HC Deb 14 November 1990 vol 180 cc578-676
Mr. Speaker

I must announce to the House that I have selected two amendments—that in the name of the Leader of the Opposition and the amendment, for Division only, in the name of the leader of the Liberal Democrats.

Mrs. Margaret Ewing (Moray)

On a point of order, Mr. Speaker, about the selection of amendments. I wish to stress that I speak on behalf not only of the Scottish National party but of the nationalist parties and the party led by the right hon. Member for Lagan Valley (Mr. Molyneaux). As you know, we fully understand and appreciate the procedures which preclude you from selecting amendments today, other than those that you have specifically chosen. But you are aware also that this is a pluralist House and that it is necessary to debate all the different aspects and attitudes in the House. I therefore wonder whether it is possible for you to support the other minority parties in asking the Procedure Committee to look at the possibility of from time to time selecting amendments in the name of the members of those parties.

Mr. Speaker

I am grateful to the hon. Lady, but only the Scottish National party has an amendment on the Order Paper today; the Ulster Unionist party and Plaid Cymru do not. The hon. Lady should take up herself with the Procedure Committee the question of giving authority to the Chair to call a third amendment for Division. Today I shall be as helpful as I can be in calling members of the minority parties to put their point of view in the debate.

I must also announce to the House that, in view of the large number of right hon. and hon. Members—mostly right hon. Members—who want to participate today, I shall put a 10-minute limit on speeches between 7 and 9 o'clock. But I ask those who are called before then to try to ensure that their speeches are not much longer than that.

3.35 pm
Mr. John Smith (Monklands, East)

I beg to move, at the end of the Question, to add: But humbly regret that the Gracious Speech seeks to continue economic policies which have caused recession, falling output and investment, rising unemployment, high interest rates and a massive deficit in the balance of payments; deplore the continuing confusion and disarray in domestic economic policies and towards the future economic and social development of the European Community; and call upon the Government to prepare for the competitive challenges of the Single Market after 1992 by adopting an industrial strategy which promotes sustained investment in the manufacturing sector and encourages industrial innovation through the application of science and technology, to exploit fully the potential of the neglected regions through a vigorous regional economic policy and a modern transport system, and to provide the new opportunities in education and training which are crucial to Britain's economic recovery and future prosperity. When debating the Gracious Speech as we do in this House each year, we do not confine ourselves to a textual analysis of the often anodyne language contained in it. We look to other material, to additional evidence, to establish what Government policies are and are intended to be over the forthcoming Session. What Members find persuasive by way of additional evidence is very much a matter of individual choice, but for my part I turn for guidance to the Chancellor of the Duchy of Lancaster in his capacity as chairman of the Conservative party. Each year he sets—dare I say it—the style, if not the substance, of the Conservative party conference, with the carefully calculated slogan that hangs over the conference during the whole of its proceedings.

In 1989 the slogan was: The right team for Britain's future". The right hon. Gentleman buttressed the message by quoting Henry's exhortation to the troops at Agincourt: He which hath no stomach to this fight, Let him depart". There was a consequence which Henry had not foreseen, which was that most of them did depart. There has been the biggest change in ministerial offices in the post-war political history of this country.

Looking back on it now, admittedly with the luxurious benefit of hindsight, we see that the right hon. Gentleman clearly had a talent for irony which we had not properly recognised heretofore. I doubt whether there has been a time in post-war politics when there have been so many ministerial changes. It would be repetitive to read out a long list of the senior ministerial changes, occasioned by the confusion and disarray within the Government, which have occurred since the right hon. Gentleman's stirring slogan was first revealed. But this does remind us how important it is to attach proper significance to the slogan that he gives us each year.

This year, the right hon. Gentleman tackled new ground. The slogan was: "The strength to succeed". Again with the benefit of hindsight, I believe that he should be credited with prescience as well as irony. How did he know that this very day a struggle for the succession would be announced? The very question that will agitate Conservative Members over the next weekend is: who will have the strength to succeed to the leadership of the Conservative party? How did the right hon. Gentleman know all this? How did he know that this matter would be of such concern to his party?

I have been giving consideration to whether we might offer the right hon. Gentleman a slogan for next year's Conservative party conference. Perhaps he should hold a competition among his hon. Friends to see who could come up with a slogan as prescient and ironic as its predecessors. One or two come to mind. "The challenge of leadership" might be one. Perhaps "Combating unforeseen circumstances" might have a certain charm in certain quarters; but the one that I feel most attracted to is "Catching the train to Europe". I offer the right hon. Gentleman the option of putting either a question mark or an exclamation mark after that slogan.

The trouble is that the confusion and disarray which has surfaced in the turmoil of ministerial changes has finally burst through into a direct challenge to the Prime Minister by the right hon. Member for Henley (Mr. Heseltine)—and by who knows who else, in the weeks to come. There will be a fierce struggle in the Conservative party over style, substance, personalities and policies and it will be so serious that it will divide the Conservative party not just for the next week or so, but for a very long time ahead.

However, today we are considering the Government's economic policies, a subject which is the cause of almost as much distress as the Conservative party's internal division. We begin our consideration with the current state of the economy, which is in a recession. What is more, that recession results directly, as we have frequently argued, from the Government's errors in economic policy, some of which, I will argue later, bear a striking similarity to previous errors by previous Conservative Governments.

In the exchanges following the Chancellor's autumn statement, I was taken to task for insisting that the Government should admit the truth about our present economic situation and for pointing out the truth—that we are in a recession. I was glad to note that, a few days after that, in "The Money Programme" the following Sunday, the Chancellor appeared to accept—in a qualified way—that we are in a recession.

People who watch the Chancellor answering questions in this House and who saw him on "The Money Programme" will be aware that the right hon. Gentleman's tactic has been to query the definition of recession. He says that there are so many definitions of recession: how do we assess whether we are in one? He slips from one definition to another rather like a bird flying around a cage looking for a statistical perch to alight upon temporarily, or for some convenient resting place. The Chancellor says that some people say one thing while others say another.

The Chancellor was not always so coy. When he gave evidence to the Treasury and Civil Service Select Committee on 4 December last year, my hon. Friend the Member for Hackney, North and Stoke Newington (Ms. Abbott) asked the Chancellor directly: What is your definition of a recession? The Chancellor replied: I think I would take as a definition of a recession the one that we have traditionally accepted and that is a reduction in gross domestic product over a measurable period of time, probably two or more quarters, although there is no formal and wholly agreed definition of recession. That is the sense in which I would use the term: a reduction in GDP over perhaps two quarters, a six-month period … If we have a reduction in GDP over a measurable period of time then I think it is reasonable to begin thinking in terms of a recession, but that is expressly not what we are forecasting at the moment. We have a definition of a recession and a forecast that a recession would not happen.

An important table in the autumn statement, table 2/2–11, predicts the economic prospects for 1991. That table is entitled Gross domestic product and its components". It states that, for the first half of 1990, for the GDP at factor cost, the average measure is 180.3. It drops in the second half of the year to 178.2. In the first half of 1991, it is 178.3 and it then rises rather mysteriously in the second half of 1991 by two full points. The consequence of that is clear. The autumn statement forecasts, according to the Chancellor's predictions, a drop in the level of output not only for two quarters, but for four quarters in succession.

By the Chancellor's own definition and prediction, are we not in an extremely serious recession? We should have a lot less nonsense from the Chancellor, who queries and quibbles over whether we are in a recession. We know we are in one. All the companies and businesses in our constituencies are aware of that, and the Chancellor's statistics prove that we are in one. Why cannot the Government come clean about that?

We are also aware that we are in a recession as a result of other things that the Government are predicting. Only a few months ago, the Budget predicted that manufacturing output would increase by 0.75 per cent. in the first half of next year. The Chancellor now predicts that it will fall by 0.5 per cent. over the whole of next year. In the Budget, investment is forecast to decline by 0.75 per cent. in the first half of next year. However, the autumn statement predicts that it will fall by 1.75 per cent. in the whole of 1991. In the budget, exports were forecast to rise by 5.5 per cent., but that has been revised downwards to rise by 2.5 per cent. The figures for manufacturing production released yesterday confirm the downward trend and the pattern of negative growth.

The Government's record on prediction is just as bad as their record on economic management. However, prediction is important because the only message in the Conservative party's shop window—if we could get the Government to admit it—is that, while things may be bad now, it will not be long before they will get better because we shall see everything improve in the years ahead.

We remember the hype of the so-called economic miracle when the then Chancellor of the Exchequer, speaking from the Dispatch Box in the 1988 Budget debate, told us that we had overhauled what was then West Germany and were on track for catching up with Japan. It has been the persistent standard trick of the Conservative party grossly to exaggerate achievements and unrealistically to minimise the potential downturn when their policies run into it.

Let us consider the Government's forecasting on inflation—that "temporary blip" which occurred in 1988. We remember that same Chancellor telling us not to worry because it was just a monthly phenomenon, a blip which would soon blip away like one of the little dots that appear for a passing second on a television screen, a minor irritant, no more—just a passing detail. We know what happened. We have had inflation at distressing levels ever since.

We know that the forecast for 1988 turned out to be 62 per cent. wrong and that the forcast for 1989 turned out to be 30 per cent. wrong. We know that the autumn statements last year and this year are 100 per cent. wrong. Last year at the time of the autumn statement, the Chancellor of the Exchequer stood at the Dispatch Box and told us not to worry because inflation would be 5.75 per cent. now. What is it? Nudging 11 per cent. That is the Government's record on forecasting. People are asked to rely on those predictions and assurances that things will be better next year. We have been told exactly the same story in previous years.

The Chancellor of the Exchequer relies on the retail prices index coming down. I should hope it will come down next year. I hope that inflation will not be at these record levels next year. Indeed, the Government would have to do all the silly things that they have done in the past year all over again in order to maintain it at an RPI level of 11 per cent.

There was a time when the Chancellor found the RPI an awkward statistic. That was when, to quote the right hon. and learned Member for Surrey, East (Sir G. Howe), the Chancellor was using his "considerable talents" to explain away the Madrid conditions. He felt that there was a problem with the RPI. He had all sorts of other definitions of inflation. There was the rather ingenious "proximate rate" which made a fleeting appearance during what one might call the Madrid season, which appears to have come to an end. We also had the "underlying rate". As I understand it, there are two versions of the underlying rate. One involves stripping out the mortgage rate; the other is a bit bolder, and involves stripping out the mortgage rate and the poll tax, which gives an even better underlying rate. Obviously, the British people cannot strip out either when it comes to paying bills.

What criteria are we to apply next year to this year of recovery? The Chancellor was asked that very point by my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) during the exchanges on the autumn statement. My right hon. Friend asked: When the underlying rate was less than the RPI, the Government made a great deal of it. Now that it is likely to be more than the RPI"— as has been predicted for next year— may we have his forecast of the underlying rate of inflation, excluding mortgage interest, at the end of next year, the fourth quarter? The bland reply from the Chancellor of the Exchequer was: As the right hon. Gentleman knows"— here is sugar to the pill— —he is a very distinguished former Treasury Minister"— that is undoubtedly true— —the underlying rate of inflation has never been published, for perfectly understandable reasons."—[Official Report, 8 November 1990; Vol. 180, c. 127.] Another of the Chancellor's endearing tricks is to invent new conventions and rules whenever it suits him. He should tell the Central Statistical Office that the underlying rate—the RPI minus the mortgage rate—has never been published for understandable reasons. I have in my hand a copy of the document which it issues every month on inflation figures. One column states, "RPI—all items" and another states, "RPI—except mortgage interest payments". The answer to my right hon. Friend's question is set out precisely month by month.

The Chief Secretary to the Treasury (Mr. Norman Lamont)


Mr. Smith

There can be no dispute about it. The figures for the RPI minus mortgage interest rate payments are in the Central Statistical Office handout. It looks as if we may have to wait for an explanation until the right hon. Gentleman makes his speech.

Why on earth is it difficult to forecast the underlying rate of inflation? I suggest that it is not impossible, that it is just a matter of discretion and that the Chancellor wants to keep vague the criteria that apply. He used to find the RPI uncomfortable and he thinks that it might he in his favour next year; so he wants to go by that and abandon his previous preferred alternatives. [Interruption.] As he is explaining it to the Prime Minister—and there is no doubt that that is necessary—perhaps he should give us the benefit of that advice. We might take it, unlike the right hon. Lady. The Chancellor is treading on stony ground, as is shown by the record of his predecessors in trying to explain matters to the Prime Minister.

If I had any doubt that the underlying rate is an important issue. I would rely on the evidence of the Chief Secretary to the Treasury, who did not bound to his feet recently, who said on the radio programme "PM" on 11 May that the underlying rate was the real thing that matters. If he is right, let us know what the underlying rate will be next year.

The Chancellor of the Exchequer has said various things about this. For example, in June he said that the rate of inflation appears misleadingly unreasonable".—[Official Report, 7 June 1990; Vol. 173, c. 772.] If it is, he can put it right by giving us the proper criteria. If he does not tell us what criteria we should adopt, we shall not know whether we are back on track, as he says we shall be.

One of the real problems affecting the Government in their handling of economic policy and one of the reasons why there is a leadership contest in the Conservative party is the Government's lack of credibility. That is felt not only by the electorate—something we all know from the responses of our constituents and can see in the movement of the opinion polls—but in the financial markets, which do not believe the Government or their economic purposes. We have seen that in the way that the Government entered the exchange rate mechanism.

Substantial additional evidence of the lack of credibility of the Government and their economic policy was provided by the right hon. and learned Member for Surrey, East in his remarkable statement to the House yesterday. We know now that the Prime Minister agreed in principle to join the exchange rate mechanism only when she was cornered by the Chancellor of the Exchequer and the Foreign Secretary and threatened with their resignations unless we joined the ERM. We did not know that before the remarkable speech made by the right hon. and learned Member yesterday. Now, we know that the Prime Minister was taken at pistol point to sign up to join.

The Prime Minister (Mrs. Margaret Thatcher)


Mr. Smith

If the right hon. Lady thinks that it is nonsense, then she is casting doubt on the credibility of the right hon. and learned Member for Surrey, East. I should prefer him as a witness.

We also know, from that dismissive phrase used by the right hon. and learned Gentleman about the Chancellor of the Exchequer using his "considerable talents" to explain away the Madrid conditions, how seriously they were taken by senior Ministers. They knew that it was hocus-pocus from the start. They were there to allow the Prime Minister to look as if she were getting gently off some hook. They had no intention of tempering the Madrid conditions, which is why they were slung away when the decision to enter the ERM was taken.

People know perfectly well, because they have memories, that in that famous Walden interview, the Prime Minister said that the ERM was a higgledy-piggledy system.

Mr. Nicholas Budgen (Wolverhampton, West)

Quite right.

Mr. Smith

That sedentary intervention came from one of the Prime Minister's more noted supporters. The No Turning Back group has temporarily found its voice.

The next stage in the credibility problem will come with the hard ecu. I have been listening to various apologists on various sides of the argument appearing on radio and television with great frequency, last night, this morning, over lunchtime. One can hardly turn on a radio or a television without a Cabinet Minister or some other senior figure from the Conservative party offering his views on who should be Prime Minister. Some of us think that that might be something in which the electorate might be interested. For the moment, however, we are denied the test and we have to listen to a parade of views.

Ministers all say one thing, however, and that is this: "There is no real problem about the way forward into Europe because we have the hard ecu, and the hard ecu solves all problems." Does it? There is a fundamental question which we have raised in a previous debate and we shall raise it again today: is the hard ecu an alternative to the single currency or an alternative means of achieving it?

The right hon. and learned Member for Surrey, East reminded us yesterday of the Prime Minister's dismissive view of the hard ecu when she reported after the Rome summit. I believe that he said that there was a casual comment and an impulsive answer. I do not know how he would classify it—probably he would say that it was both a casual comment and an impulsive answer—when the Prime Minister said that the hard ecu was not likely to be widely used.

After a little research, I discovered that, when the Prime Minister returned from the Dublin summit in June, when I think the hard ecu proposals were first presented to the other colleagues, she was asked about these matters. She said: Our proposals"— that is, for the hard ecu— would lead to a common currency which people could choose to use more or less as they wished, or they could continue to use their own currency. I do not believe that that formula could develop into a single currency." —[Official Report, 28 June 1990; Vol. 175, c. 493.] That is fine. So far, so good. The right hon. Lady said that the formula could not develop into a single currency.

We have had various evasions on the subject by the Chancellor of the Exchequer, but I shall not bore the right hon. Gentleman by going through them. I turn instead to the evidence given to the House of Lords Select Committee on European Communities by the Financial Secretary to the Treasury, whom I am glad to see in his place. He was asked about the Government's proposals for the hard ecu. We have him speaking on behalf of the Government while giving evidence to a Select Committee: One goes down the path which our proposals map out and can go on from that to a single currency. I think that is the important point to get across, and perhaps this has not yet been fully understood. I do not think that it has been fully understood by the Prime Minister. The Financial Secretary to the Treasury added: I would go on to argue personally that the next stage of having a single currency"— notice "the next stage of having"— could actually happen more quickly by going down this path than by going down any prescribed institutional path, setting up institutions at rigid dates, and trying to make it all happen that way. That is a personal view and I could well be wrong about it. You could certainly mount a powerful argument that it would be a quicker path. What is it? Is it a path to a single currency or is it not? If it is, is it a quicker path or a slower path? Well, it could be. Some say one thing and some say another. It is no wonder that the right hon. Member for Henley (Mr. Heseltine) said at lunchtime today, apparently, that the Prime Minister's difficulty is that she cannot unite the Cabinet behind her European policy. I tell the right hon. Lady that she will not find unity in ambiguity in the way in which she is seeking to approach these matters, by saying that some say one thing and some say another.

Mr. Philip Oppenheim (Amber Valley)

The right hon. and learned Gentleman is on dodgy ground.

Mr. Smith

There can be no more dodgy position than the Government's position on Europe. Fundamental ambiguity lies at the heart of the hard ecu proposal. It is a simple point—

Mr. Geoffrey Dickens (Littleborough and Saddleworth)

Will the right hon. and learned Gentleman give way?

Mr. Smith


Does it or does it not lead to a single currency? Is the hard ecu intended to be a failure as a policy, or a success? We want an answer to that question during the debate. Unless the question is answered, there will remain a lack of credibility on the part of the Government.

Mr. John Townend (Bridlington)

Will the right hon. and learned Gentleman tell us whether the Opposition are in favour of a single currency and a central European bank?

Mr. Smith

I set out my views on those matters earlier, in the debate on the exchange rate mechanism. [Interruption.] The Chief Secretary knows that I can speak for myself. As I said during the debate on the exchange rate mechanism on 23 October—

Mr. Norman Lamont

What was that?

Mr. Smith

The right hon. Gentleman was present for the debate, so he heard what I said.

Mr. Lamont

I did not understand.

Mr. Smith

That is a different matter. Comprehension is entirely a matter for the right hon. Gentleman, and I cannot assist him on that. I can only explain and hope that he comprehends.

Mr. Lamont

Tell me again.

Mr. Smith

We have told the Government time and again, as I did on 23 October, that at a time when the gap between Britain's performance and that of other members of the Community is so wide, it would not be prudent to commit ourselves to an irrevocable exchange rate or to a single currency."—[Official Report, 23 October 1990; Vol. 178, c. 273.] We have made our views clear. The economic position into which this country has been led by the Government's economic policies is such that there would be a grave risk at this stage if we were linked to an irrevocable exchange rate—[Interruption.] Conservative Members may not like the policy that I articulate, but they should not claim that it has not been articulated, because I have clearly done so.

Mr. Dickens

I am grateful to the right hon. and learned Gentleman for giving way in the middle of his entertaining speech. If he ever became Prime Minister—and he has more chance of that than the Leader of the Opposition—would he go to Europe to negotiate, and perhaps move forward to stage 2, when no one could explain exactly what was meant by stage 2? Our Prime Minister is not that sort of person; she wants to know the detail. That is the difference between the two parties.

Mr. Smith

The hon. Gentleman should not worry about the leadership of the Labour party. He will have a major problem over the weekend trying to decide who to vote for as the future leader of the Opposition—

Mr. David Shaw (Dover)

She is sitting on the Front Bench.

Mr. Smith

That is absolutely right. The hon. Gentleman, not for the first time, accidentally points to the truth. The Prime Minister is sitting on the Front Bench and she may win the leadership struggle, but not the next election, and will then take up office as Leader of the Opposition. I know that it is a chilling thought. At least 100 Tory Members—although the figure may have risen since lunchtime—will find that a fearful thought.

The hon. Member for Littleborough and Saddleworth (Mr. Dickens) says that he cannot understand stage 2 and, what is more, that the Prime Minister does not understand it. In that case, they should ask for the proposals to be clarified. They should not simply walk out of meetings and denounce other people: they should ask intelligently for the proposals to be clarified. They should put questions with persistence, intelligence and perspicacity—but, as the right hon. and learned Member for Surrey, East advised and admonished them to do, they should continue, within the structure of the European Community, to make Britain's case understood. They should employ constructive diplomacy on behalf of our country.

The real problem in the context of the European Community and the real problem in the context of our domestic economy are virtually one and the same—it is the weakness of our economy after 11 years of Conservative government. I have already mentioned the illusion—

Mr. David Howell (Guildford)

The right hon. and learned Gentleman says that we should not worry about the Opposition, but some of us are worried because 180 members of his party—which is practically the whole of his party—believe in the Labour Common Market safeguards committee, which is in total opposition to monetary union and membership of the exchange rate mechanism. Is that the right hon. and learned Gentleman's position?

Mr. Smith

If the right hon. Gentleman is reduced to that sort of remark, which is both pathetic and inaccurate, we can well understand why he had such a short ministerial career, even in a Government headed by the Prime Minister. We are accustomed—[Interruption.]

Mr. Speaker

Order. Hon. Members should settle down.

Mr. Smith

As I was pointing out before I was irrelevantly interrupted by the right hon. Gentleman, the big difficulty we face, as he must know—

Mr. Norman Lamont

The right hon. and learned Gentleman explained that it was his view that we should not have a single currency in Europe for the moment. He did not think the time was right. Is there a difference in principle between his policy and the Government's policy on whether we ought to have a single currency?

Mr. Smith

I am not clear what the Government's policy is. Is it the Government's policy to have a single currency? [Laughter.] The right hon. Gentleman should stop laughing and address himself to that question. Given our economic conditions, it is premature to decide whether we could be involved in an irrevocably fixed exchange rate. That is the crucial river that has to be crossed. Once that river is crossed, it is difficult to see how one could cross back.

I am told by some Conservative Members that the hard ecu is an alternative to moving to a single currency, and by others I am told that it is a quicker way of getting to a transitional mechanism for moving towards a single currency. I deduce that some members of the Government want a single currency and others do not. We have made it absolutely clear that we would like to see established a number of matters on economic and monetary union which we think are essential components of the type of economic unity within the EC that we want to see. One is a strong regional policy which helps to preserve economic and social cohesion—[Interruption.] Perhaps we could rise above the level of schoolboy remarks from the Financial Secretary.

I do not understand how Conservative Members can think that the social cohesion of the EC is such a light matter. In the EC, 11 members think that it is sufficiently important to be regarded as one of the major objectives. It is one of the objectives of the Single European Act, for which Conservative Members voted in the House.

We want to give substance to the ambitions that were enshrined in those proposals for the EC. Of course we want to see a strong regional policy. We also want to see a strong social dimension to the EC, which is why we want to see the social charter, and the social action programme coming on its heels, which the Government seek to block against the wishes of the other 11 members of the Community. That is why we want to see changes in the way in which we decide environmental and social policies.

That policy cannot be encapsulated in one sentence: it is an extremely complex and difficult matter which Labour Members take seriously because it is important for Britain's future. It is a matter on which, according to the right hon. Member for Henley, the Cabinet cannot unite and on which the Government will never be able to unite the country.

Mr. Norman Tebbit (Chingford)

Let me put to the right hon. and learned Gentleman the proposition that the hard ecu is, in essence, a swift path to the river that one would have to bridge to reach the single currency on the other side. It is a swifter way to arrive at that point of decision. Is the right hon. and learned Gentleman saying that there are circumstances in which he would say that he was satisfied on the conditions for a single currency, or is he saying no to that? In other words, are there circumstances in which he would be willing to give up Britain's unilateral control of its own economic policy?

Mr. Oppenheim

Yes, answer.

Mr. Smith

The hon. Gentleman, who is a member of the No Turning Back group, might allow me to reply.

We do not support the proposal for the hard ecu, which is a fundamental issue of ambiguity in the Conservative party. The right hon. Member for Chingford (Mr. Tebbit) takes the view that he does only because he does not fully comprehend the trick that has been played on Conservative Members by the Foreign Office and others in producing a hard ecu with the purpose of leading to a single currency. When I last spoke on that issue in the debate about the exchange rate mechanism, the right hon. Member for Chingford was sufficiently concerned to ask questions of the Minister then addressing the House, and he was right to be so concerned. However, I cannot answer hypothetical questions about the future.

We will judge progress by the way in which we can achieve a proper regional structure for the European Community and for the social dimension. More important than all of that is the capacity of this country's economy to converge to the European standard. It is one thing to contemplate monetary arrangements of that kind if one has a strong economy, but quite a different thing if one has a weak economy, such as that being run by the present Chancellor of the Exchequer.

One would think from the tenor of the questioning that there is no ambiguity or conflict of policy in the Conservative party. If that is so, why is it having a leadership election? If Conservative Members are all agreed on European Community policies, it is passing strange that the right hon. Member for Henley has chosen to plunge his party into the most divisive leadership contest seen since the end of the war—and perhaps even in the history of the Conservative party. They cannot get away with it as easily as that. It is a question that fundamentally divides the Conservative party, and unless Tory Members can reconcile their differences, it will lead them into continuing difficulty.

The Minister of State, Home Office (Mr. John Patten)

The right hon. and learned Gentleman should look behind him. Labour Members do not understand him, and neither does the Leader of the Opposition.

Mr. Smith

Conservative Members seated behind the right hon. Gentleman certainly do not understand him.

We should address the fundamental problem affecting Britain here and now—apart from what may happen in developing the economic European Community in four, five, six or seven years' time. Stage 2 is only projected to start in 1994, and further proposals will not come forward before 1997. Anyone would be hard pressed to put a date on some of the decisions that must be made. Nevertheless, they are important decisions, and will have to be taken by the Government of this country at the appropriate time. Meanwhile, here and now—in 1990—there is much that we can do to prepare for our future in the Community, by sorting out the basic problems in the British economy.

Thank goodness that the illusion of 1988—the notion that we had overtaken West Germany and were pressing hard on Japan—has, for reasons of embarrassment, ceased to be advanced by Conservative Members. The truth is that Germany is well ahead of us, France is significantly ahead of us, Italy is overtaking us, and Spain is coming up behind. That is the fruit of 11 years of Conservative stewardship of our economy.

