right hon. Member for Monklands, East (Mr. Smith) a clear declaration that, if certain terms can be met—which are a little far-fetched because they rely on the Germans embarking on a policy of reflation, which seems unlikely, at best—the Labour party would take us into the EMS immediately. However, in last week's debate, senior Labour party members made pronouncements in terms that were very close to those of the Prime Minister. They could usefully hold a little seminar at which the Prime Minister, the right hon. Member for Bethnal Green and Stepney (Mr. Shore) and others could gather together to extend the list of conditions that would have to be satisfied before they could support entry into the EMS. Between them they could produce volumes of conditions. All of them represent delicate compromises by means of which each of the parties can refer to the EMS, because both parties are divided as to whether we should enter the EMS.
  The Chancellor's speech was thin on certain of the major issues on which answers are currently sought. It did not give any clear guidance about the Government's monetary policy. The Chancellor spoke of a broad range of indicators. He did not tell us whether he places his faith
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  in M0 or whether we are to have a new indicator of broad money. He did not tell us whether movements in the money supply or movements in the exchange rate will determine the level of interest rates.
  He was still unclear what he meant by his preference for a strong pound, and how far he would go to secure it. We know that he will spend our reserves to secure it, as that was clearly done on Friday, but how far will he raise interest rates to "buck the market" and keep the pound at the level he prefers? That remains unclear, and his speech added nothing to our knowledge.
  The Chancellor's words about the European monetary system demonstrate vividly that the Prime Minister's prejudices are still determining that issue. The Prime Minister is like the heroine of one of those old black-and-white films, who is always waiting to get on the train that is about to leave. The guard blows his whistle and still she will not get on board. We sit in the cinema wondering whether she will board the train or remain on the platform locked in an embrace. The Prime Minister is embracing her prejudices, her belief in national sovereignty and her conviction that, however little power we exercise, we must preserve the illusion of sovereignty. So she never boards the train.
  Mr. Butcher: I should like to put to the hon. Gentleman the same question I asked my right hon. Friend the Prime Minister this afternoon. The SLD is in favour of almost immediate membership of the exchange rate mechanism. If we did so with a margin of 7 per cent. between German and British interest rates, and if British borrowers bypassed with impunity the domestic constraints and borrowed from Frankfurt, would that not increase the money supply and add to domestic inflation? When would the hon. Gentleman suggest we join the exchange rate mechanism—now, under those circumstances?
  Mr. Beith: Borrowers are quite free to borrow in Frankfurt now. The former Chancellor quite rightly removed exchange controls and capital controls. One disincentive to borrowing abroad is uncertainty about the exchange rate, and clearly that is a changing situation. Clearly, the basis on which we would enter the exchange rate mechanism and the terms of the currency at the moment of our entry are bound to be influenced by such issues. The Conservative party is supposed to be in favour of liberal exchange rates and a free regime in which people can borrow freely in any part of Europe. I believe that any security or framework for our currency requires us to join the European monetary system as soon as we reasonably can.
  What other respite is being offered to those who now have to face a £900-a-year increase on a £30,000 mortgage as a result of the interest rate increases since March? What respite is offered to all the other victims of high interest rates?
  There can be no serious prospect of lower interest rates, unless some alternative to present policy is found. Only one element of that alternative is membership of the exchange rate mechanism. There have to be other components. There has to be a tight fiscal policy, but that should not be achieved by further cuts in the very public expenditure which is necessary to turn round our balance of payments deficit. We should not start cutting expenditure on training, research and the infrastructure, which are most in need of additional expenditure. The new

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  Chancellor, as a former Chief Secretary, was familiar with that exercise. He was so recently in that office that I was tempted to use his former title.
  If we launch into public expenditure cuts in those areas, we shall never get the trade deficit sorted out. It must therefore he achieved by other means. We have suggested increases in national insurance contributions, a commitment not to make tax cuts in the next Budget and the abandonment of the 20p in the pound tax pledge. I did not hear anything from the new Chancellor about whether he still holds to that pledge, and whether that policy is unchanged.
  We want incentives for saving, and we have suggested changes in funding policy all designed to accompany membership of the exchange rate mechanism. We certainly would not argue that that by itself would solve our economic problems. The Chancellor was building a straw man, erecting a whole structure around the idea that there are those who believe that membership of the exchange rate mechanism would sort out all our problems.
  As it is, there is no framework, no rule and no discipline now governing British economic policy. We are not in the exchange rate mechanism and we are clearly not joining it; we do not have in independent central bank; and the right hon. Member for Blaby implied that we must have one or the other if anti-inflation policy is to be credible. It would be interesting to hear whether the study of central bank independence to which he referred has been taken any further or whether it found its way into the Prime Minister's or Sir Alan Walters's wastepaper basket; and if so, for what reason. Perhaps it is to be a new source of dispute. Is it an unchanged commitment which will be continued by the new Chancellor, or will it surge forward at some point as the issue on which he resigns when he discovers that it is the subject of tittle-tattle and unwarranted things all got up by the press?
  There is no clear framework within which British economic policy operates—it is not the EMS, the independent central bank, broad money or narrow money; and it is certainly not the exchange rate. If monetarism cannot be worked by the present Government, I cannot conceive of any Government that could make it work. If a strict monetary policy tied to M0 cannot be made to work by this Government, with the authoritarian power that is exercised by the Prime Minister and that certainly was not exercised in America by President Reagan, I suspect that the experiment has been carried out and that we have demonstrated that there is no political structure short of absolute dictatorship in which pure monetarism can be applied.
  We now have the economic management of a touch on the tiller, but the Chancellor will find that two different hands are reaching for the tiller. If he is not careful, the new Chancellor will find that another hand is there before his.
  The right hon. Member for Blaby stated in his resignation letter:
  "The successful conduct of economic policy is possible only if there is—and is seen to be—full agreement between the Prime Minister and the Chancellor of the Exchequer."
  How will that ever be secured other than by subservience? How did the Prime Minister manage to contrive that what the former Chancellor wanted as his price for staying happened as soon as he had got out of the door? That is the unanswered question about the details of last week. How could she have received and accepted the very
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  resignation which had been sought the moment that the former Chancellor had departed? Did she try to dissuade Sir Alan Walters from resigning? We never found out.
  The former Trade Secretary, the right hon. Member for Chingford (Mr. Tebbit), dwelt on how dangerous it was for a captain to appear semi-detached from the team, and said that, had Lord Whitelaw still been in the Government, he would have warned the Prime Minister that she was in danger of having to choose between her adviser and the Chancellor. The Prime Minister said that the Chancellor was unassailable. What Chancellor is unassailable if his chosen exchange rate policy is publicly challenged by the Prime Minister's adviser? What Chancellor is unassailable if the Government's stated conditions for entering the European monetary system are extended every time the Prime Minister opens her mouth, and particularly every time she appears on television? The longer that interview had continued, the more conditions she could have produced to prevent our entering the exchange rate mechanism.
  It is all part of a wider issue. As the right hon. Member for Blaby pointed out, it is the tip of an iceberg. The Prime Minister's dispute with the former Chancellor, her hectoring of our European partners and her behaviour at the Commonwealth conference are all of a piece. It all rests on the belief that she alone is right and everyone else is out of step. It is no basis for running Commonwealth, Europe or Cabinet, and it comes home most particularly in Cabinet government. It means that nothing the Chancellor could say today can claim much credibility. Indeed, if his stature grows in office, his future will be shortened.
  The whole character of British government under the Prime Minister has become autocratic, centralised and patronising. Power is concentrated as never before. Cabinet government has gone the way of local government. The Prime Minister has no time for it, and the people of this country are the victims.
  Liberal Democrats are determined to secure for this country a system of government in which no future Prime Minister can exercise such unchallenged power.
  6.19 pm
  Sir Ian Gilmour: The hon. Member for Berwick-upon-Tweed (Mr. Beith) envisaged a seminar to be attended by the Prime Minister, Labour Members and himself. That is an enticing thought. I do not like seminars, but I should like to be present at that one.
  There seemed to be something of a black hole in the policy that the hon. Member for Berwick-upon-Tweed outlined, but he made some interesting remarks about the European monetary system. I shall not talk about that, neither shall I talk about Sir Alan Walters.
  There was even more of a black hole in the critical speech made by the right hon. and learned Member for Monklands, East (Mr. Smith). Although his name was not mentioned, there was the all-pervasive presence of one man throughout the speeches that the right hon. and learned Gentleman made last week and today—Mr. Walter Mondale, to whom I shall return shortly.
  I congratulate my right hon. Friend the Chancellor of his new high office, in which we all know that he will perform exceedingly well. He has a difficult task ahead, for two reasons. First, as was confirmed this afternoon, his predecessor is a man of massive intellectual distinction, knowledge and ability and, secondly, because the legacy

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  that my right hon. Friend has inherited is not as he would wish. He made a good start today with a most pugnacious and partisan speech. Although there was not a black hole in his policy, there was a small gap in it, with which I should like to deal in a moment.
  My right hon. Friend mentioned the balance of payments, although not in as much detail as I should have wished, and said that it would come down in line with inflation. The key question is whether by using a single weapon the balance of payments problem and inflation can be conquered. That is not only interesting but it is the key factor in whether we shall have a Conservative Government after 1992.
  The Government have never exactly explained how interest rates are meant to cure inflation—certainly not through controlling the money supply, as the hon. Member for Berwick-upon-Tweed suggested. I do not think that anyone believes that that now happens. But as my right hon. Friend the Chancellor seemed to suggest, they work by cutting demand, so unemployment rises and wage claims are reduced. There is pressure on companies not to accede to wage claims, and therefore inflation falls as companies' profit margins, particularly on exports, are squeezed. Clearly, that is not the only way of cutting demand and it has obvious disadvantages, which I shall mention only briefly as the House is well aware of them.
  The first disadvantage of using interest rates is that they have an immediate effect on the retail price index and therefore increase inflation. It is a perfectly respectable argument to say that mortgage interest rates should not be included in the RPI, but the fact is that increases in mortgages increase housing costs and will have an effect on wage claims later this year.
  The second disadvantage is that high interest rates have an uncertain effect over an uncertain period. The Government have been using the interest-rate weapon with increasing strength for a year, but it is still unclear when, whether, where and by how much the economy is slowing down.
  The third disadvantage is injustice. As my right hon. Friend the Chancellor freely conceded, people who have bought houses, or who are trying to do so, are, through no fault of their own, suffering grievously. High interest rates have equally important, if not more important, effects on industrial investment, which has only recently recovered, and therefore have serious implications for our future.
  The fourth disadvantage of high interest rates is their perverse effect on the balance of payments. Squeezing export margins not only makes it difficult for exporters to export but sometimes makes it almost impossible. After a year of the medicine that we have been enjoying—if that is the right word—the last quarter was the worst for the balance of payments in our history. Although the last month was slightly less discouraging than the preceding two, the last quarter has been disastrous.
  Everyone now seems to agree that a sharp fall in demand is necessary. As the policy of high interest rates has the considerable disadvantages that I have mentioned, the onus is surely heavy on the Government to prove that no other weapon could or should be used. Until now, that onus of proof has not come anywhere near being discharged. Indeed, it has hardly been attempted.
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  In his speech last week, when he was interrupted by the hon. Member for Berwick-upon-Tweed, my right hon. Friend the Member for Blaby (Mr. Lawson) dismissed out of hand the use of fiscal measures to reduce demand, curb inflation and help the balance of payments. If I understood my right hon. Friend the Chancellor correctly, he said the same this afternoon. He said that we should use all practical levers, but then said that the key lever is monetary policy. He said nothing about using fiscal policy.
  As it is now widely agreed that the tax cuts in the 1988 Budget were too high, surely this is the time to rectify that mistake. The Government's objective is to cut demand, and tax rates do that far better than high interest rates, because they are far fairer and do not hit investment but cut consumption.
  The Labour party is unable to recommend that obvious expedient—to some extent, the same applies to the Liberal Democrats, if that is the right name—because of its electoral unpopularity. We all know what happened to Walter Mondale—he has never been heard of or seen since he fought the 1984 election on a tax-increasing policy. Mr. Bush got himself into quite a lot of trouble by following the reverse of that example in 1988. The Government are not prepared to implement such a policy, because they have made such a fetish of tax cuts. We all welcome tax cuts and have done very well from them, but surely it is wholly erroneous to think that taxes should never increase. Surely the only proper way to proceed is to cut taxes when one can and raise them when one must. Surely this near-crisis is one of the occasions when taxes should be raised.
  Dr. John Marek: The right hon. Gentleman should be careful about what taxes he is talking about. He must remember that the Government have increased taxes as a proportion of gross domestic product, whereas they were about 4 or 5 per cent. lower under the last Labour Administration.
  Sir Ian Gilmour: I apologise if I did not make myself clear. I was talking about direct taxes, which I think was implicit when I mentioned the tax cuts in 1988.
  I believe that income tax should be increased and that the ceiling on national insurance contributions should be removed. That is one point about which I am in agreement with the Social and Liberal Democratic party. If taxes are not increased, it will be difficult to solve the current problem.
  Another expedient that is derided by many hon. Members on this side of the House—it certainly has great disadvantages, but I do not believe that it would be right entirely to rule it out—is some sort of credit controls. As my right hon. Friend the Member for Blaby said in his Mansion house speech, they would be very leaky and there would be massive evasion, but would there be so much evasion that they would not be worth having? There is considerable income tax evasion, but no one has suggested that we should not have income tax.
  The Government have not made the case in practice—that is important, because so far the medicine has not worked very well—and neither have they argued it properly in theory, for using only high interest rates, which have considerable disadvantages. I hope that they will think again. The enormous advantage of raising direct taxes and using direct control of credit is that the reduction in domestic demand would, so far as possible, be

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  concentrated on personal consumption, which is where it is needed. With lower interest rates and ultimately a lower real rate of exchange, industrial investment and international competitiveness would be better sustained. After we have turned what my right hon. Friend the Member for Blaby suggested will be an awkward corner, there will be a reasonable chance of achieving at a later stage sustained non-inflationary growth. There will be a real chance that the Conservative party will win the next general election.
  6.30 pm
  Mr. Doug Hoyle: The hon. Member for Bridlington (Mr. Townend) suggested that, because we were courteous and polite to the right hon. Member for Blaby (Mr. Lawson), we accepted the Government's economic policies. That is untrue. It has been said repeatedly that it is business as usual. I shudder to think about that, because it means that we shall have a £20 billion deficit by the end of the year. The former Chancellor suggested that that did not matter and neither did the fact that we will have a manufacturing deficit of £17·5 billion. Far from being a success story, the economic record of the Government since 1979 has been one of failure. Under this Government, the increase in expenditure on manufactured goods has been three times greater than the increase in what has been spent on the production of manufactured goods. That is a way to disaster.
  Since the Government took office in 1979, there has been a 20 to 25 per cent. destruction of manufacturing industry and we are paying a heavy price for that now. The growth in output since 1979 shows that this country is 17th out of the 18 OECD countries. That is far from being a success—it is a failure. If the Government continue to claim it as a success, I would not like to see what they regard as a failure.
  Last year the former Chancellor spent billions of pounds trying to keep the pound below DM3. This year he has spent billions of pounds trying to keep it above DM3. Clearly, both policies cannot be right. To continue with that policy would be akin to economic madness. The consequences of attempting to keep the pound at a level that cannot be sustained were pointed out by my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) when he said that successive Governments—including previous Labour Governments—have paid a heavy price for trying to keep the currency at a level that one cannot protect. It would be better to allow it to float downwards.
  The right hon. Member for Chesham and Amersham (Sir I. Gilmour) referred to high interest rates attracting hot money into the country. That hot money would quickly leave when interest rates came down. High interest rates mean mortgages that people cannot afford and that is under a Government who talk about a property-owning democracy. People will have to give up their homes because they cannot afford them and young couples cannot even think about buying. Even more disturbing is the cut that will take place in investment in manufacturing industry. Already we are investing less than our competitors such as France, Italy or West Germany. The Confederation of British Industry predicts that the cut will occur in 1990. As a consequence of that cut we will be less competitive and there will be a rise in unemployment.
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  That is the price that the British people will have to pay if we continue with the policies adopted by the previous Chancellor. We have heard today from the Prime Minister and the Chancellor that that is the path they will follow, whatever the consequences. It would make more sense if we kept the pound below DM3 as it would make our products more competitive in relation to Germany. it would also make imports from Germany more expensive. That would be sensible because we have a trade deficit with West Germany of £9 billion. We need to obtain a bigger share of that market. It is madness to continue with the present policy.
  We should be looking at how we can revitalise our manufacturing industry. The Conservative party does not understand manufacturing industry or what it has done to it. It is good to have an economic debate on the day that the Secretary of State for Trade and Industry said at the Dispatch Box that the Government are withdrawing the golden share from Jaguar. That will mean that the last of the totally British-owned motor manufacturers will go to the wall. It does not seem to matter that by that policy he has created a bear garden in which the multinational American companies will slug it out. It does not seem to matter that research and development in Jaguar will go overseas. The Minister does not seem to care about the consequences for Jaguar employees, or what our position in the motor industry will be.
  That is symptomatic of the Government's approach to manufacturing industry in general. It is a sad state of affairs. We ought to be looking—
  Mr. Ian McCartney: The Chancellor tried to say that the imbalance between Germany and other nations was caused by retailing and reinvestment. I was asked recently by a managing director in my constituency to visit his company. The company has a policy to buy British. It has spent six months scouring Britain in an attempt to obtain British machinery for retooling. The Government have completely destroyed that sector of the economy and that company had to buy Japanese and German machinery. That whole sector of manufacturing industry and the new technologies in packaging have been destroyed and companies cannot now buy British when they want to.
  Mr. Hoyle: That is a good point. If one goes into any plant where investment is taking place—particularly in machine tools—one finds that companies are forced to buy foreign because the goods are no longer available in this country. A large part of the destruction of the manufacturing industry has involved the machine tool industry. That seedcorn has gone. The Government are doing nothing to bring about the revitalisation of manufacturing industry. They say that we can be prosperous with a service economy. We have seen the consequences of buying goods from abroad in our £20 billion deficit.
  We ought to be trying to give incentives to manufacturing industry to strengthen the manufacturing base that we have left. One of the tragedies of Government policy was seen recently in Sunderland, where two companies wanted to recommence shipbuilding. Those companies did not want any intervention funding and would have been prepared to re-establish shipbuilding in an area where labour was still available. However, the Government went to the European Commission and were

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  ready to accept that, if the companies reopened for shipbuilding, there could be a cost of about £90 million. That is ridiculous. They ought to have said that we are going to see shipbuilding reopened in Sunderland because there is going to be an upturn. However, that is typical of the Government's outlook in relation to manufacturing industry.
  The same is true of training. The hon. Member for Bridlington talked about a reduction in the working week. The West Germans already enjoy a shorter working week, yet they are more competitive than us. The hon. Gentleman said that a shorter working week would cause a problem because of the skills shortage. That shortage exists because we are not training people and are not providing training in the new industries, such as information technology. That is one of the tragedies. The problem with the Government is that they think always in the short term, never in the long term.
  I am sorry that the new Chancellor of the Exchequer is not in the Chamber. We wish him well in his new job, but we heard a very uninspired speech from him. Much effort was needed by Conservative Members even to acknowledge that the right hon. Gentleman had completed his speech. One or two tried bravely to wave their Order Papers. We could see that there was no great enthusiasm for what he was saying.
  The right hon. Gentleman's problem is the problem of the previous Chancellor—who will be in charge of the Department? One suspects that "Fortress Thatcher" will continue and that the Prime Minister will continue to run this Department as she runs every other Department, whatever the possible cost of having the Prime Minister running that Department and whatever the possible cost to our international standing. We gather from what she said on Sunday that she will continue to do it her way and if her Ministers do not like it, they can get out of the Cabinet. That applies, of course, to the present Chancellor.
  This shows the need for a different Government who will collaborate with our European partners and end what the Bundesbank is doing in terms of deflationary policy. That must be the way forward. We need a Government who care not only about national but about regional policies. I am afraid that, judging by what we have heard from Conservative Members, we will not have that type of Government from the Conservatives. We need a new Government who will have faith in the country, our people and the future. I know that we will not get that from the Conservatives. Only a Labour Government can bring that about. [Laughter.] If I were a Conservative Member, I would not laugh so loudly. Some Conservative Members have only a short time to remain in the House.
  6.42 pm
  Mr. Quentin Davies: It must be unusual in the House for a particular economic concept to form the touchstone of a major political debate and even more unusual—it is perhaps unprecedented—for an esoteric, technical mechanism such as the exchange rate mechanism to be the source and focus of so much emotion.
  There is a perfectly coherent, valid, intellectual argument that Governments should not concern themselves with exchange rates, that the target of macro-economic demand management should be the
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  maintenance of equilibrium between money supply and productive capacity, and that Governments who interfere with exchange rates run into fundamental contradictions with sound monetary management. It is true that it is technically impossible to target a particular monetary aggregate and the exchange rate. If one targets the exchange rate, one commits oneself to increasing interest rates if the exchange rate falls below the target, thereby reducing demand. If the parity tends to move above the target, one has to reduce interest rates and increase demand. The monetary course is therefore changed involuntarily.
  One great problem for those who follow that argument is that, since the end of the Bretton Woods system in 1971—indeed, in modern history—there has never been a Government of any major western country who for any length of time have been disinterested in the level of the exchange rate. That is more than a reflection of the natural detrimental desire of all politicians to interfere in and manipulate the economy. There is a sound theoretical basis for the stance that has been adopted by all western Governments.
  First, the notorious stickiness of prices in modern economies produces a ratchet effect. Unionised labour demands nominal increases in wages to cover actual, recorded or expected inflation but does not accept nominal reductions in wages, however far prices may fall.
  Mr. McCartney: The hon. Gentleman is explaining an interesting theory about trade unionists accepting wage cuts in times of recession. Is the hon. Gentleman, with his various directorships and other arrangements providing tens of thousands of pounds for working here part time, prepared to give up some of that money, given the value of his work in the House?
  Mr. Davies: I would be in danger of being ruled out of order if I followed the hon. Gentleman's remarks. I look forward to the opportunity to debate that matter with him in another context.
  Because of the ratchet effect, if one's currency depreciates unduly, one suddenly finds that a higher level of inflation has been built in without the possibility of building it out if the parity rises.
  Secondly, there is the technical deficiency of monetarism. The theory is based on the assumption that there must be some objective measure for policy. Under modern conditions, almost no one has succeeded in finding an aggregate that tracks effectively the money supply and aggregate demand over a period. The United States may have done that—I think of M2 in the first half of this century, which is the basis for Milton Friedman's famous work on that subject and, indeed, his Nobel prize. However, no one in Great Britain has been able to find an index that even begins to play the role that the monetarists require of it.
  Thirdly, no responsible Government can contemplate a unilateral free float. If every other country is intervening to manage its exchange rate, clearly any country that declines to join that game will be the passive victim of those intervention policies. Free floating, rather like football, is probably a game that cannot be played alone. It requires others who are prepared to play by the same rules.
  The argument which is pursued enthusiastically between those who say that in no circumstances should Governments intervene in the exchange rate or adopt an

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  exchange rate policy and the supporters of the ERM is a charade. This is an elaborate debate which has nothing to do with the issue. The issue is not whether we should have an exchange rate policy but whether, if we were part of the ERM, that policy would be more effective and we could achieve given objectives at a cheaper price. That means not just a smaller use of reserves to maintain a particular parity but moving interest rates, for example, less far in either direction to counter an undesired rise or fall in parity, resulting in a smaller loss to other economic objectives.
  I find it difficult not to take the view that within the ERM, monetary policy would be more effective and, in the sense in which I have defined it, cheaper. It cannot make sense to suppose that if we were co-ordinating our use of reserves with others' use of reserves, so that intervention was in the same direction, it would not be more effective. A greater weight of demand or supply for a given currency would bear on the markets at a given time.
  There is also the great matter of confidence. There could be no greater degree of commitment by any Government to a particular exchange rate policy than to announce the exchange rate which is targeted. That would be the effect of our joining the ERM, and we have not done that up till now.
  Conversely, if we decline to join the ERM, I am afraid that we shall be sending a signal to the financial markets to the effect that we are unwilling or unable to accept the degree of discipline which is required for us to join. We would again be regarded as having a more volatile and weaker currency structurally than have the countries which are members of the ERM. That would be dangerous because a weaker currency discounts a higher level of inflation and interest rates, and the prophecies can too easily be self-fulfilling.
  The Chancellor made a positive speech today. It has been an encouraging day for those who are committed to stability in the economy and to our future prosperity to hear that our joining the ERM is no longer a question of whether but of when. We must have a viable system which is able to deliver the advantages that I have set out, and we must have the right parity at the moment when we join; DM2·85 is much closer to whatever the right parity is than is DM3·15, which was the figure not long ago. The country can take from today's debate a message of considerable encouragement. It is with pleasure that I endorse the remarks of the Chancellor.
  6.52 pm
  Mr. Stuart Bell: I was intrigued by the speech of the hon. Member for Stamford and Spalding (Mr. Davies) I was not sure whether he was referring to monetarism today, yesterday or tomorrow. It was interesting to learn that the parity of no devaluation welcomes a devaluation of the pound from DM3·5 to DM2·85. It seems that that message has not yet reached the occupants of the Conservative Back Benches.
  I was grateful when the Chancellor allowed me to intervene earlier so that I could put to him a point contained in an OECD review showing that in relation to the British economy it was Government policy that interest rates should stay as high as necessary for as long as necessary to reduce inflationary pressures. The review went on to point out that the Government had also confirmed their commitment to not accommodating
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  increases in domestic costs by exchange rate depreciation. In short, the British Government would use interest rates to stabilise the exchange rate and to fight inflation.
  I asked the Chancellor if that was still the policy of Her Majesty's Government. During his speech he elaborated on that and said clearly that he believed in a firm exchange rate. That means that he believes that the markets should be bucked. That is a clear swing away from what I can only describe as the nefarious influence of Alan Walters at No. 10 Downing street.
  Neither the Chancellor nor my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) dealt at length with the subject of credit controls. I shall not discuss that subject at length, but I trust that in clue course the Minister will examine the points that I raise. A recent paper published by the International Monetary Fund entitled "The instruments and operating procedures for conducting monetary policy in the group of five countries" showed that, while the level of short-term interest rates was the main monetary policy weapon in America, Japan, West Germany, Britain and France, it was supplemented by bank reserve ratios in all the five countries except Britain.
  Thus, within the central banks of our major competitors and allies is a measure of some control on their lending. Hence, if we are moving away, as I believe we are, from the single-club policy about which we have heard for so long—the right hon. Member for Chesham and Amersham (Sir I. Gilmour) thought that there was no other weapon—it might be useful to examine the concept of supplementing by bank reserve ratios so that we are in line with our competitors.
  We also often hear from the Government—not surprisingly, I suppose—about what our policy would be in a given situation. I am reminded of the general who approached Napoleon and said, "Suppose the enemy was to the front of you and behind you. Suppose also that the enemy was to the right and left of you so that you were surrounded. What would you do to get out of that situation?" Napoleon replied, "Get out of it? I would not have got into it." Who would get into the situation of having £20 billion deficit across the exchanges? Who would get into a situation of having inflation that does not go down? Who would get into a situation of having 15 per cent. interest rates, meaning an overdraft at 18 per cent. for those who borrow, and then ask Her Majesty's Opposition, "What would you do about that?" Our answer, which we give regularly, is that we need an industrial strategy that will offset the balance of payments deficit.
  We believe in an industrial rather than a financial strategy. We cannot allow our country to be overrun for years to come by imported products and respond only in a financial manner. The consequence of high interest rates is an added cost to all of us, whether or not we borrow, because at the end of the day those high interest rates bear on all members of the public. Only by embarking on an industrial strategy that gets British workers making goods for British consumers will we ease away from the massive deficit in our balance of payments. My hon. Friend the Member for Warrington, North (Mr. Hoyle) dealt with that issue and said that nothing was being done to revitalise industry.
  In the final analysis, we are talking about the wealth of the nation, the so-called prosperity which lies in the net worth of the personal sector, which is based on the inflated