The economy will not be put right by the policies in the Gracious Speech, whose most alarming aspect is that it promises no change in Government policy. Now, at the end of a decade, we have a massive balance of payments deficit, the highest interest and inflation rates of any industrialised country, and rising unemployment.

It is not the first time that Britain has faced economic problems under a Conservative Government. I occasionally read publications produced by the City—some from institutes that are sympathetic to the Conservative party, but others that are more objective. The Greenwell Montagu gilt-edged research paper, "UK inflation in the 1990s", highlights the tendency of British Governments to over-expand demand and to preside over periods of over-rapid expansion, mistaking them for the beginning of the catching up of British economic performance with those of our competitors and the beginning of a virtuous circle. We have not heard those phrases from the Conservative party.

The report continues: There have been three phases of this sort, all of which had serious consequences.

  1. (a) Maudling's dash for growth 1963–64;
  2. (b) Barber's boom, 1972–73;
  3. (c) The Lawson boom, 1986–88."
We are back in the stop phase of stop-go economics for the third time under Conservative guidance of the British economy. The Government tell us, as we are stuck in the stop of yet another stop-go following the depressing and worrying cycle of economic mismanagement, that we will soon be back on track.

How can we be back on track when, even in the midst of a recession in 1990–91, the Treasury predicted a balance of payments deficit of £11 billion? Under the previous Chancellor, it was argued that the terrible balance of payments figures were the result of excessive demand and a so-called investment boom. Those are not occurring in 1990–91, yet we still have massive balance of payments deficits.

Does it never occur to the Government that we need a change of policy, not merely because it has not worked under this Government but because it has not worked under previous Conservative Governments? We end up in difficult economic situations, and the Labour party has to be elected to deal with them. It has happened before. The cycle mentioned by the learned authors of the Greenwell Montagu report is not complete. Usually it has to be completed by the British electorate. We are facing such a problem now and we shall have to tackle the underlying problems of the British economy. No one seriously believes that this is some minor matter of a mismatch of demand and supply. There are serious structural defects in the British economy, which require a supply-side policy to deal with them.

As, regrettably, unemployment rises in the regions and nations of Britain, the need for a regional policy will become more manifest, and its neglect even more apparent. Just before I came into the debate today, I met representatives of 500 workers of James Howden, a company in Renfrew in Scotland. Five hundred people are facing redundancy there in a modern factory, which was opened by the Prime Minister in 1981 and which is widely regarded as having the best of technological excellence. Five hundred people will lose their jobs. That is what is happening in Britain today.

Let not the Government tell us that there is no recession and that this is some temporary problem—let them look into the faces of the people who are facing redundancy and tell us. Let the Government understand the consequences of their economic policies. This is not really an academic matter, as it affects the living standards and life opportunities of all the citizens of this country. The longer we continue to neglect the fragile technological base of British industry, the longer it will take us to match our competitors and to get up speed for Europe. The longer we neglect education and training the more difficult our problems will be.

In another report that I came across, Mr. David Lomax, the group economic adviser for National 'Westminster bank, described the Government's training record as "execrable". I do not think that any Opposition Member has thought of such a dismissive and abusive term, and that quarter is not entirely unsympathetic to the Government.

In powerful speeches yesterday, my hon. Friends the Shadow Education and Employment Secretaries outlined the major defects in Government policy and the Labour party's proposals for proper education and training. As we prepare for 1992, it is crucial that we get those things right, that we pay attention to building up the technological base of British industry, that we have a strong and vigorous regional policy and a new commitment to education and training, and that we give the manufacturing sector of the British economy the place it should have had during the neglected decade of the 1980s.

The Opposition intend to build for success in Britain and in Europe. We have a vision of a fair society in which world class public services provide the best of facilities for all our citizens—a society in which care and compassion are active ingredients in social policies and where those least able to help themselves are given a helping hand by the rest of the community. We shall fight for that vision within Britain and within the European Community, but we also know that Britain cannot achieve these ambitions, which we hold on behalf of all our people, without a strong economy. That is why we shall tackle the problem of rebuilding the British economy patiently, purposefully, determinedly, year in and year out. [Interruption.]

Mr. Speaker


Mr. Smith

I shall explain to Conservative Members how we shall do so, and set out our targets for the supply-side regeneration of the economy. I shall set out what we have in mind. I fear that the Conservative party's problem is not merely one of comprehension, but one of understanding what the people of this country want. They want a strong economy and a fair society. Other European Community countries seem to be able to achieve those aims. The British people want that deeply, passionately and urgently. That is why they are turning in such large numbers to the Labour party, in order to make sure that a Labour Government are elected at the first available opportunity.

4.19 pm
The Chancellor of the Exchequer (Mr. John Major)

Fond though I am of the right hon. and learned Member for Monklands, East (Mr. Smith), we have just heard the shallowest speech from the Opposition Front Bench for years. Stale jokes and cheap gibes are no policy for any Opposition who ever hope to form a Government. The right hon. and learned Gentleman spelt out his usual long litany of criticisms of the Government, but he did not set out in any detail, or in any sense at all, clear policies on what needs to be done.

In "Meet the Challenge: Make the Change" and in "Looking to the Future", the Labour party claims to have a selection of policies of which it is proud. So proud is the Labour party of those policies that Opposition Front-Bench spokesmen hardly ever mention them. What we get from them is absolutely nothing at all about the success of British industry over the past decade. They do not congratulate British industry on its record investment over the past decade. They never mention the dramatic improvements that British management and the British work force have brought about in terms of increased productivity. The trouble with the Labour party is that what is good for the country is bad for it, and it recognises that all the time.

Mr. Dennis Skinner (Bolsover)

Will the right hon. Gentleman give way?

Mr. Major

I shall with great pleasure give way to the hon. Gentleman a little later.

The right hon. and learned Gentleman referred to the quotation by my right hon. Friend the Member for Mole Valley (Mr. Baker) from Shakespeare's "Henry V". As I listened to the right hon. and learned Gentleman it was another, lesser-known poet, rejoicing in the name of John Gay, who sprang to my mind. John Gay was a master of burlesque. The right hon. and learned Gentleman may recall that he wrote: I know you lawyers can, with ease, Twist words and meanings as you please;". [Interruption.] Opposition Front-Bench spokesmen seem to be remarkably boisterous when their policies have no credibility whatever.

The right hon.and learned Gentleman mentioned the underlying rate of inflation. Of course we published in our document both the retail prices index and the underlying rate of inflation after the event. That is the information that he had. What I said to the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), which he will understand as a former Treasury Minister, was that we never forecast the underlying rate of inflation for a sound economic reason. As we forecast the retail prices index, if we were also to forecast the underlying rate of inflation it would be possible to calculate interest rate assumptions, with very severe market effects. The right hon. Member for Ashton-under-Lyne understands that. It is a pity that the shadow Chancellor of the Exchequer does not understand it, too.

Mr. John Smith

Will the right hon. Gentleman answer a simple question? How should we judge whether or not he is successful next year—by the retail prices index or by the underlying rate of inflation?

Mr. Major

In due course the right hon. and learned Gentleman will see by both measures, and by the producer price index, how successful we are. The way to judge the success of policies is to see what the outturn of those policies is. I am content to be judged in that way.

The right hon. and learned Gentleman also referred, with a total lack of self-knowledge, to what he rather crudely called "Lawson's boom". I seem to recall that in 1987 and 1988 the right hon. and learned Gentleman was asking for ever lower interest rates to increase demand.

Mr. Robert Sheldon (Ashton-under-Lyne)

I understand why the right hon. Gentleman did not wish to give the underlying rate. It is the same argument as was used against giving the retail prices index and unemployment figures many months in advance. Of course, we have the autumn statement, which gives much more information and I could not understand why he was so coy about giving this further information to the House.

Mr. Major

It was precisely for the reason that I have just given. If I gave the underlying rate of inflation forecast and the retail prices index forecast, it would be easy for anybody to calculate interest rate assumptions. The right hon. Member for Ashton-under-Lyne will know that that is not an attractive proposition.

The right hon. and learned Member for Monklands, East made a great deal of the short-term problems that he perceives we have. He ignored the growth that we have had over the past eight years, the growth this year and the growth that we shall have again next year. Alas, he neglected to mention that. Of course, he wants to portray prospects as black as he can because he knows that, when inflation is heading down, we shall return to sustainable growth and a stronger economy.

That is what concerns the right hon. and learned Gentleman. He knows that economic success for his country will mean political failure for his party. He knows very well that recovery is not just possible but probable because the underlying economy is incomparably stronger than it was a decade ago. Industry knows that, too. Last week John Banham addressed the Confederation of British Industry conference and said: We must believe in ourselves and build on what has been achieved … We must not let our present difficulties obliterate the memory of the past 10 years. And this is precisely what is in danger of happening. Indeed it is. It is partly because Opposition Members see party advantage in denying the changes and improvements of the past decade.

We should not be blind to the improvements that have taken place. Business investment has risen dramatically.

Mr. Neil Kinnock (Islwyn)

Manufacturing investment?

Mr. Major

Over the three years to 1989, business investment rose by 45 per cent., which is an unprecedented increase. It is hardly surprising that that is not sustainable at this stage of the economic cycle. However, even assuming the modest downturn that we forecast this year and next, business investment will still be over 50 per cent. higher than when the Government took office in 1979. Over the past decade, the economy has grown faster than France or Germany. That is the first post-war decade in which that has happened. Also, living standards have risen enormously, with the real take-home pay of a married man with two children up by a third since 1979.

Mr. Kinnock

This is a fraud.

Mr. Major

I ask the Leader of the Opposition, who is muttering: which of those improvements are inaccurate and why do he and his right hon. and learned Friend never acknowledge them? Why do not they offer some real hope for our prospects in the 1990s? My statements are accurate and the Leader of the Opposition knows it.

Mr. Giles Radice (Durham, North)


Mr. Major

I shall give way a little later.

I do not believe for a second that those achievements will vanish. They are fundamental and they will last. With other supply side improvements, they will improve Britain's economic fortunes throughout the 1990s. Do not be deceived. Our prospects in the medium and longer term remain excellent. In the 1990s we shall see the huge investment of the past few years bearing fruit as new capacity comes on stream; provided that firms remain competitive by containing their costs, it will continually help to close the current account deficit.

I am wholly determined that the British economy will be ready for the challenges that lie ahead of us in the 1990s. I am wholly determined that we shall take the difficult decisions necessary now to ensure that it is. That is why we joined the exchange rate mechanism. That is why we shall stick with the tough policies that we have pursued and why I have no intention of reducing interest rates until I am satisfied that it is safe to do so.

Mr. D. N. Campbell-Savours (Workington)


Mr. Major

I shall give way in a moment.

High interest rates, although painful, are bringing the slowdown in demand that is necessary to reduce inflationary pressures. As for our forecasts, as the right hon. and learned Member for Monklands, East who now clearly reads so much that is published in the City, will know, the overwhelming majority of analysts now agree with our forecast that inflation will come down next year to around 5.5 per cent. by the fourth quarter, and we intend then to keep it there.

Mr. Campbell-Savours

Does the Chancellor agree with the former deputy Prime Minister who said yesterday that failure to enter the ERM in 1986 had been inflationary and had led to inflation?

Mr. Major

No, Sir, and for the reason, which should appeal to the hon. Gentleman, that if we had entered the exchange rate mechanism at that time, we should have done so at a rate against the deutschmark of about 3.30 and 3.85. I am not convinced that it would have been the right time to enter. The right time to enter was when we entered. The moment the opportunity was there, we took the opportunity on the first available occasion when I judged that it was safe to do so.

Mr. Skinner

On entering, will the Chancellor tell us whether he is prepared to take out his bat first wicket down?

Mr. Major

So far as I am aware, the opening batsman is well played in and will stay there, I hope, for a long time to come.

The current account deficit, to which the right hon. and learned Gentleman referred and in which he has apparently lost interest, so narrow is his span of interest, is now narrowing as a result of the low growth of import volumes combined with a substantially stronger growth of exports.

Mr. Gordon Brown (Dunfermline, East)

It was £16 billion.

Mr. Major

The hon. Gentleman says that it was £16 billion. He is the hon. Gentleman who, at one stage, was forecasting that it would be more than £20 billion this year. So much for accurate forecasts.

Mr. Ken Livingstone (Brent, East)

Will the right hon. Gentleman give way?

Mr. Major

I shall give way to a former Lambethan.

Mr. Livingstone

On the record of changes over the past decade, will the Chancellor comment on the fact that over that decade the proportion of our GDP going in exports has dropped by 3.5 per cent. of total GDP? Is that not the problem we face? What does the right hon. Gentleman propose to do to change that?

Mr. Major

As the hon. Gentleman will know, the trend has been reversing itself, and exports have been growing substantially faster than imports over the past year or so and are projected to continue to do so. The expansion of growth of demand, actually sucked in more imports that domestic supply could not produce, but with the collapse and reduction of demand, it is moving back into equilibrium at a rapid rate.

The slowdown in the economy points again to the trade deficit narrowing still further next year to around 1.75 per cent. of GDP.

Mr. Radice

Will the right hon. Gentleman give way?

Mr. Major

If the hon. Gentleman will forgive me, I have already given way more often than the right hon. and learned Member for Monklands, East. If he behaves himself, I may give way to him later.

That trade deficit compares, for example, with Spain's current account deficit of 3.5 per cent. of GDP, which perhaps puts ours in a better perspective.

As I made clear to the House last week, we intend to continue to maintain a tight fiscal stance both to support monetary policy and to squeeze inflation. By the end of 1990–91 we expect to have repaid £29 billion-worth of public sector debt over four years. That will save £2.75 billion in interest payments every year, the equivalent of a penny-ha'penny off the standard rate of income tax. We now expect a lower debt repayment this year than I had forecast in March at the time of the Budget, and lower than we enjoyed last year. But it is perhaps not only unusual but remarkable and encouraging that, at this stage of the economic cycle, with activity weakening, our central forecast for debt repayment amounts to £3 billion. Germany, for example, so often quoted against us as a virtuous economy, is likely to have a deficit this year in excess of 3 per cent. of GNP, while France's deficit this year is likely to be about 1.25 of GNP.

As the autumn statement showed, we have not loosened our grip on public expenditure. We have made the difficult choices that were necessary and are not accommodating fully the higher than expected inflation either this year or in the planning totals that my right hon. Friend the Chief Secretary negotiated for the next three years. Instead of seeing a surge in the ratio of public expenditure to national income, as we have in past economic downturns, our plans maintain a stable ratio until 1993–94, when we expect it to resume its downward movement.

Despite that restraint, within the overall settlement we have been able to keep our word and have not reneged on the spending commitments that we made. There has been room for more resources to be allocated to key areas, especially to protect the more vulnerable groups in society. We have been able to maintain the real value of benefits that are paid to 10 million pensioners and 11 million people on income-related benefits; we have been able to increase spending on health between this year and next by £3 billion, which is a real increase of 5 per cent.; we have enabled British Rail and London Regional Transport to spend nearly £750,000,000 on safety measures in the next three years; and there has been an increase in provision for capital expenditure of £1.5 billion.

Nor, in addition to those increases, have we overlooked the self-evident uncertainties in the world economy or at home. In view of those, we have set aside higher reserves in the next three years—up to £10.5 billion in the third year.

Mr. Tam Dalyell (Linlithgow)


Mr. Major

Will the hon. Gentleman forgive me? I want to make a little progress.

While Opposition Members speak at length about the problems that we face, as we saw from the right hon. and learned Member for Monklands, East, they are a little less clear, to put it kindly, about how to solve them. Their industrial strategy would not do so.

Mr. Radice

Will the right hon. Gentleman give way?

Mr. Major

If the hon. Gentleman behaves himself, later.

Labour's industrial strategy amounts to a familiar programme of detailed intervention.

Mr. John Smith

This is the House of Commons.

Mr. Major

The right hon. and learned Gentleman says that this is the House of Commons. As he is sitting on the Front Bench, perhaps he should behave as though it were the House of Commons. Is it not interesting that every time we get to Labour's policies, Labour Members seek to disrupt whomsoever is at the Dispatch Box? Is that not because they know precisely what is in their policy documents, and what political poison it is? I am perfectly prepared to stay here until they keep silent so that we can discuss the policies that they will not talk about. In their document——

Mr. Radice


Mr. Major

As the hon. Gentleman is unable to contain himself, I shall give way.

Mr. Radice

I thank the Chancellor for at last giving way. Will he answer the question put by my right hon. and learned Friend the Member for Monklands, East (Mr. Smith): Is the economy now in recession, or is it not?

Mr. Major

If the hon. Gentleman is aware of the classic definition of recession—two quarters of falling output—he will know that it is impossible to know until we have the output figures for those two quarters, and we do not yet have those figures. If he wishes to know whether I think that it is probable that there will have been a downturn in output over two quarters, I have said several times that I think that it is probable. But I shall not know until the output figures are produced, and neither does the right hon. and learned Member for Monklands, East.

Let us return to Labour's industrial strategy. In its document, "Meet the Challenge, Make the Change", there is the quite extraordinary admission—this is from the new model Labour party—that the market can be tolerated only providing the Government regulates it. So much for supply side socialism and for the new model Labour party. I dare say so much, too, for the right hon. and learned Gentleman's agreeable lunches in the City, if it reads his document.

Dame Elaine Kellett-Bowman (Lancaster)

He is chewing now.

Mr. Major

The right hon. and learned Member for Monklands, East spoke for a long time—he is probably very hungry.

What of the policies that would bring about this industrial renaissance from Labour? Let me tell my right hon. and hon. Friends what they are: a new national investment bank, a series of tax incentives to encourage investment, an enhanced regional policy, a British technology enterprise fund and, of course, and not to be missed, an increased role for regional enterprise boards and development agencies, all peopled with Labour's placemen.

Some hon Members with long memories may think that that list has a familiar ring to it, and so it should. For medium-term industrial strategy, read Harold Wilson's national plan. The new terminology, brushed up and dusted down, may better fit the 1990s, but the policy would not. It failed in the 1960s and 1970s and would be equally disastrous if it were ever tried again in the 1990s.

The right hon. and learned Member for Monklands, East mentioned unemployment. As for the labour market, this is a time when domestic conditions, reinforced by membership of the ERM, demand both wage flexibility and wage restraint. The whole of Europe seeks such flexibility—except, of course, the Labour party. I quote from "Looking to the Future". The Labour party argues that there are … dangers in flexibility for the labour market. Perhaps Labour thinks that there are merits in inflexibility. The whole of Europe is wrong and the Labour party is right. The Labour party has proposed its old friend, a minimum wage, at two thirds of national male average earnings, which would cause the loss of thousands of jobs for people on modest incomes—so much for Labour's plans for the vulnerable.

Mr. Ian Bruce (Dorset, South)

Can my right hon. Friend estimate to what level manufacturers' costs would rise because of that policy and the effect on inflation if we were to have a Labour Government?

Mr. Major

I cannot do that. Although I carefully read the Labour party's document, alas I found no such costing in it to show that.

Of course, the right hon. and learned Member for Monklands, East is right to say that he wants more investment and more saving. I wholly agree. That is certainly the right objective. The question is, how shall we get it? We shall certainly not get it with his policies—not with plans to increase capital gains taxes, to introduce a new form of capital transfer tax and to reintroduce an investment income surcharge. I offer this thought to the right hon. and learned Gentleman—one cannot encourage savings by penalising the saver. One does not encourage investment by damaging saving. All Labour's tax incentives would achieve is a distortion of investment decisions, damaging the quality and quantum of investment and reducing the return that it yields. 'That is what happened under the Labour Government in the 1960s and 1970s, yet Labour wants to try it again—no doubt, a crypto-policy.

Labour's medium-term industrial strategy amounts to three things: savings—Labour will tax them; investment—Labour will distort it; the labour market—Labour will cripple it. All that is quite apart—[Interruption.] It is much more in the Queen's Speech than anything that the right hon. and learned Member for Monklands, East said. All that is quite apart from the fact that the Labour party has no credible policies to tackle inflation. Labour would not use a tight fiscal policy or high interest rates—that much is clear. For Labour, interest rates at any level are always too high and public expenditure at any level is always too low.

For a while, the Labour party tried to shore up its credentials by saying that it would join the ERM, although only—let it be noted—on conditions that would transform the whole system. Now that option has gone. Labour now has only one distinctive policy left—the imposition of credit controls—and even that is withering away. The right hon. and learned Member for Monklands, East admitted that controls would not be "hermetically sealed". I think that saying that they would not be "hermetically sealed" is his way of admitting that they would not work. They would not. That is why they have been ditched all over Europe—by the French, the Italians, the Dutch and the rest of Europe.

In recent months, policy on Europe and the debate on economic and monetary union have occupied centre stage. That is not surprising, for there is a great deal at stake in economic and monetary union. But the rapid push towards the Delors version of economic and monetary union owes almost everything to pressures for closer political integration in the Community and very little to the fundamental need for deeper economic and monetary integration. That was the message from the Rome Council, but it is the wrong way to approach such important and far-reaching decisions. What is needed is a constructive, practical and pragmatic approach. That is the approach that the Community has been following over the past five years or so. It has built on the undoubted discipline of the exchange rate mechanism, with the deutschmark providing the anchor. The result has been an impressive degree of convergence on low inflation in much of Europe.

Our proposals are—agreed by the whole Government—to continue that successful evolutionary approach in the further moves now under discussion towards economic and monetary integration.

Mr. Bob Cryer (Bradford, South)

Will the right hon. Gentleman be a runner in the second ballot for the Tory leadership? Will he make that clear?

Mr. Major

The hon. Gentleman is in no position to yell from a sedentary position. There is not even agreement on the Bench upon which he sits on this issue. [Interruption.] Labour Members might as well agree with our policy, for it is clear that their party has none. That is why we have put forward our proposals for a European monetary fund and a parallel currency. They are practical and realistic and they will promote convergence and economic integration beyond stage 1. Most important, they will enable the 12 member states of the Community to move forward together. That is an important development.

The fact that some European figures attack our proposals should not worry us. They do so because our proposals are gaining ground—[Interruption.] The Opposition may not like it, but there is no point in people attacking policies that are not gathering ground. It is because our policies are gathering ground that some people attack them. I believe that they will win more adherents as the intergovernmental conference gets down to details. One of the points upon which we and our partners agreed at the Rome Council was that there needs to be a substantial next stage, which should involve the further development of the ecu. At present, the only worked-up proposals for stage 2 are ours and the Spanish proposals, which are built upon ours and are similar to ours.

The IGC, which starts next month, will determine the future direction of the Community. It is therefore of enormous importance not just for this country but for the Community as a whole and for the wider Europe. We face some difficult negotiations—that is undeniable—but the House should remember that we are in the middle of the process. The IGC has not yet started. There is a long way to go. We should not underestimate for a second the strong desire both here and among our partners that we should not be sidelined in any way. Our European partners want the United Kingdom in the centre of the Community. We have played a leading role in recent years in the creation of an open Community based on free trade and the abolition of barriers.

Our partners know that, and they know, too, that that would not have been achieved but for the leadership of my right hon. Friend the Prime Minister. I am convinced that we can and should continue to play that constructive and central role and that we shall be able to agree on a way forward on economic and monetary union that is acceptable to all 12 member states and, crucially, equally acceptable to right hon. and hon. Members who have a direct interest in what is determined.

We must not trivialise the debate. The Leader of the Opposition, when asked about a single currency—perhaps one of the most important issues before the country for years—said: We can certainly have the Queen's head on our currency. I would be very much in favour of doing that. That is nice to know. It is good to see a precise appreciation of these complex points, but when pressed on that and asked whether he thought that as long as the Queen's head was on the coin it would not matter if there were a common currency or a single currency, the right hon. Gentleman said: That is the whole point that Leon Brittan and Jacques Delors and everybody else has made. Actually, it was not: their points were altogether deeper, but let that pass.

Do not the Opposition comprehend the seriousness of this issue? The Delors report advocates a single monetary policy controlled by a non-resident bank that might be independent and not answerable to national Parliaments. That would be imposed by politicians, not decided by choice. Do not the Opposition realise that, whatever is stamped on either side of a coin, that coin must have a single unvarying value in terms of all other Community currencies? Those are issues of vital importance to Parliament and our future, and they deserve much more than the right hon. Gentleman's glib answers to questions that he does not understand. He clearly does not understand what he would commit us to were he in government. He would simply follow the lead of others and join the end of the queue without having the faintest idea what he was queueing for: "The other 11 people seem to know, so it must be right—we will join the queue." That is the limit of the right hon. Gentleman's understanding.

We know what is at stake, however: the whole future direction, composition and nature of the European Community. I believe that we must be a part of it, building, developing and shaping it. Our partners believe that too, which is why I am confident that we shall be able to negotiate a way to success in the intergovernmental conference that starts shortly.

The current slowdown in the economy is in no sense comfortable but it is absolutely necessary, and once it is over, once inflation is heading downwards again and growth is picking up, as will happen, we shall put our problems behind us and begin to build on the formidable array of our achievements of the past decade. For when people get the chance to choose once again between a party that has principles and a party that has abandoned them, between a party that delivers freedom and a party that inhibits it, between a party that builds prosperity and one that merely seeks to redistribute it, I believe that they will vote for the consistency, courage and conviction with which my right hon. Friend the Prime Minister has led this country so successfully for so long.

Mr. Nicholas Bennett (Pembroke)

On a point of order, Madam Deputy Speaker. I seek your advice about remarks made by the Leader of the Opposition during my right hon. Friend's speech.

When my right hon. Friend was giving the House some statistics about the increase in business investment in the past few years and the relative success of the British economy compared with France and Germany—[Interruption.]

Madam Deputy Speaker (Miss Betty Boothroyd)

Order. I must hear the point of order, and the hon. Gentleman must come to a point of order with which the Chair can deal.

Mr. Bennett

Once my right hon. Friend had given those good news statistics, the Leader of the Opposition was distinctly heard to say that they are a fake. That was clearly a reflection on my right hon. Friend and his officials. Would the right hon. Gentleman care to withdraw the remark?

Madam Deputy Speaker

That is not a point of order for the Chair. It may be a debating point, but the Chair has no responsibility for that.

4.53 pm
Mr. A. J. Beith (Berwick-upon-Tweed)

That point of order further illustrated the fact that proceedings in the House have had a slightly unreal air about them ever since the right hon. and learned Member for Surrey, East (Sir G. Howe) changed the course of events by his personal statement yesterday afternoon. The result of that statement was to throw wide open the chasm in the Conservative party on Europe, an issue which should be central to the Gracious Speech and which is central to the future of this country. Yet the same issue divides the Labour party as firmly as it divides the Conservative party. The remarks that the right hon. and learned Gentleman made about stretching language to accommodate different points of view, true as they are of the Government, were shown to be equally true as the right hon. and learned Member for Monklands, East (Mr. Smith) sought to explain his position on certain fundamental European questions this afternoon.

I cannot believe that the Chancellor—who, fortunately for him, was not interrupted by any background noise from those immediately around him this afternoon—has no view as to what the nature of a future European monetary system should be. I cannot believe that he imagines a European monetary system with divided responsibility for monetary policy in which the politicians of any one country, or indeed the Council of Ministers, could undermine sound money by continually interfering in the running of monetary policy by a central bank. If the Chancellor has such a view, I wish that he would expound it and explain how his hard ecu system would work.

The issue may be academic, but it is interesting to examine what the Chancellor's real views are. I say that it is academic because it does not have a hope, but if the Chancellor believes that it is a serious contender perhaps he will explain what would happen if a member country with substantial public sector deficits decided to go on printing more and more money and exchange it into hard ecus at whatever value the bank cared to name. Sooner or later the central banking institution—the Eurofed—would say to that country, "Sorry, the game is up—you cannot run public sector deficits like that and take part in our scheme, so we shall interfere with your supposedly sovereign power and stop this continuing."

Inherent in the right hon. Gentleman's scheme is the very denial of sovereignty which worries the Prime Minister so much. I find this one of the necessary and acceptable parts of the scheme. It is not possible to run such a system without getting away from the possibility that any one country could print money, but the Prime Minister clings tenaciously to the desire to be able to print money on whatever terms she or her successors choose.

This is why no form of words and no structure can paper over the differences. Perhaps the Chancellor would not be in a position to insist that his scheme was seriously workable unless he put his hat into the ring and won, but unless he does so there is no hope of his scheme being taken seriously.

I wish to concentrate on a few key points in what I hope will be a brief contribution. The first is growth, and what the Chancellor said about it. He spoke today about the prospects for improved growth in the latter part of next year. I do not understand how he deduces that from what he forecasts about current events. He talks of an average growth of 0.5 per cent., yet from that he concludes that he can achieve 2 per cent. growth at some time in the year. I do not know what he means by that figure, unless it be that there will be a substantial spurt of growth in the economy in the latter part of next year. Is that to be achieved by a careless policy on interest rates? It certainly does not flow logically from what the right hon. Gentleman has described as happening in the economy so far.

For that growth to happen at all, there would have to be, as the right hon. Gentleman himself concluded a high level of investment. He assumes that investment will remain on a plateau, but how will it do that if, as he already forecasts, the margins for business are effectively halved in the course of the year? How will a high level of investment be achieved from lower profitability? Put together, the Chancellor's forecasts do not appear to add up.

I am worried that the Chancellor does not show any real anxiety about the likely level of underlying inflation next year. It is not true that he has failed to forecast the underlying rate. His denials are unnecessary, because, when answering me during exchanges on the autumn statement on 8 November, he said: I expect underlying inflation also to fall next year … to broadly the level of the headline rate."—[Official Report, 8 November 1990; Vol. 180, c. 126.] If that is not a forecast, I do not know what is, but it is a forecast that our underlying inflation will be roughly double that of our main competitors. The Chancellor may want to bask in the glow of lower headline inflation. but he must recognise that what he knows to be continuing high underlying inflation is a serious problem for the British economy and one to which he has not yet forecast a solution.

Part of the solution to that problem lies in the very disciplines that his right hon. Friend the Prime Minister finds so irksome—the disciplines involved in the kind of system being run by our European partners. Thus we get into the area opened up by the right hon. and learned Member for Surrey, East. In passing, I wish to pay tribute to something that has not been mentioned so far—the right hon. and learned Gentleman's work as Leader of the House. I worked closely with him in the House of Commons Commission and his work will stand the House in very good stead and will prove, to be of real and lasting benefit.

Having worked closely with the right hon. and learned Gentleman, I always found him to be a reliable and sound witness. When matters are in dispute, I am inclined to accept his view, particularly when it comes to describing what happened in the Government five years ago. At that stage, the right hon. and learned Gentleman decided that we should be part of the exchange rate mechanism. I am not quite sure from what he said whether the right hon. Member for Blaby (Mr. Lawson) had reached that decision then, but we need not worry too much about that, as he arrived at the conclusion shortly afterwards.

Five years ago, the right hon. and learned Member for Surrey, East decided that we should be part of the European monetary system's exchange rate mechanism. My right hon. and hon. Friends and I sensed that that was right, and on 29 January 1986 we tabled a motion to the effect that this country should enter the exchange rate mechanism. The Government strongly resisted the idea that we should join, and a vote was taken on the matter. I am pleased to tell the House that the hon. Member for Clwyd, North-West (Sir A. Meyer) voted with us on that occasion. The right hon. Member for Henley (Mr. Heseltine) voted against the motion. The right hon. and learned Member for Surrey, East was mysteriously absent and did not vote but abstained—like the entire Labour party, which at that time was a long way from having anything like a policy on the exchange rate mechanism.

The Prime Minister might like to borrow the words used by the hon. Member for Sedgefield (Mr. Blair) when we debated that motion in 1986. The hon. Member for Sedgefield is generally regarded as one of the more European enthusiasts in the Labour shadow Cabinet. He said: The first consequence is that the EMS is essentially a deutschmark bloc. It could be said that we would be putting Herr Pohl of the Bundesbank in 11 Downing street. He might be preferable to the present incumbent, but we should yield our freedom of action."—[Official Report, 29 January 1986; Vol. 90, c. 990.] The views of the shadow Cabinet bear an extraordinary similarity to those of the Prime Minister. We should have joined the exchange rate mechanism much earlier. Had we done so, we would not now be paying such a high price. We would not have had high interest rates or high inflation for so long. Following our recent decision to join, we would not now be unable to reduce interest rates further because, were we to do so, we would hit the bottom margin of our wide band in the exchange rate mechanism.

The Government must face up to the issues about a single currency and a central bank. As the Chancellor said with reference to the Leader of the Opposition, those are not issues about whose head appears on bank notes. The Chancellor cannot simply accuse the Leader of the Opposition of basing his arguments on that point because the Prime Minister is also worried about the head on bank notes. She is worried about the title of the pound sterling. She sounds more and more like Harold Wilson in his latter years.

The issue at stake is whether we are to have sound money. Are we to have a currency in which people will want to be paid because it is sound? If many of my constituents were offered the choice of being paid in deutschmarks or in sterling, and were given even the briefest sign of what the relative values of the currencies were likely to be, they would probably opt to be paid in deutschmarks. They might prefer to have the money printed in a more familiar form, just as many of them now use Scottish pound notes which, rightly, do not have the Queen's head on them. They are interested in the value of the currency.

Will their savings decrease in value? Will they be able to buy next year what they could buy this year with the little that they have pout away for retirement? That is the kind of guarantee that the Government's present policies cannot give my constituents.

Mr. Tebbit

Do the hon. Gentleman's constituents have any interest in whether they should have the right, as citizens of this kingdom, to fire the Chancellor of the Exchequer of the day, whether he is a British Chancellor or, under the idealised system promoted by the hon. Gentleman, a Euro fed Chancellor?

Mr. Beith

My constituents have watched in fascination as the Prime Minister has parted with Chancellors and senior Ministers of all kinds. They do not feel closely involved in those decisions as to who is to hold senior office in the Government, which have clearly depended more on disagreements within the Government.

The right hon. Member for Chingford (Mr. Tebbit) persists in using that argument without facing the central issue. Germany is no less a democracy because its Parliament has entrusted to its central bank the responsibility for maintaining sound money. The German Finance Minister is no less subject to dismissal because his Parliament has entrusted to its central bank a duty and responsibility to promote price stability and sound money. We should be in a better position in this country if our central bank had that responsibility. We should be in a better position in future if European monetary policy were determined on that basis rather than on a basis which allows the politicians of the day to manipulate the soundness of money to meet the timetable for an election or other short-term considerations.

It is not possible to sustain the argument about sovereignty without recognising how much Britain will lose if it continues to assume that the best interests of its citizens lie in the ability to pretend that we can ignore what is going on in the rest of the world economy when setting out interest rates or determining what happens to our currency.

Sir William Clark (Croydon, South)

With regard to the independence of the banks and particularly the Bundesbank, why did Helmut Kohl, when East and West Germany were reunified, allow the ostmark and the deutschmark to be interchangeable—one for one up to a limit of 5,000 and one for two thereafter? That was a political decision taken by Helmut Kohl. Where is the independence of the Bundesbank in that? The president of the Bundesbank did not care for that arrangement.

Mr. Beith

That clearly shows how circumscribed and precise is the independence enjoyed by the Bundesbank. It has autonomous responsibility for price stability, but it is not responsible for deciding the terms upon which West Germany unites with East Germany. The head of the Bundesbank is not the Chancellor of the Exchequer, still less the Chancellor of the Federal Republic. His responsibility is clearly defined—to ensure that, at the end of the day, he presides over a sound currency, which is something that successive British Chancellors of the Exchequer have failed to do.

I do not know how much longer, under the current leadership or under any foreseen leadership, the Government will remain impaled on the view that British sovereignty and the distinctive British character depend on preserving the Chancellor's ability to distort and debase our currency. I do not believe that the Government can sustain any serious anti-inflation policy unless they change that view.

Mr. Skinner

The hon. Member for Berwick-upon-Tweed (Mr. Beith), like many of his hon. Friends, has for years been trying to explain that his party wants to hand over powers to the Common Market and to Germany, in particular with regard to currency. How does he square that with the fact that one of the first Liberal motions this Session is to sustain a Welsh Parliament?

Mr. Beith

I am more and more amazed. Admittedly, the hon. Member for Bolsover (Mr. Skinner) is at odds with some members of his own party on this issue. However, he cannot understand that it is possible to have decisions taken within Europe at the lowest possible level and for decisions to be taken in Wales by a Welsh Parliament and in Scotland by a Scottish Parliament. Such decisions are being taken in Europe all the time.

If the hon. Member for Bolsover believes that the British Government currently have maximum control over the pursuit of our interests in Europe, he is very much mistaken. The Bundesbank takes decisions which have a very powerful impact on our economy. I would much rather be part of a central bank and monetary system which was much more influenced by our own traditions and ways because we were part of it, but I would nevertheless like it to enjoy the kind of independence that has enabled Germany to have a much lower rate of inflation for so long. Those who deride and disagree with that view should consider what has happened in other countries. Germany is no less a democracy for having pursued that kind of system, but it is a very much more successful economy for having pursued it.

Many Tory Members are profoundly unhappy with the Prime Minister's approach on Europe, although not many of them are intervening this afternoon. I wish to make them an offer. We in the Liberal Democratic party have tabled an amendment to the Loyal Address which is the ideal vehicle for those who wish to show that they believe that Britain should play a positive role in Europe. It may be that the right hon. Member for Henley (Mr. Heseltine) is not the man for them, but they do not wish at this stage to be identified with any particular candidate.

As I go round the House, I find that that seems to be a widespread view. There are many who want a change but do not want their name attached to any particular candidate. I invite them to join us in the Division Lobby to regret the absence from the Gracious Speech of any coherent policy to secure for the people of the United Kingdom the benefits of the economic, monetary and political union of the European Community. At least some Members of Parliament, and many more people outside the House, realise that that is where our future lies.

5.10 pm
Mr. Nicholas Ridley (Cirencester and Tewkesbury)

Yesterday my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) included in his speech the fact that matters of substance were partially the reason for his resignation, else, he said, he would be the first Minister in history who has resigned because he was in full agreement with Government policy. I must lay claim to that title myself. [Laughter.] I hope that the House will let me explain my views on this matter, although I do not expect to be heard in silence and without interruption, as my right hon. and learned Friend was yesterday.

This morning I again searched my right hon. and learned Friend's speech for the difference of substance between what he feels and Government policy. I cannot quite see what it is that prevents him from being the second Minister to resign because he was in full agreement with Government policy. He said: none of us wants the imposition of a single currency."—[Official Report, 13 November 1990; Vol. 180, c. 461–3.] That is true of the Government, the official Opposition and the majority of the country, but not of the Liberals. There are some fundamental reasons why that should be so and we should analyse them before we see this matter in terms of the fervour of one's Europeanism or the refusal to face up to the realities of the economic world.

As Mr. Pohl, an eminent witness, has said, this will lead to a federal system in due course. Another economic expert, who is not embroiled in the present dispute, John Maynard Keynes, said: Whoever controls the currency, controls the Government. To take control of the monetary, fiscal and budgetary weapons is to control the entire economic management of an economy. These are grave issues. The spectre of a country whose Government lose control of such vital matters is one that we should not toss aside lightheartedly, as the hon. Member for Berwick-upon-Tweed (Mr. Beith) did as proof of his European virility.

I do not rest my argument on the point about sovereignty. I have no objection to pooling sovereignty. However, when we are asked to pool a bit of sovereignty, we should ensure that we can afford to do without it. We should not contemplate losing the piece of sovereignty which concerns the management of our currency.

Why is that so? The Community has weak and strong states and nations. Within large states, there are weak and strong regions and areas. The weaker peripheral parts of a community with a single currency will always find it hard to match the rate of productivity increase in the rich areas. That is multiplied, because high wages cause high investment to get rid of high wage costs. Low wages do not cause such high investment, because wage costs are low and the machinery is not worth it. Therefore, that built-in multiplier explains why rich areas continue to prosper while poor ones find it hard to keep up. Hon. Members from Scotland, Northern Ireland, Wales and the north of England know what I mean about the difficulty of keeping economies which cannot progress at the same speed within a single currency. [Interruption.] If there is divergence within a single currency, economic and political strain is inevitable.

In a recent interview in a British paper, Mr. Pohl said: By abolishing the Exchange rate between them, the mechanism that would otherwise have taken the strain has disappeared. What remains for disadvantaged regions? First, they must lower their wages, but it is impossible to say, "We are taking you into a single currency which means decreasing wages by 20 per cent." That is to ask the impossible. There is no such possibility as devaluation, because the Government do not fix interest rates: Eurofed does. Therefore, we cannot put pressure on wages in that way. There is no alternative to grants from the richer to the poorer areas.

I call in aid, and agree with, the words of the Leader of the Opposition in the exchange rate mechanism debate: If the Community seeks to achieve currency union between member states, then whatever the implications for Britain, it will have to make arrangements for joint growth strategies, fiscal co-ordination and regional policies on an unprecedented scale."—[Official Report, 23 October 1990; Vol. 178, c. 213] Mind you, Madam Deputy Speaker, he said that more in joy than sorrow. Nevertheless, it is true.

The latest estimates of the cost of a single currency for East and West Germany is £40 billion to £50 billion a year for five years. That is the scale of expenditure that we are talking about. Moreover, as hon. Members from the north-east, Scotland and Wales constantly remind us, such grants are not successful. Although they are put into those areas, they do not solve the problem, which is a lack of competitiveness. We will never solve a lack of competitiveness with capital grants.

A single currency leads to discontent, political divisions, and in the end, nationalist parties and break-up. Why else is the Soviet empire disintegrating? It is for one reason, that it has had a single currency for longer than the strains within that empire can accept. Who gains? The poor areas are disadvantaged and the rich areas are bled heavily for the cost of the grants. We are already a net contributor to the Community of £2.2 billion annually. That would increase dramatically.

I conclude that it is not in the interests of any member of the Community to go in for such an idea, certainly not at this time, when the convergence of both the regions within countries and of the nations within the Community is far from any meeting. It is not just that there should be convergence at one point: it is that the convergence should remain as a permanency in the economic relations between states. It is impossible to contemplate that happening for a long time.

Mr. Ian Bruce

Will my right hon. Friend confirm that our regional policy is often under pressure from the European Community because, where we describe certain regions as being in economic need, compared with deprived areas in some European countries they are quite prosperous, so a flow of grants would not necessarily come from a central European regional policy?

Mr. Ridley

I have heard regional policy argued over. I have taken part in debates about it in the House over 30 years. There can be no resolution of these problems. Nobody will ever accept that such a policy is right, and it never does the trick, either. It is very much the worst solution to the problem that I have outlined.

All this has nothing to do with inflation. At this point, I pay a warm tribute to my right hon. and learned Friend the Member for Surrey, East for his period as Chancellor of the Exchequer. He was one of the best Chancellors of the century. As he said, he not only laid the foundations of our industrial recovery but brought inflation down from 22 to 4 per cent. He made that remarkable achievement with a floating pound. That achievement had nothing to do with the ERM or with being a member of the EMU or a single currency or the gold standard or Bretton Woods or anything else. The only time that we had a dramatic success with inflation was when we were not trying to interfere with the exchange rate.

My right hon. and learned Friend said that he and my right hon. Friend the Member for Blaby (Mr. Lawson) wanted to join the ERM much earlier, but my right hon. Friend the Member for Blaby had pre-empted him. He made the pound shadow the deutschmark, thereby creating inflation. I must conclude that inflation is directly related to the control of money supply and is not in any sense connected with exchange rate policy.

In the Community, when one talks to key Europeans, one is told that the question is not whether we should have a single currency but when and how quickly. They tell us that it is inevitable that we will join because Britain always gives way in the end, and that we all have to get quickly on that famous train mentioned by my right hon. and learned Friend.

These people owe us an explanation of what they wish to achieve with a single currency and of how these fundamental defects are to be overcome. My right hon. Friend the Prime Minister is right to be firm about the single currency. She should, as she does, seek to persuade the other eleven of the mistake that they are making, of the dangers to Europe and to Britain. She is right to offer the hard ecu as a feasible alternative that will test whether the nations of Europe want to go to a single currency, and it leaves the choice to them, rather than pushing an option at them.

There is no middle way. If we do not leave things roughly as they are, there is only the hard ecu or the imposition of a single currency. My right hon. and learned Friend did not tell us what middle way he saw. Therefore, I have to conclude that he does not have a point of difference of substance with the Government. If the House agrees that there will be damaging consequences of joining the economic and monetary union as proposed, it follows that those who proceed will do less well than those who do not. Therefore there is a strong case for persuading them not to proceed with it, but if they insist, there is a much stronger case for us opting out.

Therefore, my right hon. Friend the Prime Minister is right to pursue the positive priority goals in Europe of widening the Community, succeeding in the GATT Uruguay round, curbing the CAP and opening that protective industry to the world, and completing the single market as soon as possible. I do not think that there is a great difference between my right hon. Friend and my right hon. and learned Friend. I wonder even whether the use of this word "style" which was the other part of the argument, is not some sort of Alan Walters of my right hon. and learned Friend's imagination.

After my resignation, I received an enormous number of letters of support from older people, but curiously also from young people. There was a feeling that we were being pushed along into a single currency, that we were being bullied and that, in the end, we would be forced to join, faute de mieux, because nobody was taking the trouble to stop it.

The country is apprehensive. People want to know more about the matter first, but what they do know, they do not like. They want a firm stand to be taken. My right hon. Friend the Prime Minister has two audiences for what she says. One is that in the Council of Ministers, the Commission and Brussels, and the other is back in Britain. I think that, as between my right hon. Friend and my right hon. and learned Friend the Member for Surrey, East, the country prefers her style.

5.27 pm
Mr. Robert Sheldon (Ashton-under-Lyne)

The right hon. Member for Cirencester and Tewkesbury (Mr. Ridley) is the last remnant of the unreconstructed monetarists. His speech was a defence of policies enunciated in 1980. I remind him that the level of inflation of 21.9 per cent. was the level reached after one year of the Tory Government, who had inherited a level of 10.1 per cent. That is the measure of their achievement in those years, which led to a third of the industries in my constituency closing because of the high level of the pound and of interest rates. That was the achievement that the right hon. Gentleman seems to be the only person capable of applauding.

I was particularly interested in, and I welcome, the Chancellor of the Exchequer's comments that he was not going to be sidelined in Europe. That was most fundamental and, whether or not he cleared that with the Prime Minister, it will be important in bringing about the reconciliation with Europe that I hope will now follow as a result of his comments and the comments that we are hearing elsewhere. He said that the hard ecu is gaining ground. I do not see that when I look around. Who will use the hard ecu? The mystery is how it came to be part of the Government's policy and why it is still in play. A further question is what we are trying to achieve with it. Tim Congdon, in today's edition of the Financial Times, rubbished it as effectively as any new economic suggestion has ever been rubbished.

I think that the new hard ecu was brought in to confuse the issue. Perhaps it was introduced to receive the plaudits of the Prime Minister in presenting another factor which it was thought might delay matters within the Community. For a time it was successful. For a time there was no reaction from the rest of the Community. Perhaps the other members of the Community were trying to work out all the complications, or perhaps they just dismissed it. Whatever happened at the beginning, it is clear now that it is not a runner. I think that we should cut our losses, forget it and start again.

We have heard that the level of inflation will be the judge and jury of the Government. What is to be the level of inflation? Do we take the retail price index or the underlying rate? My right hon. and learned Friend the Member for Monklands, East (Mr. Smith) explored this issue in a most penetrating way. In effect, the Chancellor of the Exchequer said "That is all finished with now. The underlying rate is not a matter of importance any more. It is the retail price index that matters." Looking at these matters year upon year, we know that, when inflation is rising it is better to choose the underlying rate, and that when it is falling it is best to choose the RPI. It is only sensible of us, the Opposition, to ask why the Chancellor of the Exchequer is not giving the underlying rate. He said that that would involve secrets which he cannot reveal.

That is what used to be said about the RPI. Forecasts were never made of what the RPI would be. Governments never used to give forecasts of unemployment levels. When it comes to such forecasts, of course, they are described as assumptions that are built in. The same could be done with the levels of interest rates. Similarly, an assumption could be made of the underlying rate of RPI. That could be compared in the same way that we can compare the RPI as it is expected to be with what it turns out to be.

The right hon. Member for Cirencester and Tewkesbury dealt at length with European monetary union and the problems that go with conceding some of our sovereignty and some of our rights. If we could secure a convergence of the various economies, we could have one trading area with the same taxes. We would have to have the same welfare treatment and comparable living standards, employment opportunities and so forth. That, however, is a long way off. We need to consider now whether we should be a part of the discussion. That is the real question before us. When the Chancellor of the Exchequer says that we are not to be sidelined, he is saying precisely what my right hon. and learned Friend the Member for Monklands, East and my right hon. Friend the Leader of the Opposition are saying.

The right hon. Member for Cirencester and Tewkesbury was right to say that, in past years, there have been transfer payments of billions of pounds to the regions. However, even when the sums transferred were much larger than they are now, they were never enough to meet the need for evening out the great disparities within the country. Scotland and the north, among other regions, received large payments, but within the United Kingdom there have always been two safety valves. They may not be very good ones, but they have helped to eliminate the damage of real and perceived regional differences.

The first safety valve has been the willingness of our people to see part of their living standards used to help others in different parts of the country. The second safety valve has been the ability of some people to move to more prosperous parts of the country. Getting on one's bike can seriously damage the area that is exporting its best talents and there is serious condemnation of it, but it provides some opportunities in the absence of proper resources being made available to rebuild the economy.

The operation of the two safety valves is much more limited across national frontiers within the Community. The Germans cannot be expected to subsidise those in the south of Italy to anything like the extent that is required. Likewise, Belgium will not transfer resources to our north-east to anything like the extent that a United Kingdom Government would. Nor can people cross language frontiers and expect to be treated much better than guest workers, who have fewer real rights and expectations than the people of the host country.

Regional disparities will not be reduced to anything like the extent that is required because of an inability to alter the exchange rate or to undertake national policies to enable damaged communities to recover. People do not have much sympathy for other people's economic problems. We always think that our neighbour's economy would be easy to run if only all the sensible things available to be implemented were put into effect.

Nicky Kaldor—he was shamefully denied a Nobel prize for economics, a matter which I brought to the attention of the shamefaced head of that organisation on one occasion—advised several new countries on their economies. Tales were told of the implementation of his policies, which were invariably followed by riots. These stories were grossly exaggerated. But in the end, economics is always subject to political judgment. Nicky was right on economics but he did not always understand the politics of the situation.

Mr. Terence Higgins (Worthing)

The problem with Nicky Kaldor's prescriptions was not that they were wrong but that Governments did not realise that they were supposed to put his taxes into effect instead of the existing ones and not in addition to them.

Mr. Sheldon

That may have been the case in one instance. More generally, the problem was Nicky's failure to consider the political situation and to understand it. He was always proud of his political expertise, but we know that it was his mastery of economics that was the clue to that giant of a man.

If we do not examine the politics of a country, we shall not succeed with economics. For example, the United States says that the Soviet Union needs to do the obvious thing and increase bread prices threefold. That is its prescription. Meanwhile, the United States cannot bring itself to double its tax on petrol, which would solve its problems at a stroke. The Germans say that we, the British, need more discipline in respect of wages, while they threaten to disrupt the world's trade arrangements by entrenching their grossly indulged farmers within their highly prosperous economy. We like to discipline others in accordance with our own prejudices. Those who have the strongest economies are foremost in their disciplinary zeal.

The Bank of England has a certain amount of autonomy even within the structure of a nationalised industry. Mr. Pohl knows that he would have difficulty in controlling the area of his interest and involvement if he were to have other people in charge. We must ask whether the interest of bankers is the same as the national interest, or even the interest of the Community. Bankers want solid and safe loans and a strong currency, as that gives them scope for financial dealings. It is easier to operate successfully in international markets if there is a strong currency.

Sometimes that may coincide with the national or even the international interest. Everything is seen by bankers, however, in financial terms. In the inter-war years, the role of the Bank of England was considered deplorable, and it was even opposed by Conservative Members. Some Conservative Members even voted for the nationalisation of the bank. Let us not assume that bankers can be operated and even controlled by political forces.

Financial terms are not everything. We want jobs and prosperity for all. Those are not bankers' terms. We want industrial progress. Bankers want that, but only up to a point. As the hon. Member for Berwick-upon-Tweed (Mr. Beith) said, the task of the Bundesbank is to secure a stable rate of inflation, but that is not its only job. Its main job is to look after its own interests. Ours is not to make the world safe for international bankers. Of course, no one doubts that, on crucial issues, Governments will play a part and actually win. They do not do so, however, when it comes to day-to-day operations. The Chancellor of the Exchequer does not see the thousands of banking transactions that are made each day. There is great scope for clearing banks, which have a great deal of power when it comes to important decisions.

I have outlined the problems. We must do what the Chancellor and my right hon. and learned Friend have suggested, and be a part of the discussions and the negotiations. We must not adopt the tone of being superior to the remainder of the Community. A1 my arguments and all the arguments of the right hon. Member for Cirencester and Tewkesbury are known. We are not the only people in Europe who understand the problems. Other people understand them and are concerned about them.

We are talking about a period years hence, so we do not have to decide every detail now. I am reminded of the story about a couple, one of whom said, "I think that we should get married." The other replied, "Yes, what a good idea." The first one said, "We will have a lovely home." "Yes we will," the other replied. "We will have a couple of children," said the first. "Yes," the other replied. "We will have a boy and a girl, and the girl's name will be Valerie." "No, no, no," said the first, "her name will be Joan." The couple split up.