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  value of people's homes. House prices have shot up by so much that we are becoming almost millionaires, in the poor sense of the word. Paul Getty used to describe himself as a rich millionaire. I recall once joking that I was a poor millionaire, and I have had to live with that remark ever since. With property values rising, we are getting wealthier. We have witnessed what a newspaper referred to as the embourgeoisement of the British people.
  That has nothing to do with the creation of wealth or with the productive capacity of our manufacturing base: it is happening simply because so much money is available to enable people to buy property that house prices spiral, and intangibly some of us have the impression that we are becoming richer. I say "intangibly" because, when we come to sell the family home and buy another, we have to get on the treadmill again—borrowing more money to buy another house at a greatly inflated value—and so the process continues. The bubble expands until one day, like all bubbles, it bursts.
  The Government make a vice out of their own virtues. Hardly a Chancellor's Question Time goes by without some reference to the iniquity of allowing mortgage payments to be part of the retail price index. We are constantly told that, if that did not happen, our inflation rate would be lower than that of Italy. Only the Republic of Ireland, we are told, follows the same system.
  We are told that the Government believe in and stand for a property-owning democracy. The Conservatives want everyone to own their own homes. Indeed, they arrange the financial conditions to that end, so that in the Chancellor's constituency of Huntingdon people can borrow five times their annual earnings to buy properties. The Government then complain all the way to the House of Commons about the unfairness of the system and the extent of mortgage payments ending up in the retail price index. As the Chancellor may one day want to come to the House to tell us that he is going to take mortgage payments out of the RPI, he must remind the House that other countries, which do not have the same policy and which have a large rented sector, use a rental value in the calculation of the inflation rate. The Chancellor cannot simply say that he will take mortgage payments out of the RPI and thus bring down inflation without putting something in its place, as our competitors in Europe do.
  The Prime Minister showed her solidarity with her new Chancellor today. We all know that she believes in Victorian values, but they did not necessarily work in those days and they work even less today, 100 years later. The old Victorian concept of covering one's balance of payments deficit on manufactured goods by invisibles through the City of London has died the death. Last month's deficit was reached after imports of £10·37 billion exceeded exports worth £8·4 billion. The surplus on trade in services and profits from abroad was put at £300 million —hardly a significant contribution to reducing a trade deficit which has reached such massive proportions.
  The Prime Minister certainly believes in freedom, hut it is the freedom to push up interest rates and to threaten the small business man. We have heard from the Chancellor that the number of new starts in business is 1,600 a week. He did not tell the House how many businesses close down in the same period.
  The Financial Secretary to the Treasury (Mr. Peter Lilley): The figure was net.
  Mr. Bell: I did not hear the word "net", but if the figure is net I will accept that. However, the small business men have to live with high interest rates, high overdrafts and the threat of bankruptcy. Home owners have to pay more for their mortgages. In the Chancellor's constituency of Huntingdon, five times the value of a person's salary is available to obtain a mortgage.
  In the Prime Minister's country, we have the freedom to risk our lives at work and the risks are greater because the Health and Safety Executive has been impoverished by Tory cuts. We have the freedom to borrow more than we can pay back through the banker's card, thus adding to insecurity. The OECD report said:
  "An increasing number of households may be overextended or severely constrained—because interest payments now amount to some 13 per cent. of disposable income and exceed interest receipts for the personal sector."
  We have the freedom to worry about the future of our children, the future of our educational institutions and the education system itself. Since 1982–83, the Government have cut capital spending on education and science by 10 per cent. in real terms and serious shortages of teachers now threaten educational reform. Her Majesty's inspectors stated in their 1989 report:
  "Too many teachers fear that their profession and its work are misjudged and seriously undervalued."
  The Prime Minister also gives us the freedom to leave our own homes and areas to seek work elsewhere because the Government have failed to have an appropriate regional policy. We know that average income has risen faster in the four better-off regions—the south-west, greater London, the south-east and East Anglia—but the chances of being in the bottom 10 per cent. of households in terms of earnings is greatest for the people in the west midlands and as one moves steadily north. The freedom to be homeless under this Government has doubled between 1979 and 1987, with the number of new houses completed in Great Britain falling by 17 per cent. That is the freedom in which the Prime Minister believes. It is the freedom of the condemned man. We all know the story of the condemned man who, before being taken to the scaffold, can have any breakfast he likes. That is the freedom of the British people—to have a good breakfast before the hanging.
  We heard today from the former Chancellor of the Exchequer, the right hon. Member for Blaby (Mr. Lawson). The hon. Member for Bridlington (Mr. Townend) referred to the right hon. Gentleman's speech, as did my hon. Friend the Member for Warrington, North (Mr. Hoyle). However, the fact that we respect the former Chancellor, as a House of Commons man making a statement to us, does not mean that we accept the policy that he followed for so many years.
  The steps leading to his resignation are easy to trace and they were touched on by the hon. Member for Bridlington. There was the relaxation of monetary policy in 1985. There was the devaluation of the pound which followed the fall in oil prices—another piece of sleight of hand by the former Chancellor. The party that did not devalue allowed the pound to be devalued when oil prices slipped in 1985. That gave Britain a competitive edge which ensured economic prosperity, as the country perceived it, in the run-up to the 1987 general election. We saw, in fact, a devaluation-led boom leading up to the 1987

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  election and, like the Barber boom, it was good old devaluation from the man who said that his party had never been the party of devaluation and never would be.
  The short-term benefits were there for all to see under the effective disguise of an economic miracle. That was part of the go strategy of the former Chancellor, but when it was time to put a stop to the go policy he was unable to do so. When the consequences of the go policy were high inflation and a high balance of payments deficit, when there was a serious imbalance in and destabilisation of the economy, and when the time came to bring that under control, he was unable to do so.
  Mr. Christopher Hawkins: As I believe that the hon. Gentleman is a straightforward and honest man, I wish to ask him a question before he moves too far from high interest rates. His party's alternative is to have discussions with the big banks to encourage them to lend less to the public. Has he considered that it is not enough to talk only to the big banks? His party would also have to talk to the building societies, which are now free to lend for purposes other than home ownership. There are about 500 building societies in Britain. It would also have to talk to Curry's, Dixon's, Selfridges and all the shops dishing out credit on every high street. One can pick up a few thousand quid in an afternoon just with shop credit cards. The hon. Gentleman should also consider all the moneylenders. One would need to hire the Albert hall to talk all those people and institutions out of giving credit.
  Mr. Bell: The Opposition believe that the single-club policy is neither an effective policy nor the only policy. As we have often said, the alternative is to consider the question of credit controls. I have given one suggestion to the Chief Secretary to the Treasury on ratio bank reserves and there are other possibilities. However, I do not want to go down that road as I have to wind up my speech so that my colleagues who have been sitting here patiently can speak.
  I do not want to give the impression that the former Chancellor was any kind of miracle worker. On the day he resigned, the headline in the Evening Standard said:
  "Miracle Worker or Mirage Builder".
  There is no doubt that the former Chancellor's record reads like a bad novel in which the characters are unreal and the story line naive, and in which words count for little more than to fill page upon page of paper. Only the ending has any semblance of reality, as the novel ends in tragedy.
  Last week, the former Chancellor moved an amendment to an Opposition motion in which he commended the Government on raising output. He knew all along, because he had referred to it, that the latest CBI report revealed that the volume of new orders had fallen over the past four months, the first negative result since July 1986. The right hon. Member for Chesham and Amersham referred to the economy slowing down. There was proof in the CBI report, which showed that the economy was slowing down.
  According to the latest OECD report, using the former Chancellor's own peculiar method of plucking statistics out of the air, growth over the past 10 years
  "hardly exceeded two per cent. per annum."
  I n other words, over 10 years, there was 2 per cent. growth per annum.
  In his last speech from the Dispatch Box, the former Chancellor said:
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  "The real issues are what is happening to productivity, to the quality and quantity of investment, to profitability and to training."—[Official Report, 24 October 1989; Vol. 158, c. 694.]
  In fact, when it comes to growth, the United Kingdom is still 25 per cent. behind most of the rest of Europe. It is 16th out of 21 in the European productivity league table, and in non-manufacturing the rate of productivity growth has been only one third as fast as in manufacturing. Investment stood at £3,000 per head in 1988. It is lower than that of our major competitors and it is half that of Japan. Between 1979 and 1987, investment rose by only 9 per cent., which is less than half as fast as consumer spending. Manufacturing investment fell by one third between 1979 and 1983.
  We have listened to the Chancellor of the Exchequer today. We are aware of the mountain that faces him in tackling the balance of payments deficit and the difficulties facing him with interest rates and the exchange rate mechanism with Europe. The Chancellor of the Exchequer has the Gordian knot before him, but he has no Excalibur with which to cut it.
  Several hon. Members rose—
  Madam Deputy Speaker (Miss Betty Boothroyd): Order. Before calling the next hon. Member, I remind the House that Mr. Speaker has determined that speeches should be limited to 10 minutes between 7 pm and 9 pm. The digital clocks are there for all to see.
  7.9 pm
  Mr. David Howell: I will of course obey your ruling, Madam Deputy Speaker, because I do not wish to hit an iceberg, or even the tip of one.
  It is ironic that a few years ago, when some of us in this House and elsewhere immersed ourselves in arcane questions about the European monetary system and the exchange rate mechanism, they were dismissed as boring and sexless subjects which had no political relevance. People were not generally interested in those questions. However, hon. Members now talk of nothing else. In the Tea Room and the Smoking Room, there are 650 experts on the exchange rate mechanism and why it is a good or had thing. Even those who are against it claim to know something about it.
  It is also ironic that, just when everyone has become an expert, the exchange rate mechanism has become rather more marginal to the central question of international currency and even to our national domestic issues than it was in the past. That has happened partly because of the greater attempts of the G7 nations to co-ordinate. It has also happened for a reason described by my right hon. Friend the Chancellor of the Exchequer this afternoon. The real issue is how we in this country impose monetary discipline on ourselves. In other words, the real issue is how we manage our own affairs.
  I believe that the exchange rate mechanism, when we join under certain conditions, will help at the margin to reduce some of the speculation against the pound which has mounted inevitably while we are outside the grid and others are inside. But, as my right hon. Friend the Chancellor said, the real issue is how we manage our internal monetary affairs to ensure price stability.
  In that regard it is right to ask, as this debate asks, how the Bundesbank has done it over the years. How has it been able again and again to control the monetary aggregates to deliver up a quite amazing degree of price

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  stability and so fulfil the overriding duty of maintaining the value of the currency? Neither the good Professor Sir Alan Walters, whom I greatly admire for having a very stimulating mind, nor my right hon. Friend the Member for Blaby (Mr. Lawson), the former Chancellor, was able to face that question.
  We have heard arguments about whether we should go for floating rates and monetary control or the exchange rate mechanism. However, neither Sir Alan Walters nor my right hon. Friend the former Chancellor could say how, in an economy of our size or even in a larger one, we can control the monetary aggregates. The truth is that neither the theory of floating rates with wonderful precise control of the monetary aggregates—it ought to work on paper, and Professor Walters is quite right to state that it works in theory—nor the move towards fixed and managed rates within an exchange rate grid, can work unless we know how to control the money supply and the monetary aggregates internally.
  If we do not know that, we will run into difficulties no matter whether we are part of the exchange rate mechanism or not. We are dealing with international capital flows, not with a panacea, whether the ERM or a magic adherence to money supply figures which it is impossible to get hold of.
  Even after the eruptions of last week, we must still address that issue. There are two new thoughts on the agenda that hon. Members must consider with the utmost care. The first was raised by my right hon. Friend the Member for Blaby. We should be under no illusions: in all that he said this afternoon, he made one comment of the utmost significance which will be central to our debates in future. He said that he had been thinking, as many of us have, about how to set up a genuinely independent central bank which would depoliticise monetary decisions. The politicisation of such decisions bedevils them, causing them to be taken on political rather than purely technical grounds.
  I am not talking simply about denationalisation and repealing the Bank of England Act 1946. We must unravel issues dating back to the first world war, long before going off the gold standard, when the Bank of England and the politicians from Lloyd George onwards became increasingly interwoven. We must address that very complex problem now. I was very encouraged to hear the ideas raised by my right hon. Friend the Member for Blaby, and like others I want to see them developed.
  The second new thought follows from the first. If we have an independent central bank, we can begin to operate on the money supply in ways in which we have not been able to do hitherto. We set the interest rate for money and the central bank provides unlimited quantities as lender of last resort at the price of 15 per cent. That is not controlling supply, it is controlling demand. Many of us wonder whether we can switch to operating on the bank's reserves—on the monetary base. In that case, the independent central bank would not set interest rates. Instead, it would operate on the reserves and interest rates would fall out of the end of that. They would be more volatile, as there would be no fixed interest rate.
  We must consider those two new thoughts if we are to begin to move away from the crazy and quite false argument in recent times about whether we should be part
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  of the ERM or have a floating rate. That is a stark and unreal choice on which we have paralysed and crucified ourselves.
  I understand that references to independent central banks are anathema to many Opposition Members. They think back to 1931 when they seized control of the banking system from Montagu Norman and the rest. Today the Labour party wants to return to exchange controls. That is the only way in which Labour Members can conceivably run a direct consumer credit control system. They must return to exchange controls. My recipe is no good for the Labour party. However, if my right hon. and hon. Friends believe that we are surrendering power if we move monetary policy to a more independent banking authority, they are wrong. There will be a substantial gain in the power and influence of politicians to ensure that sensible monetary policies operate in this country.
  My right hon. Friend the Member for Blaby, the former Chancellor, has confirmed that the time has come for us to have an independent central bank which can operate an effective monetary policy which ensures stability of the currency upon which everything—the jobs, growth and everything else hon. Members want—depends.
  7.17 pm
  Mr. Terry Fields: This debate is a vote of no confidence in the Government. The Opposition Benches faithfully reflect the views of the British public in their attitude to the Government.
  A week ago tonight I was billed to debate with a Tory Member of Parliament in the students' union at Liverpool University a motion that
  "this house has no confidence in the Tory Government."
  Over the summer the students' union applied to 60 Tory Members to get that debate started. As we have no Tory Members in Liverpool, the students' union thought that they would have to haul one through the Mersey tunnel. Unfortunately he could not show up. The Government cannot get a Tory Member to defend their economic policies.
  Mr. Alex Salmond (Banfff and Buchan): Will the hon. Gentleman give way?
  Mr. Fields: No. I have only just started and I have only 10 minutes to speak. Other hon. Members are waiting.
  In the European elections earlier this year, the results marked a sea change in British politics. For the first time in 10 years, there was a massive swing against the Tories. They gained their lowest percentage of votes in 100 years.
  The workers and the youth in this country hate what the Government are doing in society. More importantly, that hatred is directed at the Prime Minister and the Chancellor for causing the conditions that prevail for millions of people.
  We must move away from personal attacks, although they are very convenient. Labour Members share the glee of their constituents at what is happening on the Conservative Benches. However, we must be sober in our approach to what is happening in the economy. Those Tory characters will not suffer; instead the ordinary working-class men, women and children, the old, sick and disabled will suffer as a consequence of the Government's mismanagement of the economy.
  Hon. Members talk about opinion polls. They are faithfully reflecting what is going on. Ex-Cabinet Ministers on the Government Back Benches outnumber Ministers

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  on the Front Bench as a result of their disillusionment with what is going on. We saw in the Financial Times last week that a survey even in Lewes, Sussex, showed that most Tory voters are disillusioned with what is going on in the country. We see key issues such as the Health Service, the water and electricity industries, the poll tax and pollution militating against support for the Government. The economic collapse is politically undermined by what is going on in the House and in our legislation. The Government got away with it for a while—as long as they delivered the goods for certain sections of the community and provided inceased profit for financiers and capitalists, while squeezing poorer people to ensure that profits were maintained.
  However, the mood in the country has changed, particularly in regard to housing, health, water, gas prices, privatisation of the electricity and water industries, inflation, and mortgage rises. Whole sections of our community are turning in their tens of thousands against the Tory Government. The reason for that, which Conservative Members are too blind to see, is the decline in Britain's economy. Total disregard for investment in our industrial base is at the root of the crisis.
  One hundred years ago, Britain's share of world manufacturing exports was 33·2 per cent., 50 years ago, it was down to 20·9 per cent., and today it is at an all-time low of 8·1 per cent. We were third in the OECD league, but we are now 19th. From 1979 to 1986, there was a 13 per cent. fall in investment in this country, while other OECD countries increased their investment by one third in the five years preceding 1987.
  Those points are important. To the working class they are statistics, but we must elevate the argument to allow people to see clearly that these things do not just happen on a whim. There are deep-seated problems in the British economy. At the end of the day, British workers will pick up the tab while the jokers in the Government walk away from the problem. The key to the crisis is the lack of investment. The Government are all right taking the profits and running away with them. In 1979, they invested £10·4 billion in industry. In 1982, the figure dropped to £6·35 billion. In 1988, the level was up to £10·01 billion. That means that in 1988 the Government had reached only the 1979 level of economic investment—in real terms, the 1950 level.
  Economic growth between 1979 and 1988 was 2·1 per cent. a year, the smallest rate of economic growth in the whole nine-year period. The EEC estimates that, in the next two years, growth in Britain will be lower than that in France, Italy, Belgium, the Netherlands, Ireland, Greece, Spain and Portugal. Britain is becoming a Third-world economy.
  Statistics are one thing, but the reality of life for working people is that a woman in my constituency sold her baby aged two because she was suffering mortgage repayment problems amounting to £1,000. It means also that a guy went into a housing benefit office and set fire to the place, unfortunately killing one of the clerks, and then jumped from a six-storey block of flats. The Government are responsible for those social conditions. They are responsible for 10,000 pensioners dying every year because of neglect, hunger and hypothermia. At a stroke, the Government reduced the benefits of 5·5 million people and gave £2 billion in tax cuts to their rich friends while taking £650 million from pensioners and the unemployed and
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  low-paid. The Government and their economic policies mean personal debt and poverty for millions of our fellow citizens.
  I do not wish to speak for too long. The case will be adequately made by my hon. Friends. Although Lawson and Walters can walk away from the problem, millions of ordinary decent people in society will be stuck with nowhere to go. In that will be the seeds of destruction not only of the Government but of the system that they represent. As Socialists, we give fair warning that workers are turning towards democratic Socialism because they see the ineffectuality—[Interruption.]
  Mr. Terry Dicks: In Russia, Hungary and East Germany?
  Mr. Fields: I do not need cameras, mate. I will speak on Socialism anywhere. You know nothing about capitalism. We know a lot about your system. That is why you are cutting into education. I do not refer to you, Madam Deputy Speaker, I refer to the hon. Member for Hayes and Harlington (Mr. Dicks).
  Madam Deputy Speaker (Miss Betty Boothroyd): I trust that the hon. Member will direct his remarks through the Chair.
  Mr. Fields: As capitalism fails, not only in Britain but internationally, workers will come to the only logical conclusion: that the solution to the problems lies in the Socialist transformation of society—a democratic system of society—in which the talent, energy and resources of people cast on to the scrap heap by the Government's economic policies are put to the common good, and in which wealth creation is channelled to improve the conditions all people in society, not the spivs who are represented by this bankrupt, politically corrupt Government. The Opposition wholeheartedly oppose the Government policies and look forward to the day when we see them out of office, with an elected Labour Government carrying out Socialist policies on behalf of the people.
  7.25 pm
  Mr. Nicholas Budgen: I suppose that there are still some who believe that the control of inflation should be the judge and jury of the Government's policy. Therefore, we looked to the new Chancellor's speech for some signs of his attitude towards inflation. Three factors in my right hon. Friend's speech may give us cause for some encouragement at this time.
  First, it was significant that my right hon. Friend argued against inflation, not on the narrow economic ground that, for instance, it makes investment decisions difficult—it certainly does that—and not merely that it causes difficulty in wage negotiations, although it certainly does that. He argued on the social ground that inflation is felt most deeply by the poor. Perhaps my right hon. Friend) has the advantage of origins which make him feel that point deeply. He faces taking a risk in favour of growth or being more cautious and anxious to contain inflation, and he demonstrated that his gut instinct would be more inclined to reduce inflation.
  Secondly, his analysis of the causes of our present difficulties was rather heartening. Of course, my right hon. Friend the Member for Blaby (Mr. Lawson) believes—no doubt honourably—that our present difficulties arise from a single mistake. He says that all the great industrial

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  nations reflated after the crash in October 1987 and that he, with all other Chancellors, was inexorably and inevitably driven to follow their mistaken advice. However, our present Chancellor puts it rather more widely. He says that there was excessive expansion of the economy over about two years. He points to the excessive retail sales and to the high level of house prices during that time. For him the problem is much bigger and will require much stronger action than was envisaged by our right hon. Friend the Member for Blaby.
  The third factor in my right hon. Friend's speech should encourage those of us who believe that inflation should be substantially reduced. The last time when people saved in large measure—that is, when the savings ratio was about 15 per cent.—was between 1974 and 1976. Of course it is true that there was a high rate of inflation then, but there were also circumstances of grave political instability. Any sensible person would say to himself or herself, "My goodness me, I must have a bit of spare cash in my deposit account because I can't be exactly sure what's going to happen over the next couple of years."
  There are, of course, grave disadvantages for those of us who are party politicians when we see political disturbances or our party doing badly in the polls. Ironically, there are also economic advantages for those of us who wish to see people saving more and who wish to see control of the money supply. If people say, "My goodness me, the Tories might lose the next election. My goodness me, there could be circumstances of great uncertainty ahead," they save more. They are less inclined to borrow a bit more or to buy a more expensive house, and to that extent credit is reduced.
  Therefore, there are three factors that should enable us to give a couple of cheers for the new Chancellor. However, I withdraw the third cheer because I still find it impossible to understand what the Government's exchange rate policy is. It seems that we believe in markets when the markets hold up the value of the pound, but we do not believe in markets when they bring down the value of the pound. That is rather like believing in democracy when one wins an election, but not believing in democracy when one loses.
  The difficulty is that no one can say that the British people are firmly opposed to inflation. There was no popular outcry between 1986 and 1988 when it was quite obvious to anybody who took even a passing interest that credit was far too lax and the money supply expanding far too fast. Indeed, we were extremely popular during that period.
  It is not the process of creating inflation that is unpopular, it is the process of checking it that is unpopular. Everybody enjoys the binge but complains afterwards that the Alka-Seltzer tastes unpleasant. Therefore, while we are administering the Alka-Seltzer, it is important to try to reduce its unpleasant taste if possible.
  One way in which that can be done is to point out that a disagreeable consequence of a period of lax credit is that the exchange rate is likely to fall. It will not fall principally as a result of the words of the Leader of the Opposition. Indeed, I cannot believe that he is betraying his country if he happens to point out that there are few advantages from a lower exchange rate against the deutschmark.
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  However, to give the impression that it is within the power of Governments to hold up the exchange rate is to give the impression to the rest of the country that—if I may take the Alka-Seltzer analogy further—the Alka-Seltzer will be even more unpleasant than it is. Of course it is necessary to encourage people to save and to explain that at least personal borrowing must be reduced, but if we were to give the impression that it is also our wish heavily to squeeze manufacturing industry to a greater extent than is necessary by holding up the exchange rate—which I argue is not possible anyway, but even if it were possible and we intended to do it—we would be telling people that the squeeze will be more difficult than it would have been and that the consequences for unemployment would be much greater.
  Surely we are entitled to say, "All right, we believe that there has been an excessive expansion of credit for a couple of years, sadly, that the increase in the money supply will inevitably work its way through into price levels and one likely consequence is that the exchange rate—the pound—will fall against other currencies," because at least that means that some manufacturers will be able to take up demand from foreign countries. They will be able to export to a greater extent, even if they find that their home markets go dead. Surely we should be able to give that necessary message if we are to sustain the political will to fight the inflation that was created in the past.
  It is silly to pretend that the British people dislike inflation. Between 1986 and 1988 they have seen all the symptoms of rising inflation going through its first euphoric phase. I have never found anybody who has said, "My goodness me, it is a terrible thing—my house has gone up in value by 30 per cent. this year." As far as I can gather, everybody believes that inflation is caused by the other person's wage increase and, in spite of the great work done, I am bound to say—
  Madam Deputy Speaker: Order. I must now call the next hon. Member. Ms. Primarolo.
  7.36 pm
  Ms. Dawn Primarolo: It is not Alka-Seltzer that the Government are administering to the population of Britain and especially to its workers, it is arsenic—[Interruption.]
  Madam Deputy Speaker: Order. The hon. Lady needs to be heard.
  Ms. Primarolo: The arsenic is proving terminal for a great many workers and the pain that they are experiencing is not the pain that leads to recovery: it is the pain that leads to certain economic death.
  I wish to approach the debate from a slightly different angle. I wish to interpret and concentrate on the definition of "economics" as
  "the way society distributes its goods and benefits to the population"
  and within that,
  "the rewards that leads to and the needs it fulfils."
  Using this approach, we can take a broader look at the impact of the Government's economic policies and in so doing, we must consider the social and human consequences of those policies and whether they are morally defensible.
  I do not believe that is is morally defensible that there are beggars in our large cities across Britain. I do not