It is nonsense. Our task is to say, "We are talking about a period long hence; we are not the clever ones and you the foolish ones; we do not have such experience that we can say that we know how to run our economy much better than you know how to run yours. We are all trying to find solutions."

Mr. David Howell

The right hon. Gentleman is speaking with great wisdom, as he often does in economic debates, but is he not unnecessarily complicating the issue of the authority of central banks and their independence of elected Governments? Surely a central bank should look after monetary policy and monetary affairs, as the Bundesbank does, while the elected politicians have the last say on higher matters of state—for example, the unification of Germany. The process must be open and understood. It must be made clear when the interests of monetary stability are put second to other matters. There is no difficulty with that, so I do not understand the right hon. Gentleman's problem.

Mr. Sheldon

The right hon. Gentleman is aware that a number of decisions are made each day in discussions between the Governor of the Bank of England and the Chancellor. He is also aware that the Chancellor is not always successful in those discussions. The Governor has a great deal more detailed day-to-day information at hand. We must not assume objectivity in some of the actions taken by some people. That is the major problem.

Another issue I now wish to raise is the fact that capital allowances are only 25 per cent. With the downturn in investment, especially in manufacturing, it is essential that investment is maintained at as high a level as is reasonably possible. I have said again and again that 25 per cent. is nonsense. If a company buys a piece of machinery for £1,000, at the end of the year it is written down to £750. Very often, that 25 per cent. reduction is less than the commission earned by the person selling that machine. The machine is not worth £750. Far from being an investment incentive, the level of capital allowance is frequently an investment disincentive. I hope that the Government will consider short-term improvements in the capital allowance, as has happened in the past.

With the change in the perceived roles of the Chancellor and the Prime Minister, I hope that the right hon. Gentleman will firmly nail on the head any question of mortgage interest relief being raised above the current level of £30,000. We all know that it is the Prime Minister's dearest wish to have higher and higher levels of mortgage interest relief. We all know that all that does is feed through into the price of houses and so increase the difficulties for those who want to start on the house ownership ladder. The relief is costing £8,000 million a year. It is a waste of money. Instead, we should find some way of putting that £8,000 million into industry, especially manufacturing industry. That is one task that the Chancellor must undertake.

We are approaching the end of our debates on the Gracious Speech. It is not a happy tale. It appears that the balance of payments deficit will continue indefinitely. Despite the many years of benefit from the vast sums of money from North sea oil, despite the many years of the benefit of £5,000 million a year from privatisation, what has been achieved with that enormous amount of income? It has all been a vast disappointment to the country.

5.44 pm
Mr. Michael Grylls (Surrey, North-West)

The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) made an interesting and amusing reference to a couple considering their family planning and their dreams about how many children they would have. Of course, I understand his analogy with Europe, but if we spent all our time dreaming about having a family, we would never get around to having one. That is relevant to this debate because people on the continent appear to spend a great deal of time dreaming about what might happen at some time in the future, while forgetting to deal with the problems of today.

British business—the wealth-creating sector of our economy—wants the final, proper and complete establishment of a single market in Europe. That is what is needed and that is what will create greater wealth, but it will not happen if we just dream about the possibility of a common currency. My right hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) dealt with that point extremely well.

My right hon. Friend the Chancellor rightly spoke about the prospects for a reduction in inflation under present policies and under the medicine that he is administering to remedy the problems that have hit this country. He is right to suggest that the medicine has bitten hard and that the effects will soon be evident. After all, we have been through this before. At the beginning of the 1980s, the Government had to deal with inflation and there were high interest rates. There was a resurgence of the problem in 1985, and again financial constraints were imposed and inflation brought down. I believe that the same will happen now.

The right hon. and learned Member for Monklands, East (Mr. Smith) tried to have some fun with the question whether or not Britain is in a recession. I do not think that it is a matter for fun and he was being silly. He knows—or at least he should know—the correct definition, because my right hon. Friend the Chancellor had to remind him, in answer to his intervention. If the right hon. and learned Gentleman really wanted to be helpful, which he does not, he would admit that the medicine is working and that the economy is slowing down. Everybody knows that that is true. The sooner that that process is completed, the sooner we shall be out of any difficulties.

After 10 years of record growth in the economy, people expect that to continue. They think that there is some sort of magic about it and that, because we have done so well for 10 years, we shall continue to do so and that there will be no decline. I am not making a political point but merely stating what I believe business men and individuals perceive to be the position. They are concerned about what is happening. People have forgotten that life goes in cycles, and that there are economic cycles which do not last for ever. The history books show that. In a way, 10 years of growth is a great record, but sooner or later there had to be a dip. That is exactly what has happened now.

I wish to quote from a report which states: Employment is in steady decline and industrial output is in steady decline. Housing stocks are down by one third. Companies are battening down the hatches. Recession is a fact. People who have lost their jobs have given up hope of finding any new ones. That is a description not of the British economy, but of the United States economy. Although Britain has been hit by high inflation, the economic cycle does not apply uniquely to Britain. It is happening in all industrialised countries.

The other day I met an old friend with whom I went to school but had not seen for many years. We were reminiscing, as one does on such occasions, and he told me that when he was at school his family was poor because all their money had been lost in the depression of the 1930s. I had not realised that. How easy it would have been after the stock exchange crash in 1987 for the world to go into a spin similar to the great depression of the 1930s. The reason why it did not was that the economies worked together to ensure that interest rates were cut. With the benefit of hindsight, it is easy to be critical of those interest rate cuts—there is no point arguing about whether they were right or wrong, because they happened—but it is easy to forget that without them the world economies might have gone into a spin which might have had the tragic consequence of wiping out people's money and jobs on a mass scale, as happened in the 1930s.

Despite the problems that America and Britain are experiencing, Britain, happily, is fortunate in having a basically sound economy. In support of that, I cite the creation of new small businesses—an area in which many people, including myself, have taken an interest over the years. Despite the high interest rate policies since the middle of 1988 to deal with inflation, the net number of new businesses being created has been running at 1,700 per week, which surely proves that, even with high interest rates, the economy is basically strong. It is important to remember that. The economy is strong because it has been growing for most of this year, despite high interest rates.

The economy is fit. It is rather like a horse that is fit and strong but needs to be reined back, and that is what is happening. As we learned from the autumn statement last week, our finances are still in a prudent shape compared with some of our neighbour countries, including the United States with its huge budget deficit. That is a wonderful thing. It is helpful that our public finances are strong. People's disposable income is still rising, unemployment is lower than that of our European competitors and youth employment is half the EC average. Those are all signs of a fundamentally strong economy. Whatever the shadow Chancellor may say, he cannot get away from that. He knows that the British economy is fundamentally strong, finances are strong and the problem of inflation will be resolved.

In addition to the 1,700 new smaller businesses per week being created, there are 70,000 more medium-sized firms than there were a year ago, so I do not take it seriously when business men say that it is difficult to sell or that there is not much of a market today. Not only are there 2 million more people in work, which is a market for goods and services, but there are also all those new firms which did not exist a year ago.

It is said in criticism of my right hon. Friend the Prime Minister that she has been abrasive, that she will not go along with the majority in the Community, that if she were a bit more polite she would have more influence in Europe—not that I have ever known her to be impolite—but is it not more sensible to judge by results? When Britain's large budget contributions were being discussed in 1981 and 1984, people said that it was improper to discuss such a measly matter as a budget rebate. But my right. hon. Friend succeeded beyond most of our wildest dreams and obtained a rebate of £10 billion. It is extraordinarily churlish of anyone inside or outside the House to criticise someone who has so successfully delivered the goods.

We saw another example of firm negotiation—call it abrasive if you will—in the fact that, 10 days after my right hon. Friend the Prime Minister raised the matter in Rome, the farm subsidy issue was resolved. It is absurd to accuse her of wrecking the Rome summit. The fact that she raised the GATT talks at the Rome summit must have had an effect because the matter was resolved and we now have the chance to save those all-important talks.

Mr. Roy Beggs (Antrim, East)

Does the hon. Gentleman agree that in signing the Anglo-Irish Agreement the Prime Minister showed that she was capable of extreme compromise and also capable of taking bad advice?

Mr. Grylls

You would be critical of me, Madam Deputy Speaker, if I transgressed on to Irish matters in a debate on the economy. I hope that many of the things that I have said about the economy will apply to the important and much-loved Province of Northern Ireland, for which I have a great affection.

My right hon. Friend the Prime Minister has been criticised for fighting for British interests. I have just described two matters on which she fought successfully. I would rather put my faith in someone who has fought battles and proved that she can succeed. In the tricky negotiations at the intergovernmental conference next month, so well outlined by my right hon. Friend the Member for Cirencester and Tewkesbury earlier, and in the future negotiations on monetary union, I would rather put my money on the Prime Minister leading us in the right direction than on anyone else.

5.57 pm
Miss Joan Lestor (Eccles)

I have tried to translate some of the phrases used by the Chancellor of the Exchequer and one or two Conservative Members into what is happening in my constituency and others like it. I have listened to phrases such as the strength of the economy, how wages have risen and how the economy has grown, but I have heard little about the effects of what has happened in the past 10 years, about low pay and long-term unemployment, in constituencies such as mine in the north-west where there has been no investment and where traditional industries have declined. I have tried to consider what has been taking place and what that has meant to people, because it is people and how matters affect them that Government policy should be about.

There is one section of society whose interests are not being adequately represented and who are rarely discussed in the House. They do not organise, they do not lobby and they do not have a voice or a vote. They are the children and the young people below voting age. For them, the Chancellor's autumn statement and the Gracious Speech brought no cheer. There were no proposals to tackle child poverty. There was no commitment either to ending the misery of long-term unemployment, which has been a characteristic of my constituency for many years, long before I was returned to the House as its Member of Parliament, when it was represented by Lewis Carter-Jones. There was no promise of the industrial regeneration that it so badly needs to provide jobs now for parents, and the prospect of employment tomorrow for their youngsters.

The Gracious Speech contained no coherent strategy aimed at strengthening the family, whose importance we have heard so much about, to offer employment, and proper child care so that women could be free to work and provide their families with a better quality of life. Instead, we have heard only of proposals to penalise errant fathers in such a way that the main beneficiary will be not their children but the Treasury. There are proposals to withhold benefits from mothers who are, for many reasons, unable or unwilling to name the fathers of their children. That is to visit the sins of the fathers upon the children in true Victorian fashion.

Characteristic of many Conservative Members and Government statements is their attitude to one-parent families, because that term is becoming the swear word that "bastard" and "illegitimate" were in my youth. One-parent families are perceived as the cause of so many problems, so they must be punished.

Last week, the Chancellor had the ideal opportunity to put right some of the damage inflicted by the Government on children over the past decade, yet he turned his back on them, and on the poverty in which so many of them are forced to live. The freezing of child benefit for four years and the meagre new £1 payment for the first child reveals the Government's attitude to child poverty.

The Child Poverty Action Group suggests as a definition for poverty, those living on and below the level of supplementary benefit, and those living below 50 per cent. of average income. I commend also the definition in the Church of England's 1985 report, "Faith in the City", which drew widespread comment: Poverty is not only about shortage of money. It is about rights and relationships; about how people are treated and how they regard themselves; about powerlessness, exclusion and loss of dignity. Yet the lack of an adequate income is at its heart. The Government's refusal to define an official poverty line makes it difficult to arrive at a yardstick. It is yet another manifestation of the Government's reluctance to produce official figures for homeless children, for example—whose numbers are lost in the statistics for homeless households.

I can tell the House what poverty is, because I see it in my own constituency and the surrounding areas. I see it in the people who come to my surgery week after week. Poverty is kids sleeping rough in our cities and begging for money. Poverty is pensioners counting out their last few pence at the supermarket checkout, and having to return something to the shelf because they cannot afford to buy it.

Poverty is a mother with two or three children crowded into one room in a sleazy bed-and-breakfast hotel, or having to use her child benefit to pay the poll tax instead of buying clothes for her kids—because otherwise the bailiffs are likely to arrive. Poverty is children in Conservative Britain having to be kept away from school because they have no shoes. All that after a decade of a so-called economic miracle.

Conservative Members may argue that none of that is true. It may not be true of the children in their constituencies. It is not true of many children. But one must judge the success of any economy and society by conditions at the lowest end of the scale. That is the true test—not how wages have increased for the majority. If Conservative Members are honest with themselves, they will admit that the claims that I make are true in respect of an increasing minority of our children. Not a single agency dealing with children in this country would fail to support my remarks. Those agencies are the source of the statistics that I shall give shortly, not the Labour party.

Since 1979, and the so-called economic miracle, the number of families receiving supplementary benefit has increased by two thirds, despite there being only a small rise in its real value—far behind the increase in real earnings that we heard about today. There is a shocking stagnation in the incomes of the poor. How much longer must they wait for the benefits of the "economic miracle" to trickle down to them? The theory was that if the economy came right, the benefits would trickle down to the poor. That did not happen in America, from which the Government borrowed that theory. The substantial increase in the numbers dependent upon supplementary benefit is a direct consequence of rising unemployment during the 1980s.

It is a shameful indictment of the Government that they are still prepared to countenance one child in 10 living in households in which the head of the family is unemployed. Half a million children have lived with their parents' unemployment for more than two years. I see that in my constituency day in, day out. It is in areas such as mine that one can see poverty, in which people must choose between paying the poll tax and buying their kids a pair of shoes.

What are we to make of the self-styled party of the family, who suggested that fathers should get on their bikes in search of a job, and placed family relationships under intolerable stress as a result of unemployment that was cold-bloodedly engineered by the Government? When I hear people deploring the divorce figures, I think of the constituency that I represented for 17 years until 1983. Unemployment had not at that time hit Slough as it had the north-west. People moving there and elsewhere in the south-east could not afford to buy property even if they had owned a house before, and families were torn apart. Among the most important factors in divorce are poverty and the intolerable strains imposed by separation and the attempt to keep a family together on a meagre income.

In 1987, more than 10 million people—one fifth of the population—lived in poverty. The number of families with income below supplementary benefit level increased by 18 per cent. between 1979 and 1987, to 1.9 million. The bottom line is that more people are on low incomes and making use of the minimum safety net benefit. Among the poorest of the poor are the children of such families.

According to the Institute of Fiscal Studies, in 1987 nearly 2 million families comprising 3 million individuals had incomes below supplementary benefit level. That is an intolerable record of economic mismanagement and moral insensitivity. I never hear debated in the House what unemployment and poverty really mean for families.

There was nothing in the autumn statement for the children of Salford, Eccles and other areas that the so-called economic miracle has passed by. The hon. Member for Surrey, North-West (Mr. Grylls) spoke of the number of new businesses that have been started, but I should like to know how many folded over the past few years. There has been no new investment in industry, to offer a future for our children. Children and young people are among the worst casualties of the past decade. Many in my own constituency and in others who are now young adults have never worked since leaving school seven or eight years ago. If the Government continue as they have, and given the content of the Gracious Speech and the autumn statement, the brothers and sisters of those youngsters will face exactly the same fate.

6.9 pm

Mr. Norman Tebbit (Chingford)

It is always a privilege to follow the hon. Member for Eccles (Miss Lestor), because she always speaks with great sincerity on these matters. However, she should not think, because Conservative Members may take a different view of the way in which those problems are best resolved, that we are less conscious of them. I did not have to wait to become a Member of Parliament for a seat in the north to know about unemployment and poverty.

I especially enjoyed the traditional turn from our resident cheeky chappie, the right hon. and learned Member for Monklands, East (Mr. Smith), who was on his usual cheeky form.[Interruption.] He entertained us with selective economic memoirs. He made a long speech, and if he will contain himself for a moment, and stop talking to his right hon. Friends, I shall continue my speech. The right hon. and learned Gentleman seemed to be completely unable to recollect the name of the only British Chancellor who had to apply for an International Monetary Fund loan. Since he sat down, perhaps he has been able to remember which Chancellor had to go to the IMF. He shakes his head, so I see that he still cannot remember. The name "Healey" clearly escapes him. I think that that is a fair example of selective amnesia.

I should like to deal with other issues, but I think that the phrase which the right hon. and learned Gentleman used today— there can be no unity in ambiguity"— will be today's bon mot and will be hung round his neck for ever more. It may be quoted back at him on many occasions.

There is no doubt that the economy is slowing down quite rapidly. That was my right hon. Friend the Chancellor's intention and he was quite right. The economy had expanded over a long period at a high rate of growth and had finished up by expanding too fast. That was the consequence of excessive monetary growth. [Interruption.] I see that the right hon. and learned Gentleman is at it again. He cannot resist talking all the time. If only he said something, it would not be so bad, but he managed to talk today for about 45 minutes without saying a word. I wish that he would shut up for a minute now.

One of the interesting aspects of the current slow-down, recession or whatever one wishes to call it, is that there has been—[Interruption.] He is at it again. Some of us realised a long time ago that it is difficult to have one's ears and mouth open at the same time. The right hon. and learned Gentleman has not learnt that.

It is obvious to some of us who are engaged in the world of business rather than merely the world of politics and the weasel words of the law, that there has been a considerable slow-down in the economy, but it has not been uniform. One aspect of the slow-down which has been immediately obvious to those of us who travel around the country is that the recession has hit hardest and earliest in the south-east, in industries such as retailing and distribution. It is the first such slow-down or recession in this country. For a long time, the north and manufacturing were not affected. It is now clear that the slow-down is reaching the north, and it is cutting into manufacturing industry.

I can tell my right hon. Friends on the Front Bench and the right hon. and learned Member for Monklands, East that a time is coming when present policy should be eased. There is another respect in which this recession is different from some earlier recessions—in the quality of commercial undertakings today compared with 10 or 12 years ago. As the House will know, I am a non-executive director of a number of companies, including British Telecom. The rate of growth in the telecommunications industry has slowed markedly but, none the less, better cost control has meant that profits have increased. That is a safeguard for investment, which is running at twice the level in real terms that it was when the industry was nationalised.

The right hon. and learned Member for Monklands, East talked about the poor quality of British firms today. He could travel anywhere in the world and ask about British Telecom's reputation. Every great multinational company in the world would place British Telecom among the top three telecommunications companies in the world. Would they have done so in 1987? Would they hell. That is not an isolated example. All the companies with which I am associated are having difficulties, naturally enough, as the economy slows down, but they all look upon this as a time when they have to cut costs and prune back to become more competitive, knowing full well that it will not be long before the economy is booming again, and they will be in good shape.

The attitude of the management and the work force—I do not like to distinguish between the two, because the work force stretches from the board to the shop floor without distinction, in my view—is totally different now and more realistic than it has ever been. There is no bleak pessimism in any of the businesses with which I am associated.

I must tell my right hon. Friends on the Front Bench that it is clear that tight monetary policy is healing the inflationary wound inflicted by earlier excessively loose monetary policies. For the productive economy, the time is fast approaching when we should ease interest rates and allow growth to resume. It is clear that inflation is on a downward path.

I appreciate that, in the present atmosphere of political uncertainty, it may be difficult for the Chancellor to ease interest rates, since we are locked into the ERM. At some stage, my right hon. Friend the Chancellor will be faced with the unpleasant dilemma of whether to hold interest rates higher than would be right for our domestic purposes because of his obligations under ERM. That does not mean that I am necessarily against entry into the ERM, but that "it ain't no free lunch".

Not long ago, Opposition Members saw the ERM as the answer to all our problems—until we joined, when they turned against it, as they always do.

The ERM leads me naturally to the problem of a common or a single currency within the European Community. In the debate on the Queen's Speech this year, I have heard two speeches which I thought were quite remarkable of their kind—another speech was quite remarkable because it was unkind, but that is another matter. The first speech was that of the right hon. Member who was the former leader of one half of the alliance—I do not wish to be objectionable, but I cannot remember his constituency for the moment. [HON. MEMBERS: "Plymouth, Devonport."] Yes, the right hon. Member for Plymouth, Devonport (Dr. Owen), who spoke on Wednesday. There was scarcely a word that he uttered with which I or my right hon. Friend the Prime Minister would disagree. There can be no politician more devoted to the European ideal than the right hon. Gentleman—he walked out of the Labour party over it.

Mr. Beith


Mr. Tebbit

That was one of the reasons. Perhaps some of the other reasons were even uglier than the quarrel over that policy. I do his former right hon. Friends the favour of saying that he walked out over policy rather than style.

The second remarkable speech was that made today by my right hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley). He chose to make his resignation speech in a debate in which he could be challenged. There were few who challenged a word of what he said. I only wish that certain Opposition Members, particularly the right hon. Member for Bethnal Green and Stepney (Mr. Shore) had been here. I know, from the way that he nodded during the speech of the right hon. Member for Plymouth, Devon (Dr. Owen), that he would have agreed with just about every word that was uttered by my right hon. Friend the Member for Cirencester and Tewkesbury. That is because these are great issues with which we are dealing.

Perhaps I felt that they were good speeches because I agreed with them. They revolved around issues that I have tried to raise—issues not of sovereignty but of the political rights of the people of this country. That is what we mean by sovereignty. We should do well to use such blunt words. They also revolved around the issues that my right hon. Friend the Member for Cirencester and Tewkesbury raised. With merciless logic, he exposed the fact that, if a single currency were to be imposed across Europe, it would necessarily involve huge transfers of wealth from the wealthiest countries to the poorer countries.

"Good," many people might say. However, my conclusion is exactly the same as that of my right hon. Friend: that it would not be long before all the old sores of nationalism were reopened, as the Germans began to say, "This is no good for us. We don't mind our farmers in Bavaria remaining fat on the common agricultural policy, but we're damned if we see why we should he bled white not only by our commitment to sort out socialism in East Germany, among our brothers, but also by having to sort out socialism in Greece and the consequences of socialism elsewhere in the European Community."

The break-up of the Community would be brought about by the refusal of the wealthier countries, as my right hon. Friend said, and as I believe the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) implied, to do that. Although they could stomach substantial transfers of wealth within their own boundaries, they would find it increasingly difficult to stomach them widely across national boundaries. We should be embarking on policies that would inevitably increase, not reduce, nationalism in Europe.

Wearing my business hat, the idea of a common currency—with a strong commitment to maintaining the relative parity of sterling—or of a single currency looks highly attractive, but the former would make less likely and the latter would make impossible devaluations to restore the competitiveness that had been lost by a deterioration in cost control, howsoever brought about. I fancy, therefore, that even some of those in the Confederation of British Industry who are most enthusiastic about such policies might find that their enthusiasm was tempered quite soon after a common currency, let alone a single currency, was imposed.

There are other implications. It is right to raise one of the simple conundrums of a single currency, which is this: where are there two Chancellors per currency, let alone 12? There can be only one Chancellor for a currency. There is one for the dollar, another for the rouble and yet another for the deutschmark. As soon as the deutschmark spread across East Germany, the East German Finance Minister closed the door of his office and went home. There was no place for him.

The case was made—disgracefully, I believe, by Sir Leon Brittan because the case was unworthy of the integrity and intellect of that very considerable politician—that we could get around these difficulties by putting sterling on one side of a piece of paper and the ecu on the other. That was a good enough idea to fool the Leader of the Opposition, but to fool intelligent people one has to go a long way beyond that.

Today, in this kingdom, the Royal Bank of Scotland can print notes with a distinctive motif on them but the currency is sterling and Scotland's Chancellor of the Exchequer is my right hon. Friend the Member for Huntingdon (Mr. Major)—no one else. No doubt Sir Leon Brittan and his fellow commissioners would be prepared to allow a Scottish ecu with thistles on one side, a Welsh ecu with leeks on one side and an Irish ecu, which would probably come with the shamrock or the red hand of Ulster, according to taste, on one side. Perhaps there could be English ecu notes with red or white roses on one side, according to taste. However, that would not make four, six or eight Chancellors out of one. There can be only one Chancellor for one currency.

Mr. David Trimble (Upper Bann)

I hate to spoil the right hon. Gentleman's interesting and entertaining analogies, but I ask him to consider the currency of the Republic of Ireland. It was firmly linked to the pound sterling from its inception in 1921 until about 10 years ago. There were two Chancellors for a currency that was firmly linked.

Mr. Tebbit

The hon. Gentleman makes the fatal error of failing to distinguish between what is in effect a common or linked currency and a single currency. Such monetary discipline as there is in the Republic of Ireland is imposed by the need of the Chancellor there to maintain some value for his currency relative to that of sterling. That is the discipline. If people in the Republic of Ireland wanted to renege on the linking of their currency to ours, they would be free to do so. If they wanted to devalue or upvalue their currency, they would be free to do so. The parities between the two have changed from time to time. That is what could happen under the regime of a common currency, such as the hard ecu.

Let me put it again more clearly than perhaps I did earlier to the right hon. and learned Member for Monklands, East the point about the hard ecu. Yes, if the hard ecu were adopted by our partners, it would accelerate this country towards that rubicon that we should have to cross to reach a single currency. It would have no effect upon that decision, but it would bring that decision closer. That, I believe, is what my right hon. Friend the Chancellor of the Exchequer meant. To return to my analogy of the ecu decorated, according to taste, throughout the European Community, all that decoration would not give back to the people of this kingdom the right that they have today to sack or to elect a Government who are responsible for economic policy. No Government are entirely sovereign over their economic policy, but that is no reason for throwing away what sovereignty we have. It is a great idea to have an independent bank that would be responsible for making sure that the currency was in good shape. I am delighted to know of the trust that Opposition Members put in bankers. They have grown up a lot in recent years.

The Opposition Chief Whip points at those who sit on the Liberal Benches, the implication being that it is not just the Labour party that has grown up in recent years. He has not, however, been listening to what his right hon. and hon. Friends on the Opposition Front Bench have said. He simply does not understand what they say.

Mr. William Cash (Stafford)

Will my right hon. Friend give way?

Mr. Tebbit

I hope that my hon. Friend will excuse me from allowing him to intervene. Many other hon. Members wish to speak, and I do not intend to detain the House for much longer.

The right hon. Member for Ashton-under-Lyne also made a significant point about the relationship between the Gennan federal authorities and the Bundesbank. He said that, at the end of the day, on big issues, the politicians will have their way over the bank as they did in the reunification issue. That is fine, and I agree with him. That would be so. In that case, when are we going to discuss the democratic institutions that would control the politicians who would have control over the bankers when vital issues are at stake? We need to ask ourselves that question. I do not think that we should allow ourselves too much ambiguity, even in the cause of unity, when we are debating these matters.

I recall that the right hon. and learned Member for Monklands, East said that the question of a single currency divides my party. I have to admit that there is a good deal of truth in that. It does not divide the Social and Liberal Democratic party. It has only one view and that establishes it for the non-party it is. To have a single view on such an issue can be accomplished only by a party with no more than half a dozen Members. When I asked the right hon. and learned Member for Monklands, East whether he would be willing to accept a single currency, which by common consent means the end of independent budgetary policy, he took refuge in the unity of ambiguity. I do not know why, because he had even made my point that such a decision would be irrevocable. That is an important step forward. At least the right hon. and learned Gentleman knows the magnitude of the decision that the Leader of the Opposition would take so lightly.