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  believe that it is morally defensible that we see people sleeping on kerbs in cardboard boxes in alleys in London, lying beside cars that cost between £20,000 and £40,000. I do not believe that an economy that produces those levels of inequality is working properly.
  Because of the time limit, I shall touch only briefly on the issues that I wish to cover. First, when judging the Government in economic terms, there has been much talk about the industrial base and our manufacturing industries. Let us consider mergers and the Government's paralysis when faced with supporting and defending our economic base and manufacturing industries. Let us consider DRG, a Bristol-based firm where thousands of people's jobs are being traded as if they were houses on a Monopoly board in a hostile bid financed by junk bonds. People's lives are being traded as if they were cattle, without any power to influence the decisions that are being taken. As a consequence of that bid, 200 engineering firms are expected to close in Bristol alone, let alone the consequences for other parts of the country. Where is the economic sense of that in terms of our future industrial policy? Where are the views that say that we are defending our economic base?
  I turn now to the major question of the inequalities in our society. About 69 per cent. of the population believe that Britain is more unequal now than it was 10 years ago. In that period, the Government have deliberately increased the inequality in our society. They have widened the gap so that the top 10 per cent. of the population have received increases of 41 per cent. while the bottom 10 per cent. have received only 1·7 per cent. Where is the economic justice in that?
  There has been much talk about borrowing. The Banking, Finance and Insurance Union produced a report entitled, "Hard times for the poor as the credit gap widens." It said—this is a surprise—that there are two worlds in our divided society—the haves the have-nots. When the haves go to banks when they have financial problems, they are provided with new services and credits. However, if the poor fall on hard times, they are denied that credit. They are forced to the moneylenders and loan sharks. That is another arcane medical treatment that the Government want to impose on the British people—using leeches on the poor.
  The Government refuse to invest in training, when £750 million is necessary for vocational training. They do not bother investing in people's houses, in the young, schools, social services, infrastructure and transport systems. Then they tell us that it makes economic sense to pawn the future to make a quick buck in the present. That is their economic strategy, and that is the strategy that both the Labour party and the people of Britain are rejecting.
  The Labour party is not alone in criticising the Government's strategy. The CBI has also done so. It produced a report, which was carried out on a regional basis. The one for our region is called, "Prosperity for the 1990s: South West's needs". It says that if we are to take advantage of future economic growth, we must have the infrastructure, the training, the houses and the transport systems to do so. We need to have investment now to ensure that our companies are producing in the future. The Government are not interested in that approach. They are interested only in making money for the people who have it now and in making sure that the people who do not have it continue not to have it.
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  The Government deal in banal explanations such as, "If it's hurting, it must be working." That is a crazy approach to people's lives. The people whom it hurts are the very people whom it is not designed to benefit. It hurts people at the bottom of the economic scale because it is about transferring money to those at the top. Those at the top get the Alka-Seltzer while we at the bottom get the arsenic. That is not good enough. It is not necessary for us to have esoteric debates about whether the current occupant of the post of the Chancellor of the Exchequer—
  Mr. Jacques Arnold: Will the hon. Lady give way?
  Ms. Primarolo: No, I will not give way because we are having to operate under the 10-minute limit and it is difficult to make a quick speech, especially for those who have been here all afternoon—unlike others.
  The Government must do more than change the Chancellor. They must change their economic policy and require all their Departments to work as a team, which they do not do now. For example, the Secretary of State for Employment tells us that young people should not take training unless it is vocational. Then the Secretary of State for Social Services penalises young people by stopping their benefit if they refuse to take any job at any price, regardless of the effect that that has on their future.
  People's lives are a misery. They are struggling to make ends meet and are being denied money from the social fund. They are being threatened with unemployment and bad housing. They can see the riches in a small section of our society developing and expanding beyond their wildest imagination, and the Government have the cheek to tell us that that is a sensible economic strategy. It is not. It is about division, inequality and unfairness, and about the Government's defeat at the next general election.
  7.44 pm
  Mr. Cranley Onslow: The first point that I shall make is a personal one, but I hope that it is one with which the House can agree. We all know that politics is a game that is played with a hard ball, and inevitably, from time to time, players will get hurt. None of us, politicians or political commentators, should take sadistic pleasure when we see it happen. For that reason especially, and because he has served the country and my party very well for many years, I regret the hurt that last week's events must have inflicted on my right hon. Friend the Member for Blaby (Mr. Lawson). I believe that that regret is shared by every one of my colleagues. His speech today was all the more remarkable for that.
  My next task must be to add my voice to the good wishes that others have already expressed to my right hon. Friend the Member for Huntingdon (Mr. Major) on his succession to the great office of Chancellor of the Exchequer. No one can deny his ability. He proved that again in full measure today. His own words said it all. With our right hon. Friend at the Treasury, the Prime Minister now leads a team that is as strong as it has ever been, and it will work together for policies in which we all believe.
  The economy is fundamentally sound, we have a tight fiscal policy, the Government's accounts are in substantial surplus and our public finances are the strongest in the western world. That is an essential part of the war against inflation. However, so too is the use of interest rates. The

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  Labour party likes to pretend that one can control inflation without using interest rates, but one cannot maintain the conditions for sound money unless one is prepared to raise the cost of borrowing. Money is simply another resource. If a Government want people to use less of it, they have to raise its price.
  When I intervened in the economic debate on 7 June, I told the right hon. and learned Member for Monklands, East (Mr. Smith) that, although his speech on 24 October contained some amusing bits, that did not conceal the fact that it was fundamentally shallow and unconvincing. I am glad to pay him a tribute now, as he clearly took my criticism to heart. His speech last Tuesday had so many funny bits in it that he almost succeeded in hiding the fact that its policy content was too thin to show if one stood it sideways. Today's speech was little better, so I am sure that the right hon. and learned Gentleman will not mind if I try to tease out some of the few threads of Labour's alternative policy that he found that he could weave into his speech on 24 October between the jokes.
  I shall start at column 684, skipping the first two and a half pages of comic invention. He said:
  "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."
  I hope that I am not being unfair if I say that this industrial strategy amounts to more publicly funded investment, more publicly funded training and much more public expenditure, although we have never been told how much more.
  Then, in column 686, the right hon. and learned Gentleman made it plain, when he talked about raising more money by taxation, that he would be perfectly ready to do this. We know that the Labour party is committed to massive income tax increases that would affect 95 per cent. of the tax-paying public—not forgetting its proposals for an investment income surcharge. The right hon. and learned Gentleman then dealt with credit controls, an issue that has become such a central feature of what passes for Opposition policy:
  "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."
  He added that he believed that the banks would co-operate, but if they did not,
  "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."
  He went on to say that he did not expect that foreign banks would take an irresponsible view if approached by the Government.
  As my right hon. Friend the Member for Worthing (Mr. Higgins) said in his speech later in the debate—it is a pity that he was not more widely reported—
  "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."—[Official Report, 24 October 1989; Vol 158, c. 684–715.]
  If nothing else, there would be no means of making an overseas bank refuse credit to someone from this country who wanted a loan.
  What interests me even more is the fact that credit controls must mean credit rationing, and we have been given no sign of how a credit rationing scheme would work
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  and who would get priority. What, for instance, would happen to mortages? We should nor forget that mortgages account for 85 per cent. of personal borrowing. If wealth-creating manufacturing industry is to have top priority, how are the firms to be chosen and what say will the unions demand in that choice? It did not surprise me that, when the Leader of the Opposition was challenged about credit rationing by Mr. Hobday on Friday morning last week, he shot off at a tangent like a demented ferret, babbling about siege economies.
  I shall return to the exchange rate mechanism, about which we have all heard so much. The right hon. and learned Member for Monklands, East told us last week that we should
  "negotiate to join the ERM under the important and prudent conditions that the Labour party has outlined."
  The right hon. and learned Gentleman had to be prompted by my hon. Friend the Member for Northampton, North (Mr. Marlow) to remind us of those conditions, as he was again prompted today. What was his response on 24 October? He said:
  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."[Official Report, 24 October 1989; Vol. 158, c. 684–5.]
  He was immediately challenged by my hon. Friend the Member for Horsham (Sir P. Hordern) to say what size of devaluation that entailed. The right hon. and learned Gentleman dodged the question, refused to give way further, and put up a great cloud of smoke by engaging in a prolonged exchange with my right hon. Friend the Member for Henley (Mr. Heseltine). We saw the same sort of tactic today. The right hon. and learned Gentleman refused to give way. He accused those who sought to intervene of organised wrecking tactics, and rode off in another direction.
  The Leader of the Opposition returned to the subject on Friday when he spoke of establishing serious conditions, and then negotiating those conditions for entry into the ERM, as something that the Government must do to assist the pound and the economy. That is a bit rich. In the first place, the "conditions" that the Labour party claims to have outlined are vague in the extreme, and virtually useless as a basis for any sort of negotiation worthy of that name.
  Even more to the point, the Government have already gone a long way down that road. The relevant terms of the Madrid summit are a commitment, and I think that the Government have the terms right. Britain will join the ERM when our Madrid conditions are met. Nothing has changed on that since last week. There is no question that we shall go into the ERM, but we shall not do so immediately, not even within the next month.
  It will take time to reduce inflation, and it will take time for other Governments to remove the controls that prevent the free movement of capital in many European countries; France is very much an example. Mr. Mitterrand should be concentrating very much on removing those controls instead of dreaming up new and unnecessary treaties of Rome in some sort of geopolitical effort to forestall forces at work elsewhere in Europe. Meanwhile, I am sure that we must be careful not to let these matters become out of proportion or to constitute some sort of totem issue. I entirely agree with those who say that the ERM is not a soft option or a panacea. Membership must be a discipline or it will be pointless, but it must be an acceptable

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  discipline. That is why it is vital that we should adhere to the straightforward and sensible terms that we have set and insist that they are met before we join.
  In all this, the people of the United Kingdom will expect us to defend their interests. If we do not stand up for ourselves, who will? That brings me back to the Leader of the Opposition. At one moment he is under control, playing the part and sticking to the script, at the next he has gone bananas. That is exactly what happened last Friday morning on the "Today" programme when the right hon. Gentleman set out to talk the pound down, to make it plummet, and to do everything in his power to damage the economy for his own short-term political gain.
  The Leader of the Opposition said recently that the Prime Minister puts her pride before her country. Everyone knows that that could not be further from the truth. What is true is that the Leader of the Opposition will be remembered as a man who will do anything, say anything and unsay it for political power. He puts his ambition first and his country nowhere. That happens time and time again.
  7.54 pm
  Mr. Graham Allen: There has been some speculation that the former Chancellor of the Exchequer resigned because of the actions of the Prime Minister or Sir Alan Walters. That is not my view. The former Chancellor of the Exchequer resigned having read the Treasury's economic forecast for next year. It is one thing for a Chancellor to carry the economic can when he is in charge of economic policy and another to be the fall guy for someone else's economic policy. The Treasury forecasts that were prepared for the Autumn Statement were available for the Chancellor to see. There was no need for a crystal ball—he read the book and got out from under. Much of the forecast information was probably available in the summer recess; all that was needed was the opportunity artificially to up the stakes on his excuse—Walters—and get out with as much political kudos as he could muster.
  Of what was the ex-Chancellor of the Exchequer frightened? What do the Treasury forecasts predict? As they are not available to Members of this place, the nearest that we can get is the London business school survey, which was published yesterday and which predicts slow down, poor growth, deceleration in output, rising inflation, falling investment and increasing unemployment—welcome to the Treasury, Mr. Major! In addition, there is a world record trade deficit, the highest inflation in industrial Europe, the highest interest rates of any of our G7 world competitors, a devaluing pound, a reducing share of global manufacturing and money market hysteria which makes lemmings seem laid back. That situation, plus the Treasury's forecast of further deterioration into recession, explains with clarity why the ex-Chancellor of the Exchequer baled out when he did.
  Parliament has been a mere spectator. Oddly enough, the debate shows why we need a more democratically elected second Chamber. It underlines once again that the House is failing in its constitutional duty of holding the Government to account. That is more evident and more desperately necessary in economic policy than in any other area. No statement on the economy has been volunteered to the House by the Government since before the Summer recess. No emergency debate was granted after that recess
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  despite the magnitude of the crisis. It has been left to the official Opposition to use one of its Opposition days to drag the Chancellor of the Exchequer to the House. In years to come, this week will be remembered as a constitutional rather than an economic crisis.
  Where is the Prime Minister in all this? We all know that the right hon. Lady lacks confidence in the House. That is evidenced by the few occasions when she makes statements, compared with the number of times her predecessors did. Unquestionably, the Prime Minister holds the House in contempt, but we are told now that the bunker mentality has gone so far that when the Cabinet met last week it did not even discuss the exchange rate mechanism, the European monetary system or the crisis involving the Prime Minister and the Chancellor of the Exchequer.
  Without agreeing to it, we have seen the development of a twisted presidential system in which Parliament and the Cabinet can be disregarded and in which no written constitutional checks can be brought to bear. Where President Nixon's Erlichman, Haldeman and Dean could be exposed, an impotent and decorative House of Commons cannot even gain access to Powell, Ingham, Griffiths and Walters. The Mother of Parliaments, like the mother in "Psycho", sits as an ancient and obsessively preened skeleton—permanently in the dark.
  We criticise the City of London for being distant and irrelevant to the "real economy", but we in this place must demand to be more than an irrelevant sideshow to the real political life of the country, which we have allowed to gravitate wholly to the Government and the press conference. That is an issue to which the Labour party must give a great deal of thought.
  In the short period that remains to me in this debate, should like to dispel some Tory economic myths peddled by the Prime Minister and her yes-men. Those myths were nicely summarised by the Economic Secretary to the Treasury when he replied to the Adjournment debate which I raised on the state of the economy on the first day following the summer recess. I am sure that he will forgive me if I use his script as the basis for some comments.
  First, he talked of generating "sustainable economic growth" over the past few years. Where is that growth? The growth that we have experienced has been generated by consumption. During 1988, the gross domestic product grew by 8 per cent. while production increased by only 5 per cent. An article in today's edition of the Financial Times tells us that there has been a rise of 23 per cent. in the number of business failures since the same period in 1986. Insolvency practitioners say that that is the tip of the iceberg. Perhaps that is the iceberg to which the former Chancellor of the Exchequer, the right hon. Member for Blaby (Mr. Lawson) referred.
  The head of the Price Waterhouse insolvency arm says:
  "The situation is now worse than in the run up to the two previous recessions."
  Market forces have not delivered investment to Britain. There has been a collapse of manufacturing and we have seen massive investment abroad. Short-termism has strangled British enterprise.
  The Government then talk of "a supply side revolution." At least there is some truth in that. There has, indeed, been a supply side revolution. For 100 years we have largely supplied our economy from home production.

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  Now our supplies are coming increasingly from abroad. That is indeed revolutionary, but it is commonly known as a balance of payments crisis.
  The Government spokesman went on to say that manufacturing productivity is growing. Manufacturing as a percentage of GDP is falling and the reason for the growth in productivity is due entirely to the bankruptcies in the period 1980–82. Inefficient manufacturing companies were eliminated from the calculations so that average productivity rose. In cricketing terms, the Conservatives have taken all the bowlers out of the batting averages and declared that the team now has a higher average. In that statistical essay, the Chancellor, who I understand is a cricketing fan, appears as the blue bearded wonder.
  Then the man from the Treasury said:
  "Businesses are at the most profitable for 20 years."
  The surge in profits stems from an economic boom generated primarily by credit-financed consumer spending, which has worsened inflation. The outlook for profit growth is for a sharp downturn as economic growth slows and costs rise. Industry has taken advantage of the improved profits in order to one-time profit-take rather than to invest in their businesses and ensure continued growth.
  The Government have also referred to "unprecedented prosperity". If they are referring to the unprecedented consumer spending of the past five years, which has been credit driven, including mortgage borrowing, they are correct. However, all the surveys show that such a period is about to end and turn into a long period of slow economic growth, high inflation and Britain having the highest interest rates in Europe. The chickens are coming home to roost and many are deeply affected by the salmonella of decayed monetarism.
  Mr. Jaques Arnold rose—
  Mr. Allen: The reference to decayed monetarism was not an invitation to the hon. Gentleman to intervene. Then the man from the Ministry said:
  "investment has grown more than twice as fast as consumption, a clear sign that British industry has confidence in the future".—[Official Report, 17 October 1989; Vol. 158, c. 118–119.]
  That is one of several Government entries in the British Statistical Institute's whopper of the year contest. Consumption is measured in billions and investment in millions, but by measuring the increase in percentage terms, the picture can be reversed. For example, a 10 per cent. increase in investment is completely overshadowed in real terms by a mere 2 per cent. increase in consumption. There can be no greater compliment to the central office public speaking courses than that Ministers still keep a straight face when delivering such statistical distortions. The CBI surveys tell a completely different story. Business investment has collapsed due to high interest rates.
  According to the Economic Secretary, the Budget surplus is an achievement unequalled in the past 40 years. Basically, it means that Government income is higher than Government expenditure, which means that the Government have either overtaxed, perhaps by accident or perhaps to depress demand, or they feel that they cannot spend their revenues in the areas crying out for public expenditure because of the inflationary consequences of
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  doing so, so they use that money for prematurely repaying debts to the money market where it can swill around looking for short-term capital gain.
  Time has caught up with me so I must wind up my remarks. In the past few years, the Conservative party has successfully perpetrated a number of other economic myths. They need to be nailed and I shall take pleasure in performing that public service in the months ahead.
  8.3 pm
  Mr. Matthew Carrington: As my right hon. Friend the Chancellor of the Exchequer said, there is no doubt, contrary to what the hon. Member for Nottingham, North (Mr. Allen) was alleging, that the United Kingdom's underlying economy is strong at the moment. We need only look at one element of that economy to see how strong it is. At the moment, industrial investment is still running high and the corporate level of profitability has been running at record levels over the past 20 years. That is a combination of facts which leads us to suppose that industrial investment is likely to be sustainable in the medium term and perhaps in the long term.
  But it is equally true that we face two major problems in the economy, and both are closely related. One is the inflation rate and the other is the balance of payments deficit which is running at far too high a level. Both those problems must be controlled in the same way—by the rise in interest rates. Interest rates are, in reality, the only way of controlling inflation.
  As my right hon. Friend the Member for Worthing (Mr. Higgins) said last week, credit controls on lending institutions would fail. They would certainly fail in the absence of exchange controls being reintroduced, because anybody wishing to borrow under those circumstances would simply go to some bank which was not subject to those credit controls. As my right hon. Friend the Member for Guildford (Mr. Howell) said this afternoon, the Labour party's underlying policy in introducing credit controls and restrictions on bank lending through special reserves and reserve deposits is inherently to suggest the reintroduction of exchange controls.
  No one welcomes high interest rates, because of their effect on people with mortgages and on small businesses. However, it must be said that the damage that they do to large businesses is much less, since, even with the change in the overall corporate borrowing level in the past year, larger businesses tend not to be net borrowers. They tend to be cash-rich, which means that the present level of interest rates tends to favour them.
  But the damage caused by high interest rates is less than the damage caused by inflation, as has come out clearly in the debate. The danger of high interest rates is that they have to be maintained for too long, in which case the damage that they do to individuals trying to find the money to pay for their increased mortgages becomes much more serious. People can always finance a short deficit on their mortgage payments, but it is much more difficult if the deficit lasts for any length of time. Inevitably, interest rates have an effect on the exchange rate and, inevitably, the two are not necessarily working in the right direction.
  There is a strong argument that the level of interest rates in the economy is too high for domestic inflation purposes, but is only just high enough for exchange rate purposes. That in itself leads to a problem which may well

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  exacerbate the slowing down of the economy to the point where it would be difficult to control a soft landing. We must hope that interest rates, for exchange rate purposes, can be brought down before too much damage is done to the domestic economy.
  Industry needs a stable exchange rate so that it can plan and market properly for export orders. In the long term, that can be achieved only by bringing the fundamentals of the United Kingdom economy into line with those of our major trading partners, which in practice means the major countries in the EC, particularly West Germany.
  That is a highly desirable goal which it has been argued would be achieved by our joining the exchange rate mechanism of the EMS. The long-term goal to join the ERM is highly desirable, but to be able to do so and to make it work, we have to bring our economy into line with the other large economies inside the ERM, principally with West Germany.
  The mechanism for achieving that is rather complicated. The problem is that the ERM is effectively a deutschmark parity mechanism. Only one currency, the deutschmark, is heavily traded within the ERM, making the ERM a monopolar parity arrangement. That is relatively easy to sustain against the international currency transactions in volumes which will be dealing inside those markets. Inevitably, that will change as France removes its exchange controls. At present, the French franc is not widely traded outside the French banks, but it must be expected that when it is, pressure will be put on the ERM.
  If the United Kingdom joins the ERM, there will be two heavily-traded currencies inside the parity, which will lead to serious problems. If there are three heavily-traded currencies, with the French franc inside the parity, we shall run the risk of blowing the ERM wide apart. There is one simple reason for that. At present, currency dealers have no idea which way bank intervention will operate in their currency. If there is a parity arrangement and dealers know within which band of parity a currency is being held, they will be able to trade currencies against each other. Foreign exchange dealers and currency dealers will know exactly where intervention will come from and will trade on a one-way ticket.
  It would not be possible to sustain the present simple ERM if we joined it. One of the major constraints is that at present the Bundesbank dictates the monetary policy of member states through the ERM. It does so effectively, but I doubt whether it could do so if sterling were in the ERM.
  I was intrigued when my right hon. Friend the Member for Blaby (Mr. Lawson) said that suggestions had been made in the Treasury that the Bank of England should be constituted with its own charter—presumably modelled on the Federal Reserve in the United States—to enable it to control the money supply independent of political decisions. That has some attractions, even in isolation, but I am afraid that it is the attraction of copping out on political decisions. It should be possible to run monetary policy sensibly and prudently without establishing the Bank of England as a separate entity.
  It is sensible to consider that suggestion as a way of resolving the inherent problems of the ERM. If the Bank of England and the Banque de France could have a relationship with a more moderately constituted Bundesbank, so that the three central banks of the major EC currencies could operate monetary policy independent of political decisions, they could run monetary policy in such a way as to produce stability of monetary policy
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  across the EC which would enable the ERM to work. That is a fundamental change towards which we should perhaps move more rapidly than we are moving towards European monetary union.
  8.12 pm
  Mr. George Howarth: I listened with great care to the opening speech of my hon. and learned Friend the Member for Monklands, East (Mr. Smith). He isolated three important elements of policy which have a direct and important effect on manufacturing industry which poses the greatest problem in our economy. No one can take lightly the fact that our economy, which has historically been based on trade, has a balance of payments deficit in manufactured goods amounting to £20 billion. No matter what Conservative Members say or think, they cannot escape the scale and depth of the problem represented by that statistic. The House must accept that, no matter what is happening on the stock exchange or which way the currency is going, if manufacturing industry, from which wealth is created, is not healthy, the rest of the economy cannot be healthy and our aims cannot be achieved.
  My hon. Friend the Member for Bristol, South (Ms. Primarolo) made an important and specific point about what is happening in the financial sector. She expressed anxiety about the effect on her constituency of a takeover bid for the DRG group of companies. That will also affect my constituency, where a factory is about to be taken over. There is no manufacturing or industrial logic to the takeover, which bears out the point made by my right hon. and learned Friend the Member for Monklands, East. The only reason for it is that the organisation making the bid wishes to reduce productive capacity in that industry. That is the direction that the economy is taking but it will not produce the goods and services that we need for the future.
  I wish to concentrate on the Government's performance in the three areas mentioned by my right hon. and learned Friend. Before I do so, I wish to comment briefly on a point made by the former Chancellor of the Exchequer, the right hon. Member for Blaby (Mr. Lawson). Bank Briefing of August 1989—hardly a Left-wing journal or centre of revolutionary ideas—said:
  "While it is usual for the company sector to move into deficit in this stage in the economic cycle, a second year of deficit would be exceptional."
  Today, the right hon. Member for Blaby, who with his experience in the Treasury is presumably better informed on these matters than most hon. Members, conceded that in his view we shall have that second year of deficit during which company finances will be in even greater difficulty than this year. That was an important revelation. Let us be clear that our economic prospects in the manufacturing sector are no great shakes.
  A further matter for concern is the future of the engineering industry. I am interested in that industry because I spent the first 10 years of my working life in it and I am sponsored by an engineering union. In The Engineer of 28 September 1989—again, hardly an organ of the Labour party—John Pullin, writing an article entitled "Battening down the hatches", stated:
  "Engineering industry is heading for the downturn, and appears to be cutting back on investment in people, products and processes—the principal tactic used in the deep recession of the early 1980s."

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  Clearly, well-informed sources in the financial sector and the engineering industry as well as the former Chancellor of the Exchequer believe that we are inescapably heading for a hard landing.
  The three important points made by my right hon. and learned Friend about rebuilding the economy take on even greater relevance. If we are to climb out of the recession it is important that manufacturing and, in particular, engineering companies have the resources to do so. My right hon. and learned Friend the Member for Monklands, East spoke about the need for a regional policy. What is a regional policy and how does it apply? One important aspect which affects my region, the north-west, is proper transport links. We have had various reports about the progress of the Channel tunnel, but we now know that it will be finished. What will be the consequences for the regions?
  In the August edition of the National Westminster bank Quarterly Review—I presume that hon. Members will accept that it is not a particularly biased journal—Derek Palmer, who works for the CBI, wrote:
  "the 70 per cent. of United Kingdom residents who live outside the South East will be very much on the periphery"—
  when the Channel tunnel is completed. He went on:
  "instead of the proposed London to channel tunnel high speed rail link, there are strong arguments that a high speed line to Glasgow via the North West and Birmingham would give greater benefits."
  That is what the experts are saying about the needs of regional policy
  .
  Mr. Palmer went on to compare our position with that of West Germany. According to him,
  "West Germany invests three times as much in rail transport as we do. It is planning a 2,800 mile network of 150–170 mph inter city express services including 500 miles of new line."
  Nothing like that is happening in this country. The regional infrastructure that we need if we are to take advantage of any upturn in manufacturing simply will not appear—and that is just one small aspect of policy.
  The second of my right hon. and learned Friend's important points concerned research and development. I have compared the amounts spent—as a percentage of gross domestic product—by both Government and private sector in the United Kingdom, France, the Federal Republic of Germany, Italy, Japan, Sweden and the United States. The United Kingdom is bottom of the list bar two and equal with one. That hardly suggests the sort of Government action that we must expect if we are to experience a revival of the manufacturing and engineering industries.
  My right hon. and learned Friend's third point concerned investment in training. What is happening to that? Again, let us compare our progress with that of West Germany. I have figures from the engineering industry training board—they were published in July 1988, but the position has not changed much since then. In 1987–88, 8,273 people were undergoing apprenticeships as craftsmen and technicians; in 1979, the figure was 21,000. In West Germany, the apprenticeships in industrial metalworking trades alone amount to 179,000. There are 62,000 apprentices in industrial electrical trades, 184,000 in metalworking trades and crafts and 65,000 in electrical trades and crafts.
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  Clearly ours is no recipe for an industrial revival: we have not the regional infrastructure, the research and development or the trained people. What do the Government offer? They offer youth training schemes, which between them produce qualifications for only 25 per cent. of those who take part in them. The Government have failed to take any appropriate action to help manufacturing, and their failure has imperilled the entire economy. It has placed the trade by which we live in grave difficulty. That will ensure that they lose office in the next election, and deservedly so.
  8.22 pm
  Mrs. Teresa Gorman: In one of her perspicacious and incisive speeches, my right hon. Friend the Prime Minister once said that, whereas architects live in infrastructure, most of us live in houses. A similar comment could be made about economic debate in this House.
  Politicians deal in economic theories and dogmas of one kind or another, while the rest of the world has to pay the mortgage and keep the businesses going, in the teeth of fluctuating interest rates which make it extremely difficult for them to compete or to plan ahead. I think that it is good for some of the people who listen to "Today in Parliament" on the radio to hear some sympathy from some of us—who enjoy relatively secure incomes, although we may have mortgages to pay—and from economists in their ivory towers who pass on their theories to us; to say nothing of the Treasury officials, who are even more cushioned and feather-bedded than the rest. We tell these people that they must grin and bear it, because we are going to chase our economic theory of the moment—in this case monetarism—or we tell them that we must switch to yet another theoretical device, the European monetary system, which will somehow solve all our problems.
  The Labour party is, of course, a captive of the economic theories of Karl Marx: it is stuck with the Socialist idea that not only money but every aspect of the economy can be manipulated to make it work. At present, Conservative Members are in the grip of monetarist theories of the Chicago school of economics, which believes that controlling the money supply and using interest rates to regulate inflation—which, as we all acknowledge nowadays, is caused by Governments—can somehow make the economy and the money supply turn out all right in the end.
  I think of a family known to me, three of whose members were in employment 18 months ago. For 16 years, the husband was in a good job with a good salary; now he is out of work because the company's business was money and it no longer had a job for him. The firm that apprenticed his young son has had to get rid of him because of monetary constraints, and his daughter tells me that present monthly interest on her mortgage is what she used to pay in a quarter. Those people are in severe difficulties, largely because of our constant addiction to one monetary theory or another.
  When in the grip of one of these theories, politicians tend to believe that there is no alternative. My right hon. Friend the Member for Blaby (Mr. Lawson), however, touched on one alternative: he said that he had spoken to the Prime Minister some time ago about the prospect of