It is long overdue that we should remove the ambiguities that surround these issues, even if it might bring about accord across the Floor of the House between those who take different views within their own parties. There is nothing wrong at times with agreement across the Floor of the House, and there is nothing wrong with an honest acceptance of the fact that, when issues as great as these arise, there can be differences within parties.

I will fight for the whole of my political life to avoid a socialist economic policy being imposed upon the people of this country. The right hon. and learned Member for Monklands, East will struggle against it as best he can, but if he were elected to office, his colleagues would make him eat his words and he would have to impose one. I shall also struggle for the whole of my political life for the right of the British people to have a socialist policy if they want one. I shall fight for them to have a free market, Liberal policy or even a salad policy or a green policy if they so wish.

However, those decisions should be taken in this country by British people. We should not find ourselves in the position where our rates of tax and our budgetary policies are beyond the control of the people of this country. That is the great issue, on which my right hon. Friend the Prime Minister, and the right hon. Members for Devonport and for Bethnal Green and Stepney are right.

6.33 pm
Mr. Alan Williams (Swansea, West)

The right hon. Member for Chingford (Mr. Tebbit) started his speech with typical charm but, without being patronising, his speech then became worth listening to. His analysis of the trend of the present recession is faulty. He said that the recession is hitting first in the south of England and has not yet hit as hard in the rest of the country. That is natural when we are dealing with a deflation that is consumer based. It is not generally realised that Oxford street has the retailing turnover of Leeds. Therefore, when the Government decide that to achieve their recessionary impact they will hit consumer spending, inevitably it is the main retailing centres that feel the first blows.

There is nothing novel or different about that. Indeed, even during the problems caused by the oil price increases, the north-east of England retained its employment levels far longer than the rest of the country. That was not because it was healthier but because it had long lead industries such as power plant and so on where existing contracts take time to work through. When the contracts had worked through, the recession hit. When there was an upturn, it was not felt in that area. Therefore, there is no solace for the regions in the pattern that is being followed in this recession. It is a natural consequence of the economic policy that has been adopted by the Government.

Many of us have known the right hon. and learned Member for Surrey, East (Sir G. Howe) for a great many years. Without any hypocrisy, I should say that hon. Members on both sides of the House listened to his speech yesterday with great sympathy, because we understand the humiliations that have been heaped upon him by the Prime Minister. However, it was a limited sense of sympathy because, as a fellow Welshman, my hon. Friend the Member for Warrington, North (Mr. Hoyle), and my hon. Friends who represent the north and Scotland all remember that it was the right hon. and learned Gentleman's 1979 Budget that unleashed the industrial carnage that destroyed one third of the jobs in our manufacturing industry.

When I was at the Department of Trade and Industry, Keith Joseph, now the noble Lord Joseph, and the right hon. and learned Member for Surrey, East, who then spoke for the Opposition, were the architects of British monetarism. They were the only people foolish enough to absorb the nonsenses of the Chicago school that had been the joke of economists for decades. We were the only country to adopt those nonsensical policies. Galbraith thanked heaven that it started in Britain because they then knew that they should not try it in the United States.

The right hon. and learned Member for Surrey, East together with Lord Joseph convinced the Prime Minister that she should adopt monetarism. It was a conquest of persuasion over comprehension. In his speech yesterday, the right hon. and learned Gentleman was somewhat selective about history. He said, quite rightly, that he had brought inflation down from 22 per cent. to 4 per cent. However, I remember that he put inflation up to 22 per cent. in the first place. It was his opportunity Budget and his doubling of VAT that led to us having to have high interest rates and high sterling for many years. That made it impossible for us to sell abroad, compete or invest. He was rather like the captain who is claiming credit for getting off the rocks the ship that he put on the rocks in the first place. He tried to ignore the fact that he lost 2 million of his industrial crew along the route and severely damaged the engine room at the same time.

This may be the last year of the Government. What do we find? We have rising unemployment again, inflation is higher than when they came to office and we have a balance of payments crisis. It is a measure of the mess in which we find ourselves that the Chancellor was boasting that the balance of payments deficit next year will be "only" £11 billion. That is the third highest in our history. That is the measure of 11 years of achievement by the Government. All that is left to them and their Thatcherite revolution—the Prime Minister, the Chancellor and others keep returning to it—are claims relating to improving fundamentally Britain's productivity. However, even that was laid to rest on Monday.

There was a fascinating article in The Guardian by Victor Keegan, based on a 20-year study by academics at Aston and Leicester It showed that nearly all the productivity gain that is claimed by the Government is actually technological productivity. Before Conservative Members say, "Good, that is what we want," I warn them that it is not necessarily in their favour. Nearly all the productivity that has been gained since the Government came to office is technology-based rather than labour-based. The Government have not produced the enormous turnaround in attitudes and so on that they talk about. That was not the problem. As my hon. Friend the Member for Warrington, North, with his union background, will no doubt tell the House later, we do not have the back-up in capital, equipment, machinery and labour that our competitors have.

Mr. Doug Hoyle (Warrington, North)

My right hon. Friend should add that the Government came to office to bring down inflation, and that inflation is now higher than it was in 1979, despite one third of manufacturing industry having been destroyed.

Mr. Williams

It is just one more example of the way in which the Government ignore points that are difficult for them to explain.

Less than 10 per cent. of the increase in productivity has been labour based. The rest has been technology-based. The significant point about why the Government have nothing to boast about is that more than half that increase and improvement took place in the first three years of the decade. It took place despite the fact that investment in manufacturing had fallen 41 per cent. under this Government. As the article points out, they were enjoying the benefits of the record level of investment that they inherited. The article states: But, whatever the reason, the actual rise in labour productivity is pretty small beer … compared with the very sharp increases in technological productivity of about 36 per cent. recorded over the decade. The article goes on to state: Thus, the 10.8 per cent. a year peak increase in technological productivity during the early Thatcher years until 1983 … was really caused by the investment boom of the outgoing Labour administration. That is what we always told them. That is what the industrial strategy was all about—improving productivity and bringing industry up to date. In the early part of the decade, the Government lived on the seedcorn of the 1970s, and in the rest of the decade their economic policy has been kept afloat by North sea oil revenues.

Let us think about what could have happened to our competitiveness, productivity and unit costs if only the Government had sustained investment—£20 billion more would have been invested had they sustained the level that they inherited, and £30 billion more would have been invested, according to the Chancellor of the Exchequer, had they maintained the rate of growth in investment under the Labour Government. The tragedy of this decade—it will probably not be fully realised by the British people for many years—is that we have thrown away the one and only chance in the whole post-war period to have sustained growth. It was the only time when we could look ahead and know that, because of the oil revenues that were to come, we were to be free of the stop-go pressures that were the result of the balance of payments crises that have beset all Governments of both parties in the post-war period.

Despite having a £130 billion cushion against foreign currency pressures of the decade, the Government have still ended up with balance of payments crises and without the break into continuous and sustainable growth that we could have had. We are now back at "stop" yet again. Today, the Chancellor came as near as he is likely to for some time to admitting that the country is now in recession.

We heard yesterday in the resignation speech how, five years ago, the then Chancellor and the then Foreign Secretary threatened resignation unless the Prime Minister gave a nebulous guarantee that, at some time in the future, she would take the country into the ERM. Indeed, some hon. Members might say that perhaps she was at least more faithful to her beliefs over those five years than the then Chancellor and the then Foreign Secretary were. One is bound to ask what has happened. After all, the Chancellor who threatened to resign has already resigned and gone. The then Foreign Secretary who threatened to resign was a trivialised and irrelevant member of her Cabinet.

The pound could not be in a more difficult situation. We have high inflation. What made the Prime Minister say, "Although for five years I have resisted all threats of resignation and all the better opportunities that there have been to go in, I shall now go into the ERM"? There can be only one explanation. It is purely electoral. It is because she sees an electoral benefit which is sufficiently great to overcome the antipathy that enabled her to alienate members of her Cabinet and resist their pressures for all those years.

Why did she do that? With £30 billion of private enterprise hot money—a sort of private enterprise version of the international monetary fund loan—swilling around and that the Government have to keep here, in an election year the Government need the extra shield that the collective reserves of the central banks of Europe will give them to carry them through times of pressure. The crucial point—it is why there is a gap in the autumn statement—is that the key is in interest rates and the need for interest rate cuts.

We had a 1 per cent. cut when the Government entered the ERM. The aim—it is probably unattainable—is to get a total 3 per cent. cut, and more if possible, but 3 per cent. is the probable level between now and the spring. Let us consider what that means in economic and political terms. A 1 per cent. cut in the mortgage interest rate puts £2 billion of spending money in people's pockets—that is after allowing for MIRAS. It represents a £2 billion boost to spending for a Chancellor who is always saying, "But of course we are spending too much." If the Government attain the target of a 3 per cent. interest rate cut—it is the explanation of the gap in the autumn statement—they will release £6 billion of purchasing power into the economy within the next six months, or they will start the process.

Of course, the political impact is somewhat different from a change in income tax. Whereas 21 million people pay income tax, only 9 million people will get the benefit of the mortgage interest rate reduction. For those who have mortgages, the relief will be the equivalent of a 6p in the pound cut in income tax. In the south-east of England, excluding Greater London, because of the average level of mortgage rates there, it will be the equivalent of a 7p cut in income tax. In Greater London, because of the higher level of mortgages, it will be the equivalent of an 8p cut in income tax. That is the gap in the autumn statement and it is the key to the tactic and the argument that persuaded the Prime Minister to go into Europe.

Mr. Tebbit

I must apologise; I was trying to follow the right hon. Gentleman's argument, but my attention lapsed for a moment. I therefore did not hear him say whether he thinks that the Government should have joined the ERM, whether interest rates should be kept high to keep purchasing power out of the hands of people who have mortgages or whether they should be cut. I am a little confused about what he thinks should happen.

Mr. Williams

Of course I want a reduction in interest rates, but a major, national strategic economic decision has been taken not in the national strategic interest but in the short-term electoral interests of the Conservative party. The purpose is to create a window of opportunity——

Mr. Hoyle

A fleeting opportunity

Mr. Williams

That is right. We are not going from stop to go; there will be only a slight selective movement. As I said, because of the way in which mortgages are geared, the major benefit will be felt in the south of England. I do not have to spell out for hon. Members the selective advantage of that for the Conservative party's political interests.

Mr. Alex Salmond (Banff and Buchan)

Is the right hon. Gentleman aware that the disproportionate effect of mortgage tax relief in the south of England will be more than £1,000 million this year, which is more than the entire regional aid budget for the United Kingdom?

Mr. Williams

Ministers and Conservative Members speak of regional policy and of assistance for the regions, but nowhere has had more money pumped into it than the south-east of England. Further, £23 billion has been given to the top 5 per cent. of wage earners, more than half of whom live in the south of England. The amount of regional assistance for Northern Ireland, Wales, the north and Scotland is dwarfed into irrelevance compared with the incredible injection of purchasing power into the south of England. That explains why the property boom began in the south so early and why prices have escalated so rapidly compared with elsewhere in the country, creating not only an income gap but a capital gap between the regions. The gap is widening as a result of taxation policy.

Mr. Ian Bruce

indicated dissent.

Mr. Williams

The hon. Gentleman will no doubt take part in the debate. I am glad that at least I am keeping him awake.

The ERM has nothing to do with the strategy for national economic recovery but everything to do with the election. When the £6 billion that I mentioned is pumped into the economy, as we have a marginal propensity to import of 36 per cent. —one of the highest levels in the western world—£2 billion will immediately be spent on drawing in extra imports. As mortgage funds feed through into spending power later in the year, the balance of payments deficit, which the Government say is reducing to only the third worst in history, will worsen. By the end of next year and the beginning of 1992, when our unit costs will be higher than those of Europe, when the pound will still be far too high and when our inflation will be higher than that of any of the major industrial EC countries, our balance of payments will become even worse. That is why the Chancellor has concentrated his attention on the third quarter of next year.

We shall then be in a renewed stop, having barely had a period of go. The Government's aim must be to jump during that very short opportunity, because after it has gone we shall be back in a recession from which there will be little hope of recovery. As the Government know, as industry knows and as the right hon. Member for Chingford must know, given his industrial experience, we have joined the ERM at an unsustainable rate of sterling.

6.45 pm
Mr. Ian Bruce (Dorset, South)

I am grateful to be called in probably the first economic debate in which I have spoken since becoming a Member, and at a time when much interest is being expressed in our European policies.

I must disagree with hon. Members who have attached such high importance to what is happening with the ERM. Strangely, we seem to be holding a leadership election based on European policy and how people perceive it—there have even been resignations about it—yet we should be concerned about the underlying strength of our economy. When talking about a single currency, one finds that the vast majority not only of the Conservative party but of the Labour party and of our constituents agree with the Prime Minister's policy.

One of my local free newspapers, the Swanage and Wareham Advertiser—this is probably the first time that it has appeared in Hansard—spoke to ordinary people in the street who were Labour or Liberal voters, but it found only one person who disagreed with the Prime Minister's policy. They said all sorts of terrible things about the Prime Minister, but they wholly agreed with her policy to ensure control of our economy.

We are beginning to realise that the ERM is not a panacea but simply a tool, like so many other tools of economic policy, such as linking with the gold standard, or the Bretton Woods system. We have always needed such flexibility in our monetary policy.

In the past five years, there have been enormous changes in the value of sterling. In a difficult market, we have had to ensure that our underlying economy was strong. In the recent past, employment, investment in industry and the improvement in our productivity have been extremely strong. We have done extremely well with our debt repayment, which goes against the trend of almost all other countries, which have financed much of what they have done through deficits. The real wages of poor and rich people alike have been doing extremely well—perhaps too well, given the current level of inflation.

I was interested in the speech of the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), who made an interesting point about the requirements of bankers and politicians. He said that we should not rely solely on monetary policy to overcome difficulties in our underlying economy.

The social charter is far more serious for European policy. Our European partners would like us to agree to a raft of measures that are socialism writ large. It is nonsense for the Labour party to speak of the minimum wage as a percentage of the average wage, because any mathematician knows that, as soon as the minimum wage is made a percentage of the average, the average increases and keeps increasing. The only way of achieving what our European partners want is for everyone to be paid at the highest level.

Leaving aside the mathematical impossibility of the Labour party's suggestion, the minimum wage, as suggested in the social charter, would ratchet up costs within the European Community, which would be bad for Europe, for jobs and for many other matters. It is easy to sell the idea of giving more maternity pay, more sick pay, more time off for training, more this, that and all the other things, but it all ratchets up the cost to our industries.

As a Young Conservative, I remember us Tories talking about the difference between direct and indirect taxes, but that is not something about which we hear much these days. When we came to power, we deliberately put up VAT and increased indirect taxation. Our policy was to reduce direct taxation by bringing down income tax. The ratio between direct and indirect taxes has improved, as we have reduced income tax. However, in some economic respects, we do not have a level playing field with our European partners. In fact, we are tipping the playing field against us in terms of VAT.

VAT in the United Kingdom is probably the lowest in the Community, and that has a strange effect. VAT is imposed on every product when it gets to the shops, whether an import or an export. If there is high taxation through VAT, or any other form of indirect tax, on all products when they get to the shop, imports and home-produced goods are taxed equally. We try to front-end-load the costs of our manufacturers with such things as employers' national insurance contributions which, under the Government of my right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath) were 5 to 6 per cent. and then rose to 11 per cent. We have must reduced that slightly, but we have told companies that they will have to pay a greater proportion of sick pay.

We should concentrate on reducing the direct costs that go into the costs of manufacturers and service industries—for example, the rates bill, which has just increased by 10.8 per cent.—and transferring them to the VAT side of the equation. We would thereby reduce the basic costs for our manufacturers and service industries. All the goods and services that are purchased in the United Kingdom would be taxed. That would increase the price of imports. If the basic costs to a home manufacturer were cut, the consumer would pay more or less the same for home-produced goods, even though VAT was added.

Goods exported to France or Germany end up with 25 per cent. VAT, whereas at home the rate was 15 per cent. French companies which import have a lower cost base, because VAT in France is 25 per cent., and only 15 per cent. is levied at this end. A graph wold show that we were tipping the scales against exporters and in favour of importers. Treasury Ministers should consider this point. I have written to my right hon. Friend the Chancellor about it.

From my constituency point of view, we are looking forward to a reduction in defence costs, but that can have severe economic implications. There is a naval base, a Fleet Air Arm base and an Army base in my constituency as well as a body which is involved in military research, and manufacturers which service that industry. It is important for constituencies such as mine that the Government look at the problems of reducing defence expenditure, to ensure that the burden does not fall on one community. The Government should have the overall responsibility to ensure that they do this sensibly. We know that we will have to take cuts and we gladly accept our share, as long as the cuts are spread correctly.

Many people may say that the Queen's Speech referred to few radical measures, but the Government have an enormous job to do in terms of education, with the local management of schools; in ensuring that the right percentage is given to schools rather than held in county halls; and in the national health service in ensuring that the additional money we give is used efficiently. Although the Queen's Speech may be seen as a consolidation measure, firm management of our changes is needed. I believe that we have the right team in Cabinet to see them through. I commend the Queen's Speech.

Several Hon. Members


Mr. Deputy Speaker (Sir Paul Dean)

Order. I remind the House that the 10-minute limit on speeches is now in operation.

7.5 Pm

Mr. Ken Livingstone (Brent, East)

The main gap in the Gracious Speech, as identified in the amendment tabled by my right hon. and hon. Friends, is in economic policy. It is a damning indictment that we should face this situation after 11 years of Conservative Government. That is I I years in which we have had the bonus of North sea oil—a bonus denied to our major competitors—and we have squandered it. Can we imagine what would have happened in Germany or Japan if they had had the benefit that this Government had of revenues of £12.5 billion in the best year? Those Governments would have invested it in industrial regeneration, research and development and training. We have invested it abroad in the economies of our major competitors and have squandered much of the rest of it in completely spurious consumer booms aimed at winning the 1983 and 1987 elections.

Conservative Members have complained that the problem is that the measures we took to avert the major slump after the stock market crash in October 1987 led to the problems we face, but that is nonsense. The measures that were agreed by all the G7 nations were broadly similar, but the same problems do not afflict the economies of our major competitors in the Group of Seven. The problems which we face are the result not of an attempt to avoid that slump but of the Government's short-sighted, profligate and wasteful policies at home.

For all the talk of monetarism, the Government have been prepared massively to inflate the money supply to save their own neck as elections have come along. We now have the most recent gimmick—the idea that, if we join the exchange rate mechanism, this will save us from our problems with the British economy. It is a gimmick, and that is why the market is not supporting the level at which we joined the ERM.

The international financiers who will have to consider what to do with their money know that we entered the ERM at an unrealistically high level, and they are not prepared to prop up the pound at that level. As everyone who looks at the figures knows, they know that, whoever wins the next national election, or the election next week, will have no alternative but to devalue the pound, or we will waste years propping up an unrealistic exchange rate, just as the 1964–70 Wilson Administration did. We must not repeat that mistake.

The real indictment of the Government is that, over their 11 years in office, the percentage of GDP that we export has declined by 3.5 per cent. That may not sound like much, but each percentage point of GDP means £5 billion. Let us compare that record with those of our two most similar European competitors.

Over the same period, France has increased the proportion of its GDP going into exports by 2.5 percentage points, and Germany by eight. It is against that background that we should judge the Government's record. These are reasonably comparable European neighbours who have faced the same broad international circumstances and have had roughly the same opportunities as we have—indeed, our opportunities have been better, given North sea oil, but we have thrown them away.

Now people are jumping up and grasping at the exchange rate mechanism as though it will save us from further difficult problems. Hon. Members on both sides of the House and editorial writers outside it are saying that entry into the ERM will lead to a convergence of our economies: that somehow, by the simple miraculous act of joining the ERM, we can achieve German levels of economic productivity and competitiveness. But that is not what happened to the nations which composed the ERM before we joined it. France, the Low Countries and Germany achieved roughly equivalent increases in productivity in 1962 and 1963 and they stayed broadly close together throughout the succeeding two and a half decades. That allowed them to have an exchange rate mechanism that linked their currencies.

Many people are looking at this the wrong way round—putting the cart before the horse. We must achieve the same increase in productivity in the British economy if we are to sustain any realistic membership of the ERM; otherwise, as regularly as clockwork, we shall have to devalue, and our hold on what remaining markets we have will be continually eroded.

I am not here merely to attack the Government. I believe that we must propose positive alternatives. There is not the slightest doubt that, while we remain in the ERM at this level, we shall not be able to get our economy working properly. We should immediately devalue to about DM2.50. Indeed, I would go further and suggest that we go to DM2.40, so that the pound would be positively undervalued and then tied to the narrow 2.5 per cent band.

That would send the message to all markets that the Government are committed to a massive expansion of our industrial base. It would show that we were putting our industrial economy ahead of our financial and City interests. That basis would give the British economy sustained growth——

Mr. Gerald Howarth (Cannock and Burntwood)

On what basis does the hon. Gentleman calculate that DM2.50 is just the right rate for the British economy?

Mr. Livingstone

I said that we should undervalue, taking my advice from economists who have calculated that, from the viewpoint of our exports, we should be in the range of DM2.50 to DM2.60. That represents a broad consensus among economists, and in linking such a decision to an immediate cut in interest rates of 2 per cent. we should also take measures similar to ones that have been used in the past, although not the simple reintroduction of exchange controls. I do not believe that they are necessary, but we need to take measures with our domestic financial institutions to slow down the flow of wealth out of Britain and to ensure that, instead of investing abroad, we invest in building our industrial base.

Let us remember that half of all the investment abroad under this regime has been in the economy of the United States of America, one of our major competitors; and the profit that we have received back from that investment has done nothing to help to close the real gap which has opened up in our trade deficit as American workers have got the jobs that British wealth has created. The trade deficit has developed as we have imported what they have made because we are not creating it here.

Moreover, to help the balance of payments deficit, we have had to keep our interest rates high to attract short-term hot money. I challenge Conservative Members to go out and explain that to the people of Britian—that to allow our financial institutions to invest in the economies of our major competitors and create jobs there, we are prepared to keep our interest rates high and hence impose a heavy burden on every mortgage holder in Britain. The people would say that that was mad. If we had followed policies like that in the second world war. it would have been called economic treason and Churchill would have shot whoever did it.

We are in an economic war with our major competitors, and we should put our interests first. The problem is that the Conservative Benches are littered with people who think that we have a special relationship with the United States which overrides our own immediate interests. We subordinate ourselves again and again in domestic, economic and foreign policy to the interests of the United States.

Finally, we should initiate a major cut in defence spending of up to 50 per cent. over five years, thereby releasing wealth for a major programme of investment in industrial regeneration and in training. If we took those measures tomorrow, we should broadcast to the whole world that we intended to end 100 years of relative industrial and economic decline and to commit ourselves to an expanding economy that was capable of sustaining growth and providing the wealth to support the level of social services that the people in this nation have a right to expect. It would be an economy capable of rivalling within a decade the West Germany that is and the united Germany which will rapidly develop.

The debate on the ERM has been unrealistic. In or out of the exchange rate mechanism, in or out of the Common Market, whoever wants to govern Britain well in the 1990s and avoid disastrous increases in unemployment must implement the sort of measures that I have described, which my party has argued for throughout these years that the locusts have eaten, when the best opportunity that the British economy ever had has been squandered.

7.16 pm
Mr. Terence Higgins (Worthing)

It is traditional to debate economic affairs on the final day of the series of debates on the Gracious Speech, but that has the disadvantage that the Leader of the House has to deal with a whole range of debates from previous days when he comes to wind up today. I hope that he will pick up just one point in the opening speech by the shadow Chancellor of the Exchequer, who dealt at great length with the issue of whether we were or were not in a recession—after which he said not a single word about what the Labour party would do to deal with the recession. I hope that my right hon. Friend will pick up on that.

I shall eschew commenting on the autumn statement, because the Treasury and Civil Service Select Committee will be taking evidence on it from officials next week, and then from the Chief Secretary and the Chancellor, and we shall have an opportunity to debate the statement in depth once the Committee has reported to the House.

I shall therefore concentrate on the main thrust of today's argument—the relationship between the economy and Europe. Before doing so, however, I wish to comment on one other aspect of the Queen's Speech. I am delighted that it includes provision for compensating those affected by road programmes, which have long constituted what can only be described as highway robbery. I fear that such compensation will not be able to cover everyone affected by such schemes, especially those off the main routes, but we look forward to seeing the details and I am pleased that we can make some progress. I am also glad that my right hon. Friend the Secretary of State for Transport in his speech last Friday referred to me as advocating this idea.

The question of a single currency has proved to be the touchstone of this debate. It is extraordinary that it should be the centre of our discussions, given that there is no realistic prospect of a single currency being implemented for many years to come. The most bizarre suggestion that I have heard in recent days was the suggestion in The Economist that we should have a referendum on the subject. I am and always have been wholly opposed to referendums. I believe that Edmund Burke was right to stress the importance of our representative system of democracy and I have therefore always regarded the idea of a referendum as incompatible with that system.

It would be particularly extraordinary to hold one on this subject, not least because many of our parliamentary colleagues appearing on radio and television recently have failed to distinguish between a common currency and a single currency and have treated them as though they were the same. There is a fundamental difference between a common currency, which runs alongside an existing one, and a single currency which would involve the abolition of all existing EC countries' currencies. If our colleagues are so confused, it is clear that this would not be a good subject for a referendum.

This is a highly technical subject. This afternoon, I was delighted to hear my right hon. Friends the Members for Cirencester and Tewkesbury (Mr. Ridley) and for Chingford (Mr. Tebbit) pick up a point that I have been making for some considerable time in debates and at Question Time. They have said that opting for a single currency would mean that we would be giving up for all time the most effective means of adjusting for regional variations in costs and prices. Over a period, for an extended geographical area, that would inevitably lead to high unemployment in some parts of the Community and to the accumulation of financial imbalances between one part of the Community and another.

As I stressed when we originally debated the exchange rate mechanism, the idea that that can be compensated for by financial flows contrasts with our experience, which shows that even within the United Kingdom such transfers are ineffective and do not make up for regional variations. There would be no guarantee that such flows would take place. Together with the sovereignty issue, that is the fundamental objection, which must be brought out as strongly as possible. I am glad that both my right hon. Friends made that point.

In present circumstances, an area about the size of a deutschmark bloc—Germany, France and the Benelux countries—could continue to operate without impossible strains. It is clear, however, that if we extend the area to include Spain, Greece, the United Kingdom and Italy, the strains will be completely intolerable. I hope we can convince our fellow members of the Community of the real risks.

There would be other dangers as well. If we were to implement a single currency over an extended area, it would be far more difficult for countries in eastern Europe such as Hungary and Poland to join as full members. It would tend to make the Community inward-looking rather than outward-looking. My right hon. Friend the Prime Minister was right to stress the dangers of protectionism and the importance of making the European Community an outward-looking Community instead of an inward-looking one.