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  privatising, or at least making independent, the Bank of England, and he presented the idea that banks should not be manipulated by politicians.
  There is an alternative to our entry into the EMS, with all that that might entail. The involvement of a Euro central bank and a Euro central currency would in itself lead to inflation; the European Community inflates everything that it touches, as we have seen with the common agricultural policy. The alternative is a free banking system in which the Government would no longer intervene with money supply, and would allow the value of money to be decided by the markets. We should then no longer be in the grip of an obsession with some dead economic theory.
  I should have thought that by now it was generally accepted that Governments who tinker about to stabilise either industries or money inevitably end up in some sort of crisis. Conservative Members have abandoned the idea of monopoly control of industries; we believe in the creation of free markets. We have shown that it works —in steel and road transport, for instance—but we seem to baulk at the idea of doing the same with monetary policies. We are following the traditional line that the Government know best and that, somehow or other, we can organise money to stabilise the economic system. Yet we know that the ups and downs of past years—high interest rates and low interest rates—have all been produced in response to political demands. Our present circumstances, in my view, prove the need for deregulation of our banking system.
  Instead of concentrating on yet another panacea—in this instance, the EMS and the eventual establishment of a central bank—we should think in terms of denationalising, or perhaps demonopolising, the Bank of England, and making it just another bank in competition with the other European banks—which themselves should be free to set up banking institutions in the various European countries, and to circulate their currencies in competition with one another.
  The idea of having competing currencies has also been touched on by the Government in recent times. It would mean that people who did not quite trust their own Government to keep up the value of their money, would be free to move their money into other currencies, and this would exercise some form of discipline.
  The purpose of free trade in money is to impose on monetary and financial agencies a much-needed discipline by making it impossible for any of them for any length of time to issue the kind of money whose worth could be devalued. Inflation is a product of Government policy. It would be impossible for us to have inflation if there were competing currencies and if banks were responsible for their own decisions and their own financial policies. If any bank lent more than it should, the value of its currency would automatically be devalued. People would become aware that the bank was too free with its money. They would then move their savings or their business activities to banks that followed more prudent policies.
  If we decided to invest in, say, deutschmarks, the value of that currency would rise. In turn, that would restrain its use because people would look for a cheaper alternative. These currencies would then gain strength from that confidence, and this would eventually lead to some parity of value.
  The balance of payments problem would not exist if there were a free market in currencies and free banking. We do not worry about the balance of payments between,
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  say, Lancashire and Yorkshire. We would not need to worry about it, either, between Germany and France., or between France and Britain, or between Britain and Spain if there were a free market in currencies within Europe and if the central banks of the European countries were denationalised.
  Britain could lead the way by means of its own internal monetary policies. We could decide to have competing currencies in this country. We could remove our legal tender laws which prevent that from happening and decide that the Bank of England should no longer be subject to Government control, that it should stand or fall by its own economic decisions.
  By creating a free market in money and in banking, we should be able to settle down to living our lives without constantly worrying about the fluctuating value of money, which leads to inflation, and fluctuating interest rates that are designed to correct inflation. In just the same way as we do not worry now about shopping for our groceries because we have a choice, or about shopping for our clothes because we have a choice, we should also have a choice in money and in banking.
  8.32 pm
  Mr. Jim Sillars: When the dust settles on this debate, I think that people will find that the opening lines of the Scottish National party's amendment, which has not been selected, are most apt. A grave indecision on a major economic matter still lies at the heart of the Government. The Prime Minister has told us that advisers advise and Ministers decide, but we have yet to have a clear, rational explanation as to why the adviser was preferred to the decider on economic policy. That will come back to haunt the Government time and again.
  When I returned to Westminster after almost 10 years it was like coming through a time warp. With the exception of a few electronic clocks, nothing had changed. The place had retained its wigs and garters, its delusions about its pre-eminent place in the world's democracies and its sad, tenacious hold on traditional patterns of thought, action and style from bygone days. Only one piece of the old jigsaw was missing from the time warp—an economic crisis.
  The past week has put the final piece of the jigsaw in place. It is just like old times again. Some time soon I am sure that we shall hear once again the erudite arguments which used to be swapped by the dual failures on both Front Benches about the J curve, or perhaps we shall remain entranced by the new contraption of the exchange rate mechanism, which will doubtless spawn an immense journalistic industry in the next 12 months. The right hon. Member for Guildford (Mr. Howell) already said that there will soon be 650 experts on the ERM in the House of Commons and I am sure that it will be talked about in all the pubs, clubs and golf clubs throughout the country.
  In reality, we are living through just one more episode in the saga of decline, relative to the rest of the world, witnessing the weakness and crisis of an English economy which at its core is essentially weak, and a political economy which is incapable of addressing that essential weakness.
  The core weakness of the English economy is its lack of sufficient indigenous basic resources in relation to its population and a consistent failure to overcome that weakness by investing in manufacturing at a magnitude

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  which would enable English society to buy in what it does not naturally have, add value and capture overseas markets—as the Japanese have done with an essentially core-weak economy. Faced with the challenge to invest the political economy concentrates instead on consumption, engineered to win elections over what are, in economic terms, remarkably short four-year cycles. That emphasis on consumption simply compounds the weakness and creates a series of crisis in the English economy.
  Nothing new is happening now. In 1964, the Tories bequeathed an economic crisis to Labour. In 1970, after the white heat of the technological revolution had been doused before it caught fire, Labour handed an economy in trouble back to the Tories. In 1974, the deflated ball was passed back to Labour, and in 1979 Labour passed on a shambles to the Tories. For eight years thereafter there appeared to be a break in the cycle of failure. The Tories proclaimed it a miracle, and so it was—a miraculous and spectacular robbery of £78 billion of oil wealth from Scotland, a vast sum from a resource which gave them additional revenue and simultaneously covered up the growing crisis in the balance of trade created by the continuing destruction of the manufacturing base. The miracle is that they got away with it. Without that money there would have been no election victory for them in 1987.
  Now that oil prices have been reduced and the camouflage removed, the real economy can be seen again—a bit different here and there but still essentially weak, because investment has never reached the level required to give it clout in the international arena. Now we are back in the usual crisis. The Tories have no answer, and when one analyses the speeches of the right hon. and learned Member for Monklands, East (Mr. Smith) and the hon. Member for Dunfermline, East (Mr. Brown) last week, one sees that Labour has no answer either. Both were witty and stylish, but their policies lack substance.
  The harsh fact is that if the English economy is to claw its way out of 150 years of decline it can do so only by sacrificing consumption to investment. That would require a combination of monetary and fiscal policy, of which tax increases would form a key part. The consequence would be a drastic cut in the standard of living for the hitherto boom areas of the south. Both Labour and Tories calculate that that is not politically possible, so the decline will continue.
  In the meantime, over many, many years, the Scottish economy has suffered greviously from being handcuffed to this weak English economy especially when, after the first and second world wars, centralisation—meaning London control of policy and a loss of indigenous control—became the order of the day north of the border.
  In a recent document, "Scotland's Economy", the Scottish TUC puts it well. It says:
  "We start with the dimensions of the crisis. Norway and Denmark both have populations of roughly the same size as Scotland. At the beginning of the century Scotland possessed a far more productive economy than either. Output per head was more than 50 per cent. higher. Now the position is reversed. Scotland's GDP per head is only 89 per cent. that of Denmark and 76 per cent. of Norway's."
  The document also tells us:
  "Scotland's industrial workforce today is only 58 per cent. of what it was in 1972."
  Although the STUC hoped that it would not be read as such, and has tried to massage the time scales to
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  concentrate mostly on the past 10 years, it cannot hide the consistent hammering and debilitation of the Scottish economy under both Tory and Labour regimes. In reality, the document is an indictment of both. The message that roars from its pages is that Scotland needs to be free if it is to flourish.
  All economists of whatever school now agree that the English economy hangs on the brink of recession. The Government's policy of high interest rates is deliberately designed to force it as near that brink as possible without going over the edge and losing even minimal growth. History shows, however, that policies designed to deflate the English economy deliver a killer blow to Scotland's economy, because yoked as we are in a political and economic union which Labour defends as vehemently as do the Tories, we have no choices north of the border. Cooling off down here puts us into deep freeze. We are told that all the present agony of interest rates is to cool off the overheated south of England, but we do not have any experience of overheating in Scotland.
  Of the top 10 unemployment black spot areas, Strathclyde, Fife and the Western Isles occupy three places. They represent more than half Scotland. While west Sussex has an unemployment rate of 2 per cent., in Strathclyde it is 12·9 per cent. and in Scotland as a whole it is 10·4 per cent. Those are the fiddled figures. In reality, unemployment is much higher. In Kinning park, Govan, the unemployment rate for men is 29·6 per cent. and the overall rate is 22·6 per cent. Not even in the world of the unreal, which describes Downing street today, could anyone argue that those figures represent an overheating which demands a squeeze by means of an interest rate of 15 per cent.
  The lesson to be drawn by the people of Scotland from this Tory crisis and from previous Labour ones is that the union in which we now are is redundant and damaging. Only when we move from this union to the new union of the European Community—which will enable us to make key decisions on monetary, fiscal and investment policy—will Scotland, which has an intrinsically strong economy, fulfil its potential.
  8.43 pm
  Mr. Anthony Coombs: One of the less edifying spectacles of the past two days has been the gleeful anticipation of many Opposition Members, waiting for the market to crash, the pound to plummet or a crisis to occur. Nothing more clearly demonstrates the hypocrisy of their so-called interest in the health of the economy than their profound disappointment that none of those things has happened. The markets have firmed up and the pound has been recovering. The reason is quite simple. Despite temporarily high interest rates and speculation about our entry into the exchange rate mechanism, and even despite the Chancellor's resignation, the markets recognise that the economy is underpinned fundamentally by a very strong backing.
  I could quote statistics which have been mentioned today on the record of manufacturing exports, the record of sustained growth and increases in the standard of living which seem to have eluded the hon. Member for Bristol, South (Ms. Primarolo), but I will quote first three factors to emphasise my point. First, British industry is spending on training and investing in its work force £18 billion per year, which represents £700 per year for every man,

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  woman and child in this country. What is more, that figure is expected to increase by a further 50 per cent. this year. Secondly, only last week in my constituency Brinton's, the biggest carpet manufacturer, announced a locally based investment programme of £41 million over the next five years. That does not seem to demonstrate a lack of faith in our economic policies or in the strength of the economy. Thirdly, only yesterday an article in The Independent stated:
  "The underlying strength of the economy—as measured by bank lending, declining unemployment and manufacturing output is … robust."
  Of course the Gallup poll shows a fall in consumer spending. That is the intention of high interest rates. The housing market has at last been corrected from the over-high levels that it reached. More important, the CBI survey, despite showing some slowing down in investment intentions, still forecasts a growth rate next year of between 1 and 2 per cent., which demonstrates that although growth is slow, it will not stop altogether and there will be the soft landing that the Government have targeted.
  We have obviously focused on interest rates because as my right hon. Friend the Chancellor said, the Government have regarded them as an essential tool of monetary policy. Ever since the Macmillan committee of 1931, through the short-term interest rate control of the 1950s to the interest rate controls of the past few years, the role of interest rates in affecting demand in the economy has always been the subject of some debate.
  As the hon. Member for Fulham (Mr. Carrington) rightly pointed out, there has always been a conflict between their internal role in reducing the aggregate demand through consumption, thereby reducing inflation, and their external role in increasing the exchange rate which decreases inflation but makes the elimination of the balance of payments deficit more difficult through the falling value of the pound, especially as in recent times balance of payments deficits have often been a manifestation of increased excess demand in the economy rather than rising prices.
  Against that background, I wish to make two points. First, if demand in the economy is to be properly regulated, interest rates must operate in the right fiscal and monetary environment. On Friday, I was pleased that the Chancellor said that the economy is not regulated by interest rates alone. Although he was right to raise interest rates to bring down inflation—it worked in 1984–85 and it will work now—that is more effective in the context of monetary supply control. It is significant that, over the past three years, the broad-based measure of money in the United Kingdom has risen by 100 per cent. while in Germany it has increased by only 45 per cent. and there is evidence, particularly in Australia and Spain, that despite high interest rates, if the broad level of monetary growth is not contained, it will result in increased inflation.
  I hope that the Treasury will consider renewed targeting of monetary supply. If an independent Bank of England —as mentioned by my right hon. Friend the Member for Blaby (Mr. Lawson) and my hon. Friend the Member for Billericay (Mrs Gorman)—would help, I would be quite happy about that. Interest rate policy is far more effective if fiscal policy is tight as it is at the moment. More important, interest rate policy works if it is realised that in the long term, and possibly in the short term, it cannot be used to buck the foreign exchange markets.
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  Secondly, our obsession with entering the exchange rate mechanism is bogus. The exchange rate mechanism is, as the new Chancellor of the Exchequer said today, a contrivance and not a recipe for problem-free economic management. As my right hon. Friend the Member for Blaby said, there are two strands of thought on the role of the exchange rate in anti-inflation policy, but anyone who thinks that simply joining the ERM will be a panacea for inflation-free economic growth is living in cloud cuckoo land. It is clear that, so long as the relative rates of inflation within different countries in the exchange rate mechanism are different, our entry into the ERM will be impractical.
  The Germans have recently wanted to revalue against the existing members of the exchange rate mechanism. That was emphasised by the chief economist of Paribas, who is otherwise in favour of our joining the ERM, when he said:
  "Sterling cannot conceivably join the ERM before the second half of 1990, when there could be a distinct slow down in United Kingdom inflation."
  That was borne out today by the Financial Times, which said that, far from converging, the economic policies of member countries of the ERM are diverging, if one considers their ratio of debt to GNP or their budget balances or deficits, all of which are growing further and further apart and may lead to problems for the stability of the ERM in the longer term.
  I find it hard to stomach the hypocritical and somewhat dishonest attitude of the Opposition. We did not hear much of the economic policy of the right hon. and learned Member for Monklands, East (Mr. Smith), apart from the fact that it would involve some sort of industrial strategy. The Opposition say that they want to encourage saving, so why did the hon. Member for Islington, South and Finsbury (Mr. Smith) say last year that we should reduce interest rates to deter savings and increase inflation" Why did the Labour party not cost its proposals, which will cost £40 billion, increase inflation to 27 per cent. and rob savings of their value? In its policy review, it proposes to abolish the business expansion scheme. How will that push savings into young companies? How will savings be encouraged by a wealth tax, a capital value tax or a tax on unearned income over £3,000 per year? Yet all those ideas were put forward in Labour's recent policy review.
  Labour Members talk about incentives and support for manufacturing industry. Will they explain why when the last Labour Government were in power output in manufacturing industry fell? What will be the effects on labour costs of Labour's proposed payroll tax and the less acceptable parts of the social charter? How will incentive be improved by decapping national insurance contributions and increasing the top rate of income tax to over 50 per cent., when we know that doing the opposite has not only increased yield and incentive but has made the tax system more equitable and fair? Labour Members will find it impossible to answer those questions.
  Like the economy that the Labour party left us in 1979, Labour Members are bankrupt. They are bankrupt of ideas, competence and credibility. Their concern for the health of the economy is bogus—and so is their motion, which I urge the House to reject.
  8.52 pm
  Mr. Austin Mitchell: I shall not attempt to follow the hon. Member for Wyre Forest (Mr. Coombs), because the degree of his confidence is in exactly

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  inverse ratio to the degree of his understanding. Over the next few months, he will have to maintain that balance if he is to retain his sanity.
  I do not want to comment on the fun that we have been seeing in the Fuhrerbunker or the hatred at Hatter's castle over the past week. It has been a touching spectacle, with the brave little woman getting on with the woman's work of trying to dominate the world, but being upset by emotional men throwing menopausal spasms all over the place.
  I should not want to comment on that domestic drama. However, I should like to comment on the advice given by Professor Alan Walters, because much of the argument rests on whether his advice is accurate. Professor Walters was saying, first, that the pound needs to come down and, secondly, that we should not join the exchange rate mechanism. That advice is correct, because the pound is overvalued in real terms, even according to 1986 figures, by about 17 per cent. against the deutschmark, and by 45 per cent. according to 1976 figures. It will be difficult for British industry to prevail, to compete and to send exports to the EEC. Our main problem is that 75 per cent. of our deficit is with the EEC. It will be difficult to compete against imports in our home market.
  Professor Walters seemed to be saying that the EMS is a monetarist joke that imposes on us an externally determined exchange rate decided by our competitors, whose interest it is to ensure that sterling is overvalued. It puts us back in the old sisyphean trap of struggling to maintain an externally determined exchange rate.
  If we enter the EMS, sterling will be a guy rope holding the deutschmark down. The main problem with trading in Europe is that Germany is maintaining its huge industrial expansion and surpluses by keeping the deutschmark undervalued. If the ERM becomes a means of maintaining that undervaluation, it will lead to what it has led to in France and Italy—deflation, depression and a rise in unemployment. It seems to me that Professor Walters's advice is correct. The interesting question is why the Government do not accept it.
  Britain's industrial base is threatened because of the folly of the Government's economic policy. For the first four years of their term of office we had massive deflation, which closed about a quarter of our manufacturing capacity and led to a loss of 28 per cent. of manufacturing jobs. If that deflation is followed, as it was, by a massive expansion of credit, a balance of payments deficit on the scale that we are experiencing is inevitable, because British industry cannot cope with the ensuing demand from the credit explosion.
  How do we now deal with that problem? The only way is to get the exchange rate down. The Americans, faced with a smaller deficit in trade, talked the dollar down by about 40 per cent. That requires lower interest rates, so we can use the exchange rate to return the competitive advantage of British industry and to tax imports effectively. We secure that by lower interest rates, which help to counteract inflationary consequences. Any inflationary consequences will be comparatively minor because there would be an improvement in unit costs, but we will also need to counter inflationary consequences with social co-operation.
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  The hoo-hah of the last week and the dramatic resignation of the Chancellor should be used as an opportunity, or perhaps as a smokescreen, not to say "We shall carry on with our policies", which will be disastrous and ruinous for British industry, but as an opportunity to change and accept the advice that Professor Walters offered in the first place.
  8.56 pm
  Mr. Jacques Arnold: I cannot help noting that here we are yet again with an Opposition debate on the economy. In view of the events over the past few days, I should have thought that we would be seeing a full-scale motion of no confidence in the Government. Would it be uncharitable to wonder why? Could it be that such a motion would have to be moved by the right hon. Member for Islwyn (Mr. Kinnock), and could it be that on the subject of the economy he fears that he might be kebabbed?
  We have heard many learned speeches on the exchange rate mechanism. The one message that is clear is that it is not a comfortable infant's cradle in which we would be cared for by a nice cosy German nanny. We should have to keep within the allotted exchange rate band, but we would not have the weapon of the exchange rate to keep within that band. Therefore, increased reliance would be placed on the interest rate weapon.
  Today, we rely heavily on interest rates, as every hon. Member knows. With home ownership running at about 70 per cent. of the population, householders and business men in our constituencies are coming to us with complaints about the pain that has been created by interest rates. The opinion polls reflect that concern.
  At the end of the day, the objective is to limit credit. That has been done by price rather than by rationing. It is clear that the Opposition's policy is to rely on the latter. Credit cards and personal consumer borrowing make up only 15 per cent. of total borrowing, and even the Opposition recognise that. In his Walden interview, the hon. Member for Dagenham (Mr. Gould) said:
  "We're not talking about the familiar aspects of credit control, the hire purchase restrictions, limiting credit cards and so on—these are not big elements."
  They are concerned not about that but about the 85 per cent. of personal borrowing that takes the form of mortgages.
  The Opposition would introduce rationing of mortgages. That would hit those who are trading up. The message is clear to the electorate: if someone is thinking of moving to a better home for their family, they should be prepared to go cap in hand to a bureaucrat and, even then, they will probably not obtain the increase hoped for.
  The hon. Member for Dagenham let the cat out of the bag when Brian Walden asked him if those restrictions would inevitably hit young couples. The hon. Member for Dagenham said, "Yes." Since that Walden interview the right hon. Member for Islwyn (Mr. Kinnock) and the right hon. and learned Member for Monklands, East (Mr. Smith) have trampled on each other in the rush to the microphone to say that that is not Labour party policy. The right hon. and learned Member for Monklands, East said last week—
  Mr. Neil Hamilton: Will my hon. Friend give way?
  Mr. Arnold: No, I must finish in 10 minutes.

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  The right hon. and learned Member for Monklands, East said that he would invite the banks to co-operate in the restraining of lending. When he was twitted about the likelihood of their complying, he asked a question of my hon. Friend the Member for Amber Valley (Mr. Oppenheim):
  "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 banks is the hon. Gentleman making that accusation about?"—[Official Report, 24 October 1989; Vol. 158, c. 687.]
  I would answer that question by telling the right hon. and learned Gentleman to look at the hoardings being put up by Lloyd's bank. It has a splendid poster which says:
  "Where can we get a loan for a decent holiday?"
  I can think of no more financially irresponsible and immoral question than that, which is trying to influence consumers to borrow for a holiday.
  Why would the banks co-operate voluntarily with a future Labour Government when the trade unions—the Labour party's own paymasters—would not co-operate with the last Labour Government? Why would the City co-operate with a Labour Government when, in Labour Weekly, the right hon. Member for Islwyn described the City as
  "the army of brokers, jobbers and other quaintly named parasites."
  Even if we were to assume that British banks would fall into line and that the Bank of England would oblige foreign banks with branches in London to comply, how would the right hon. and learned Member for Monklands, East control overseas banks and get them to comply in the absence of exchange controls?
  There are hundreds of banks established with branches located in Amsterdam. The Dutch market is free of exchange and capital controls and they could, and probably would, set up departments to handle British domestic lending. The funds flowing to and fro could not be controlled. The Opposition have not suggested a viable form of credit controls in either this debate or the debate last week.
  I would make a plea to my own Front Bench spokesmen. There may be economic merit in mopping up excess spending power, but will my hon. Friend the Minister bear in mind the fact that the pips of too many mortgage borrowers are sqeaking?
  When my right hon. Friend the Chancellor considers his Budget next year, he should consider increasing mortgage interest tax relief from the current £30,000 limit to £45,000. That would constitute a greater proportion of house prices, particularly in the south-east. He should restrict that to the standard rate tax band. That would be fiscally neutral to the higher earnings but would give relief to average and low-paid households that look to the Government for protection.
  9.3 pm
  Mr. Rhodri Morgan: This has been an interesting debate. It has been bye bye, Blaby, hello, Huntingdon. The former Chancellor attempted to explain how he became the enemy within and referred to the interesting parable of the iceberg. It was not clear to me whether he thought that the Prime Minister was the iceberg or whether he thought that she was the captain of the Titanic and that he was the iceberg.
  It is true that the Prime Minister has been busy rearranging the deck chairs in the past few days. One result
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  is that the right hon. Member for Huntingdon (Mr. Major) has become the Chancellor of the Exchequer. Obviously, we all welcome him to his new job. It is always interesting to see the Bob Cratchit of the House of Commons suddenly becoming the Scrooge, and we expect to hear many more contributions from him. He is famous for being able to devour briefs from civil servants. We are sure that the Prime Minister has recognised his talents and will send him many briefs to master over the next few years. We realise that he has his own mind, but we shall not expect the Prime Minister to let him use it much. It is clear that, from now on, the Government's policies will be made in No. 10. The Prime Minister does not necessarily choose Ministers for their talent. They are chosen in spite of it.
  The Government, especially the right hon. Member for Huntingdon, appear to believe that the balance of payments problem will be solved by high business investment. That is contradicted by two outside elements, which are probably more objective than the Chancellor. The first is the London business school survey, which we all probably read on Sunday, which showed that the balance of payments would continue with a deficit of £15 billion for the next four years and that the slowdown in the economy, which high interest rates will produce next year, will result only in a marginal decrease in the balance of payments deficit.
  We must all look forward, because this problem will concern Governments of both persuasions, and think what a catastrophe an accumulated deficit extending over a five-year period—£20 billion this year, £15 billion last year and at least another three years of deficits of £15 billion—is for the whole country. How can it be turned round? How can we produce surpluses of £15 billion to £20 billion in the following four or five years to repay credit from other countries used to finance present excessive consumption?
  Secondly, the theory is that business investment today will solve the balance of payments problem tomorrow. How can that be true, given that, during the past week, the Governor of the Bank of England has been issuing warnings about the nature of that business investment? He has made it clear over the past six or so months through informal forms of credit control that the banks are lending too much money to the property sector. There are no financial or legal sanctions that he can exact—this is an informal form of credit control. Conservative Members persist in believing that it does not and could not exist. The Governor of the Bank of England publicly announced his warning: "Please, do not lend so much money to the property sector." British industry is investing far too much in property and ergo far too little in the productive investment which might correct the balance of payments problem.
  Let there be no doubt about the nature of business investment. The boom has been in fixed assets to too great an extent. Even the Governor of the Bank of England has issued informal and, finally, public warnings to that effect. Business investment is high, but it is in the wrong sectors—those that will never reduce the balance of payments deficit. Investment in office blocks has been booming, but they do not turn themselves into exports. Yes, there can be some exports in financial services, but it can never match a deficit of £20 billion without reorientation of business investment into the productive manufacturing and highly exportable sectors. Anyone who believes that our business investment is healthy, as the Chancellor said earlier today,

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  and that it can on its own solve the balance of payments problem had better talk to the Governor of the Bank of England, because plainly he does not believe it.
  The Chancellor showed astonishing naivety today. It is clear that his previous experience as Chief Secretary, when he merely tried to add the public spending forecasts of the different Departments, has not equipped him for his onerous responsibility for overall economic policy. I do not say that in a spirit of curmudgeonliness. I welcome any new appointment which might help us to run the economy in such a way that we can look forward to some equilibrium with our overseas trading partners.
  The hon. Member for Glasgow, Govan (Mr. Stillars)—once his remarks were stripped of their Caledonian paranoia—was right to say that the right hon. Member for Blaby (Mr. Lawson) had had the good fortune to preside over such a long period of a massive injection of advantageous oil wealth into the public Exchequer as to give him the luxury of making choices that Chancellors in other decades had not had.
  The economy is almost back on a normal path now. There is still some extra bounce in it arising from our oil wealth, but that is much less than it was. We now need from the new Chancellor a direction of economic policy which will put the balance of payments deficit right. It is now at world record levels, 4 per cent. of our GNP, which is not production at home but consumption from other countries that we are having to finance. If we do not get that right, we will inherit an enormous mess when Labour takes over the government of Britain two years from now.
  9.10 pm
  Mr. Gordon Brown: I wish at the outset to welcome the Chancellor to his new position and I shall begin by saying what he should have said this afternoon. He should have said that he would introduce an Autumn Statement for investment in industry and that he would deal with the trade deficit as a serious problem. He should have conceded that supply side measures for investment, training and research and for the regions were necessary and that he would act to curb the inflation that the Government had directly created by their policy of inflating electricity and water prices and by the poll tax. He should have announced that he would open negotiations to join the exchange rate mechanism on the conditions that Labour had suggested.
  In short, the Chancellor had a marvellous opportunity, as he changed jobs, to change policies. Instead, he told us that he was determined to repeat the errors of the past. Those mistakes in the last 18 months have meant that mortgages have risen by £80 a month for the typical home owner. They have meant that business borrowing is now up by more than £1·5 billion. They have meant that company bankruptcies have risen by 18 per cent. in the last year.
  Those mistakes, which have led the CBI to worry about faltering and then falling investment, have made us, for the end of this year and next year, the slowest-growing economy in Europe, and have led the European Commission in its annual report on the British economy, published a few days ago, to say that British investment was low by European standards, that savings were pitifully
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  low, that the trade deficit would not fall of its own accord and that there was a range of weapons, beyond the exclusive reliance on interest rates, that should be used.
  Yet today, when we are faced with all the problems that business, industry, home owners and families throughout the country confront, the Chancellor made a virtue of saying that there was not the slightest need for a change of policy. There was no hint of the possibility of even the remotest fine tuning of the nation's economic policy. The Government still claim to the last detail, to the last decimal point, of their interest rate strategy, that nothing needs to be changed.
  That has been the spirit of the events of the last seven days. The first occurrence after the Chancellor resigned was that the Deputy Prime Minister told the House that their "successful policies" would continue, the economic miracle was intact. Then the new Foreign Secretary came on the radio—no doubt looking forward to the freedom of a job in which he could be far from Downing street—and said:
  "It is a long time since the Cabinet was so united on major items of policy."
  Then we witnessed incessantly on radio and television the increasingly ridiculous and ever-present figure of the chairman of the Conservative party, a one-man Saatchi and Saatchi, saying: "Everything will go on just as before."
  That was not the most reassuring statement at that time. "Just as before," he said, meaning resignation, reshuffle, confusion and disarray. "Business as usual," we were told. it was to be "the team approach".
  Our argument is that, even after weeks of division and disarray, of uncertainty and confusion, even after the resignation of a Chancellor who had been in office for six and a half years, and even after the personal adviser to the Prime Minister had resigned, the divisions which led to the resignations over the economic direction of policy remain to be resolved, and nothing that the Chancellor said today leads us to believe that they are on their way to being resolved.
  There were two questions before us after the Chancellor's resignation—why did he resign, and what is the Government's policy? We now have an answer to the first question, courtesy not of the Prime Minister in an hour-long interview on Sunday, but of the former Chancellor in a 15-minute speech this afternoon.
  Dame Elaine Kellett-Bowman: It was nine minutes.
  Mr. Gordon Brown: It was a nine-minute speech this afternoon, which was dignified and a model of what a speech in these circumstances should be. Let us recall what the Prime Minister said about the Chancellor's departure on Sunday. She said that she did not know why he had resigned. When asked whether he would have stayed if Sir Alan Walters had gone, she said:
  "I don't know, I don't know."
  She did not seem to know why he had gone.
  Can anybody be in any doubt why he resigned after what we have heard today? It was not a personality clash, some wayward gesture or a spur-of-the-moment decision. As we have heard this afternoon, it was a fundamental question of policy—a question of exchange rate policy, which is right at the heart of the Government's economic strategy. As the former Chancellor well knows, it is a matter that has not yet been resolved.

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  The former Chancellor told us three things this afternoon: first, that he believes in exchange rate management; secondly, that he had come to the conclusion that the European monetary system and the exchange rate mechanism were the best vehicle for it; thirdly, that the sooner we were able to join rather than later, the better for this country. It is perfectly clear what the dispute of which, as he said, the Walters article was the tip of the iceberg was all about. Can anybody doubt how strongly he felt about EMS?
  Mr. Lawson: If I may just set the record straight, the tip of the iceberg I was referring to was that this one article was merely the tip of the iceberg of Alan Walters's activities generally. I was not referring to the wider issues as being part of the iceberg. That is a different matter on which I was giving my views to the House.
  Mr. Brown: I am grateful to the former Chancellor. Before he arrived in the House, I said what a dignified speech he had made. The former Chancellor clarified the Walden interview in even greater detail than we had suspected. When the Prime Minister was asked whether the Chancellor would have stayed if Sir Alan had gone, she said:
  "I don't know, I don't know."
  From what the former Chancellor has now said, it is clear what the result might have been.
  No one can doubt how strongly the Chancellor felt about European monetary co-operation, no one can doubt how much he felt that the Madrid compromise was in difficulties, and no one can doubt that the issue was not just Professor Walters's activities, but the Prime Minister's apparent agreement with the views of Sir Alan. Yet this is the Prime Minister who said on Sunday—and on Thursday and again today—
  "I have always supported my Chancellor."
  The issue that still remains to be resolved is whether the Prime Minister, since Thursday's events, has ever repudiated Sir Alan Walters. Has she ever repudiated his view that the EMS was "half-baked"? Has she ever repudiated his view that the EMS had only a minimum level of plausibility? Has she ever repudiated Sir Alan's view that he spoke for the Prime Minister as well as speaking for himself'? It is not what the Prime Minister did not know on Sunday, but what she did not want to say, that is the issue. That is the question at the heart of the Government's confusion of policy, which remains even to this day.
  What are the Government's views on these major issues of economic policy or, more appropriately, what are the views of the Ministers one by one, because that is the way in which we now have to deal with these matters?
  Let us start with the views of the Prime Minister. Can anybody doubt that, although the Government's official policy was to believe in exchange rate management and co-ordination, the Prime Minister has always believed, in her own words, that one "cannot buck the market"? While the official policy for many months was for co-ordination, the Prime Minister's view is that sterling should be floating free on the foreign exchanges and determined by market forces. The Government's official view was to join the exchange rate mechanism, but what is the Prime Minister's view? Has she ever given us one good reason for joining?
  Let us consider the Prime Minister's excuses for not joining. In 1985, she said that she could not join because of the strength of the dollar. In January 1986, she rejected
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  joining because she said that the British economy was different. In March 1986, the reason was the special status of sterling. In April 1986, it was the potential drain on our reserves. In June 1986, it was speculation. In November 1986, as the Financial Times article reveals, the reason was our economic weakness. The Prime Minister said that we would go in strong—if she was going to take us in. In 1987, her reason for not joining was the deflationary impact of the links to the deutschmark. In 1988, the excuse 'was inflation, and in 1989, the number of conditions to be met has multiplied.
  In June this year, the ex-Chancellor referred to the two main preconditions for joining the exchange rate mechanism, which he identified as inflation and the removal of exchange controls. The Prime Minister, in response, said:
  "Far many more conditions must be taken into account."
  It was a question of waiting to see what happened with inflation, and even then sterling could join the EMS only if the conditions clearly existed. The Prime Minister then added cabotage, and on Sunday she added doubts about policy towards British family farms.
  Under those circumstances, is that evidence of the Prime Minister wanting to join the EMS? Is the Prime Minister looking not for arguments to go in, but for excuses to stay out? She is not looking for actions we can take, like reducing inflation, to make it possible for us to join; instead, she is looking for action that she expects others to take so that we can stay out. How many more conditions will she have added by 1990? If the Prime Minister has her way, we will not be new members of the EMS by 1990, but there will certainly be new conditions.
  Where do the rest of the Cabinet stand? Where does the Deputy Prime Minister stand? At the weekend, he said that it was of the highest importance that the Government remained committed to the position, clearly and in good faith. He said that we had to be clear about what was agreed in Madrid. How did the letter or spirit of Madrid include cabotage, which was added by the Prime Minister? How did it include dealing with the French farmers or, as the Prime Minister said, that
  "artificial and cultural barriers had to come down"?
  Is anyone in any doubt that the Prime Minister was attempting to create conditions to make it more difficult to join? Is it correct that on 24 January in a Lobby at the House, as the Daily Telegraph reported, the Prime Minister said that Britain would not join during the course of this Parliament?
  Where does the Deputy Prime Minister stand in all this? What does he think of the Prime Minister's interview? What does he think of the new conditions? The truth is that he hoisted the flag of insurrection for 18 hours and then threw up the white flag of surrender. That was the shortest rebellion in history. When will he have the courage of his convictions rather than the courage of the Prime Minister's?
  I have already welcomed the new Chancellor to his job. He has had the right training for the job over the past few weeks when he was Foreign Secretary—private humiliation, public repudiation and then instant promotion. They say that the Chancellor is ambitious. I cannot believe that. If he was truly ambitious last Thursday, he would have waited half an hour, looked at the jobs on offer and then gone for the most influential vacancy of all, that of part-time, back-stage economic adviser to the Prime Minister.

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  What are the Chancellor's views on European monetary co-operation? Let us consider what he said when he first addressed that subject in November 1981. He last spoke in detail on that matter as a humble Back Bencher. He said:
  "At the beginning of the parliamentary recess I firmly believed that Britain should not enter the European monetary system. I have returned to the House, having spoken to firm after firm in my constituency, believing that the sooner we enter the European monetary system to improve exchange rate stability the better it will be for our exports and our interests generally. I have no doubt that that is the right course."—[Official Report, 4 November 1981; Vol. 12, c. 68.]
  What was right—[Interruption.] The Chancellor does not think that he said it. It appears in Hansard of 4 November 1981. What was the right course to be followed, immediately and unconditionally? The right course then is apparently not the right course now. Does the Chancellor still believe that the sooner we enter the better? Does he still believe that it is still the right course unconditionally? What are the Chancellor's real views? From what he said this afternoon, hon. Members did not get a full appreciation of his views—it was "on the one hand, on the other hand."
  The truth was in an answer to an intervention by my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon), who asked whether the Chancellor believed that the EMS is half-baked. The Chancellor would not or could not answer the question. He refused to repudiate Sir Alan's view. If he believes that the EMS is half-baked, why does he not say so? If he believes, against Sir Alan, that it has only a minimum level of plausibility, why does he not say so? If the Chancellor wishes to intervene now and repudiate Sir Alan's view, I should be happy to let him do so.
  On what terms did the Chancellor accept the job? Did he ask that Sir Alan be removed? Clearly not. Did he ask that the Prime Minister drop her view that the EMS is half-baked, or did he just say, "Yes, Prime Minister"? Did she say, "My adviser will be in touch"? The only thing that we can say with certainty after the Chancellor's speech today, which added to rather than ended the confusion, is that his position is unassailable. Where are we now? We have a Prime Minister who is clearly hostile to European monetary co-operation, senior Ministers who are in favour of it, and a Chancellor who has not made up his mind. The divisions will still remain to be resolved, and they go right to the heart of economic strategy. Do the Government believe in management of our economy or do they believe that they cannot buck the market?
  What will the Cabinet Ministers do? Will they stand up to the Prime Minister? Look at the Cabinet—the right team for Britain's future. Last month's right team for Britain's future has given way to this month's right team for Britain's future. Last month's right team has less future than could possibly have been foreseen.
  What of the Ministers themselves? The Prime Minister was directly asked about that on Friday. Jean Rook asked:
  "You are accused of refusing to recognise your Cabinet as a team or working with it. What is your reaction?"
  The Prime Minister replied:
  "A leader must lead, must lead firmly, must have firm convictions and must see that these convictions are reflected in each piece of policy."
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  There was not a mention of the team at all, no mention of working together, and not even a mention of the chairman of the Conservative party.
  On "Panorama" last night, the Foreign Secretary came nearest to giving us the answer to how to deal with the Prime Minister. How does he deal with the Prime Minister? He answered:
  "to argue, but courteously. Then you will find yourself being contradicted, and sometimes told you don't know what you are talking about."
  [Interruption.] Obviously, the Ministers know what it is all about. The Foreign Secretary went on to state:
  "But if you persevere, and have good arguments on your side, then you will find you will gain ground."
  The right hon. Members for Henley (Mr. Heseltine) and for Shropshire, North (Mr. Biffen), Lord Pym, Lord Prior and now the former Chancellor—the people who have persevered—have gained ground, but the ground that they are on is the Government Back Benches.
  Who are the real decision makers in the Government? Faced with a choice between a Chancellor of six and a half years' standing, whom she had praised as brilliant, wonderful and marvellous, and a part-time adviser two months back, for most of the time contactable only by telephone, the Prime Minister chose her back-stairs adviser. When faced with the choice between the adviser, as she said, with only the power to advise and the Minister with the power to decide, she chose the adviser. Why? I suspect that it was because, in her own words, he is "one of us". It was the most damaging appointment of an adviser by a head of Government since—I was going to say, since Caligula's horse, but at least the horse stayed in Rome and worked full-time.
  What sort of Cabinet do we have? Ministers sweep into Downing street in chauffeur-driven cars and wave to the television cameras as they ascend the steps of No. 10, but then find that the only person who listens to them is the policeman on the door. We have "do-as-you-are-told" Ministers in a "speak-when-spoken-to" Cabinet in a "Yes, Prime Minister" Government.
  Our argument is not about the constitutional theories of government or about the end of Cabinet government or the pretence of it; it is about the lives and aspirations of millions of people throughout the country and about how they have been hit by the failures of a Government who are now divided. They tell us that we are going to have a soft landing, they tell the passengers to fasten their safety belts, but all we can hear is the noise of the squabbles in the cockpit about who has the controls.
  They have had 10 years, at the end of which the Chancellor still tells us that the economic miracle is intact, but that his policies are going to hurt. Why are they going to hurt if there is an economic miracle? It is because the balance of payments deficit is the worst that we have ever known—yet the Chancellor cannot even admit that it is a problem. No other country has a deficit so big, yet the Government cannot concede that it is worthy of action. Inflation is the highest of all our major competitors, yet the Government came into power 10 years ago with the objective of zero inflation. We have the highest interest rates and the highest mortgate rates in the world. I advise Conservative Members that they cannot begin to solve those problems as long as the philosophy is "you can't buck the market".

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  What did the Prime Minister say about all this on the Walden interview on Sunday? When faced with these difficulties facing industry, business, home owners and families, she said:
  "Let's get down to the success we've had … the way in which people now copy Thatcherism, as they call it, the world over … Country after country is following our policies. They come in and say to me: 'We've tried everything else, now we'll try Thatcherism'".
  Is France, with a 3 per cent. inflation rate, aspiring to the Thatcherite inflation rate of 7·5 per cent.? Is West Germany, with a trade surplus, attempting to strive towards the Thatcherite deficit that is approaching £20 billion? Is Japan, with 5 to 6 per cent. interest rates, aspiring to the Thatcherite miracle of interest rates at 15 per cent.? How many other countries aspire to deficits of the size that we have, and how many other countries aspire to inflation rates and interest rates at our levels? The Thatcherite miracle is not for export, because, as everybody knows, the miracle does not exist.
  At the end of this week, where are we in the future course of policy for this country? The former Chancellor has gone because the Prime Minister preferred an itinerant adviser to a senior Minister—a court favourite to a Cabinet Minister. We have a new Chancellor who has been unable to tell us his view, but who has added to the confusion over exchange rate management rather than resolved it. We have a Foreign Secretary who says that the Government's job is to persuade people, when it is clear that it is his job and that of his colleagues to persuade the Prime Minister. We have a Deputy Prime Minister who raised the standard of revolt, but lowered it immediately afterwards. Yet that is what we are told is the "right team" for Britain's future. Is anybody in any doubt that, with the Cabinet divided and Conservative supporters throughout the country in disarray, we have now entered the first days in the final collapse of the Government—
  Dame Elaine Kellett-Bowman: Rubbish.
  Mr. Brown: The real question that we must ask this evening is, who can now look to the Government for support? On Sunday, on that Walden interview, there was no mention of the problems people have or of those facing industry and business. These problems cannot be solved if we have a Prime Minister who is so out of touch and so protected from reality by unelected advisers that she does not even acknowledge that the problems exist. We need Cabinet government and democracy, and we need a Government who will take action to solve our economic problems. For that, the country will have to look to Labour.
  9.35 pm
  The Chief Secretary to the Treasury (Mr. Norman Lamont)I start by joining my right hon. Friend the Chancellor of the Exchequer in paying tribute to my right hon. Friend the Member for Blaby (Mr. Lawson). My right hon. Friend was a good friend to me and it was a matter of great sadness to me that he felt that he had to resign. I worked with him for some three and a half years, and those were stimulating and enjoyable years. My right hon. Friend has had a great impact on this Government, as my right hon. Friend the Chancellor said, but not just as Chancellor of the Exchequer. As Financial Secretary to the Treasury, he played a key part in the abolition of exchange controls. As my right hon. Friend the Chancellor
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  said, it will be for history to judge the significance of the tax reforms introduced by my right hon. Friend the Member for Blaby. I believe that both sides of the House will agree that the speech that my right hon. Friend made was one of force, eloquence, and enormous lucidity, and it retained, as my right hon. Friend always does, a capacity to surprise. Those are the qualities which the people who have worked with my right hon. Friend know he has and for which they appreciate him.
  Mr. Radice: If the former Chancellor's speech was so good, and if his case was so good, why did the Chief Secretary not resign with him?
  Mr. Lamont: I spent no less than six or seven hours last week trying to persuade my right hon. Friend not to go, not simply because I did not wish him to resign bat because I felt that it was a mistake, that it was unnecessary for him to resign and that his position, although difficult, was not impossible. Having expressed that view to my right hon. Friend, it would have been false if I had behaved any differently, and I know that my right hon. Friend agrees with me.
  It is curious, as my right hon. Friend the Member for Guildford (Mr. Howell) and my hon. Friend the Member for Stamford and Spalding (Mr. Davies) pointed out, that an issue as esoteric and narrow as the European monetary system should come so to dominate a debate as it has dominated the House today. My right hon. Friend the Chancellor has taken the first possible opportunity to emphasise that he wants to join the exchange rate mechanism as soon as the conditions set out after the Madrid summit can be satisfied. My right hon. Friend has made it crystal clear that he intends that they should be satisfied. He also went on to sound a note of caution by saying that the ERM is not a panacea. It is neither the salvation nor the ruin of the British economy. It is not. as the hon. Member for Berwick-upon-Tweed (Mr. Beith) suggested, that my right hon. Friend wanted to put up some Aunt Sally to knock down. It is because of the feeling that my right hon. Friend and I have, like many other hon. Members, that sometimes it is important to put this issue in perspective.
  We must remember that the British economy has been managed at different times with different exchange rate regimes. We have had fixed rates and floating rates, and it is not obvious, at least to me, that economic success is correlated exclusively with one or the other. There are, as my right hon. Friend the Chancellor said, no soft options either inside or outside the EMS. If we are inside it, we shall still have to use interest rates to link our currency with low-inflation currencies. If we were outside the EMS, and even if the currency floated freely, which is not the Government's policy, we would still have a tight squeeze to contain inflationary pressures. Either way, there are no soft options.
  Mr. D. N. Campbell-Savours: The right hon. Gentleman has said that the position of the ex-Chancellor of the Exchequer last week was difficult. How was it difficult?
  Mr. Lamont: My right hon. Friend the Member for Blaby has expressed his view and the reasons why he resigned. I do not wish to add to anything that has been said on that score.
  The Opposition—
  Several Hon. Members rose—
  Mr. Lamont: I am not giving way.
  The Opposition have argued that there are divisions—
  Mr. Stuart Bell: The Minister has said that his position was difficult but that it was not impossible for him to stay in his job. Will he tell the House why his position was difficult?
  Mr. Lamont: The hon. Gentleman misheard me. If he reads the report of the debate in Hansard he will note what I said.
  The Opposition have sought to present themselves as the party that is united on the issue of the ERM. Those of my right hon. and hon. Friends who were present for the debate on the economy last week will agree, I am sure, that I was able to demonstrate fairly clearly that there are considerable divisions within the Opposition. The right hon. and learned Member for Monklands, East (Mr. Smith) believes that it is important to enter the ERM because the volatility of the currency matters. The hon. Members for Sedgefield (Mr. Blair) and for Dagenham (Mr. Gould) do not think that the volatility of the currency matters at all. The hon. Member for Dagenham has said that he has a general hostility to the prospect of full membership. That is the view of a member of the shadow Cabinet, not of a part-time adviser to the Labour party. Is the hon. Member for Dagenham going to resign or not?
  We are not surprised about the issues on which Opposition Members disagree, because we are used to them disagreeing. More remarkable is the point on which they all seem to agree. It is not clear, however, why they think that their long list of conditions would be more easily satisfied than those laid down by the Government. Their list is much longer than the Government's, much more amorphous and much more difficult to satisfy. It is the Labour party which is likely to lay down conditions that will never be satisfied.
  The Opposition want what they call the deflationary tendency in the ERM to be removed. That is the issue on which all Opposition Members seem to be agreed. That is the most astonishing feature of all. For the majority of people, the essence of the ERM is to join it so that currencies will converge towards the lowest inflation rate, towards the German rate. That is why people want to join it. The Labour party is the only group I can think of that wishes to join it while not accepting the main reason for it.
  The Labour party's policy document states:
  "Substantial changes would therefore be required before the next Labour Government could take sterling into the exchange rate mechanism".
  The Labour party wants to subvert the monetary discipline that the system can provide. That is something that the Germans, for instance, could never tolerate. Further, the Labour party's policy document tells us that there must
  "be less reliance on interest rate adjustment and more on co-operation between central banks."
  That is mere wishful thinking. How can a Government run a monetary policy without using interest rates? Perhaps someone would tell me that.
  The Labour party wants to undermine the position of the Bundesbank. Labour's proposals to link the ERM to growth and to remove its deflationary bias would, if any of our European partners were foolish enough to accept
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  them, drive the Germans out because those proposals are not consistent with the Bundesbank's constitutional duty to secure price stability.
  It is extraordinary that everyone who advocates participating in the ERM is usually attracted to it as an anchor against inflation—except the Labour party, which does not want to join it until it is sure that it cannot be a bulwark against inflation. That is not surprising because we know that, whether in or out of office, Labour is always the party of inflation.
  My hon. Friend the Member for Bridlington (Mr. Townend) asked why we were having this debate today. After all, we had an economic debate last week. Perhaps in future we shall have economic debates once a week, or twice a week. That would be a good thing—far better than doing the public expenditure survey round or sitting in the Star Chamber. I would not mind. But perhaps we are having an economic debate for the reason to which my hon. Friend the Member for Gravesham (Mr. Arnold) referred—that although the Labour party knew that it had to initiate a debate, it did not dare put down a censure motion and have a censure debate. Mr. Mandelson decided that the matter would be better handled by the right hon. and learned Member for Monklands, East (Mr. Smith) and the hon. Member for Dunfermline, East (Mr. Brown), and that is why we are having an economic debate today.
  Perhaps I am doing Opposition Members an injustice. Perhaps the real purpose of having a debate is so that Opposition Members could give those parts of their speeches that they did not give us last week—the bits that dealt with their policies. Those were the bits that we were to wait for.
  It is hardly surprising. The right hon. and learned Member for Monklands, East belongs to the Crossman school of politics. My hon. Friends will recall that some years ago, when the late Mr. Crossman published a Labour policy document on pensions, he was asked by the press why it did not contain any figures. He replied that it did not have any figures because they would all be shot to bits by the Tories. That is the attitude that the right hon. and learned Gentleman takes. He knows that he cannot produce any policies which will not be shot to bits by the press and will also please his hon. Friends.
  Mr. George Foulkes: On a point of order, Mr. Speaker. Page 6104 of today's Order Paper gives the title of today's debate as "Government economic policy". The Minister is not addressing himself to that issue.
  Mr. Speaker: There is also a Government amendment.
  Mr. Lamont: We can all see that the Opposition have enormous confidence in themselves. They are terrified that we shall discuss their policies. That is a real advertisement for their confidence.
  In the past week, the right hon. and learned Member for Monklands, East, who does not believe in policies, has been in a bit of difficulty because he is being pressed all the time by the media. He is being asked what he will do and how his credit controls will operate. The right hon. and learned Gentleman has managed to get through by putting on his best Glasgow family doctor appearance and looking confident.
  Mr. Onslow rose—
  Mr. Lamont: I shall give way in a minute. [Interruption.]
  Mr. Speaker: Order. I hope that the House will settle down. We have 10 minutes left.
  Mr. Lamont: I have always thought that the right hon. and learned Gentleman—"Dr. Smith"—would be a very good Glasgow general practitioner. He is very nice, very charming and very reassuring, with a good bedside manner. No doubt he would be one of those doctors who whisper in the patient's ear, "I think that that Mrs. Thatcher has gone a little too far with the NHS," but in every other way he would be excellent. The only trouble is that we would be wondering, has he kept up to date? Has he not read any textbooks, or articles in the Lancet? Does he know about the latest medicines that are available on the market? The more we listen to the right hon. and learned Gentleman, the more extraordinary and old-fashioned his policies seem.
  Mr. Harry Ewing: On a point of order, Mr. Speaker. I should like to help the Chief Secretary. For the past five minutes he has been going on about doctors. If there is a doctor in the House who can provide him with a couple of tranquillisers, the debate will proceed much better.
  Mr. Speaker: I think that what would help the Chief Secretary, indeed, the whole House—would be for hon. Members to listen to his speech with the same care with which they listened to the speech of the right hon. and learned Member for Monklands, East (Mr. Smith).
  Mr. Lamont: We know that Labour is not a tolerant party—we know how easy Labour Members find it to listen to any argument against themselves—and that has been illustrated tonight.
  Mr. Morgan: Will the Chief Secretary give way?
  Mr. Lamont: No.
  When the right hon. and learned Member for Monklands, East was asked on the radio the other day what his policy was against inflation, he replied, "Industrial strategy." I must say, I was astonished. I know that the right hon. and learned Gentleman had to say that he believed in industrial strategy when he was Secretary of State for Trade, but it never occurred to me then that he really believed in it. Nor did it occur to me that he could really believe in it today. Whatever else his industrial strategy may be, it has nothing to do with the immediate problem of inflation that faces us now.
  The truth is that the right hon. and learned Gentleman has no policy—he simply has a phrase, albeit rather less coarse than the sort of phrase that the Leader of the Opposition uses when he is asked what is Labour party policy. We are told that Labour policy is to be one of backing winners—its record on that was not very good last time—and innovative technology. I think that we would be a bit more impressed by that if we had not sat here, year after year, listening to the right hon. and learned Gentleman ask for more money for shipbuilding, coal and all the other sectors that are not exactly at the leading edge of British industry. The idea of an industrial strategy is mildewed, moth-eaten and one might even say half-baked.
  Does anyone really believe that the investments of the Industrial Reorganisation Corporation and the National Enterprise Board when Labour was in office did the British motor industry any good whatever? Is not the future of
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  today's motor industry, as a result of our policies of privatisation and attracting foreign investment, better than it ever was under Labour's "industrial strategy"?
  Mr. Morgan rose—
  Mr. Lamont: No, I will not give way.
  It was the same when the IRC and NEB were investing in industrial technology. My hon. Friends may not remember the plethora of companies named after Greek islands and Greek gods. The gods may have been immortal, but the companies certainly were not, and they cost the taxpayer many millions of pounds. If we had never benefited from the activities of the NEB and the IRC, can anyone imagine that our industrial performance would have been any different? Of course it would not have been, although the taxpayer would have been billions of pounds better off.
  What the right hon. Member for Monklands, East forgets is that in that golden age—that wonderful period when we had an industrial strategy—industrial production went down. What we need is not an industrial strategy in the sense in which he means the phrase, but a strategy for profits and commerce. That is what we have had lately, and that is why the health of our commerce and industry is better that it has been for years.
  Whenever the right hon. and learned Gentleman has a problem, he has only one answer—to call a meeting. When he was asked a few years ago what he was going to do about car imports he said, "I'm going to call a meeting with the multinationals." He was asked what he was going to do about imports when he was Secretary of State for Trade. He said, "I'm going to call a meeting of the central working party." When the right hon. and learned Gentleman was asked last week how he would operate credit controls, he said that he would call a meeting of the bankers. The only answer he has is to call a meeting
  Credit controls did not work in the 1970s and they will not work now. The right hon. and learned Gentleman forgets that credit controls would also be highly damaging to British industry. Have the Opposition forgotten the effect of credit controls on the car industry in particular? Do they want to reintroduce the stringent credit controls that were imposed on the car industry? There is no doubt that their reintroduction would be vastly more damaging to investment—
  Mr. John Maxton: Will the right hon. Gentleman give way?
  Mr. Lamont: There have already been a large number of interventions. I do not intend to have my speech disrupted by the hon. Gentleman.
  The reintroduction of credit controls would have a very damaging effect on industry. Last year, the president of the Society of Motor Manufacturers and Traders said:
  "High interest rates, though painful, are a far more palatable solution than the reintroduction of credit controls. Those we most certainly do not want. The whole tactic was hopeless to manage and very destablising."
  That is the view of manufacturing industry, and the right hon. and learned Member for Monklands, East, ought to take it into account.
  The right hon. and learned Gentleman also put forward the policy of supply side Socialism. We are told that the Opposition will free up the market and free up the workings of the economy. What a supply side policy normally means is liberalisation—lifting the burden of

  273
  bureaucracy and less intervention. Supply side policies are precisely the opposite of what the Opposition want. They want more bureaucracy and more intervention.
  What are the examples of supply side Socialism? One example is an extension of the dock labour scheme. The way to free up the British economy, however, is to abolish the dock labour scheme. Another example of supply side Socialism is to extend the legal immunity of secondary picketing—what a way to encourage inward investment, and what an embarrassment for the British economy.
  The Opposition have no policy. After their defeat in the last general election, the hon. Member for Dagenham said:
  "No amount of slick presentation can work if we do not have something sensible to say."
  Getting the sensible things to say has been their difficulty. It was their problem then and it remains their problem today.
  Mr. Morgan: Will the Chief Secretary now tell the House what it has been waiting to hear for the last 20 minutes? When he said that the Chancellor's position was difficult, did he mean that in his three and a half hours of discussion he and the Chancellor were hoping to go to the Prime Minister together and say, "Walters must go"?
  Mr. Lamont: The hon. Gentleman is building fiction upon fiction. If he reads Hansard he will see that his interpretation is wholly wrong.
  The Opposition have tried to make this a debate about the Prime Minister's style. If it is a debate about that, why have they not had the courage to put down a no confidence motion?
  Mr. Derek Foster 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 238, Noes 342.