The basic manifestation of that inward-lookingness has been the common agricultural policy and the intrinsic schizophrenia, which has existed in the Community ever since its foundation of a general policy for industry which is in favour of competition and trade across borders and a policy on agriculture which is essentially protectionist. We must stress that point in the discussions.

A great deal of attention has been focused on the remarks of Doctor Pohl, the president of the Bundesbank, for whom I have the greatest respect, particularly at a technical level. He has stressed his objections to the Government's proposal for a hard ecu. They need analysis and I do not agree with them. However, insufficient publicity has been given to the effects that Dr. Pohl believes that the Delors proposals will have. In many ways Dr. Pohl is more opposed to those proposals than to the hard ecu proposals. He is clear that it would be a mistake to rush into the kind of proposals that Mr. Delors has been putting forward.

However, I am a little puzzled by Dr. Pohl's attitude to a European central bank. He seems anxious to design that in the greatest detail, but it seems to have been put into cold storage until it is needed. That is rather uncertain. Dr. Pohl raises all the issues that have been raised by my right hon. and hon. Friends as to who would be accountable for democratic control in such a European central bank. In that regard, it is important that the Government argue those fundamental points in the IGCs. I hope that it will be possible for my right hon. Friend the Chancellor, in what will be a very difficult task, to get the support of Spain and Greece for his proposals. A parallel currency would have considerable advantages at the moment.

I am afraid that there is a danger of rushing into a treaty amendment, which would not be acceptable for the reasons that I have given. We would then face the difficulty of deciding whether to use the veto and there might be a danger that some Community members might set up their own arrangements for a single currency. I cannot help but feel that the economic analysis of those issues must lead us to conclude that that would be a mistake. However, the Chancellor will have difficulty persuading those countries, although I am sure that he will carry out his task most effectively. I believe that there is no great division of opinion on the matter on either side of the House. Of course, there are hon. Members at either end of the spectrum, but the vast majority of hon. Members are not in favour of a rush towards a single currency or stages 2 and 3 of the Delors proposals. I hope that my right hon. Friend the Chancellor will bear that in mind.

The Community must concentrate on the other difficult issues, not least the problems with agriculture. The Commission's proposal in the Uruguay round is inadequate. We should not simply be pressing for a 30 per cent. reduction in agriculture subsidies. We must recognise that there should be urgent reforms. Measures for economic integration should be worked for steadily, but they must rely on greater convergence of the economies. That must come first, rather than our seeking to establish a single currency which would inevitably create quite intolerable strains.

7.26 pm
Mr. Jack Thompson (Wansbeck)

I have listened carefully to nearly all the speeches that have been made today. Hon. Members referred to the broad brush situation of our economy and I found it intriguing that the speeches today have been dominated by our relationship with Europe. That is all very well, but we must remember that other elements of the economy must be considered. I make no apology for referring to the position in my region. I am the secretary of the northern group of Labour Members and I have a great interest in my part of the country. I am sorry that the Chancellor has just left the Chamber. If he had spent more time visiting the north of England, he would have discovered that the recession has existed there in various stages for 10 years. In fact, we have never really been out of a recession.

It is often repeated that this nation's chief economic resource is its people and that the maintenance and improvement of material, intellectual and environmental living standards depend upon the people's skills, knowledge, ingenuity and application. A further powerful influence are Government policies, which in the past 10 years have done little to enhance those attributes in the northern region of England. In fact, the vast reservoir of skills and talents has been deliberately stifled and wasted in terms of the uncontrolled destruction of the region's traditional industries, causing thousands of highly skilled personnel in the shipbuilding, engineering and mining industries to lose their jobs and future prospects of employment for their children.

Even if the argument is accepted that the old industries had to decline—and that is an argument in its own right—a huge pool of skilled workers were left with no future and many of them still languish on the banks of the Tyne and Wear, in Cumbria, Cleveland, Durham and Northumberland. They suffer when a planned change in the industrial base of the region could have harnessed their talents without the traumatic events of the past few years. Those people are not the sort to adapt easily to working in the tourist or service industries. Their backgrounds and traditions preclude that. Their skills, knowledge, ingenuity and application have been wasted in the pursuit of free market dogma and can never be replaced by the pseudo, superficial training schemes which have been introduced, revised, revised again and are still found wanting.

The issue of closer links with the EEC greatly concerns many who have an interest in the economic advancement of the northern region. Increasing numbers of people feel that the only genuine support that the region will get is from the Community, because it is clear that the Community is far more sensitive to the problems of peripheral regions than the present Government are. Those people do not see EEC support as a handout but rather as a return on investment. The Government do not recognise that, being notable in their reluctance fully to adopt the principle of additionality.

Many of my constituents and others in the northern region are not particularly concerned about a single European currency. They tend to think in terms of what is happening in the region. We have a substantial amount of Japanese industry, some German-based industry and some Canadian-based industry. My constituents recognise the value of the Canadian dollar, the yen and the deutschmark as being every bit as important as the value of the British pound.

The approach of the single European market is of great concern in the region. Due to the Government's lack of interest in regional regeneration, we lag far behind in communications, especially road systems north of Newcastle and west to Carlisle. They are vital links in developing the region. We lack skills training for our young people and need more modern plant. All those factors add to our problems, which the Government could have helped us to overcome. We are not inspired by the advent of the channel tunnel without proper links to the north. The northern region could cope with those changes if it were allowed to compete at the same level as other regions. We do not ask for privileges—only fair treatment.

Equality of opportunity was evident in the 1960s and 1970s, when industries were specifically encouraged to establish in the region. Examples in my constituency are Alcan Aluminium, Glaxo, Searle and a number of others. Boots, Merck Sharpe and Dohme, and Bristol Myers are in the constituency of my hon. Friend the Member for Blyth Valley (Mr. Campbell). All those industries responded to the opportunities made available to them, mainly by the Labour Government, and they continue to survive despite the pressure of high interest rates, inflation and the unified business rate. The only real efforts being made to regenerate the region are coming from two organisations—the Northern Development Company and the Northern Region Councils Association, both of which are doing splendid work on behalf of the region with only minimal Government support for the NDC.

There is urgent need for a proper regional dimension in Government policy. I fully support the Labour party's proposals to introduce a form of regional structure, decentralising some of the Government's inward-looking services and allowing more scope for local input and decision making. There are too many decision makers cocooned in Whitehall and Westminster, unaware of the real situation in the far-flung reaches of the Thatcher empire. Flying visits by Ministers of a half or one day's duration do nothing to inspire confidence in remote decision making.

In a recent report in the Newcastle Evening Chronicle, Mr. Paul Briggs, chairman of the Northern Confederation of British Industry, said: As a nation we need to force-feed investment. This is not whingeing and whining—this is reality. Time is not on our side and we cannot achieve increased productivity, lower unit costs and consistently low unemployment without the equipment to make it possible. Investment in manufacturing industry had a very small share of the national investment and without it—we cannot keep up with our overseas competitors. I agree entirely with those sentiments because he, at least, is a man who lives with the problems and knows some of the answers to them.

7.33 pm
Mr. Gerald Howarth (Cannock and Burntwood)

Anybody watching our proceedings on television, as many seem to do nowadays, cannot fail to be impressed by the contrast between the speech of my right hon. Friend the Chancellor of the Exchequer and the entertaining speech of the right hon. and learned Member for Monklands, East (Mr. Smith). My right hon. Friend was right to suggest that the speech from the Opposition Front Bench was incredibly shallow. If it revealed anything, it was that, as far as we could determine the Opposition's policy on Europe, it was identical to that of the Government.

I, too, welcome the Gracious Speech, not least because we are promised a Session of rather less frenetic activity than we have been accustomed to in recent years. It will not do hon. Members any harm to get home to their wives at a more civilised hour.

It is a great privilege to serve in this Parliament and it has been a privilege to serve throughout the past two Parliaments, especially under the leadership of my right hon. Friend the Prime Minister. She has unquestionably brought about an enormous resurgence in Great Britain's standing throughout the world. Wherever one goes now Britain is a respected country. Indeed, even where people do not know the name of our country, they know the name of our Prime Minister. That high standing has been transferred to the United Kingdom economy where welcome and dramatic changes have taken place.

The hon. Member for Wansbeck (Mr. Thompson) mentioned foreign investment in the United Kingdom. He answered his hon. Friend the Member for Brent, East (Mr. Livingstone), who complained that United Kingdom profits were invested overseas. The hon. Member for Wansbeck has demonstrated that investment is a two-way process. Thanks to the liberal trading climate that we have created in the United Kingdom, foreign investors want to invest here alongside British investors.

We have seen a massive 50 per cent. increase in productivity over the past 11 years, record growth in the past eight years, strikes becoming less and less frequent, a low taxation regime and, the greatest achievement of all, balanced budgets. Those are sound, solid achievements, on which this Queen's Speech builds.

Like my right hon. Friend the Member for Worthing (Mr. Higgins), I welcome the proposal for compensation for compulsory purchase. That will go a long way towards ensuring that the infrastructure projects that we need are unlocked rather more quickly than they are at present.

The Opposition have no constructive policies to offer. As time goes on, more and more of our people will take things for granted as their unhappy experience of socialism in the United Kingdom fades into the distance.

Privatisation has been one of the great jewels in the crown of successive Conservative Governments since 1979. It has been a spectacularly successful policy. It is worth reminding the British people, our electorate, of the four principal benefits that it has brought. First, it has released the flair and enterprise of managers and people working in industry. Secondly, it has given people a stake in the business for which they work. They now have more commitment and reason for commitment. Thirdly, it has released those industries from Treasury control. Now they can invest funds in much needed investment when they believe that it is right and not have to take their place in the queue as the Treasury thinks fit, competing with other political priorities. Fourthly, it has brought better service to customers, which is most important. Fifthly and incidentally, it has raised about £28,000 million for the Exchequer, but that is only a happy by-product.

Privatisation has been most successful where we have introduced competition. There has been competition in the airline industry and it is no accident that British Airways is the world's favourite airline. It has been transformed beyond all recognition from the days when it was in the public sector.

Mr. Salmond

What does the hon. Gentleman think of competition in the privatised steel industry?

Mr. Howarth

Wherever there is competition, it is good for consumers, whether private individuals or corporations.

We have seen enormous changes in British Telecom. It has been transformed from a moribund industry where there was no choice, into an industry that is successful and meets the demands of customers. It is now possible to buy a telephone for less than £20. Under the socialists we had no choice—just what was on offer. The investment has taken place at a rate of £3,000 million in the latest year, in addition to a total investment of £40,500 million. That shows that the private sector invests in technology for the benefit of consumers when it can make profits and run its own affairs. We were told it would not be interested in the consumer or in public service, but not only do 96 per cent. of payphones work, but whereas in 1984 there were only 77,000 payphones, today there are 95,000. Mercury is providing real competition, and I look forward to Friday when I shall be opening a new Mercury payphone in my constituency.

The success of the denationalised industries is shown by the transformation in their finances. Whereas, in 1978–79, those industries that have since been privatised received Government subsidies of £19 million, excluding capital grant and public dividend capital, in 1989–90, those same companies contributed no less than £1,500 million to the Exchequer in corporation tax. That is a demonstration of the success of privatisation. Those companies have been turned round in an exciting development.

Other countries have followed our example. Recently, Argentina privatised its telephone service. Even the Opposition are paying lip service to competition, although I thought that it was rich for their spokesman to say yesterday, "While we welcome competition … " Every time that the Government have introduced competition, the Opposition have opposed it root and branch. They do not like the consumer having choice. The British people will not trust a party that pays lip service to the ideas that we established and carried to fruition.

We have a great deal further to go, but we are making progress. We have introduced choice in education. Local management of schools is proving to be a great success. Our proposals on health are going through. I am pleased that privatisation will feature in this legislative Session.

These are not the easiest of times for the Conservative party. Inflation is the litmus test by which we judge ourselves, and there is no doubt that we have not been as successful at containing inflation as we should have been. However, my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe)—I am sorry that he is not here now—was wrong to suggest that, had we joined the ERM five years ago, we should have been able to contain inflation. There is no evidence to sustain that argument, and my right hon. Friends the Members for Chingford (Mr. Tebbit) and for Worthing (Mr. Higgins) have demonstrated without any doubt that fixed exchange rates offer no solution to the problems of the United Kingdom.

When my right hon and learned Friend was Chancellor of the Exchequer, he distinguished himself by being the Chancellor of floating exchange rates. We should have kept to that policy, for in that lay a mechanism by which the strains and imbalances of trading patterns could be taken care of by the marketplace rather than politicians. It was ridiculous of the hon. Member for Brent, East to suggest that DM2.50 is the rate at which the pound should be linked to the deutschmark. He has no idea what the right rate is, and nor does anybody else. It should be left to the markets to determine. Fixed exchange rates will inevitably lead to centralised monetary and economic control and my belief is that that will lead to severe and dangerous tension throughout Europe.

While I welcome much in the Queen's Speech, there is one omission. The hon. Member for Ashfield (Mr. Haynes) will agree that it is a shame that there is no Bill on coal-mining subsidence. I hope that my right hon. Friend the Leader of the House will be able to devote time to ensuring that that will come before the House during this Session.

Several hon. Members


Mr. Deputy Speaker

Order. The winding-up speeches are expected to begin at 9.10 pm. Six hon. Members wish to speak in the debate. If my mathematics is correct, that means that I can somewhat relax the 10-minute limit on speeches, but were any hon. Member to abuse that. I should have no hesitation in putting on the clamps again.

7.44 pm
Mr. Alex Salmond (Banff and Buchan)

I shall concentrate in today's debate on the economy on the Scottish steel industry, but I shall first pick up on four speeches. First, I listened with some interest to the right hon. Member for Chingford (Mr. Tebbit), who made a plea for self-determination, control and the ability to sack Governments and Chancellors. I wish that he had extended that important right to the nation of Scotland, which has been trying to sack this Government and successive Tory Chancellors over the past 10 years.

I suspect that the major difference between the right hon. Gentleman and me on Europe, and the reason why I am friendly to the developments taking place in the European Community and he is so hostile to them is that we in Scotland are starting from zero self-government, zero control and zero self-determination. Therefore, any improvement on our position, or the raising of our status to that of other member states over the next few years, will be a major achievement for Scotland.

I also listened with interest to the speech of the right hon. Member for Cirencester and Tewkesbury (Mr. Ridley) and to his appeal to hon. Members representing constituencies in Northern Ireland, the north of England and Scotland to show their support of his view that those areas have been disadvantaged within the monentary union of the United Kingdom. The hon. Member's economic views are probably as popular with the people of Northern Ireland, Scotland and the north of England as are his political views with the Germans, the French and the Irish. His views would have a great deal more credibility were it not for the fact that, as Secretary of State for Trade and Industry, he presided over the demolition of regional policy in the United Kingdom. Someone from his background does not have the right to lecture other Europeans on whether they would be prepared to make a fiscal contribution to offset the disadvantages of monetary union to areas of low productivity.

Such a policy could be introduced. We could, for example, have surrogate devaluations, such as labour subsidies, in the community. There are many debates in Europe on how such fiscal assistance could be introduced in the monetary union of the Community. I should be more confident of the interest and ability of other Europeans to take part in such a policy than I would ever be of the right hon. Member's wish to do so, given his track record on regional policy.

I listened with interest to the Prime Minister's speech, and I re-read it last night to remind myself of what the right hon. Member for Yeovil (Mr. Ashdown) called a "chilling" passage on the Gulf. I was concerned by the circumstances in which that passage arose. The deputy Prime Minister had resigned, her leading political rival was poised to strike and she was expecting an assault from the Leader of the Opposition. She was not to know that her position would be strengthened by the time that he sat down! Her speech was calculated. That passage seemed to me to be designed to divert attention from domestic political difficulties in much the same way as the American President used sabre rattling on the Gulf to divert attention from his domestic problems two weeks ago.

I cannot see the point in sabre rattling on the Gulf. A dictator like Saddam Hussein will not meekly withdraw from Kuwait, because the loss of face involved would lead inevitably to the demise of his regime. It does not seem that the western world is prepared to offer him the golden bridge of diplomacy, which would allow a peaceful settlement to be negotiated. The consequences of a war in the Gulf are becoming all the more clear, and may include 100,000 dead and substantial if not gigantic environmental and economic damage to the international community.

The only real option in the Gulf is the determined application of sanctions to get hold of the windpipe of the Iraqi economy, to keep hold of it and gradually increase pressure until internal dissent brings about the demise of the Iraqi regime. Such a policy demands patience, real guts and determination, rather than the saloon-bar patriotism offered by the Prime Minister last week.

The Prime Minister's political difficulties are substantially greater than they were at this time last week. I hope that, in the midst of the Tory party's internal election battles over the next four days or so, we do not see the Gulf card played once again as a diversion from domestic political difficulties.

I found it interesting that the Leader of the Opposition managed to achieve the not inconsiderable performance of delivering a speech in which he did not lay a glove on the Prime Minister, never mind a knockout blow. I re-read it carefully last night to try to ascertain whether that was part of a grand strategy or merely natural ability. I have no doubt that, while natural ability comes into it, the right hon. Gentleman's speech was designed to ease the pressure on the Prime Minister. Indeed, it was designed to put no pressure upon her. If the Conservative party wants once again to alter the rules of its internal election contests, I suggest that it extends the franchise to the Labour Front Bench, where it will find some of the few remaining Members of this place who are extremely anxious to keep the Prime Minister in office.

If it is true, as I understand the hon. Member for Cunningham, North (Mr. Wilson) wrote in the West Highland Free Press only last week, that the Labour party calculated their interest to be in the retention in office of the present Prime Minister, I suggest that it tries to keep that quiet, safely away from the notice of the electors of Paisley, Renfrew and Johnston over the next two weeks.

I shall say a few words about the Scottish steel industry. The hot strip mill at Ravenscraig is under a death sentence from British Steel, despite its high productivity. The Clydesdale seamless tube works is also under a death sentence, despite the fact that a modest investment could make the works competitive in the one major steel market in Europe which is expanding. The Dalzell plate mill still awaits a decision in respect of a single plate mill strategy. It is still anxiously wondering whether it is to be the chosen plant, despite the fact that a Glasgow university study showed clearly that the cost of concentrating on Dalzell would be about £125 million, while the cost of the green-field site option would be £425 million.

First, I should like to hear a firm commitment from the Opposition Front Bench on the position of Dalzell within the single plate-mill strategy. I should like the Labour party unambiguously to back Dalzell as the best option for such a strategy. Secondly, I should like to hear from Conservative Members at least—the hon. Member for Cannock and Burntwood (Mr. Howarth) made a plea earlier about competition in markets—that they are prepared to support a reference to the Monopolies and Mergers Commission, or, even better, to the European Commission, designed to examine the exploitation of the monopoly in domestic steel production in which British Steel is undoubtedly engaged.

Mr. Doug Hoyle (Warrington, North)

I do not know whether the hon. Gentleman is aware that the Select Committee on Trade and Industry, of which I am a member, took the right decision today to examine the position at Ravenscraig. We know how essential it is for Scotland and the entire British economy. I think that we shall all join the hon. Gentleman in doing our best to save the steel industry in Scotland for the nation.

Mr. Salmond

I thank the hon. Gentleman for his intervention. I welcome the decision of the Select Committee. I hope that it will extend the terms of reference of the inquiry to include the Dalzell plant. I hope also that it will examine the network of deals in which British Steel has engaged across Europe to carve up markets and restrict competition. That is the folly of privatising as a monopoly, and that applies certainly to British Steel.

Thirdly, I should like to hear some commitment from the Labour party on public ownership. It seems to me and to many others in Scotland that, if the Opposition parties are to have any influence on the actions of the board of British Steel, we need to convince Sir Robert Scholey and the other members of the board that, unless he changes course and stays the hand of the executioner over the Scottish steel industry, there will be a day of reckoning. If he and his board are engaged in an act of industrial vandalism—that is the only possible description of the rundown of the Scottish steel industry—such a strategic industry cannot be left to the likes of them. The Opposition parties should say clearly that, if British Steel continues on its present course, it will be a candidate for public ownership. That is something that the Opposition parties could do now that might have an immediate influence on British Steel's decision making for Scottish plants.

I believe that the Labour party is not making that demand and not engaging in that sort of rhetoric because it is frightened of the concept of public ownership. It is not now "respectable" to sell public ownership south of Birmingham, to that part of the electorate on whom it has targeted so many of its political efforts. About 20,000 jobs are linked to the Scottish steel industry, either directly or within the plants of immediate suppliers. If we include industries which depend on the sourcing points for steel that would be affected by price increases if the steel industry in Scotland were run down, perhaps as many as 100,000 jobs in Scotland would be touched in one way or another by closures and the demise of the Scottish steel industry.

What country in history has discovered oil and ended up poorer but Scotland? What country in Europe would be running down its indigenous steel industry in the face of the large and expanding North sea market but Scotland? What country but Scotland has had to endure the level of economic incompetence that has been imposed upon it by a succession of United Kingdom Chancellors of the Exchequer?

7.58 pm
Sir William Clark (Croydon, South)

I welcome the Gracious Speech. My only regret is the speech of my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe). I found it disappointing and, in some sections, unfair.

I welcome especially the items in the Gracious Speech that are related to transport, whether they be planning applications or increased investment in our transport system. I welcome also the privatisation of the Export Credits Guarantee Department, the insurance department for exports.

The Gracious Speech is tied up with the autumn statement. It is right to put on record again the congratulations of my right hon. and hon. Friends and myself on the achievements of my right hon. Friends the Chancellor of the Exchequer and the Chief Secretary to the Treasury. Week after week and month after month, we suffered rumours about what was happening in the economy. These originated from the media and the pundits. The House will recollect that the overshoot of public expenditure for next year was said to be about £12 billion. In fact, the public expenditure increase will be increased by about £8 billion. The media and the pundits were about £4 billion out on that score alone.

If we discount the reverse element within public expenditure of £3.5 billion, the increase in public expenditure for next year has been contained to £4.5 billion. The Government's commitments to pensions, welfare payments and the rest of it will all be honoured. Many local authorities—mainly those which are Labour controlled—have overspent, and the Government's control of public expenditure is a remarkable performance.

My right hon. Friend the Chancellor of the Exchequer rightly castigated the right hon. and learned Member for Monklands, East (Mr. Smith), the shadow Chancellor of the Exchequer, for not once mentioning any of the achievements of the Conservative Government in terms of the economy since 1979. I know that Opposition Members do not like good news. They should stop talking down the economy. We have more people in work today than in 1979. I accept that inflation is high, but it has come down from 26 per cent. ——

Mr. Bruce Grocott (The Wrekin)

When was that?

Sir William Clark

It was 22 per cent., and rising rapidly, when we took office.

Our exports have risen since 1979. In addition, our net overseas assets, as a percentage of gross domestic product, are the largest of any major industrialised country. Another important point is that all the doom and gloom about new businesses in fact relate to those that fail. Currently, the net increase in new businesses—those that are set up minus those that fail—is 1,300 per week. That is not a bad record. Of course, there are many fewer strikes now.

There has been a transformation in our economy, to which the Opposition should at some point pay tribute. The national debt next year will be reduced by £29 billion. I remind Opposition Members that that is equivalent to 12p in the pound at the standard tax rate. The interest on that sum would be about 1.5 to 2p on the standard rate each year, so it is a considerable achievement.

There has been a great deal of talk about the exchange rate mechanism, which Britain has entered with a 6 per cent. margin either way and at a deutschmark rate of 2.95. Some people have questioned whether that was the right rate at which to enter, but hon. Members should remember that Britain will eventually move to a 2 per cent. margin either way. If at that time it is felt that the 2.95 rate is too high, it can be adjusted.

I am convinced that the hard ecu should not be written off. The bond issues in the ecu market on the London international financial futures exchange are growing. That currency is being used for bond issues. In March next year, the exchange intends to introduce a futures market in the ecu. We should not set any time limit, but rather wait to see what evolves from that. In five or 10 years—who knows?—the hard ecu may be acceptable. In the meantime, we could have a parallel currency with a European monetary fund.

In each of our economic debates, the Opposition are asked what they would spend in Government, and how much it would cost. We never have an answer. They promise increases in pensions and in spending on the national health service and on education. Whatever one cares to name, they promise to provide it. They say that they have not costed their proposals, but I can help them, as Liverpool university has costed all their promises——

Mr. Grocott


Sir William Clark

If the hon. Gentleman does not believe me, I can send him a copy of Professor Patrick Minford's report. He has costed the Opposition's proposals at £22 billion—[Interruption.] If Opposition Members do not accept that figure, they should tell us their figure. I am prepared to accept Liverpool university's estimate.

I remind Opposition Members of what that would mean for taxpayers. A Labour Government would have to find that money and they could do it through an increase in the standard rate of tax from 25p to 35p. That would produce £20 billion. As the higher rate taxpayer would also have his rate increased, that would produce a little extra revenue. If the Labour party does not want to do that, it could raise value added tax by 10 per cent., which would produce just over £20 billion. I am convinced that the general public are entitled to know how much all the glowing promises from various Opposition spokesmen will cost the taxpayer—[Interruption.] If Opposition Members do not agree with the Liverpool university figure, they must tell us their figures.

I accept that the medicine of high interest rates is unpalatable and unpleasant, but it is worth it because the economy has slowed. However, I agree with my right hon. Friend the Chancellor that it will pick up next year. We must be realistic and pragmatic and take various factors into account—the Gulf, the United States economy, and so on. I accept that we are in rough seas, but we have been there before and we have come through.

We have achieved a tremendous amount. We have achieved a strong economy, and we must not deny that or talk it down. We must continue with the present policies. We do not want any U-turns. I am convinced that we shall come through and that Britain will return to prosperity. That is why I welcome the Gracious Speech.

8.8 pm

Mr. Doug Hoyle (Warrington, North)

If ever there was typical complacency, it was the speech of the hon. Member for Croydon, South (Sir W. Clark). Indeed, there has been a series of complacent speeches by Conservative Members, from the Chancellor onwards. At least the Chancellor admitted that Britain is in a recession. Of course, we are not simply in a recession—we are in a deep recession. All that the hon. Member for Croydon, South could talk about was Labour party promises—not what the Government will do to remedy the mess into which they have got this country.

The Government are inept. There has been a high degree of economic mismanagement. They have had £91 billion in oil revenues—they have been positively awash with oil—since they took office in 1979, but we have little to show for it.

It is not much good Conservative Members talking about the new companies that have been created when there were 16,500 bankruptcies in the first nine months of this year and 64 per cent. more liquidations in the third quarter of this year than there were in the same period last year. That is not a record of success—it is a record of failure.