  Division No. 363]

  [10 pm

  AYES

  Abbott, Ms Diane

  Brown, Gordon (D'mline E)

  Adams, Allen (Paisley N)

  Brown, Nicholas (Newcastle E)

  Allen, Graham

  Brown, Ron (Edinburgh Leith)

  Alton, David

  Bruce, Malcolm (Gordon)

  Archer, Rt Hon Peter

  Buchan, Norman

  Armstrong, Hilary

  Buckley, George J.

  Ashdown, Rt Hon Paddy

  Caborn, Richard

  Ashley, Rt Hon Jack

  Callaghan, Jim

  Ashton, Joe

  Campbell, Menzies (Fife NE)

  Banks, Tony (Newham NW)

  Campbell, Ron (Blyth Valley)

  Barnes, Harry (Derbyshire NE)

  Campbell-Savours, D. N.

  Barnes, Mrs Rosie (Greenwich)

  Canavan, Dennis

  Barron, Kevin

  Carlile, Alex (Mont'g)

  Battle, John

  Cartwright, John

  Beckett, Margaret

  Clark, Dr David (S Shields)

  Beith, A. J.

  Clarke, Tom (Monklands W)

  Bell, Stuart

  Clay, Bob

  Benn, Rt Hon Tony

  Clelland, David

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

  Clwyd, Mrs Ann

  Bermingham, Gerald

  Cohen, Harry

  Bidwell, Sydney

  Coleman, Donald

  Blair, Tony

  Cook, Frank (Stockton N)

  Blunkett, David

  Cook, Robin (Livingston)

  Boateng, Paul

  Corbett, Robin

  Boyes, Roland

  Corbyn, Jeremy

  Bradley, Keith

  Cousins, Jim

  Bray, Dr Jeremy

  Cox, Tom

  274

  Crowther, Stan

  Litherland, Robert

  Cryer, Bob

  Livingstone, Ken

  Cummings, John

  Livsey, Richard

  Cunliffe, Lawrence

  Lloyd, Tony (Stretford)

  Dalyell, Tam

  Lofthouse, Geoffrey

  Darling, Alistair

  Loyden, Eddie

  Davies, Rt Hon Denzil (Llanelli)

  McAllion, John

  Davies, Ron (Caerphilly)

  McAvoy, Thomas

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

  McCartney, Ian

  Dewar, Donald

  Macdonald, Calum A.

  Dixon, Don

  McFall, John

  Dobson, Frank

  McKay, Allen (Barnsley West)

  Doran, Frank

  McKelvey, William

  Douglas, Dick

  McLeish, Henry

  Duffy, A. E. P.

  McNamara, Kevin

  Dunnachie, Jimmy

  McWilliam, John

  Dunwoody, Hon Mrs Gwyneth

  Madden, Max

  Eadie, Alexander

  Mahon, Mrs Alice

  Eastham, Ken

  Marek, Dr John

  Evans, John (St Helens N)

  Marshall, David (Shettleston)

  Ewing, Harry (Falkirk E)

  Marshall, Jim (Leicester S)

  Ewing, Mrs Margaret (Moray)

  Martin, Michael J. (Springburn)

  Fatchett, Derek

  Martlew, Eric

  Faulds, Andrew

  Maxton, John

  Field, Frank (Birkenhead)

  Meacher, Michael

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

  Meale, Alan

  Fisher, Mark

  Michael, Alun

  Flannery, Martin

  Michie, Bill (Sheffield Heeley)

  Flynn, Paul

  Michie, Mrs Ray (Arg'l & Bute)

  Foster, Derek

  Mitchell, Austin (G't Grimsby)

  Foulkes, George

  Moonie, Dr Lewis

  Fraser, John

  Morgan, Rhodri

  Fyfe, Maria

  Morley, Elliot

  Galloway, George

  Morris, Rt Hon A. (W'shawe)

  Garrett, John (Norwich South)

  Morris, Rt Hon J. (Aberavon)

  Garrett, Ted (Wallsend)

  Mowlam, Marjorie

  George, Bruce

  Mullin, Chris

  Gilbert, Rt Hon Dr John

  Murphy, Paul

  Godman, Dr Norman A.

  Nellist, Dave

  Gordon, Mildred

  Oakes, Rt Hon Gordon

  Gould, Bryan

  O'Brien, William

  Graham, Thomas

  O'Neill, Martin

  Grant, Bernie (Tottenham)

  Owen, Rt Hon Dr David

  Griffiths, Nigel (Edinburgh S)

  Parry, Robert

  Griffiths, Win (Bridgend)

  Patchett, Terry

  Grocott, Bruce

  Pendry, Tom

  Hardy, Peter

  Pike, Peter L.

  Harman, Ms Harriet

  Powell, Ray (Ogmore)

  Hattersley, Rt Hon Roy

  Prescott, John

  Healey, Rt Hon Denis

  Primarolo, Dawn

  Heffer, Eric S.

  Quin, Ms Joyce

  Henderson, Doug

  Radice, Giles

  Hoey, Ms Kate (Vauxhall)

  Randall, Stuart

  Hogg, N. (C'nauld & Kilsyth)

  Redmond, Martin

  Home Robertson, John

  Rees, Rt Hon Merlyn

  Hood, Jimmy

  Richardson, Jo

  Howarth, George (Knowsley N)

  Roberts, Allan (Bootle)

  Howell, Rt Hon D. (S'heath)

  Robertson, George

  Howells, Geraint

  Rogers, Allan

  Howells, Dr. Kim (Pontypridd)

  Rooker, Jeff

  Hoyle, Doug

  Rowlands, Ted

  Hughes, John (Coventry NE)

  Ruddock, Joan

  Hughes, Robert (Aberdeen N)

  Salmond, Alex

  Hughes, Roy (Newport E)

  Sedgemore, Brian

  Hughes, Simon (Southwark)

  Sheerman, Barry

  Illsley, Eric

  Sheldon, Rt Hon Robert

  Ingram, Adam

  Shore, Rt Hon Peter

  Janner, Greville

  Short, Clare

  Johnston, Sir Russell

  Sillars, Jim

  Jones, Barry (Alyn & Deeside)

  Skinner, Dennis

  Jones, Ieuan (Ynys Môn)

  Smith, Andrew (Oxford E)

  Jones, Martyn (Clwyd S W)

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

  Kaufman, Rt Hon Gerald

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

  Kennedy, Charles

  Smith, J. P. (Vale of Glam)

  Kinnock, Rt Hon Neil

  Snape, Peter

  Lambie, David

  Soley, Clive

  Lamond, James

  Spearing, Nigel

  Leadbitter, Ted

  Steinberg, Gerry

  Lestor, Joan (Eccles)

  Stott, Roger

  Lewis, Terry

  Strang, Gavin

  275

  Straw, Jack

  Welsh, Michael (Doncaster N)

  Taylor, Mrs Ann (Dewsbury)

  Wigley, Dafydd

  Taylor, Matthew (Truro)

  Williams, Rt Hon Alan

  Thomas, Dr Datydd Elis

  Williams, Alan W. (Carm'then)

  Thompson, Jack (Wansbeck)

  Wilson, Brian

  Turner, Dennis

  Winnick, David

  Vaz, Keith

  Wise, Mrs Audrey

  Wall, Pat

  Worthington, Tony

  Wallace, James

  Wray, Jimmy

  Walley, Joan

  Young, David (Bolton SE)

  Wardell, Gareth (Gower)

  Wareing, Robert N.

  Tellers for the Ayes:

  Watson, Mike (Glasgow, C)

  Mr. Frank Haynes and Mrs. Llin Golding.

  Welsh, Andrew (Angus E)

  NOES

  Aitken, Jonathan

  Colvin, Michael

  Alexander, Richard

  Conway, Derek

  Alison, Rt Hon Michael

  Coombs, Anthony (Wyre F'rest)

  Allason, Rupert

  Cope, Rt Hon John

  Amery, Rt Hon Julian

  Cormack, Patrick

  Amess, David

  Couchman, James

  Amos, Alan

  Cran, James

  Arbuthnot, James

  Critchley, Julian

  Arnold, Jacques (Gravesham)

  Currie, Mrs Edwina

  Arnold, Tom (Hazel Grove)

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

  Ashby, David

  Davis, David (Boothferry)

  Aspinwall, Jack

  Day, Stephen

  Atkins, Robert

  Devlin, Tim

  Baker, Rt Hon K. (Mole Valley)

  Dicks, Terry

  Baker, Nicholas (Dorset N)

  Dorrell, Stephen

  Baldry, Tony

  Douglas-Hamilton, Lord James

  Banks, Robert (Harrogate)

  Dover, Den

  Batiste, Spencer

  Dunn, Bob

  Beaumont-Dark, Anthony

  Eggar, Tim

  Bellingham, Henry

  Emery, Sir Peter

  Bendall, Vivian

  Evans, David (Welwyn Hatf'd)

  Bennett, Nicholas (Pembroke)

  Evennett, David

  Benyon, W.

  Fairbairn, Sir Nicholas

  Bevan, David Gilroy

  Fallon, Michael

  Biffen, Rt Hon John

  Favell, Tony

  Blackburn, Dr John G.

  Fenner, Dame Peggy

  Blaker, Rt Hon Sir Peter

  Field, Barry (Isle of Wight)

  Body, Sir Richard

  Finsberg, Sir Geoffrey

  Bonsor, Sir Nicholas

  Fishburn, John Dudley

  Boscawen, Hon Robert

  Fookes, Dame Janet

  Bottomley, Peter

  Forman, Nigel

  Bottomley, Mrs Virginia

  Forsyth, Michael (Stirling)

  Bowden, A (Brighton K'pto'n)

  Forth, Eric

  Bowden, Gerald (Dulwich)

  Fowler, Rt Hon Norman

  Bowis, John

  Fox, Sir Marcus

  Boyson, Rt Hon Dr Sir Rhodes

  Franks, Cecil

  Braine, Rt Hon Sir Bernard

  Freeman, Roger

  Brandon-Bravo, Martin

  French, Douglas

  Brazier, Julian

  Gale, Roger

  Bright, Graham

  Garel-Jones, Tristan

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

  Gill, Christopher

  Browne, John (Winchester)

  Gilmour, Rt Hon Sir Ian

  Bruce, Ian (Dorset South)

  Glyn, Dr Alan

  Buck, Sir Antony

  Goodhart, Sir Philip

  Budgen, Nicholas

  Goodson-Wickes, Dr Charles

  Burns, Simon

  Gorman, Mrs Teresa

  Burt, Alistair

  Gorst, John

  Butcher, John

  Gow, Ian

  Butler, Chris

  Grant, Sir Anthony (CambsSW)

  Butterfill, John

  Greenway, Harry (Ealing N)

  Carlisle, John, (Luton N)

  Greenway, John (Ryedale)

  Carlisle, Kenneth (Lincoln)

  Gregory, Conal

  Carrington, Matthew

  Griffiths, Peter (Portsmouth N)

  Carttiss, Michael

  Grist, Ian

  Cash, William

  Ground, Patrick

  Chalker, Rt Hon Mrs Lynda

  Grylls, Michael

  Channon, Rt Hon Paul

  Hague, William

  Chapman, Sydney

  Hamilton, Neil (Tatton)

  Chope, Christopher

  Hampson, Dr Keith

  Churchill, Mr

  Hanley, Jeremy

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

  Hannam, John

  Clark, Dr Michael (Rochford)

  Hargreaves, Ken (Hyndburn)

  Clark, Sir W. (Croydon S)

  Harris, David

  Clarke, Rt Hon K. (Rushcliffe)

  Haselhurst, Alan

  276

  Hawkins, Christopher

  Meyer, Sir Anthony

  Hayes, Jerry

  Miller, Sir Hal

  Hayhoe, Rt Hon Sir Barney

  Mills, Iain

  Hayward, Robert

  Miscampbell, Norman

  Heath, Rt Hon Edward

  Mitchell, Andrew (Gedling)

  Heathcoat-Amory, David

  Mitchell, Sir David

  Heddle, John

  Moate, Roger

  Heseltine, Rt Hon Michael

  Monro, Sir Hector

  Hicks, Mrs Maureen (Wolv' NE)

  Montgomery, Sir Fergus

  Higgins, Rt Hon Terence L.

  Moore, Rt Hon John

  Hill, James

  Morris, M (N'hampton S)

  Hind, Kenneth

  Morrison, Sir Charles

  Hogg, Hon Douglas (Gr'th'm)

  Morrison, Rt Hon P (Chester)

  Holt, Richard

  Moss, Malcolm

  Hordern, Sir Peter

  Moynihan, Hon Colin

  Howard, Michael

  Mudd, David

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

  Neale, Gerrard

  Howarth, G. (Cannock & B'wd)

  Needham, Richard

  Howe, Rt Hon Sir Geoffrey

  Nelson, Anthony

  Howell, Rt Hon David (G'dford)

  Neubert, Michael

  Howell, Ralph (North Norfolk)

  Newton, Rt Hon Tony

  Hughes, Robert G. (Harrow W)

  Nicholls, Patrick

  Hunt, David (Wirral W)

  Nicholson, David (Taunton)

  Hunter, Andrew

  Nicholson, Emma (Devon West)

  Hurd, Rt Hon Douglas

  Norris, Steve

  Irvine, Michael

  Onslow, Rt Hon Cranley

  Irving, Charles

  Oppenheim, Phillip

  Jack, Michael

  Page, Richard

  Jackson, Robert

  Parkinson, Rt Hon Cecil

  Jessel, Toby

  Patnick, Irvine

  Johnson Smith, Sir Geoffrey

  Patten, Rt Hon Chris (Bath)

  Jones, Gwilym (Cardiff N)

  Patten, John (Oxford W)

  Jones, Robert B (Herts W)

  Pattie, Rt Hon Sir Geoffrey

  Jopling, Rt Hon Michael

  Pawsey, James

  Kellett-Bowman, Dame Elaine

  Peacock, Mrs Elizabeth

  Key, Robert

  Porter, Barry (Wirral S)

  Kilfedder, James

  Porter, David (Waveney)

  King, Roger (B'ham N'thfield)

  Portillo, Michael

  Kirkhope, Timothy

  Powell, William (Corby)

  Knapman, Roger

  Price, Sir David

  Knight, Greg (Derby North)

  Raison, Rt Hon Timothy

  Knight, Dame Jill (Edgbaston)

  Rathbone, Tim

  Knowles, Michael

  Redwood, John

  Knox, David

  Renton, Rt Hon Tim

  Lamont, Rt Hon Norman

  Rhodes James, Robert

  Lang, Ian

  Riddick, Graham

  Latham, Michael

  Ridley, Rt Hon Nicholas

  Lawrence, Ivan

  Ridsdale, Sir Julian

  Lawson, Rt Hon Nigel

  Rifkind, Rt Hon Malcolm

  Lee, John (Pendle)

  Roberts, Wyn (Conwy)

  Leigh, Edward (Gainsbor'gh)

  Roe, Mrs Marion

  Lennox-Boyd, Hon Mark

  Rossi, Sir Hugh

  Lester, Jim (Broxtowe)

  Rost, Peter

  Lightbown, David

  Rowe, Andrew

  Lilley, Peter

  Rumbold, Mrs Angela

  Lloyd, Sir Ian (Havant)

  Ryder, Richard

  Lloyd, Peter (Fareham)

  Sackville, Hon Tom

  Lord, Michael

  Sainsbury, Hon Tim

  Lyell, Sir Nicholas

  Sayeed, Jonathan

  Macfarlane, Sir Neil

  Scott, Rt Hon Nicholas

  MacGregor, Rt Hon John

  Shaw, David (Dover)

  MacKay, Andrew (E Berkshire)

  Shaw, Sir Giles (Pudsey)

  Maclean, David

  Shaw, Sir Michael (Scarb')

  McNair-Wilson, Sir Michael

  Shelton, Sir William

  McNair-Wilson, Sir Patrick

  Shephard, Mrs G. (Norfolk SW)

  Madel, David

  Shepherd, Colin (Hereford)

  Major, Rt Hon John

  Shepherd, Richard (Aldridge)

  Malins, Humfrey

  Shersby, Michael

  Mans, Keith

  Sims, Roger

  Maples, John

  Skeet, Sir Trevor

  Marland, Paul

  Smith, Sir Dudley (Warwick)

  Marlow, Tony

  Smith, Tim (Beaconsfield)

  Marshall, John (Hendon S)

  Soames, Hon Nicholas

  Marshall, Michael (Arundel)

  Speed, Keith

  Martin, David (Portsmouth S)

  Speller, Tony

  Mates, Michael

  Spicer, Sir Jim (Dorset W)

  Maude, Hon Francis

  Spicer, Michael (S Worcs)

  Maxwell-Hyslop, Robin

  Squire, Robin

  Mayhew, Rt Hon Sir Patrick

  Stanbrook, Ivor

  Mellor, David

  Stanley, Rt Hon Sir John

  277

  Steen, Anthony

  Vaughan, Sir Gerard

  Stern, Michael

  Viggers, Peter

  Stevens, Lewis

  Waddington, Rt Hon David

  Stewart, Allan (Eastwood)

  Wakeham, Rt Hon John

  Stewart, Andy (Sherwood)

  Walden, George

  Stewart, Rt Hon Ian (Herts N)

  Walker, Bill (T'side North)

  Stokes, Sir John

  Walker, Rt Hon P. (W'cester)

  Stradling Thomas, Sir John

  Waller, Gary

  Sumberg, David

  Walters, Sir Dennis

  Summerson, Hugo

  Ward, John

  Tapsell, Sir Peter

  Wardle, Charles (Bexhill)

  Taylor, Ian (Esher)

  Warren, Kenneth

  Taylor, John M (Solihull)

  Watts, John

  Taylor, Teddy (S'end E)

  Wheeler, John

  Tebbit, Rt Hon Norman

  Whitney, Ray

  Temple-Morris, Peter

  Widdecombe, Ann

  Thatcher, Rt Hon Margaret

  Wiggin, Jerry

  Thompson, D. (Calder Valley)

  Wilkinson, John

  Thompson, Patrick (Norwich N)

  Winterton, Mrs Ann

  Thorne, Neil

  Winterton, Nicholas

  Thornton, Malcolm

  Wolfson, Mark

  Thurnham, Peter

  Wood, Timothy

  Townend, John (Bridlington)

  Yeo, Tim

  Townsend, Cyril D. (B'heath)

  Young, Sir George (Acton)

  Tracey, Richard

  Younger, Rt Hon George

  Tredinnick, David

  Trippier, David

  Tellers for the Noes:

  Trotter, Neville

  Mr. Alastair Goodlad and Mr. Tony Durant.

  Twinn, Dr Ian

  Question accordingly negatived.
  Question, That the proposed words be there added, put forthwith pursuant to Standing Order No. 30 (Question on amendments):—
  The House divided: Ayes 339, Noes 234.

  Division No. 364]

  [10.14 pm

  AYES

  Aitken, Jonathan

  Browne, John (Winchester)

  Alexander, Richard

  Bruce, Ian (Dorset South)

  Alison, Rt Hon Michael

  Buck, Sir Antony

  Allason, Rupert

  Budgen, Nicholas

  Amery, Rt Hon Julian

  Burns, Simon

  Amess, David

  Burt, Alistair

  Amos, Alan

  Butcher, John

  Arbuthnot, James

  Butler, Chris

  Arnold, Jacques (Gravesham)

  Butterfill, John

  Arnold, Tom (Hazel Grove)

  Carlisle, John, (Luton N)

  Ashby, David

  Carlisle, Kenneth (Lincoln)

  Aspinwall, Jack

  Carrington, Matthew

  Atkins, Robert

  Carttiss, Michael

  Baker, Rt Hon K. (Mole Valley)

  Cash, William

  Baker, Nicholas (Dorset N)

  Chalker, Rt Hon Mrs Lynda

  Baldry, Tony

  Channon, Rt Hon Paul

  Banks, Robert (Harrogate)

  Chapman, Sydney

  Batiste, Spencer

  Chope, Christopher

  Beaumont-Dark, Anthony

  Churchill, Mr

  Bellingham, Henry

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

  Bendall, Vivian

  Clark, Dr Michael (Rochford)

  Bennett, Nicholas (Pembroke)

  Clark, Sir W. (Croydon S)

  Benyon, W.

  Clarke, Rt Hon K. (Rushcliffe)

  Bevan, David Gilroy

  Colvin, Michael

  Biffen, Rt Hon John

  Conway, Derek

  Blackburn, Dr John G.

  Coombs, Anthony (Wyre F'rest)

  Blaker, Rt Hon Sir Peter

  Cope, Rt Hon John

  Body, Sir Richard

  Cormack, Patrick

  Bonsor, Sir Nicholas

  Couchman, James

  Boscawen, Hon Robert

  Cran, James

  Bottomley, Peter

  Critchley, Julian

  Bottomley, Mrs Virginia

  Currie, Mrs Edwina

  Bowden, A (Brighton K'pto'n)

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

  Bowden, Gerald (Dulwich)

  Davis, David (Boothferry)

  Bowis, John

  Day, Stephen

  Boyson, Rt Hon Dr Sir Rhodes

  Devlin, Tim

  Braine, Rt Hon Sir Bernard

  Dicks, Terry

  Brandon-Bravo, Martin

  Dorrell, Stephen

  Brazier, Julian

  Douglas-Hamilton, Lord James

  Bright, Graham

  Dover, Den

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

  Dunn, Bob

  278

  Eggar, Tim

  Kellett-Bowman, Dame Elaine

  Emery, Sir Peter

  Key, Robert

  Evans, David (Welwyn Hatf'd)

  Kilfedder, James

  Evennett, David

  King, Roger (B'ham N'thfield)

  Fairbairn, Sir Nicholas

  Kirkhope, Timothy

  Fallon, Michael

  Knapman, Roger

  Favell, Tony

  Knight, Greg (Derby North)

  Fenner, Dame Peggy

  Knight, Dame Jill (Edgbaston)

  Field, Barry (Isle of Wight)

  Knowles, Michael

  Finsberg, Sir Geoffrey

  Knox, David

  Fishburn, John Dudley

  Lamont, Rt Hon Norman

  Fookes, Dame Janet

  Lang, Ian

  Forman, Nigel

  Latham, Michael

  Forsyth, Michael (Stirling)

  Lawrence, Ivan

  Forth, Eric

  Lawson, Rt Hon Nigel

  Fowler, Rt Hon Norman

  Lee, John (Pendle)

  Fox, Sir Marcus

  Leigh, Edward (Gainsbor'gh)

  Franks, Cecil

  Lennox-Boyd, Hon Mark

  Freeman, Roger

  Lester, Jim (Broxtowe)

  French, Douglas

  Lightbown, David

  Gale, Roger

  Lilley, Peter

  Garel-Jones, Tristan

  Lloyd, Sir Ian (Havant)

  Gill, Christopher

  Lloyd, Peter (Fareham)

  Gilmour, Rt Hon Sir Ian

  Lord, Michael

  Glyn, Dr Alan

  Lyell, Sir Nicholas

  Goodhart, Sir Philip

  Macfarlane, Sir Neil

  Goodson-Wickes, Dr Charles

  MacGregor, Rt Hon John

  Gorman, Mrs Teresa

  MacKay, Andrew (E Berkshire)

  Gorst, John

  Maclean, David

  Gow, Ian

  McNair-Wilson, Sir Michael

  Grant, Sir Anthony (CambsSW)

  McNair-Wilson, Sir Patrick

  Greenway, Harry (Ealing N)

  Madel, David

  Greenway, John (Ryedale)

  Major, Rt Hon John

  Gregory, Conal

  Malins, Humfrey

  Griffiths, Peter (Portsmouth N)

  Mans, Keith

  Grist, Ian

  Maples, John

  Ground, Patrick

  Marland, Paul

  Grylls, Michael

  Marlow, Tony

  Hague, William

  Marshall, John (Hendon S)

  Hamilton, Neil (Tatton)

  Marshall, Michael (Arundel)

  Hampson, Dr Keith

  Martin, David (Portsmouth S)

  Hanley, Jeremy

  Maude, Hon Francis

  Hannam, John

  Maxwell-Hyslop, Robin

  Hargreaves, Ken (Hyndburn)

  Mayhew, Rt Hon Sir Patrick

  Harris, David

  Mellor, David

  Haselhurst, Alan

  Meyer, Sir Anthony

  Hawkins, Christopher

  Miller, Sir Hal

  Hayes, Jerry

  Mills, Iain

  Hayhoe, Rt Hon Sir Barney

  Miscampbell, Norman

  Hayward, Robert

  Mitchell, Andrew (Gedling)

  Heath, Rt Hon Edward

  Mitchell, Sir David

  Heathcoat-Amory, David

  Moate, Roger

  Heddle, John

  Monro, Sir Hector

  Heseltine, Rt Hon Michael

  Montgomery, Sir Fergus

  Hicks, Mrs Maureen (Wolv' NE)

  Moore, Rt Hon John

  Higgins, Rt Hon Terence L.

  Morris, M (N'hampton S)

  Hill, James

  Morrison, Sir Charles

  Hind, Kenneth

  Morrison, Rt Hon P (Chester)

  Hogg, Hon Douglas (Gr'th'm)

  Moss, Malcolm

  Holt, Richard

  Moynihan, Hon Colin

  Hordern, Sir Peter

  Mudd, David

  Howard, Michael

  Neale, Gerrard

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

  Needham, Richard

  Howarth, G. (Cannock & B'wd)

  Nelson, Anthony

  Howe, Rt Hon Sir Geoffrey

  Neubert, Michael

  Howell, Rt Hon David (G'dford)

  Newton, Rt Hon Tony

  Howell, Ralph (North Norfolk)

  Nicholls, Patrick

  Hughes, Robert G. (Harrow W)

  Nicholson, David (Taunton)

  Hunt, David (Wirral W)

  Nicholson, Emma (Devon West)

  Hunter, Andrew

  Norris, Steve

  Hurd, Rt Hon Douglas

  Onslow, Rt Hon Cranley

  Irvine, Michael

  Oppenheim, Phillip

  Irving, Charles

  Page, Richard

  Jack, Michael

  Parkinson, Rt Hon Cecil

  Jackson, Robert

  Patnick, Irvine

  Jessel, Toby

  Patten, Rt Hon Chris (Bath)

  Johnson Smith, Sir Geoffrey

  Patten, John (Oxford W)

  Jones, Gwilym (Cardiff N)

  Pattie, Rt Hon Sir Geoffrey

  Jones, Robert B (Herts W)

  Pawsey, James

  Jopling, Rt Hon Michael

  Peacock, Mrs Elizabeth

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  Porter, Barry (Wirral S)

  Stradling Thomas, Sir John

  Porter, David (Waveney)

  Sumberg, David

  Portillo, Michael

  Summerson, Hugo

  Powell, William (Corby)

  Tapsell, Sir Peter

  Price, Sir David

  Taylor, Ian (Esher)

  Raison, Rt Hon Timothy

  Taylor, John M (Solihull)

  Rathbone, Tim

  Taylor, Teddy (S'end E)

  Redwood, John

  Tebbit, Rt Hon Norman

  Renton, Tim

  Temple-Morris, Peter

  Rhodes James, Robert

  Thatcher, Rt Hon Margaret

  Riddick, Graham

  Thompson, D. (Calder Valley)

  Ridley, Rt Hon Nicholas

  Thompson, Patrick (Norwich N)

  Ridsdale, Sir Julian

  Thorne, Neil

  Rifkind, Rt Hon Malcolm

  Thornton, Malcolm

  Roberts, Wyn (Conwy)

  Thurnham, Peter

  Roe, Mrs Marion

  Townend, John (Bridlington)

  Rossi, Sir Hugh

  Townsend, Cyril D. (B'heath)

  Rost, Peter

  Tracey, Richard

  Rowe, Andrew

  Tredinnick, David

  Rumbold, Mrs Angela

  Trippier, David

  Ryder, Richard

  Trotter, Neville

  Sackville, Hon Tom

  Twinn, Dr Ian

  Sainsbury, Hon Tim

  Vaughan, Sir Gerard

  Sayeed, Jonathan

  Viggers, Peter

  Shaw, David (Dover)

  Waddington, Rt Hon David

  Shaw, Sir Giles (Pudsey)

  Wakeham, Rt Hon John

  Shaw, Sir Michael (Scarb')

  Walden, George

  Shelton, Sir William

  Walker, Bill (T'side North)

  Shephard, Mrs G. (Norfolk SW)

  Walker, Rt Hon P. (W'cester)

  Shepherd, Colin (Hereford)

  Waller, Gary

  Shepherd, Richard (Aldridge)

  Walters, Sir Dennis

  Shersby, Michael

  Ward, John

  Sims, Roger

  Wardle, Charles (Bexhill)

  Skeet, Sir Trevor

  Warren, Kenneth

  Smith, Sir Dudley (Warwick)

  Watts, John

  Smith, Tim (Beaconsfield)

  Wheeler, John

  Soames, Hon Nicholas

  Whitney, Ray

  Speed, Keith

  Widdecombe, Ann

  Speller, Tony

  Wiggin, Jerry

  Spicer, Sir Jim (Dorset W)

  Wilkinson, John

  Spicer, Michael (S Worcs)

  Winterton, Mrs Ann

  Squire, Robin

  Winterton, Nicholas

  Stanbrook, Ivor

  Wolfson, Mark

  Stanley, Rt Hon Sir John

  Wood, Timothy

  Steen, Anthony

  Yeo, Tim

  Stern, Michael

  Young, Sir George (Acton)

  Stevens, Lewis

  Stewart, Allan (Eastwood)

  Tellers for the Ayes:

  Stewart, Andy (Sherwood)

  Mr. Tony Durant and Mr. Alistair Goodlad.

  Stewart, Rt Hon Ian (Herts N)

  Stokes, Sir John

  NOES

  Adams, Allen (Paisley N)

  Brown, Nicholas (Newcastle E)

  Allen, Graham

  Brown, Ron (Edinburgh Leith)

  Alton, David

  Bruce, Malcolm (Gordon)

  Archer, Rt Hon Peter

  Buchan, Norman

  Armstrong, Hilary

  Buckley, George J.

  Ashdown, Rt Hon Paddy

  Caborn, Richard

  Ashley, Rt Hon Jack

  Callaghan, Jim

  Ashton, Joe

  Campbell, Menzies (Fife NE)

  Banks, Tony (Newham NW)

  Campbell, Ron (Blyth Valley)

  Barnes, Harry (Derbyshire NE)

  Campbell-Savours, D. N.

  Barnes, Mrs Rosie (Greenwich)

  Canavan, Dennis

  Barron, Kevin

  Carlile, Alex (Mont'g)

  Battle, John

  Cartwright, John

  Beckett, Margaret

  Clark, Dr David (S Shields)

  Beith, A. J.

  Clarke, Tom (Monklands W)

  Bell, Stuart

  Clay, Bob

  Benn, Rt Hon Tony

  Clelland, David

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

  Clwyd, Mrs Ann

  Bermingham, Gerald

  Cohen, Harry

  Bidwell, Sydney

  Coleman, Donald

  Blair, Tony

  Cook, Frank (Stockton N)

  Blunkett, David

  Cook, Robin (Livingston)

  Boateng, Paul

  Corbett, Robin

  Boyes, Roland

  Corbyn, Jeremy

  Bradley, Keith

  Cousins, Jim

  Bray, Dr Jeremy

  Cox, Tom

  Brown, Gordon (D'mline E)

  Crowther, Stan

  280

  Cryer, Bob

  Livsey, Richard

  Cummings, John

  Lloyd, Tony (Stretford)

  Cunliffe, Lawrence

  Lofthouse, Geoffrey

  Cunningham, Dr John

  Loyden, Eddie

  Dalyell, Tam

  McAllion, John

  Darling, Alistair

  McAvoy, Thomas

  Davies, Rt Hon Denzil (Llanelli)

  McCartney, Ian

  Davies, Ron (Caerphilly)

  Macdonald, Calum A.

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

  McFall, John

  Dewar, Donald

  McKay, Allen (Barnsley West)

  Dixon, Don

  McKelvey, William

  Dobson, Frank

  McLeish, Henry

  Doran, Frank

  McNamara, Kevin

  Douglas, Dick

  McWilliam, John

  Duffy, A. E. P.

  Madden, Max

  Dunwoody, Hon Mrs Gwyneth

  Mahon, Mrs Alice

  Eadie, Alexander

  Marek, Dr John

  Eastham, Ken

  Marshall, David (Shettleston)

  Evans, John (St Helens N)

  Marshall, Jim (Leicester S)

  Ewing, Harry (Falkirk E)

  Martin, Michael J. (Springburn)

  Ewing, Mrs Margaret (Moray)

  Martlew, Eric

  Fatchett, Derek

  Maxton, John

  Faulds, Andrew

  Meacher, Michael

  Field, Frank (Birkenhead)

  Meale, Alan

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

  Michael, Alun

  Fisher, Mark

  Michie, Bill (Sheffield Heeley)

  Flannery, Martin

  Michie, Mrs Ray (Arg'l & Bute)

  Flynn, Paul

  Mitchell, Austin (G't Grimsby)

  Foster, Derek

  Moonie, Dr Lewis

  Foulkes, George

  Morgan, Rhodri

  Fraser, John

  Morley, Elliot

  Fyfe, Maria

  Morris, Rt Hon A. (W'shawe)

  Garrett, John (Norwich South)

  Morris, Rt Hon J. (Aberavon)

  Garrett, Ted (Wallsend)

  Mowlam, Marjorie

  George, Bruce

  Mullin, Chris

  Gilbert, Rt Hon Dr John

  Murphy, Paul

  Godman, Dr Norman A.

  Oakes, Rt Hon Gordon

  Golding, Mrs Llin

  O'Brien, William

  Gordon, Mildred

  O'Neill, Martin

  Gould, Bryan

  Orme, Rt Hon Stanley

  Graham, Thomas

  Owen, Rt Hon Dr David

  Grant, Bernie (Tottenham)

  Parry, Robert

  Griffiths, Nigel (Edinburgh S)

  Patchett, Terry

  Griffiths, Win (Bridgend)

  Pendry, Tom

  Grocott, Bruce

  Pike, Peter L.

  Hardy, Peter

  Powell, Ray (Ogmore)

  Harman, Ms Harriet

  Prescott, John

  Hattersley, Rt Hon Roy

  Primarolo, Dawn

  Healey, Rt Hon Denis

  Quin, Ms Joyce

  Heffer, Eric S.

  Radice, Giles

  Henderson, Doug

  Randall, Stuart

  Hoey, Ms Kate (Vauxhall)

  Redmond, Martin

  Hogg, N. (C'nauld & Kilsyth)

  Rees, Rt Hon Merlyn

  Home Robertson, John

  Richardson, Jo

  Hood, Jimmy

  Roberts, Allan (Bootle)

  Howarth, George (Knowsley N)

  Robertson, George

  Howell, Rt Hon D. (S'heath)

  Rogers, Allan

  Howells, Geraint

  Rooker, Jeff

  Howells, Dr. Kim (Pontypridd)

  Rowlands, Ted

  Hoyle, Doug

  Ruddock, Joan

  Hughes, John (Coventry NE)

  Salmond, Alex

  Hughes, Robert (Aberdeen N)

  Sedgemore, Brian

  Hughes, Roy (Newport E)

  Sheerman, Barry

  Hughes, Simon (Southwark)

  Sheldon, Rt Hon Robert

  Illsley, Eric

  Shore, Rt Hon Peter

  Ingram, Adam

  Short, Clare

  Janner, Greville

  Sillars, Jim

  Jones, Barry (Alyn & Deeside)

  Skinner, Dennis

  Jones, Ieuan (Ynys Môn)

  Smith, Andrew (Oxford E)

  Jones, Martyn (Clwyd S W)

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

  Kaufman, Rt Hon Gerald

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

  Kennedy, Charles

  Snape, Peter

  Kinnock, Rt Hon Neil

  Soley, Clive

  Lambie, David

  Spearing, Nigel

  Lamond, James

  Steinberg, Gerry

  Leadbitter, Ted

  Stott, Roger

  Lestor, Joan (Eccles)

  Strang, Gavin

  Lewis, Terry

  Straw, Jack

  Litherland, Robert

  Taylor, Mrs Ann (Dewsbury)

  Livingstone, Ken

  Taylor, Matthew (Truro)

  281

  Thomas, Dr Dafydd Elis

  Williams, Rt Hon Alan

  Thompson, Jack (Wansbeck)

  Williams, Alan W. (Carm'then)

  Turner, Dennis

  Wilson, Brian

  Vaz, Keith

  Winnick, David

  Wall, Pat

  Wise, Mrs Audrey

  Wallace, James

  Worthington, Tony

  Walley, Joan

  Wray, Jimmy

  Wardell, Gareth (Gower)

  Young, David (Bolton SE)

  Wareing, Robert N.

  Watson, Mike (Glasgow, C)

  Tellers for the Noes:

  Welsh, Andrew (Angus E)

  Mr. Frank Haynes and Mr. Jimmy Dunnachie.

  Welsh, Michael (Doncaster N)

  Question accordingly agreed to.
  MR. SPEAKER forthwith declared the main Question, as amended, to be agreed to.
  Resolved,
  That this House congratulates Her Majesty's Government on the determination with which it has pursued policies to bear down on inflation and improve the supply side of the economy; welcomes the sustained growth of output, productivity, investment, employment and living standards which the United Kingdom has enjoyed as a result; and endorses the Government's resolve to continue with the policies which are in the long-term interest of the British economy.

  Licensing and Clubs (Northern Ireland)
  10.27 pm
  The Parliamentary Under-Secretary of State for Northern Ireland (Mr. Richard Needham): I beg to move,
  That the draft Licensing and Clubs (Amendment) (Northern Ireland) Order 1989, which was laid before this House on 25th July, be approved.
  The order is short, containing only nine articles. In 1987, the Government made significant changes to the licensing law in Northern Ireland. These were contained in the Licensing (Northern Ireland) Order 1987. The present order is intended to complement those earlier reforms. Articles 1 and 2 are introductory. Article 3 deals with the products that can be sold on licensed premises. The present law restricts public houses and off-licences to the business authorised by the licence, which by and large is the sale of alcohol. However, it makes exceptions for certain other goods, such as selling cigarettes, crisps, and the like, which go naturally with the sale of alcohol.
  As the law stands, even the most modest change could be achieved only by primary legislation. It seems unnecessary to have an order every time a new bottle opener comes on the market. In future, therefore, we are proposing that any change should be through regulation.
  Article 4 provides for the granting of extension licences and special authorisations when new year's eve falls on a Sunday. This is on average once every seven years, and it so happens that next new year's eve will be one of those occasions. As the law stands, alcohol cannot be sold in licensed premises or registered clubs after 10 pm on Sunday. I have been persuaded by arguments from the licensed trade, registered clubs and golfers at the 19th hole that, should I not act, there will be hardly a new year's party to which I will be invited in December. The provision will enable hotels, restaurants and pubs on application to a court and registered clubs on application to the police, to sell drink after 10 pm on 31 December until I am on Monday 1 January. I was addressing my remarks to the hon. Member for Belfast, South (Rev. Martin Smyth) in particular.
  Article 5 introduces a ban on all the off-sales of alcohol after 9 pm. This is the most significant change in the order, so I shall explain how it has come about.
  Before 1 October 1987, the standard hours for alcohol off-sales from pubs and off-licences were 11.30 am to 11.00 pm., but not off-sales from pubs or the off-sales outlets attached to them.
  The measure was aimed primarily at lager louts. I had received many complaints about thuggish behaviour in Northern Ireland. It was clear that the main source of drink involved was off-licensed shops. Since then there has been a decline in the problem, but there remains a widespread clamour for stronger action to be taken against drinking in public.
  It was also clear that, following the 1987 ban, some of the off-sales shops were struggling because, as I have said, the 1987 ban did not extend to pubs or their attached off-sales outlets. Northern Ireland Members and others pointed out to me the detrimental effect that the new hours were having on existing free-standing off-licences.
  The Government, therefore, must try to square the circle. The choice is plain: either we return to 11 pm closing for all off-licence outlets, or we require all of them to close at 9 pm. To take the former course would be to sweep aside
  284
  the complaints of those who are rightly concerned about the serious problems associated with late-night drinking. That would be both unreasonable and unacceptable. The sensible answer, and the one that we have chosen, is to impose a ban on all off-sales after 9 pm, including those from pubs and off-sales outlets attached to them. That is the effect of article 5.
  I now refer to article 6. I am sure that all hon. Members share my concern about the increasing problem of underage drinking. I know that all sections of the licensed trade are equally concerned, and they do not want to have under-18s among their customers. In passing I would like to praise what are known as no-alcohol pubs. I am pleased to say that in Armagh, Ballymena and, more recently, Dungannon there have been successful ventures to entice youngsters towards alcohol-free drinking. But we must keep a tight grip on the licensing side, and especially on offences involving minors. This article will create a new ground of defence for a person charged with selling alcohol to a minor, requiring him to prove that he had used all due diligence to prevent the offence. This defence will also be available to a person charged with allowing a minor in the bar area of a pub or in an off-licence.
  This change stems from a recommendation made by Baroness Masham's group in its report on young people and alcohol, that the onus for avoiding the sale of alcohol to minors should be placed firmly on the licensee. I am sure that that is the right approach, but it is important to strike a balance. On the one hand, licensees must be left in no doubt about their responsibilities, and, on the other hand, it is important to have a defence for the conscientious licensee who makes a genuine mistake or could not foresee the intentions of his customer. I believe that the new defences strike that balance. They are, of course, identical to comparable defences now applying to the rest of the United Kingdom.
  Hon. Members may like to know that the Federation of the Retail Licensed Trade, Northern Ireland has introduced a voluntary over-18 identity card scheme, similar to those operating in England and, I am glad to say, in my constituency. That is very much the sort of action which article 6 is designed to encourage, and many hon. Members are supporting it.
  The remaining articles are mainly technical. Article 7 inserts a new arm into the definition of "intoxicating liquor" in the Licensing Act (Northern Ireland) 1971. Article 8 makes minor amendments to the Act. Article 9 contains repeal provisions.
  I believe that what we are suggesting in this order is sensible, and that is borne out by the wide measure of support that it has received in Northern Ireland during consultation. I commend the order to the House.
  10.34 pm
  Mr. Kevin McNamara: I now understand why the order is being rushed through—so that the Under-Secretary's social life will not be interfered with too greatly over Christmas. In the context of his remarks about the 19th hole, I can also understand what the right hon. Member for Old Bexley and Sidcup (Mr. Heath) meant about a one-club policy.
  The Minister has covered most of the ground, which is not a matter of controversy between the parties. The proposals in the order—particularly those dealing with under-age drinking, the new defence for licensees who

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  properly show that they are pursuing their duties, and the various other measures—are to be welcomed. I commend the order to the House.
  10.35 pm
  Mr. James Kilfedder: When the Government introduced the draft Licensing (Northern Ireland) Order 1987, to which the Minister has just referred, which banned sales from off-licence shops after 9 pm, complaints were made that the order discriminated in favour of public houses, which could continue to sell alcohol for consumption outside until 11 pm. Not only did the order financially hurt off-licences but it meant that customers could still buy quantities of drink for consumption off the premises from public houses. The 1987 order thus defeated the purpose of closing off-licences at 9 pm, which was to restrict the amount of alcohol available to persons, especially young persons, who drank, often in public, where they behaved disgracefully and offensively to people living in or walking about the area.
  So I welcome article 5, which introduces a ban on the sale of alcohol from all off-sales outlets after 9 pm, as well as forbidding the sale of alcohol for consumption off the premises on Sundays and Christmas day.
  However, I question whether article 5(1)(a) will be readily effective with its present wording, which, if I may precis it, states that the licensee shall not sell intoxicating liquor to any person for consumption off the premises on weekdays after 9 pm. I want to emphasise that the wording of article 5 does not prevent the customer from buying alcohol after 9 pm and keeping it until the premises close, thus defeating the original purpose of a time limit on off-sales of alcohol.
  Once the public house shuts at 11 pm—or later; sad to say, there are too man late night extensions—the customer can continue drinking outside in the street or in other public places, where his conduct can be extremely offensive to peace-loving and law-abiding citizens. Unfortunately, the situation is made much worse by the fact that the persons with the parcels of drink who are let loose on to the streets from the public houses will already have spent part or all of the evening drinking in a public house until closing time. They will be in a bad condition, therefore, and will behave much more badly.
  Another aspect must not be overlooked, and I hope that the Minister will not overlook it. Anyone in a public house with parcels of alcohol after 9 pm can say that he bought the drink before 9 pm, thus providing the licensee with a defence to a summons under article 5—even though the items were sold after 9 pm. That will happen on occasions.
  The police are already overstretched in Northern Ireland—they certainly are in my constituency. We need more police officers about the area. They cannot stand guard in every licensed premises in Northern Ireland to ensure that drink is not sold after 9 in the evening for consumption off the premises.
  Article 6 deals with offences involving minors—the sale of alcohol to people under the age of 18. Under the existing law, whereby the prosecution has to establish that the licensee has "knowingly" sold alcohol to a minor, the police have been frustrated in their attempts to stop under-age drinking in public houses. The order shifts the
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  burden of proof by removing the word "knowingly", but it provides a defence for the licensee if he can prove that he exercised all due diligence, or that he had no reason to suspect that the customer was under 18 years of age.
  I hope that the Minister will take my next point on board, and have the matter looked into. Under article 6, the licensee can easily avoid the penalty that should fall on someone selling alcohol to persons aged under 18. I know that the article is in line with the changes made in the Licensing Act 1988 for England and Wales, following the recommendations of the working group to which the Minister referred, on young people and alcohol, which was chaired by Baroness Masham. It is interesting to note that the working party considered whether the sale or supply of alcohol to or for an under-age customer should be an absolute offence. It said that it
  "would undoubtedly be an effective way of strengthening licensees' resolve to establish the age of doubtful young customers … Indeed, some of us considered it the only really effective way."
  On balance, it was decided against recommending that it should be an absolute offence.
  We must recognise that there is a considerable amount of under-age drinking throughout not only Northern Ireland and the United Kingdom, but elsewhere in the world. The recent survey conducted by the Department of Health and Social Services in Northern Ireland confirmed that there is a serious problem in the Province, and that two thirds of all 16 and 17-year-olds in the survey drink alcohol. Of these, 80 per cent. claim to drink in discos or clubs—some of the discos are held in public houses—51 per cent. in pubs and bars, with 52 per cent. buying alcohol from off-licences, which were also the major source of supply for drinkers under 16. The survey also revealed that, among 15-year-olds, 19 per cent. of boys and 11 per cent of girls drink at least once a week.
  That confirms that there is a serious under-age drinking problem in Northern Ireland, and it must be dealt with. I hope that the Minister will come forward with other proposals. They may not be in line with the law in England and Wales, but they should make it easier for the police to stop under-age drinking in Northern Ireland, in public houses and on the streets.
  10.43 pm
  Mr. A. Cecil Walker: We shall soon be entering a new parliamentary Session and, once again, hon. Members who have the honour to represent the Province of Northern Ireland will be expected to suffer the humiliation of participating in a charade, a pointless exercise in which Ministers pontificate on matters affecting our welfare—Ministers who are not answerable to the Northern Ireland electorate for what they do or do not do, to justify their existence. We are expected to join this annual merry-go-round with iniquitous Orders in Council and to deliberate on their contents with no oportunity to amend them. We are asked at the proposal stage for our views, but in my experience that is just a cosmetic exercise—an attempt to introduce a modicum of democracy into the process. It is the faceless civil servants who are calling the tune in Northern Ireland and the Minister, whatever his views, is powerless to alter one iota of an order of this kind.
  If my right hon. and hon. Friends were allowed to contribute in a meaningful way to these impositions, or orders, we could honestly and sincerely advance the views

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  which are representative of our electorate. We could reflect the situation in the Province. But we are not allowed to do that. That is why such orders are anathema to the people of Northern Ireland. Ministers are not considered representative of the people. That is why the present system of government will never be accepted. It will always be a bone of contention, thus precluding meaningful relations between the Government and Unionist Members.
  If I were to be treated democratically, like all those hon. Members who represent mainland constituencies, I should welcome the order as an attempt to cover something which was not dealt with in previous legislation. It is unfortunate, however, that it has not gone far enough in certain directions. The Minister is aware of my feelings on free-standing off-licences, for example. I believe that they should be subject to planning permission and not treated merely as trading shops. Such off-licences are springing up throughout my constituency and causing great offence to the community. They invariably become meeting places for lager louts, who practise what is described in the order as "anti-social behaviour".
  I welcome the provision which will restrict the sales of intoxicating liquor at off-licences to no later than 9 pm, but that will not affect the consumption of liquor in public places by young people, who drink at street corners and get up to all kinds of mischief as a consequence. The Government should take a strong line on drinking in public places. They should legislate to place a complete ban on such an anti-social activity. It is unfair to expect local councillors to take responsibility, as their powers are often limited.
  When dealing with under-age drinking, it is virtually impossible to place the onus of proof on the holder of the licence. Much of the drink consumed by minors is purchased by adults. I have witnessed this in north Belfast. Unless measures are taken to prohibit the consumption of liquor in public places, the new measures will not work.
  The rest of the order is not contentious and will not present any problems, but it falls down in its approach to under-age drinking. That defect must be overcome if it is to give full effect to the intentions which lie behind it.
  10.49 pm
  Mr. Michael Colvin: I acknowledge the experience that the hon. Member for Belfast, North (Mr. Walker) must have with lawbreakers. As a justice of the peace, he sees in court the results of some of the happenings on the streets of Belfast that he has so vividly described. I do not think he can expect us to believe, however, that the order is being dragooned through the House by faceless civil servants. I know that my hon. Friend the Minister has taken considerable soundings from everyone involved in the licensed trade, including the Federation of the Licensed Trade, Northern Ireland, which has had many discussions with the hon. Member for Belfast, North on the order.
  This is probably not the week for advisers, but it is necessary for me to declare an interest as an adviser to the federation. The Government are introducing the order because of alcohol abuse among young people, and very necessary it is, too.
  The hon. Member for North Down (Mr. Kilfedder) has already referred to the survey carried out by the DHSS published in April this year entitled "Drinking amongst
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  school children in Northern Ireland". He said something about the results of that survey, which show that most young people obtain alcohol from off-licences, clubs and discos rather than from public houses. The survey says:
  "Off-licences were the major source of supply of alcohol to adolescent drinkers between the ages of 12 and 16."
  The figures show that nearly half buy in an off-licence., a third in a club or disco, a quarter in a pub or bar and 5 per cent. elsewhere.
  When the Minister replies, will he explain why it is necessary in this order to help the off-licence at the expense of the public house? I submit that the public house is an extremely responsible place in which to drink. The publican risks losing not just his licence but his livelihood and his home should he contravene the law on, for example, under-age drinking.
  Reducing off-sales in public houses is unlikely to have any practical effect on reducing under-age drinking. Regulations to close off-licences at 9 pm were introduced in October 1987, but the fieldwork for the survey to which I have just referred was done well after that date and the results still show that adolescents obtain most of their alcohol from off-licences.
  We do not want a rather sterile debate about hours this evening. There has already been much discussion about this, and the publicans' views have been made clear through their federation at meetings with the Minister and through the paper that it submitted on the draft order. They welcome the extra time allowed at the new year but they feel that the playing field is still a little uneven and tipped in favour of the off-licence.
  I hasten to add that I am not the federation's spokesman, but it has come up with an idea that makes a lot of sense. The House will no doubt recall that, during a debate in this place on the reform of the licensing laws in England and Wales, there was considerable debate on what should be done about Sundays. As a result of what has been described in the Official Report as a cock-up in the other place, it so happened that publicans were granted additional time on Sundays.
  A feature of the licensed trade today, and Northern Ireland is no different, is that more and more families are going to public houses at weekends. Public houses are offering more facilities than ever before. Many more meals are being served, but Sunday hours, from 12.30 pm to 2.30 pm and from 7 pm to 10 pm mean that one must gallop through lunch in considerable discomfort in order to finish in the time available.
  I hope that the Minister will say whether, in order to achieve more balance in the trade, he will consider extending the hours on Sundays so that families can eat their meals and drink their drinks in just a little more comfort.
  The hon. Member for North Down mentioned the Royal Ulster Constabulary and its views. What has the RUC had to say about the draft order? Enforcement of this cut-off deadline of 9 pm on off-licence sales will be extremely difficult. Anyone who happens to be seen leaving a public house after that time with drink bought in an off-licence only has to say that he bought it before 9 pm. I do not see how anyone could ever prove otherwise, how those who break the law are to be brought to court or how a prosecution can be made to stick, unless we are to have a system of spies.
  Ideally, we should like uniformity throughout the United Kingdom. It took long enough to bring England