Building employers tell us that there will be 50,000 redundancies this year in the construction industry and a further 50,000 redundancies next year. In the real world in which many of us live, unemployment is increasing. When we talk about unemployment we must remember the misery that it brings not only to those who are unemployed but to their families, who suffer falling living standards, bills that cannot be met and the difficulties of paying for a roof over their heads. That is the real world under this Government after 11 years in office.

Anyone who doubts what is happening has only to consider the Government's unpopularity as shown in the two recent by-elections. That unpopularity has caused such a flurry in the dovecotes that Conservatives no longer know whether they want the Prime Minister.

At long last, whether they like it or not, the Government have had to join the European exchange rate. One can argue about whether DM2.95 to the pound is the right rate. The truth is that it is too high for British industry and British industry is uncompetitive, which means that more firms will go bankrupt, there will be more liquidations and more unemployment. That is the real tragedy of what is occurring.

The Prime Minister is now against EMU. She huffs and puffs like the big bad wolf at the wall, but it was she who erected that wall when she agreed to the single European market, when she took us into the ERM. She is well on the way, whether she likes it or not, and she is the person who is responsible. The Prime Minister may say that she will not accept something, but she always does in the end. That is the tragedy of the record of the Prime Minister and her party on Europe. As a result of that attitude, we are always responding to rather than shaping events.

Next we will have a European bank under the control of bankers rather than under political control. What we should be arguing for in Europe is for more regional aid and for regional policies as outlined by Labour Members. Nor, despite the crisis in British industry, is anything being done to bring about the necessary investment. Investment in industry is already lagging far behind that of our competitors, which means that we shall fall even further behind. We all know that the present situation in Britain means that investment in industry will be cut yet more, making our industry even more uncompetitive.

Labour Members also stress the importance of training, but rather than increasing training the Government will be cutting spending on training by £1 billion in real terms by 1993–94. Here again, we are falling behind our competitors—we do not have the highly mobile, highly trained work force that they have, and that augurs ill for the future.

I realise that there is a crisis of confidence in the Conservative party. There is a little local difficulty. We hear from the Prime Minister that she will not duck the bouncers, that she will not stonewall, that she will knock the bowling all over the field. As a keen student of cricket, I can tell her that the person who plays that kind of game may succeed but may also be bowled first ball. If she does not believe me, let her ask Ian Botham. She may well be bowled first ball in the election that is to take place—I do not know—but I do know that it is not the Prime Minister alone who is responsible. The Cabinet must share responsibility for the situation in which we find ourselves. Whoever is elected will also have to bear responsibility for 11 wasted years. Despite the benefits that should have accrued from oil revenues, we are not in a good position to face competition.

What we need is not a private cricket match but a cricket match in which all can join. We need a general election with a new captain, a new team and a new start. We need a team that believes in industry and in revitalising manufacturing industry so as to create the wealth to pay for our social programme, for education and for a better health service. That is what we need, but without competitive industry we shall not be in that league.

For 11 years there has been a concentration on service industries, but because of our handling of European matters we are in danger not only of losing out on the European bank—the City of London may also lose out and the centre of finance may move from here to Paris or, more likely, Frankfurt. Whether we like it or not, in or out of the Common Market, we are affected by what happens to the deutschmark. We cannot get away from that. The Government cannot lead us forward, nor can we recover from the economic mess in which we find ourselves without a new approach and a new team who will put money into industry and training and prepare us to meet the challenges of the 1990s.

8.17 pm
Mr. David Howell (Guildford)

With some exceptions, this has been a rather enjoyable debate, contrary to the expectations of some of us, certainly on the Conservative Benches. My right hon. Friend the Member for Chingford (Mr. Tebbit) was in cracking form when he spoke earlier, but his view that Chancellors should be the sole controllers, and could be the sole controllers, of modern economies was a bit romantic.

It is risky to hold such a view because that devalues the role of the other authority in any modern economy, whether a large continental one or a national one, and that is the role of the central bank and its governor—the central monetary authority. Therefore, I am concerned when I hear hon. Members talk as if there were some magic world to which we could somehow return in which all the economic factors of our nation could be controlled by the politicians, the Minister of Finance or, in our case, the Chancellor.

I go further and say that if there is one overriding and burning need in Britain in order that we may perform more effectively and have a sounder monetary policy and be better members, or effective members, of the ERM, it is that we should somehow achieve a less politicised monetary policy. It is the countries that can run a depoliticised monetary policy, with perfectly sensible and democratically controlled fiscal policies and broad national policy, which have been most successful in getting their currencies to perform and whose currencies are most respected, traded and sought in world currency markets.

Whether we are in the ERM or not, and on the whole it adds some reinforcement, it is no substitute for the fundamental need for Britain to secure and run a sound monetary policy. When world markets look in on this country and see that, however determined are our political leaders, they are still the people who pull the precise levers of monetary policy—short-term interest rates—those markets are bound to attach less credibility to such decisions than if we had a separate, more independent monetary authority.

There can never be a completely independent authority, because a subtle nexus of relationships must exist between central bank governors and any democratically elected Government. However, unless we can establish greater separation of the powers of our central monetary authorities in operating monetary policy, and remove from the shoulders of my right hon. Friends the burden of carrying the political responsibility for setting and changing short-term interest rates, we shall not succeed in establishing credibility for our currency and thus the lower interest rates at which it can be traded in a stable way that we really deserve. That touches on a fundamental misunderstanding that I believe that I saw reflected in some of the notions of my right hon. Friend the Member for Chingford, much as I agreed with many of his other remarks and enjoyed his speech.

However, the real muddle in this afternoon's debate was to be found not in the remarks of my right hon. Friend but in those of the right hon. and learned Member for Monklands, East (Mr. Smith). I do not deny that we are in a bit of a muddle, too—it would be silly to suggest otherwise. However, it was comical to witness the right hon. and learned Gentleman—who is usually so incisive and crisp, and considered such a dreaded lawyer, and who will carve everyone up at the Dispatch Box—wade into deeper and deeper difficulties as he tried to grapple with his own party's policies on Europe and its monetary affairs.

The right hon. and learned Gentleman is himself being sucked into a religious war—from which my right hon. and hon. Friends have not been entirely free—over issues of tax theology that are of remote practical importance. The great religious wars of the late middle ages were fearsome affairs and were fought with terrible ferocity, but when they ended, few people could remember what they were about or the point of those conflicts. I fear that he same is true of our arguments over a single currency and a European central bank.

Some of my right hon. and hon. Friends and Opposition Members fail to realise that the chances of a central bank ever coming about are very remote. If it happens in years to come, that will be decided not by politicians, on dates set by bureaucrats in Brussels, and riot even by treaty amendments. It will be determined by markets—industry, customers, consumers, and to some extent by central bank governors. They will decide whether it will be more convenient to operate a single currency running from Lisbon to Berlin, and from Reggio Calabria to Glasgow, or whether it will be more convenient, sensitive, flexible and articulated to operate separate currencies broadly within national zones.

Dame Elaine Kellett-Bowman

Does my right hon. Friend agree that that is exactly what my right hon. Friend the Prime Minister said? If a sufficient number of countries want to use a single currency, they will do so—and if not, they will not do so.

Mr. Howell

That is exactly the argument made by my right hon. Friend the Chancellor in respect of the hard ecu, to which I shall refer shortly.

If people imagine that Karl Otto Pohl, the Bundesbank's distinguished governor, does not understand that argument, they are wrong. He knows perfectly well that it will take years to establish a central bank. He is in no hurry, even though he is chairman of the committee that is supposedly drafting its structure. He understands perfectly well that such a concept is possible on the other side of nowhere. Therefore, he is almost certainly drafting models that are so perfect as to be unattainable. His latest suggestion is that such a bank should be free not only of all national political control but of any political control whatever, and should be spinning in space, run by a lot of platonic philosophers and bankers in a dreamy way that could never be acceptable to nation states and their Governments, or even to the Community.

A great deal of unnecessary energy and aggro has been expended over a concept which probably will not be realised, and over which we anyway have no control. There is no hurry, and in the meantime, as my hon. Friend the Member for Lancaster (Dame E. Kellett-Bowman) points out, the opportunity exists for markets to decide whether to trade on their local currencies or on a good strong ecu. The ecu already exists, and many people choose to use it. Invoicing in the ecu already occurs. Some people are paid in that currency, but need to change it in to their local currency at a bank.

The hard ecu is not a bad idea, and I would argue with Mr. Pohl about dismissing it out of hand. The hard ecu offers the market a menu, to ascertain whether it wants to use that currency. I am surprised that some people are disparaging about its use. If there were a hard ecu as good as the deutschmark, I should be happy to be paid in it and to trade in it. I am sure that many commercial concerns throughout Europe would be equally happy to trade, invoice and run their books in a hard ecu, although others may prefer pesetas or sterling.

I make a plea to my right hon. Friends and to Opposition Members who are not beyond listening not to turn on each other and to tear each other's eyes out. Instead, we should confront the realities and speak positively to our European friends—those who are perhaps a little too excited about establishing a single currency and who want to set dates, and those who are amenable to positive and co-operative argument rather than to defensive attacks and assaults.

It seems to me that the operation of a single currency is very unlikely to happen, as it would require the total convergence of the European economies. I do not accept the view that such a convergence would be impossible because some nations are poor and others are rich, nor the view of my right hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley), who seemed to put us in the forever poor category—as though Britain is permanently handicapped and will never catch up with the big boys.

The future might be quite different. The famed united Germany could get into trouble. It is about to run the most gigantic budget deficit, almost as large as America's—DM140 million, or about £50 billion—for next year. It seems likely that Germany will have to raise interest rates to cope with that, and it may no longer be the overwhelming, strongest magnet for attracting all capital in Europe. Germany is attracting such support now, which is dangerous in that it forces up the interest rates of us all. Nevertheless, I do not accept the view that the United Kingdom is a dispossessed region that is bound to lose out from fixed exchange rates or freer trade. That view has been expressed down the years by all opponents of the single market, but it is totally wrong.

We must be realistic and accept that the United Kingdom will have high interest rates for a good time to come—probably several years. The German affair is turning out expensive, and there is a vast shortage of capital in the world. Japan has ceased to export capital, and it will become more expensive stuff. If we want to maintain a sound currency, we shall have to keep our interest rates high. We have no choice. If we lowered them, capital would immediately move away, sterling would weaken and inflation would increase. Any attempt to expand our economy by escaping high interest rates would lead on the contrary to its contraction. That is the nature of the international monetary system.

There is little discretion available even to Parliament. It may be magnificent to stand here and say that this Parliament should have ultimate control of this country's monetary and fiscal policy, but in reality any Chancellor or central bank governor has only limited discretion. Those who stand up and make fine speeches, saying that Parliaments shall prevail in the matter of interest rates, are practising a cruel deception on the people. The reality is that, in open economies, there is little room for manoeuvre.

It is not good for the House or the country to be diverted from the realities. In the year ahead, we face some kind of recession. I hope that it will not be deep, but the United States is facing a recession and Japan is getting into grave difficulties over its financial structure. Those waves will be far bigger than anything that we can counter. We cannot avoid recession. Nor would any other Government be able to avoid it.

We can act prudently in adversity and we can possibly run a slightly—I emphasise the word slightly—less tough fiscal policy than we would otherwise have to pursue. We could move away from budget surpluses to perhaps just a balanced budget or a small deficit—let us consider what the Germans are doing—that would be prudent, but it would have to be carefully done. Other than that, the constraints upon the Chancellor, on the governor of the central bank—who should be reinforced—on this Parliament and on any realists are enormous. If we do not tell people so, we are deceiving them.

What we can do is to improve the supply side of our economy, as we have sought to do over the years. I do not accept that we are a crippled outlying country in Europe. We certainly have some weak patches. For a decade, I have argued that we should do more to maintain our infrastructure. I argued that in 1981–82 when I was in Government and I made no progress. I argue that case again today. Our transport infrastructure is inadequate and the education and training infrastructures also need to be built up in difficult times.

The reality is not that some wonderful control over the great forces of international monetary policy exists, which can be regained by Parliament, but simply that 1991 will be a damnably difficult year for all of us. To see this nation through we shall need prudent fiscal and monetary policies.

I have no doubt but that with the right leadership we can certainly go through and regain the lost momentum of the 1980s, based on sound finance, a strong and positive role in Europe and vigorous enterprise. It can most certainly be done and those who suggest otherwise are conjuring up bogeys and fantasies, which we should not accept and which should not frighten us away.

8.30 pm
Mr. David Trimble (Upper Bann)

Last week at our party meeting when I said that I wanted to speak today I looked forward to discussing the economy. I specially looked forward to telling the House of my experience when I recently visited an enterprise in my constituency—an enterprise which had had a growth rate in excess of 11 per cent. for most of the last decade. I was told that in recent months its export orders were running at a mere 40 per cent. of the previous year's level, the drop being due to an overvalued currency. We entered the exchange rate mechanism at too high a level. The enterprise I visited told me that it could have lived with a rate of between DM2.60 and DM2.65. At present, this country and that enterprise will suffer.

With the House's indulgence I intend to speak on a different aspect of the Queen's Speech—security, and especially security in Northern Ireland. The reason for my change of course was the events in my constituency at the weekend—the massacre at Castor Bay on the shores of Lough Neagh.

Mr. Deputy Speaker (Sir Paul Dean)

Order. I remind the hon. Gentleman that we are discussing the amendment in the name of the Leader of the Opposition dealing with the economy. I am sure that he will be able to use ingenuity to bring his remarks within that context.

Mr. Trimble

I am not sure that I wish to let so serious a subject be raised only indirectly and as a matter of ingenuity. I have been anxious to speak this evening simply to bring the grave concern of my constituents, and the great danger that what happened at the weekend will spark off yet another round of killings, to the attention of the House. If it is not possible to raise those important and grave matters before the House, then I have no desire to resort to subterfuge.

8.33 pm
Mr. William Ross (Londonderry, East)

There was no murder in my constituency at the weekend, although there have been many elsewhere in previous weeks. Therefore, I shall not speak about the security situation, other than to say that the violence that we have experienced in Northern Ireland has had a grievous effect upon our economy, as it has upon all that we desire for the wealth of the people in Northern Ireland.

The Government have asked us to support their policy on the economy this evening, as it is outlined in the Gracious Speech on page 3, where it says that the Government will maintain firm financial policies, strengthened by the Exchange Rate Mechanism, designed to reduce inflation and foster the conditions necessary for sustained growth … They will maintain firm control of public expenditure with the aim of keeping its share of national income on a downward trend. That is a laudable objective, but the Opposition take a rather different view, and have tabled an amendment. The Government's point of view is open to many interpretations, but I regret that they do not seem prepared to do more for manufacturing industry, which is the well from which our wealth is drawn. Not only do we have to consider what the Government say in the Queen's Speech, we have to take into account other Government statements, not least the autumn statement made last week. We also have to take into account the Government's actions with regard to the exchange rate mechanism.

Twice in the course of this afternoon, we have heard references made to the German budget deficit. According to some hon. Members, it will be about £50 billion, and according to the tape, it will be half that sum. In either case, it is a considerable amount of money.

I remind the House that that money will have to be found somewhere. If the Germans do not raise internal taxation to take account of it, they will have to put up interest rates and, under the terms of the ERM, no doubt they will seek the support of sterling and other member currencies for the deutschmark. I mentioned this when I spoke on the subject when we entered the exchange rate mechanism. No one else has mentioned it today. It seems strange to me that this aspect of the ERM appears to have been forgotten in the general melee on the Government Benches, but it should not be forgotten by the House, so I remind hon. Members of it.

As I pointed out in a previous debate, this country will help to pay for German reunification, and it will get very little or perhaps nothing out of the benefits which will eventually flow from it.

Hon. Members have listened with care to what ex-Ministers have had to say today and yesterday, particularly the interesting speech by the right hon. and learned Member for Surrey, East (Sir G. Howe). It was clear from what he said, and from what has been said in the past in the House for public consumption, that past statements were designed to conceal the reality of the deep and bitter disagreements about Europe which all of us knew in our hearts still existed within the Conservative party. The right hon. and learned Gentleman said that his quarrel was more about style than substance, but I suggest that there was little argument about style and a heck of a lot about substance. Our argument is about policy and his basic belief about the powers that the House should surrender to a supranational identity.

The consequences of what is going on in the Conservative party are now known to the world at large. Indeed, listening to Conservative Members in the Lobbies yesterday evening, I was irresistibly reminded of a flock of headless hens. It was quite interesting. I never thought I should see the day when the Conservative party would lose its head to the extent that it has clearly done in the past 24 hours.

Conservative Members now seem to be getting their legs under them again and to be trying to pull themselves together. Some of their speeches today have been carefully designed for that purpose and have been fairly successful. At least, that is the appearance to the outside world, although God knows what is happening under the surface—paddling away like a duck, I suppose. At least members of the Unionist party are united in our attitude to Europe. There has never been any doubt about where we stand. We are extremely sceptical of that organisation and of its work.

Mr. James Molyneaux (Lagan Valley)

We have been for 20 years.

Mr. Ross

As my right hon. Friend the leader of our party says, we have occupied that position consistently for 20 years. Would to God other Members of the House had done the same. We simply cannot understand how a person can stand for election and thereafter complain when they did not tell the electorate their true attitude. They say that they have no faith in the ability of their countrymen to earn their living in the world. I have such faith in my fellow countrymen throughout the kingdom: I believe that they can earn their living in the world. Furthermore, they do not believe that they are capable of so organising the finances of the nation as to create the necessary conditions to allow their fellow countrymen to earn their living in the world. They want, therefore, to seek shelter, in some form or another, in Europe. Finally, they say that we should move towards a united states of Europe.

The right hon. and learned Member for Surrey, East (Sir G. Howe) tried yesterday in his speech, as reported at column 463, to give the impression that there is a middle way, but I was surprised and disappointed to find that he took no steps to spell out that middle way. I am led to the conclusion that that was beyond even his considerable powers. There is no middle way. Either we run our own affairs or they are run for us by someone else. It is as simple and straightforward as that.

If we go down the path towards a totally united Europe, the House will learn the lesson that Ulster learned over a very long period. Under the Government of Ireland Act 1920, we rapidly found out that, if we wished to remain within the kingdom, we had to keep in step. My party consistently made sure that that happened. Moreover, we found out that, by keeping in step, we had to be subsidised. Therefore, we were totally under the control of those who sit on the Treasury Bench, especially when it comes to Treasury matters.

We accepted that as the price of staying within the Union, which is where we decided to remain. That meant that freedom of movement was so limited that Stormont was reduced to rubber-stamping much of the legislation. Local councillors in Northern Ireland find that they are now in a similar position. They have no freedom of movement whatsoever.

The House will find that it is rapidly placed in a similar position if we introduce a single currency that is controlled by a central bank. The path that has been set before us would lead not to a great but to a little Europe, with limited horizons. I should like the House to consider that prospect.

The Opposition ask us to support their motion. They condemn the Government but they express no view on the question that is rending the Conservative party asunder. All hon. Members know that the same argument rages on the Opposition Benches. So far, it has not come to the surface, but the argument rages under the surface on this side, just as it has raged on the Government side for so many years. I do not know when it will come to the surface, but it most assuredly will come to the surface one day.

The right hon. Member for Chingford (Mr. Tebbit) reminded us that there is all-party agreement on certain subjects. As I listened to the speech of the right hon. and learned Member for Monklands, East (Mr. Smith), I was irresistibly reminded of the circus act in which a fellow rides two horses at once. In the case of the Conservative horses, they slowly part until at last the elastic legs do not stretch far enough and the rider has to get on to one horse or the other. The Labour party also seems to be trying to ride two horses. The problem is that one is going clockwise while the other is going anti-clockwise. That is an extremely difficult act to perform. The rider will fall off very soon. The sooner the debate in the Labour party is out in the open so that the people of this country can decide, so much the better it will be for the nation, the House and both major parties.

The marketplace for this nation is the world, not Europe. We need freedom of action. Power over the economy and control of the money supply, which the House fought for centuries to wrest from the Crown, should be retained. The right hon. Member for Cirencester and Tewkesbury (Mr. Ridley) referred to that much more elegantly than I could ever do. Control of the economy should remain with the House and all the people we represent. That is fundamental to the life of the nation. The more clearly that is understood by the electorate and all hon. Members, the better it will be for us all.

I am well aware that Governments manipulate the economy so that they can be re-elected. However, that does not always work; the electorate sometimes decide that a change of Government is needed. The debate will continue not only during but after the election of the leader of the Conservative party. Our immediate and continuing concern, however, is the need for sound money. Problems will arise soon because of what is happening in Germany. The rise in public expenditure outlined in the autumn statement caused me to ask how the United Kingdom Government intend to maintain sound money. According to the tables of projected expenditure, in real terms there is to be a rise in public expenditure of £15 billion up to 1993–94. In cash terms, that is £35 billion. A large element of inflation must be built into that figure.

I hope that the Minister will tell us how the Government expect that huge and continuing rise in public expenditure to be financed. I asked the Chancellor of the Exchequer the same question last week, during the exchanges after he had made his autumn statement. He said that he did not believe that the United Kingdom would experience the problem that the Germans now face for the first time in many years—a public sector borrowing requirement. Are the Government confident that they can raise this huge additional sum by means of a buoyant economy? Are the Government certain that the British economy will be able to generate the money, or will they once more have to go to the money markets for a huge sum? I should deeply deplore such a course, which would leave a trail of misery in its wake. The further we keep away from a public sector borrowing requirement the better.

We need to be told exactly what the position is. The Government ought to provide their real economic projections and tell us how on earth they intend to finance this huge extra expenditure.

8.47 pm
Mr. John Battle (Leeds, West)

The key phrase that we associate with the Prime Minister is the one that she used some time ago: there is no alternative, or TINA. She created the impression that nothing could be done other than according to her approach. Hers was the only option; her option was to be accepted, or else. That approach was applied throughout the economy.

We were told that we had to accept, almost as an article of faith, that this country was subject to the perfect workings of the free market. When the free market was tried, tested and found wanting, we were told that the market had to be free and fair. Phrases such as "the level playing field" were introduced. Then we were told that inflation was out of political control, that it was an arithmetical equation, beyond political and economic intervention. We were also told that it was an accident, almost a non-insurable risk, even an act of God.

Yesterday in the House, we learned, perhaps in the most significant statement by the right hon. and learned Member for Surrey, East (Sir G. Howe)—it was a most revealing personal remark, and press comments have been made about how personal the right hon. and learned Gentleman's speech was—that he pinned personal responsibility for high inflation and high interest rates on the Prime Minister. He pointed to the Prime Minister as the cause of inflation. He said that her domineering approach to economic policy in the last few years was the cause of inflation.

What has been the impact of the Prime Minister's economic policies? It reveals itself increasingly as the deliberate manufacture of unemployment. There was also propagated the view that unemployment was not caused by Government policy. However, Patrick Minford from Liverpool university, who was referred to earlier, argued that unemployment and low pay should be used as a key instrument in bringing down inflation.

Mr. John Marshall (Hendon, South)

The hon. Gentleman said that the Government are following a course of deliberately creating unemployment. Will he accept that the level of job creation in the United Kingdom since 1983 is much greater than the level of job creation in any other European Community country?

Mr. Battle

I am grateful for that intervention, because it shows how eclipsed the minds of Tory Members are becoming. The hon. Gentleman talked about 1983. Perhaps he would like to return to the beginning of his Administration in 1979. He would then find that the unemployment graph rose massively under his Government, to a figure approaching 4 million. Even the figures with which we are presented now—we all accept that they are fiddled down, after 26 changes—show that unemployment is still higher, at 1.63 million, than it ever was under a Labour Government or in the preceding decade. We have had high unemployment under this Government, and from that high base it is now moving up again.

Underlying the Government's policies is the manufacture of unemployment. What is worse, underpinning that has been the policy of chipping away at the social security for those who are unemployed. I have sat in the House and watched Bills go through which make the unemployed wait longer for access to benefits after losing their jobs. I have seen the Bill containing the availability for work test with the condition that people accept any job regardless of the level of pay—and in areas such as Leeds, West, pay can be very low.

The Government have a conscious policy of pricing people into work. That may be becoming a footnote. Even the poverty figures became a footnote to a parliamentary question on the last day of the Session in the summer. We express shock and horror when Saddam Hussein turns the language round and describes the hostages as guests. However, the Government have been using and manipulating language in the same way. The Prime Minister has said that everyone in Britain is participating in increasing wealth. That is patently not true, even according to the Government's own figures.

We know that unemployment has been higher during the time of this Government than ever before. However, the key shift is not from employment to unemployment but from manufacturing to the financial and services sector. Accompanying that has been the shift to temporary, part-time and low-paid work. Unless we analyse and understand that, we cannot understand the damage that has been done to our economy over the past 10 years. Let us not forget that it was the right hon. and learned Member for Surrey, East (Sir G. Howe) who was responsible for the erosion of our manufacturing base, when one of his first Budgets effectively wiped out one third of the manufacturing jobs in this country.

In constituencies such as mine, the staple employment was in engineering, clothing, textiles and printing. The loss of such jobs has a devastating effect. I accept that there has been a growth in the financial and services sector. Leeds has a banking sector and an office sector, and development is still taking place. However, that does not replace jobs on a scale to match the loss that has occurred in the past decade.

On Canal road in my constituency, there is a helpful image. On the left-hand side is the Armley industrial museum, in which one can see textile machinery and engineering as it took place in the past. Schoolchildren visit the museum to see the industrial and manufacturing past of Leeds. On the other side of Canal road is Farnell electronics. That is a new technology industry. It is expanding but it is not replacing the jobs lost in the textiles, engineering and printing industries shown in the museum.

I could cite daily reports from the regional Confederation of British Industry and the chambers of trade and commerce which show that a further erosion of our manufacturing base is taking place now at a time of high interest rates and when firms are threatened with the uniform business rate. Rather than invest in the manufacturing base of our country, the Chancellor referred to investment in the commercial sector. That is interesting because the commercial sector includes the financial and services sector as well as manufacturing. If one isolates and examines the manufacturing sector, it is clear that there has been a lack of investment because the Government chose the consumer boom approach.

When the Chancellor derides credit controls, it may be worth his reflecting upon the fact that artificially engineered house price booms, especially in the south-east, resulted in people staking the rapidly increasing asset value of their property against further borrowing for cars, holidays and so on. That spending has resulted in the massive trade deficit now facing us.

Areas such as mine in Leeds understand the need for a dynamic manufacturing base. However, the Government's policies make the outlook bleak. Before the people are again asked to pay the price of the Government's mismanagement, they should be given the opportunity to elect a Labour Government who would adopt a dynamic and different approach to the manufacturing base.