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  and Wales more into line with Scotland; perhaps we should now start a campaign to bring Northern Ireland into line with the rest.
  I should like the Minister to give an undertaking that the matter will be kept under careful review. The DHSS survey is interesting, because it has provided a datum point. Perhaps some mechanism can be found for an update of those findings: I should like to think that some of the questions that have been asked could be asked again at the end of the year to establish the position, and to find out whether there is any trend in adolescent drinking.
  I am glad that the Minister acknowledged the over-18 card initiative by the federation, because it shows that responsible licensees are doing their bit to ensure that under-age drinking is kept under control.
  The licensed trade in Northern Ireland is, in a sense, unique. Those of us who represent English constituencies, but often visit Northern Ireland, are struck—as it is impossible not to be—by what might best be described as "sectarian problems". Public houses in Northern Ireland have two main characteristics: first, most are free houses—the landlord-and-tenant system does not exist to the same extent as in England—and, secondly, they are non-sectarian drinking places. They are responsibly owned and run, and people across the sectarian divide can meet and enjoy themselves there. In that sense, the Northern Ireland licensed trade has a unique part to play in bringing the people together more happily than has been the case hitherto.
  10.57 pm
  Mr. Clifford Forsythe: Perhaps I may take a little of the House's time to support my hon. Friend the Member for Belfast, North (Mr. Walker). If the order were proceeding as legislation normally does, we might even congratulate the Minister on its content. Unfortunately, however, we have to point out time and again the unfairness of treating such measures as Orders in Council.
  It is true that the order brings public houses into line with off-licences, in that both establishments must now stop trading in off-sales from 9 pm. I consider it fair that two establishments engaged in the same trade should have the same hours—that is an improvement on the previous arrangement—but there is no doubt that the sale of liquor to minors is a big problem in Northern Ireland, and a disgrace to those who run the off-licences.
  I hope that the Minister will consider introducing legislation to prevent adults from buying alcohol in off-licences and then selling it to minors outside. The explanatory note in the order says that it is an offence knowingly to sell alcohol to minors. An even greater problem is that adults are buying alcohol in off-licences and then selling it to minors outside the premises. Unfortunately, no one seems to be greatly concerned about this. Many hon. Members have said that it is a disgrace that on some occasions minors can be found lying in the street not far from where they purchased alcohol. It seems to be in no one's power to prevent that. It may not be possible to prevent minors from drinking, but it ought to be possible for the police to find out precisely how minors were able to obtain alcohol. The matter may lie outside the scope of the order, but it ought to be examined.
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  I welcome the fact that a licensee must now prove that he or she made every effort to prevent the sale of alcohol to under-age drinkers, by notices or other methods. That provision ought to be strictly enforced. It is not the case, as the hon. Member for Romsey and Waterside (Mr. Colvin) said, that on Sundays families spend a lot of time drinking in public houses. That is not the tradition in Northern Ireland. Public houses can open now in Northern Ireland on Sundays, but many of them do not do so because it is not the tradition there.
  Mr. Colvin: It is not the tradition in England and Wales either, but times are changing. Because pubs are now offering a facility, people are starting to do something that traditionally they have not done in the past. That may happen in Northern Ireland, too.
  Mr. Forsythe: That is a matter for the people concerned, not for the people who decide to open on Sundays. I assure the hon. Member for Romsey and Waterside that that is not the tradition in Northern Ireland and I do not believe that it will ever entirely become the tradition.
  I welcome the order, even though I should have preferred to welcome it in a different form. The House ought to change the procedure.
  11.3 pm
  Mr. Needham: The hon. Member for North Down (Mr. Kilfedder) said that he believes that the regulations do not do enough to prevent young people drinking, either outside licensed clubs or in them. The 1987 order that we are amending introduced new rules about the opening time of free-standing off-licences and limited it to 9 o'clock. The police believe that that has made a difference. Surely they are best to judge that. They believe that there has been a decline in the problems associated with late-night drinking since the off-sales hours were reduced for free-standing off-licences. In those circumstances, it would have been irresponsible of me not to take into account off-sales outlets attached to pubs.
  The hon. Gentleman then asked how the police would enforce that. The police always have an enforcement problem in matters related to drinking. How do they enforce the drinking-up provisions in pubs? Sometimes they do it with difficulty. I have to tell the hon. Gentleman that I have a different view of the honesty of his constituents. I do not believe for one minute that they will cheat and think that they can get away with cheating. I am referring not only to the drinkers but to the licensees. I am glad to see the hon. Member for Redcar (Ms. Mowlem) nodding her head in agreement. It would cost a licensee a great deal of money and possibly the loss of his livelihood if he were to breach this order and sell drink through his off-licence or over the bar after the permitted hours. I do not think that it is a question of putting in spies, as one or two prosecutions would serve as a timely reminder to anybody who tried to do that.
  The hon. Member for North Down then questioned the Government's proposed wording on the sale of alcohol to young people. I can only repeat that that wording now applies throughout the United Kingdom. I appreciate that the hon. Gentleman is a distinguished lawyer. I am not a distinguished lawyer, but although I listened most carefully to what he said, I have to accept the advice of the Government's lawyers and Lady Masham's lawyers. I

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  hope that the wording will have the impact that the Government and Lady Masham hope for throughout the United Kingdom.
  Mr. Kilfedder: I am sure that if the Minister has read Lady Masham's report, he will have noted that the working group was divided on the issue of an absolute offence. The group had the greatest difficulty in making a recommendation and only with reluctance did it decide not to recommend an absolute offence. As for the police, the Minister should talk to the police in Bangor, who have told me that there is a tremendous problem of under-age drinking and they cannot stop some licensees selling drink to under-age people.
  Mr. Needham: I can assure the hon. Gentleman that I spoke to the police in Bangor recently. I spoke to the new superintendent in the hon. Gentleman's constituency only a week ago and he told me that the police experience difficulties with outside drinking rather than problems in dealing with licensees who break the law.
  The hon. Gentleman, whom I listened to most diligently, stressed the need to introduce byelaws on these matters. That is exactly what we have done. We have extended the byelaws because we have listened to what is said in Northern Ireland. I think that we should go down that route and see how it works. I am sure that we shall continue to make progress, as we have so far. I am sure that the hon. Gentleman is grateful to the police and to all those responsible that the situation has improved.
  Unfortunately, we are not debating constitutional matters, and I am fully aware of the views of the hon. Member for Belfast, North (Mr. Walker) about the Order in Council procedure. I am not sure what the views of his party are on a replacement for Orders in Council. As I understand it, it would like orders to be dealt with by a Northern Ireland Assembly, which would gain some support among hon. Members. The Order in Council procedure is the method by which we consider legislation, and as the Minister responsible I must do the best that I can to take everybody's views into account. As the hon. Member for Belfast, North knows, I listen to his views with the greatest possible care, and whenever I can I act on his advice.
  Rev. Martin Smyth: Will the Minister acknowledge that the Conservative party was returned to power in 1979 on a manifesto to legislate in the House in the absence of a devolved Parliament? For far too long, we have not had a devolved Parliament in Northern Ireland. If we are not to have a devolved Parliament, is it not time that we legislated in this House?
  Mr. Needham: The Government's policy is that there should be a devolved Parliament, and I shall welcome the day when the hon. Gentleman comes round to that view. Until he does so, in agreement with the other parties in Northern Ireland and in the House, we must use the best method that we can.
  I use the Order in Council procedure to try to consult hon. Members, and I notice that in this instance hon. Members welcome the order. I do not believe that during the consultation period—I have just consulted the faceless officials—there was any noise, chirrup or note from hon. Members against the proposals. They should either agree with the order or shut up about it. It is obvious that this is a reasonable and sensible order with which they agree.
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  It is not good enough for the hon. Member for Belfast, North to criticise my civil servants. I am perfectly capable of making up my own mind, but as the hon. Gentleman knows only too well, I have changed my mind about the order, which is why I brought it back before the House. One of the reasons why I changed my mind was that I listened to Official Unionist Members. As a result of listening to the hon. Member, we decided to amend the order, and I am grateful for the support that I am now being given. The hon. Gentleman must not criticise civil servants, who have done everything in their power to bring the order before the House as quickly as possible to ensure that minor errors are corrected and to provide for Sunday opening.
  I must say to my hon. Friend the Member for Romsey and Waterside (Mr. Colvin) that the order certainly does not help off-licences at the expense of public houses. It brings them into line, and all the evidence that I had showed that what was happening was affecting the free-standing off-licence and not the public house, which was not fair. A pub's off-licence business is ancillary to its usual business. I have done as much as I can to assist the competitive position of pubs in Northern Ireland, not least by allowing them to open on Sundays and to have gaming machines that offer small prizes. It is important to promote the pub in Northern Ireland, which I am doing, but competition must be fair and balanced. [Interruption.] I am grateful for the comments of the hon. Member for Falkirk, West (Mr. Canavan).
  We are talking not about under-age drinking resulting from off-licence sales but about reducing the amount of drink that is bought by young people after nine o'clock for taking outside. That does not mean that people buying drink are under age—often, they are not. The move to reduce the amount of drink bought by young people has begun and will continue when the order comes into force.
  I listened carefully to what was said about Sunday opening and I have some sympathy with the views expressed about the present hours. I am sure that we will look at that. I have covered the subject of enforcement and I do not need to go over that again.
  The hon. Member for Antrim, South (Mr. Forsythe) raised the problem of minors—I assume he did not mean miners—and due diligence. It is an offence to sell to minors and the police are aware of that offence. If the hon. Gentleman has any evidence of where it occurs, he should let the police know.
  Mr. Roy Beggs: One of the major problems is not selling alcohol to minors but supplying them. We need to get at the adults, such as winos, who purchase liquor and supply it to young people in exchange for a few cans or a small tip to enable them to buy food or drink. Does the Minister agree also that there are many irresponsible parents who allow their minors to have access to liquor in their own homes?
  Mr. Needham: I agree with the hon. Gentleman but we are not discussing that now. The provision of alcohol to minors is an offence. I can remember it happening in the constituency of the hon. Member for Belfast, North. Where it has happened we have been diligent in taking the cases to the police so that they can be investigated. Some of the instances were dealt with strongly and I assure the hon. Gentleman that that will continue because I agree

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  that it is wrong. We should do everything we can to deal with the problems of under-age drinking and supplying alcohol to minors.
  This is a sensible, minor change to the original order. I am sure that it will be welcomed throughout Northern Ireland for what it tries to do. It places a better balance on competition and I am sure that it will be another step towards sensible licensing arrangements which we will continue to keep under review. I assure hon. Members that we will continue to consult them about what we propose as long as they will talk to us.
  Question put and agreed to.
  Resolved,
  That the draft Licensing and Clubs (Amendment) (Northern Ireland) Order 1989, which was laid before this House on 25th July, be approved.

  Pipeline (Grangemouth)
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Dorrell.]
  11.17 pm
  Mr. Harry Ewing: From discussing one highly volatile substance, alcohol, we now move to discuss other highly volatile substances—chemicals. I make no apology for telling the Minister of State, Department of Energy that my purpose is to try to persuade his right hon. Friend the Secretary of State, through him, not to grant the planning application lodged by Shell Chemicals UK Ltd. to construct a pipeline from Grangemouth in my constituency to Carrington near Manchester and on to Stanlow at Ellesmere Port. The purpose of such a pipeline would be to pipe from Grangemouth the total ethylene output from the Mossmorran chemical plant in Fife.
  I thank the Minister of State, Scottish Office for being present, as he recognises that such a pipeline would have serious job implications for Central and Fife regions and beyond. My hon. Friend the Member for Falkirk, West (Mr. Canavan) has a constituency interest, as many of his constituents work in the petrochemical industry at Grangemouth. Also, part of the Mossmorran plant is in the constituency of my hon. Friend the Member for Kirkcaldy (Dr. Moonie). I thank both Ministers and my hon. Friends for their courtesy in attending.
  First, I will relate the history of the application. In 1977, when the chemical plant at Mossmorran was first mooted, there was a public inquiry in Dunfermline. That inquiry went on for day after day and the advocate representing the companies involved was Mr. James Mackay, now Lord Chancellor.
  Day after day, promises were extracted from Shell UK Ltd. and another company, which is not involved in the pipeline application, that in exchange for permission to construct the chemical plant at Mossmorran in Fife, downstream chemical industries would be established. To date, those industries have not materialised, for good reasons which I understand. That change has come about because, according to Shell UK Ltd.—I accept its view—there has been a tremendous upturn in the demand for products which use ethylene as their chemical feedstock. Those products include low-density polyethylene, which is a base material in the manufacture of the carrier bags used by Marks and Spencer and by other companies in the manufacture of plastic containers. Lubricants and other such by-products are also produced.
  Against that background, Shell UK Ltd. lodged a planning application with Fife regional council to double output of ethylene at the Mossmorran site, and permission was granted earlier this year. The company then submitted to the Secretary of State for Energy the application to construct a pipeline.
  I say in all friendliness to the Minister of State that if that permission is granted, gone for ever will be the possibility of establishing downstream chemical industries—for instance, factories manufacturing clingfilm and lubricants—in the Fife or Central regions, especially in my constituency at Grangemouth. A promise that was made in 1977 is in danger of not being honoured.
  In an exchange of views with Sir George Sharp, the former regional convenor in Fife, Mr. Donald McQuaker, personnel manager of Shell UK Ltd., went on record in the Sunday newspapers as saying that it was true that the

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  company had made those promises to the people of Fife but it had discovered that retired or redundant miners were not capable of the high-skill technology jobs to which I am referring. That is an insult to Fife miners who had to give up their jobs because the pits closed and who gave all that they had to ensure that the chemical plant was constructed at Mossmorran. I therefore criticise Mr. McQuaker's comments about the Fife miners.
  There is another piece of the history to the application in which the Minister will he interested. In 1977, when the plant was constructed at Mossmorran, the original application to construct a pipeline to pipe ethylene from Mossmorran was submitted by Shell UK Ltd. on the basis that the pipeline would run from Mossmorran with a landfall in north Berwick, continuing down to Carrington and on to Stanlow at Ellesmere Port, where it is now proposed to construct a pipeline.
  Objection was made to the application by the Fife and Central regional councils and those of us who in those days were the parliamentary representatives of the constituencies involved. We took our objections to the then Secretary of State for Energy, now my right hon. Friend the Member for Chesterfield (Mr. Benn), who then represented Bristol, East. He refused that planning application and would not allow the company to construct the pipeline along the proposed route.
  As a result of that refusal, the pipeline constructed at that time runs from Mossmorran in Fife across the river Forth and follows the same corridor as the oil pipeline to my constituency and the BP refinery and chemical plant in Grangemouth. That is why the ethylene is piped from Mossmorran to Grangemouth. When Shell wants to pipe some of that ethylene south, it rents space in an existing pipeline owned by BP. I understand that, because Shell now has permission to double the output capacity at Mossmorran, the rented pipeline does not have a large enough capacity to permit the company to pipe the whole of the output south. That is a dangerous state of affairs, because if the company is given permission to construct the pipeline, the chances of any downstream industry being established in Fife, in my constituency or in the Central region will have gone forever.
  My constituents and those of my hon. Friends the Members for Falkirk, West and for Kirkcaldy have to put up with the environmental inconvenience of chemical plants. We are prepared to do that, and I do not make that comment by way of complaint. In return, however, we want the downstream industries established in our area when there is an increase in demand for the derivatives of ethylene, but we are not getting them.
  I sometimes think that, apart from my two hon. Friends who are here, I stand alone on this issue, although my hon. Friend the Member for Dunfermline, West (Mr. Douglas), who spent many days at the public inquiry, has authorised me to say tonight that he supports the stand that I am making.
  I do not understand the attitude of Fife regional council. The Fife director of planning produced a document in which that authority said that it would not object to the application. It said that the maximum number of downstream jobs that would be created was "only 200". We in Fife and Central region are not so well off for jobs that we can afford to turn our backs on 200 jobs. Indeed, if the Minister managed to secure 200 jobs in
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  the area, he would be organising a press conference, complete with television cameras, to make the announcement, and I would congratulate him on his achievement.
  The Government must examine the position objectively and the Secretary of State for Energy must turn the application down. The whole future of Fife and central Scotland is at stake from the point of view of downstream chemical industries. I do not see why the people there should tolerate the environmental inconvenience, only to find that when downstream industry jobs become available they are not established there. Shell is cheating the people whom I represent. Although that view may not be held generally and may seem a harsh criticism, I profoundly believe it to be true. If Shell had been true to its word, as given to the public inquiry in 1977, the application for the pipeline would not have been made.
  The Scottish Office has a part to play in trying to persuade the Secretary of State for Energy not to grant the application. I am talking not just of Fife and Central region, but of the interests of Scotland generally, and I ask that the application be refused because our downstream future is at stake.
  I want to give the Minister time to reply to my submission, so I will finish by saying that Grangemouth is a difficult area to which to attract jobs. The Minister of State, Scottish Office knows of our difficulties in attracting alternative industry. Our industry is petrochemical-based and my experience has been that, unless we can attract petrochemical jobs, we have little or no chance of attracting any jobs.
  I pay tribute to Asda, which has built a massive warehouse, not in Grangemouth but on the outskirts of the town. However, that is the exception rather than the rule. If we do not get the downstream industries into Grangemouth or Fife, the chances of getting alternative industry are extemely remote. When the Minister reports the matter to his right hon. Friend the Secretary of State who will make the decision, I hope that he will persuade him to throw the application out and to make Shell UK honour the promise that it made at the public inquiry. My constituents will be grateful to him, and that attitude will go well beyond my constituency. It will continue for years to come among the families who will enjoy employment in those downstream industries.
  11.30 pm
  Mr. Dennis Canavan rose—
  Mr. Deputy Speaker (Sir Paul Dean): Order. Does the hon. Gentleman have the agreement of the hon. Member for Falkirk, East (Mr. Ewing) and of the Minister to speak?
  Mr. Harry Ewing: Yes.
  The Minister of State, Department of Energy (Mr. Peter Morrison): Yes.
  Mr. Canavan: I want to support my hon. Friend the Member for Falkirk, East (Mr. Ewing) briefly and to remind the Minister of State that not long ago, there was a Minister of State, Department of Energy called Hamish Gray. He opposed the building of a pipeline that would have brought many jobs for the people of Scotland. Ironically, we now have a Minister of State who is proposing the building of a pipeline that will export many jobs from Scotland. I advise the Minister to beware. What

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  happened to Hamish Gray? He has disappeared into political oblivion, and perhaps the same will happen to the Minister of State.
  If the remarks of my hon. Friend the Member for Falkirk, East on the building of the pipeline come true, it will mean the disappearance of many jobs and potential jobs. I hope that the Minister will bear in mind not only the job and economic implications, but the political implications for his own party, especially in the light of recent events. On behalf of the people of Falkirk district, I urge him to bear these matters in mind and to abandon the ridiculous proposal to build an expensive pipeline which will pipe jobs out of Scotland and especially out of Falkirk district.
  11.33 pm
  The Minister of State, Department of Energy (Mr. Peter Morrison): I am delighted that the hon. Member for Falkirk, East (Mr. Ewing) has had the opportunity to raise this matter, which very much concerns him and his hon. Friend the Member for Falkirk, West (Mr. Canavan). It is a serious matter, but on a slightly lighter note, I must tell the hon. Member for Falkirk, West that I have no plans to go into political oblivion just now. However, I have plans to look at every issue carefully and to make a decision having heard everything.
  We have an important subject to discuss and I am sorry that the hon. Member for Kirkcaldy (Dr. Moonie) has departed, because I know that it is a matter that he takes seriously, which is why he was here earlier.
  The hon. Member for Falkirk, East has taken a personal interest for a long time in the industrial developments in his constituency. Certainly, the proposed ethylene pipeline is of particular interest to the hon. Member, as he pointed out in such a cogent and articulate fashion. As he said, the pipeline will carry ethylene from his constituency to what used to be my constituency before a boundary reorganisation.
  Ethylene is a very valuable North sea by-product and the pipeline will carry it, according to the proposals that have so far been put before me, in a safe and economical manner. We have high levels of unemployment in my area and I understand why the hon. Member for Falkirk, East explained that there are potential employment consequences for his constituency if the proposal goes ahead. If I was the hon. Gentleman I would have raised the matter in exactly the way that he raised it. The hon. Gentleman is concerned about the employment prospects in his constituency and I understand, given the potential that may arise as a result of the building of the pipeline, why he has raised the subject tonight.
  It is fair to put it on the record that, in the past year alone, the number of unemployed in the constituency of the hon. Member for Falkirk, East has dropped by about 650—about 18 per cent. While we always wish for the number to drop even further, the number of unfilled vacancies at jobcentres in his constituency has increased by almost 40 per cent.—much more than in Scotland as a whole. In the context of the whole of his constituency, I hope that the hon. Member for Falkirk, East will welcome the improvement in employment prospects over the past year.
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  The hon. Member for Falkirk, East specifically asked me to make a recommendation to my right hon. Friend the Secretary of State for Energy about the proposed pipeline. Perhaps it will be helpful if I go over the background to the project.
  As both the hon. Member for Falkirk, East and the hon. Member for Falkirk, West will be aware, Shell Chemicals UK Limited submitted its application under the Pipe-lines Act 1962, on 1 March 1989 for authorisation to construct a cross-country pipeline from Grangemouth to Stanlow for the conveyance of ethylene. It wishes to start construction in the spring of 1991, finishing in autumn of the same year.
  The pipeline would be 406 km, or 254 miles, long and 273 mm, or 10 in, in diameter and it would operate at a pressure of 1,435 lb per square inch. It would be designed to convey 610,000 tonnes per year.
  Shell has to date received no objections to its proposals from local planning authorities. However, it does not follow that there will be none, because in a number of cases Shell's proposals have not yet been placed before the full planning committee.
  As hon. Members will know, ethylene is a major feedstock for the petrochemical industry and is used in the manufacture of plastics, detergents, paints, anti-freeze, man-made fibres and many other products in everyday use. Ethylene is manufactured at the Fife ethylene plant from North sea oil and gas feedstocks. It is a highly flammable gas at normal temperatures and pressures.
  Shell has plans to carry out a major expansion of its polyethylene plant at Stanlow and it sees the pipeline as providing the most economical method of transporting the ethylene feedstock from the Scottish refineries to Cheshire. Shell has considered alternative means of transportation, but they have been rejected on safety or economic grounds. Transport by sea appears uneconomical and less safe, since specialist dockside unloading and storage facilities would be required in addition to the ethylene tankers.
  Except at the northern and southern extremities, the route passes through essentially rural, sparsely populated land. Known areas of potential development have been avoided. Remotely operated buried valves for isolation purposes to limit any potential leakage would be installed at approximately 16 km intervals. Two intermediate pigging stations and one pumping station would be installed—the latter approximately 11·5 km south-east of Carlisle.
  Shell has indicated that agreement in principle has been reached with 95 per cent. of the owners and occupiers along the route. Shell was required to carry out an environmental assessment and to submit an environmental statement in accordance with the electricity and Pipe-Line Works (Assessment of Environmental Effects) Regulations 1989. This has been discussed with interested parties such as the Nature Conservancy Council and its requirements incorporated.
  The environmental statement, a copy of which the hon. Gentleman will have, and which will be available to the public, describes in detail the manner in which Shell proposes to construct the pipeline and the steps it would take to mitigate its effect on the environment. Once constructed, the pipeline would not restrict normal agricultural activities.
  Shell was required to consider the overall safety of the proposed pipeline in a safety evaluation which was

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  reviewed for us by the major hazards assessment unit of the Health and Safety Executive. Due to the hazardous nature of ethylene, the pipeline has potential for harm. However, on the basis of the safety evaluation, the Health and Safety Executive sees no reason for refusal of the application on safety grounds. As it is entirely without prejudice to the Secretary of State's right subsequently to refuse the application, we decided that Shell's application should be allowed to proceed to the next stage, which involves public notices.
  As required by the Pipe-lines Act 1962, Shell has been instructed, first, to place notices regarding its application in the London and Edinburgh gazettes, the major national newspapers, and 30 local newspapers; secondly to serve notice on the 28 local planning authorities along the route; thirdly, to serve notice on every landowner and occupier through whose property the pipeline would run; and, fourthly, to serve notice on a number of utilities and other authorities as directed by the Department of Energy.
  Copies of maps showing the pipeline route and of the environmental statement will be available for inspection by the public at the Department of Energy and at local planning authority offices. Objections—this will be important to the hon. Gentleman—may be made to the Secretary of State for a period of 28 days after the notices are published. All representations received by the Secretary of State during the 28-day period will be carefully considered. The notices are to be published commencing with the national press today, as it happens, with final notices on 3 November in local papers.
  Shell has identified a growing need for ethylene-based products into the 1990s. It operates in a highly competitive market and it must therefore seek to achieve the most economic solution to the increasing demand in order to meet the challenges of the open European market.
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  Construction of the pipeline would involve a work force of up to 2,000 for six months or so—of course, not all in the hon. Members' constituencies. Up to 500 might be recruited locally. Although temporary, that would result in a significant injection of capital into the local economy. The number of personnel permanently involved with the maintenance of the pipeline after construction would be approximately six. Shell's existing plants at Stanlow and Carrington currently have spare capacity and are capable of expansion to meet demand. We understand that the number of additional employees required would be approximately 20.
  At a time when the Scottish CBI is foreseeing a small downturn in investment and job prospects, it gives me great pleasure to see a major local employer—in this case Esso—planning a £200 million investment for its Fife ethylene plant. The two-year construction of the plant extension will provide work for up to 2,000 people. The development will increase employment at the plant by 10 per cent.—all of whom are being recruited in Scotland—and also lead to a 10 per cent. rise in the number of long-term contractors on the site.
  It is clear that the increased capacity planned for the Mossmorran plant, which has led indirectly to Shell's need for a new pipeline, will bring more jobs to Scotland. [Interruption.] That is so. It is not realistic to expect the relocation of a major petrochemical complex from the north-west of England, but there is a very positive message for Scotland in Shell's planned investment in the new pipeline. It offers the best possible long-term assurance for the future of the ethylene plant at Mossmorran.
  Question put and agreed to.
  Adjourned accordingly at sixteen minutes to Twelve o'clock.