8.57 pm
Mr. William Cash (Stafford)

I was interested in the line taken by the hon. Member for Leeds, West (Mr. Battle). The argument about economic and monetary union will lead to the socialists squealing loudly when they realise that the charge capping arrangement that will be imposed under binding rules by the proposed central bank will cause maximum dislocation for the regions which they purport to represent most effectively in the House. Also, others elsewhere in the European Community will suffer, because when the paymaster, which is likely to be the German economy, finds that the poorer countries are running budget deficits, somebody will be sent over to say, "We do not like the fact that you are spending this money," and then, "You cannot spend it." The binding rules that will be imposed by the independent, unaccountable and unelected central bankers will thus impose upon those whom Opposition Members purport to represent the sort of misery that will create internal divisions and jealousy within Europe.

Further, it is part of the arguments that I have heard from some members of my own party and from others elsewhere that we should have a hard-core federal system which should exclude those very people in eastern Europe who most need investment to enable them to attach to the growth in their countries the democracy so hard won over the past couple of years. In reality, a central bank and a single currency are the worms in the bud of the EC, and their impact upon democracy and the withdrawal of consent which go along with them make me so bitterly opposed. As I said the other day, it would be the greatest irony if the springtime of nations turned into a silent spring for the people of eastern and central Europe when the penny drops and they find that that is the consequence.

Some people have said that all that will not happen and that it is just a jeu d'esprit on the part of other member states, that it is simply no more or less than a figment of the imagination and that we do not need to get too worried about it. The arguments for the central bank and the federalism underpinning it are constructed on arguments of the 1950s, whereas the arguments that we propose are relevant to the 1990s and to the next century.

A few days ago, the Commission published its own paper entitled, "One Market, One Money" in which it graphically described what it expects to happen. It stated: The role of national budgetary policies will be substantially revised, with new needs for autonomy to permit flexibility combined with enhanced discipline over excessive deficits and coordination to ensure an appropriate policy-mix for the Community. That means that the European Commission and those who support the proposed treaty amendments will gain control over the budgetary policies which lie before the House. Those who criticise the Prime Minister—I noticed my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) making this criticism yesterday—for not apparently going down the route of automatic progression ——

Mr. John Marshall (Hendon, South)

Does my hon. Friend agree that what the Prime Minister was seeking to do before she got on the train of economic and monetary union was to ask where the train was going and what the price of the ticket would be? Surely most passengers would adopt that approach in respect of any train.

Mr. Cash

I could not more fully support my hon. Friend's view. I put it to my right hon. and learned Friend the Member for Surrey, East in his last attendance at business questions that that was no more than a one-way ticket to federalism. That is exactly what lies at the heart of our objections to the line being taken within the Community and the Commission. The proposals are now before us. There is no doubt whatever that those who seek to suggest that all this will take place only in the year 2000 or in 1994 are missing the central point.

The treaty amendments are due to be discussed and negotiated at the intergovernmental conference which is to take place within a few months. If the treaty amendments implementing the proposals are made, the effect will be to set irrevocably in concrete the very arrangements that Opposition Members say will not happen. I make the same point with respect to some of my hon. Friends. They must appreciate that this is a determined drive to achieve a federal Europe. My hon. Friend the Member for Nottingham, East (Mr. Knowles) nods—he is an honest federalist, he knows what is in the pipeline and he wants it to happen. The difference is that I do not.

However, no responsible leader, contender or challenger, such as my right hon. Friend the Member for Henley (Mr. Heseltine), could possibly have agreed, and nor could the Leader of the Opposition possibly have agreed, to the proposed 1994 deadline without actually having proposals put before them. It would have been the height of irresponsibility. Nor can they say that there is an automatic progression towards that goal, because if that were the case there would be no need for the treaty amendments which are being proposed.

We need to get the message out to the public at large to make sure that they understand that the issue is not merely about a theoretical sovereignty but about their right as ordinary individuals and electors to choose the kind of Government they want. It is a simple question and it goes to the heart of the reason why we are in this House—to represent the interests of our electorate.

That applies equally to Conservative and Labour Members. As I said in a debate the other day, the question is, "Who governs?" We are aware of the draft amendments being proposed and we know the answers to the questions. The other member states have attempted to pre-empt the issue by setting the date of 1994 before discussions have taken place. It would have been the height of irresponsibility for us not to take the position that we took.

I ask the British electorate, the man in the street, to consider the implications for them of not only general public expenditure but specific expenditure on defence, health, education and social services being capped. If countries were to spend more than they were allowed, the squeeze would immediately be put on them. Those who, like my right hon. and learned Friend the Member for Surrey, East, that my right hon. Friend the Prime Minister was tending to lead people astray are themselves guilty of ducking the issue and leading people astray.

We did not sign up to the next stage of Delors or to automatic progression to a federal Europe, and the evidence is there for all to see. Some people want us to take that route and are prepared to issue ultimatums if we do not agree to do so. The reality is that the House is on the line. We have a responsibility to discharge, and I believe that the majority of hon. Members, let alone Conservative Members, will support the Prime Minister in the challenge to her.

9.6 pm

Mr. Keith Vaz (Leicester, East)

Labour Members are fed up with the debate on the Queen's Speech being turned into personal statements by Conservative Members about whom they support in the leadership election. We are simply not interested in the internal wrangling of the Conservative party or in Conservative Members washing their dirty linen in public. We are far more concerned about the facts about this debate and this Administration. The only thing on which I agree with the Prime Minister is her statement that the next few days and weeks should be conducted on the basis not of personalities but of the facts before the nation.

The facts show a nation in crisis and a party unfit to govern. The Queen's Speech provides no benefits for my constituents. For example, 1 million people are on the waiting list for operations. In the past 10 years, 300 hospitals have closed and 70,000 beds have been lost. If we are to believe newspaper reports, by March a further 4,500 beds will be lost on economic grounds. My constituent, Mr. Pemberton, who is 74 and who served in the second world war defending this country, has to wait 29 weeks for a hip replacement operation. He was told by the Leicester Royal Infirmary that he must wait in a queue of several hundred people. Within the Leicestershire health authority area, 9,600 people are on the waiting list for operations.

Tomorrow, in Leicester we shall welcome the shadow Secretary of State for Education, who will speak to local teachers and visit local schools. The bill for repairs to our schools is £3 billion, there are 10,000 teacher vacancies and more than half the profession has left in the past 11 years.

There are no solutions to the housing crisis in the Queen's Speech. More than 1.25 million people are on housing waiting lists, 11,000 of whom are in Leicester. People visit my surgery and those of other hon. Members asking for transfers and for homes because they want to begin a life on their own.

As for the crime figures, 4 million crimes were committed in Britain in the past year alone. By the time this last hour of the debate concludes, a further 10 crimes will have been committed in my county of Leicestershire. Then there are the overcrowded gaols. Young people in Armley prison committed suicide to escape the appalling conditions there.

The economy is in crisis. The trade deficit is so embarrassing that the Chancellor does not wish to mention it any more. The director general of the Confederation of British Industry, a friend of the Prime Minister, urges the right hon. Lady to get her act together. In the last month alone, 487 firms went bankrupt under this Government.

I wish to make a special plea in the closing minutes of the debate on the Loyal Address for the 1990–91 Session. It is a plea for the textile and footwear industries which have been devastated by the Government's policies over the past 11 years. High interest rates and the high level of imports are affecting the lives of ordinary people in my constituency. Two jobs are lost every hour in those two industries. Hon. Members are united on such issues as the multi-fibre arrangement. Both sides of the House agree that something must be done to protect those two vital industries. In one way or another, one third of my constituents depend on them for their livelihood. If this trend continues and nothing is done within the next year, I am afraid that those industries will cease to exist. They will go the same way as the textile and footwear industries in America, which have been destroyed by the high level of import penetration.

The problem of the way in which this country has been governed over the past 11 years cannot be solved by a leadership election. Nothing will change if the right hon. Member for Henley (Mr. Heseltine), or the Leader of the House or the Foreign Secretary succeed the Prime Minister. It does not really matter. What matters is the election of a new Government with policies which will directly benefit the people of Britain.

9.11 pm
Dr. John Cunningham (Copeland)

My responsibility is to review six days of debate—a task so formidable that there is not exactly a sell-out in the Chamber.

The first of several aspects of the debate which impressed me were the speeches of the mover and seconder of the Loyal Address. The right hon. Member for Ayr (Mr. Younger) and the hon. Member for Richmond and Barnes (Mr. Hanley) charmed and amused the House with their wit and humour. Their speeches were excellent. The right hon. Member for Ayr talked of his predecessor, whom I may call Younger the Elder, as that was one of his ancestors. [Interruption.] I am delighted to see the right hon. Gentleman take his seat. He referred to former Conservative Members for his constituency. I have to observe, however, that, despite the right hon. Gentleman's formidable career and record in the House, I fully expect that he will be the last Tory to sit for that constituency. The hon. Member for Richmond and Barnes perhaps gave us a hint of his own wistful crystal ball gazing when he referred to the policemen at the House being back after the next election. He may have been thinking that he would not be so lucky.

There have been moments of accidental humour, too. Yesterday, the Secretary of State for Trade and Industry said: This country enjoys one of the most open and dynamic telecommunications markets in the world."—[Official Report, 13 November 1990; Vol. 180, c. 449.] I suspect that his hon. Friend the Member for Wiltshire, North (Mr. Needham), the Parliamentary Under-Secretary of State for Northern Ireland, agrees. There have been many other moments of humour, some intended and some not, and a wide variety of effective speeches from both sides of the House. Last year I paid tribute to Ian Gow's speech in the equivalent debate. I miss his puckish wit, his friendliness and his courage. We also miss Allan Roberts, Sean Hughes, Mike Carr, Pat Wall, Allen Adams and Norman Buchan, and my thoughts and those of my right hon. and hon. Friends are with their families.

It is a pleasure to congratulate my hon. Friend the Member for Knowsley, South (Mr. O'Hara) on an excellent maiden speech during the debate. He brings to this place a formidable knowledge of education at many levels. His humour, too, will be welcomed, but as a lifelong supporter of Newcastle United I will not make any jokes about Everton.

I am delighted to welcome two new colleagues—my hon. Friends the Members for Bootle (Mr. Benton) and for Bradford, North (Mr. Rooney) whose crushing victories against the background of this debate and the autumn statement are merely the latest expression of the continuing strong desire of the British people to be rid of the present incompetent, discredited Government. After those stunning Labour results, many more Conservative Members—not only the right hon. Member for Ayr and the hon. Member for Richmond and Barnes—will be nervously scanning the "situations vacant" columns. Indeed, on those results, about 190 Conservative Members will not be returning after the general election.

I must make a passing reference to the right hon. and learned Member for Surrey, East (Sir G. Howe), the former Lord President of the Council and Leader of the House of Commons. After yesterday, I shall miss him even more than I had imagined, and I shall certainly miss him in his role as Leader of the House. He had an excellent record in that post, but there was one blemish on and otherwise good record. I refer to the Government's continuing failure to establish, as they have a duty under Standing Orders to establish, a Select Committee on Scottish Affairs. They have wholly defaulted on that obligation, and we look to the new Leader of the House to remedy that as soon as possible.

This is the 12th Gracious Speech that we have considered in the Government's term of office. My Government affirm their strong commitment to the European Community. They intend to play a full and constructive part in its further development and enlargement … My Government will give priority in economic policy to controlling inflation through the pursuit of firm monetary and fiscal policies … The quality of education will be maintained and improved". Those are laudable aims, to be sure, and I see the hon. Member for Pembroke (Mr. Bennett) agreeing with them. The problem is that they are not from the Gracious Speech of 1990 but from the Gracious Speech of 1979. Eleven years on, the Government are still making identical promises to this House and to the people of Britain.

Now, after three Parliaments with large majorities, after 11 years in power, after every penny of £91 billion of oil revenues has been frittered away, we are back to the promises of 11 years ago. Now, with inflation at 10.9 per cent. compared with a European Community average of 5.4 per cent. and an average among the other countries in the exchange rate mechanism of just 4 per cent., now, with interest rates at 14 per cent., with a balance of payments deficit forecast by the Chancellor of £15.5 billion this year, with Britain in recession however the Chancellor chooses to describe it, and with rising unemployment, this year's Gracious Speech says that the Government will reduce inflation and foster the conditions necessary for sustained growth. Who can believe that? Why should we believe it? The Government's record is a mixture of incompetence and deception. I searched in vain during the six days of debate for any recognition of the Government's abject failures in the speeches by Tory Members, but with one or two notable exceptions, my search was a waste of time.

Observers of the debate will recognise a common theme in many Tory speeches. It is to be found in the words of the old song, "Just One More Chance". After a decade of division at home and in Europe, with a Prime Minister isolated and indeed embattled in her own party and completely out of touch with the people, that is the plea from Tory Members more interested in saving their skins than in saving the country. Putting Tory party interests before those of the nation will probably extend to the engineering of a mini-boom. That is the Government's short-term election strategy now, as it was in 1987, and it would be a further disaster for the long-term interests of the British economy.

By a remarkable stroke of fate, on 14 November 1985 the Prime Minister gave an extended interview to the Financial Times. The article stated Mrs. Thatcher wants another five or six years as Britain's Prime Minister in order to complete the economic transformation of the country that she embarked upon when she was elected in 1979. Having had the other five years, she has got us right back to square one. This is where she came in.

My right hon. and hon. Friends have graphically illustrated the Government's litany of failures and the fact that their only strategy for the 1990s is to repeat the mistakes of the 1980s. We have also shown that only the Labour party has the workable policies and commitment to tackle the problems that Britain faces. A Labour Government will ensure a properly balanced economy in the United Kingdom. We will take action to bridge the skills gap through a coherent national training stategy.

According to the Chancellor's autumn statement, the Government are set to cut the employment budget by £300 million in the forthcoming year. They are also reducing the employment training scheme for the long-term unemployed. The next Labour Government will end such cuts. We know that training is one of the keys to a more successful future.

We are also committed to a modern regional policy along the lines of our main competitors in Europe and elsewhere. Already this year there has been a cut of 67 per cent. in regional enterprise grants. Regional development grants are crucial, especially in areas like my constituency, where even now Ministers are refusing to allow us to take advantage of European regional development fund money. They are denying that investment to west Cumbria as a deliberate act of ministerial policy.

Britain needs a Government prepared to work in partnership with industry, management and employees.

Mr. Cash

Does the hon. Gentleman subscribe to the idea that under the new arrangements, of which the Labour party apparently approves, there could be a central bank? If so, how can he equate the amount of money that he is now saying should be spent with the binding rules and the imposition of budget deficits that would be imposed on his Government by that bank?

Dr. Cunningham

I am sorry that I gave way to the hon. Gentleman's obsession with that subject. Nothing that has been said from the Opposition Front Bench in six days of debate has committed the Labour party to a central bank beyond political control, and the hon. Gentleman is aware of that.

Over the past 11 years, the Government have imposed contentious and ill-conceived changes on the state education system. Standards are declining and schools all over the country, including the Valley infant school in my constituency, are simply crumbling before the eyes of parents, teachers and pupils.

The Government's neglect is widespread. Despite a national outcry, the Government could find only £77 million extra for school building and repairs. That may sound a lot to people outside this place, but when that is set beside the more than £50 million allocated to a tiny percentage of pupils in city technology colleges, it is clear where the Government's priorities lie.

Our great universities are also suffering. In the very important area of science and engineering research, the Government are funding only one half of the alpha-rated proposals going to the Medical Research Council. It is increasingly difficult to recruit postgraduate research students of the right calibre. That cannot be allowed to continue if we are to compete in Europe in the 1990s and beyond. Britain's education system requires sustained commitment, which only the Labour party is willing to provide.

I was pleased to hear the new Secretary of State for Education and Science—the third in 15 months—make a public commitment to the state education system. It would carry more conviction if he and his fellow members of the Cabinet sent their own children to state schools. All those Secretaries of State have been rapidly moved on by the Prime Minister. Even her latest appointment is already being undermined for his rejection of education vouchers. To borrow a phrase of the right hon. and learned Member for Surrey, East the new Secretary of State is being subverted by some casual comment or impulsive answer."—[Official Report, 13 November 1990; Vol. 180, c. 465.] A Labour Government will increase choice and opportunity and help the one third of children who, in the words of Her Majesty's senior chief inspector of schools, are getting a raw deal under this Government. Those are not our words. We aim to make our young people the best educated and trained in Europe.

Why is it that, after 11 years of the Prime Minister's policies, our great hospitals are closing children's wards? The most famous children's ward in the most famous children's hospital in Britain, and probably in Europe, has been closed. Thousands of sick children have been nursed back to health in the Peter Pan ward of Great Ormond street hospital since it was opened in the late 1930s. That ward is now closed. How bitter that news must be for the millions of people who contributed so generously to the wishing well fund to maintain that hospital and its care for children. So much for caring Conservatism.

The authoritative British Social Attitudes annual report due out tomorrow shows that British people reject the values espoused by the Government. Now, the Government and the Conservative party are irrevocably split and it is shameful that at such a critical time for Britain at home and abroad we are left with a disabled Prime Minister and no effective Government or leadership. Once again, the Tories are letting Britain down.

In the debate on 1979 Loyal Address, the present chairman of the Conservative party, speaking of the Prime Minister, said: it is difficult to find that narrow strip of land that lies between rebellion and sycophancy."—[Offical Report, 15 May 1979; Vol. 967, c. 57.] Contemporary research does not record whether he ever found it. Nor are there any prizes for guessing, if he did, which way he jumped off it. At any event, he is now deeply engulfed in a quagmire of his own choosing, as the failed Tory campaigns continue to demonstrate. The same cannot be said of the right hon. and learned Member for Surrey, East.

Contrast the two: the Prime Minister in secrecy stabbed him in the back—he in public stabbed her in the front. The right hon. and learned Member, in a speech of considerable courage and stunning candour, confirmed the Opposition's and the country's worst fears. In my 20 years in the House, I cannot recall a more devastating indictment of a Prime Minister of any party. The right hon. and learned Gentleman confirmed many of Labour's accusations and criticisms in the past decade and his words about the Prime Minister support the oft-repeated views of my right hon. Friend the Leader of the Opposition.

The right hon. and learned Gentleman's accusation of her misconduct of Cabinet Government, his determination to expose her serious misjudgment of Britain's best interests, illustrate how strongly he believes that the Prime Minister has failed our country. His exposure of the Prime Minister's reckless determination to have her own way at any price explains his own and other resignations from the Cabinet. The Prime Minister clearly puts her own prejudices and desire to dominate before sound policies and good Government.

The Cabinet's divisions over Europe have not prevented the Government from supporting disastrous policies at home. That is why we now have poll tax, private water monopolies, crumbling schools and a run-down national health service. That is why Britain is isolated and lagging behind other western nations. The Tory Government have failed precisely because Cabinet Minister have never had the guts to stand up and be counted in front of the Prime Minister.

There is no doubt that a Prime Minister who regularly talks tough about inflation has been an engine of inflation, or that a Prime Minister who regularly claims to want to create a climate for enterprise has damaged British interests, or that a Prime Minister who boasts about defending British interests has, through impulsive outbursts, seriously damaged them. So far as we can tell, the Prime Minister is the only politician on record who has received directions to the taxidermist from an alleged dead sheep and an alleged dead parrot. As she surveys her Government and a Conservative party split asunder, seething with revolt and destabilised by the blows of the electors, she must reflect on the words of Thomas Wyatt: They flee from me, that sometime did me seek … I have seen them gentle, tame, and meek, that now are wild". Against that background of hopeless divisions, continuing policy failure and manifest incompetence, is it any surprise that we have seen this week a programme from the Government devoid of ideas, courage or Ministers of the calibre to do what is best for Britain? Our country does not need another member of that broken team or that divided party to lead another Tory Government into failure, for they all share the guilt. What people want is a general election. They want to decide who the next Prime Minister will be. As they have shown throughout Britain in 1990, that choice will be a Labour Government, led by my right hon. Friend. That election is the only way to end the present debacle. For us, it cannot come too soon. We are ready to govern. Let the people decide.

9.33 pm
The Lord President of the Council and Leader of the House of Commons (Mr. John MacGregor)

It is a great personal privilege for me to follow my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) as Leader of the House. Many have already paid great tributes to my right hon. and learned Friend for his long and most distinguished service to this country in so many capacities over the past 25 years, and I warmly join them in that.

I want tonight to single out my right hon. and learned Friend's role in the past 16 months as Leader of the House and thank him for the splendid way in which he carried it out. He has a well-deserved reputation as a reforming Leader of the House. I look forward to continuing the work that he set in hand under your aegis, Mr. Speaker, and in conjunction with the hon. Members for Copeland (Dr. Cunningham) and for Berwick-upon-Tweed (Mr. Beith) and the House of Commons Commission, to modernise the way in which we organise our affairs in the House. I look forward also to the continued co-operation of colleagues too numerous to mention on both sides of the House on whom I shall rely in the Services Committee and its Sub-Committees, in the Select Committee on Televising of Proceedings of the House and the Privileges Committee, and to suggestions—always I hope, helpful and supportive—from my hon. Friend the Member for Honiton (Sir P. Emery) and my right hon. Friend the Member for Worthing (Mr. Higgins).

I wish to join the hon. Member for Copeland in his tributes to the proposer and seconder of the motion, my right hon. Friend the Member for Ayr (Mr. Younger) and my hon. Friend the Member for Richmond and Barnes (Mr. Hanley). I have always regarded my right hon. Friend the Member for Ayr as one of the wisest and most level-headed Members of this place. As a fellow Scot, and now as Chairman of the Select Committee on Televising the Proceedings of the House, I hope that he will assure the constituent to whom he referred that the cameras present no threat to the honourable tradition of quoting from Rabbie Burns. That is something that one would expect, as television was invented by another Scot, John Logie Baird.

My hon. Friend the Member for Richmond and Barnes delighted the House with his mimicry and acting talent, for which there will clearly be a continuing demand. It is complemented by acute intelligence and knowledge and experience of the issues in which he specialises.

I am glad also to congratulate the hon. Members for Knowsley, South (Mr. O'Hara) and for Eastbourne (Mr. Bellotti) on their maiden speeches. Both mentioned education matters, which are of great interest to me. I cannot let the charge of underfunding pass, which one hon. Gentleman raised and which the hon. Member for Copeland tried to make stick a moment ago. In schools, we have increased spending per pupil by over 40 per cent. in real terms in the past 10 years. The autumn statement confirmed that both capital and current spending by local education authorities in 1991–92 will be able to rise by 16 per cent. There will be a total of over £3 billion extra for education next year. That massive increase demonstrates our continued commitment to education as a priority.

Mr. Ian Bruce

I wonder whether my right hon. Friend saw the edition of the Daily Mail, which carried a report on how the money to which he referred was being spent, especially in Labour areas, in putting teachers in front of pupils or in spending on bureaucrats. I hope that my right hon. Friend will be urging on his successor as Secretary of State for Education and Science, my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), that that ratio is not brought into effect generally.

Mr. MacGregor

I know that my hon. Friend will realise that I was focusing upon that in relation to the amount of money that was being held back in respect of local management of schools when I was in my previous capacity. I know that my successor and his ministerial colleagues will continue with the campaign.

Before I refer to the economy, there are two matters——

Mr. Robert Hughes (Aberdeen, North)

Will the right hon. Gentleman give way?

Mr. MacGregor

I am coming to the point that I think the hon. Gentleman wishes to raise.

Before I refer to the economy, there are two matters to which I should refer as Leader of the House. First, my hon. Friend the Member for Honiton raised earlier in the debate several procedural matters to which I wish to reply on other more suitable occasions. But there was one to which I believe that it would be appropriate to respond tonight. He asked that I should announce the parliamentary calendar at the start of this Session as recommended by the Procedure Committee in 1979, and beguilingly suggested that that could establish me as the most popular man in the House.

I cannot go quite that far, so I must forgo that pleasure. But I hope that it will be for the convenience of the House if I say now that, subject to the satisfactory course of business, I expect the House to adjourn for the Christmas recess on Thursday 20 December and to return in the week beginning 7 January. As Easter next year falls at the end of March, the Easter recess will include the week immediately after Easter day, Sunday 31 March. I hope that my hon. Friend the Member for Honiton will regard that as responding in the right spirit to the Procedure Committee recommendation of which he spoke.

Secondly, I know that hon. Members are interested in a Select Committee on Scottish Affairs. I have been looking into it and will continue to do so. But I have to say that I very much doubt whether it will be possible to resolve the impasse to which my right hon. and learned Friend the Member for Surrey, East referred last year, which had lasted up till then, and to which no practicable new solutions have emerged since.

Mr. Robert Hughes

I am grateful to the Leader of the House for giving way as I wrote to him about the Select Committee on Scottish Affairs the day after he was appointed. Does not he recognise that a powerful report has come to the conclusion that the Standing Orders of the House have not been complied with and that he has a duty to say that he will do more than merely look into a Select Committee on Scottish Affairs, and point out the dangers of the present position? Will he not say now that he will use his best endeavours to have such a Committee established?

Mr. MacGregor

I have said that I shall consider it, but I know from reading the documents that it is not an easy matter to resolve. As the House knows, there have been many opportunities to probe Scottish matters——

Dr. Cunningham


Mr. MacGregor

I want to move on to the debate itself, so this is the last time that I shall give way.

Dr. Cunningham

I shall be brief, as I do not want the Leader of the House to run out of time. There is no impasse. We are perfectly prepared to establish a Select Committee on Scottish Affairs. Indeed, the Leader of the House has a duty to the House to establish that Committee.

Mr. MacGregor

I shall certainly consider the matter, but I am aware of the real difficulties——

Several Hon. Members


Mr. MacGregor

I must not give way again, because we began the replies late and there is a great deal to which to respond.

The speech of the right hon. and learned Member for Monklands, East (Mr. Smith) was astonishing for its total lack of any reference to Labour's policies, as my right hon. Friend the Member for Worthing so accurately pointed out. Empty phrases—or complete waffle, as several of my hon. Friends put it—rhetoric, not reality, were the hallmarks of his speech. I know why he did not mention a specific Labour policy. He knows that, where it is not empty, it is ambiguous. How right my right hon. Friend the Member for Chingford (Mr. Tebbit) was when he said that the right hon. and learned Gentleman's phrase this afternoon, "You will not find unity in ambiguity", will return to haunt him for months to come. Where Labour policy attempts to be specific, it is fatally flawed.

shall mention just four fatal flaws. First, the Opposition have no policy on inflation. Indeed, the whole thrust of their policies would be to accelerate every inflationary trend, as they did when they were last in office. There would be increased spending and increased borrowing—and more of that in a moment—and the imposition of a national minimum wage, which, coupled with their plans to give unions major new rights and their wholehearted support of the social charter, would greatly add to inflationary wage pressures. They would shy away from interest rates to reduce excessive demand, and instead give a commitment to credit controls that are widely acknowledged to be unworkable.

No wonder the right hon. and learned Gentleman did not mention that this afternoon, because the last thing that he wanted was to be questioned about what it actually meant and how it could conceivably work. Even the Opposition's acceptance of membership of the ERM is hugely qualified and devalued by a determination to undermine its anti-inflationary rigour. Their intention to intervene in both public and private sector prices is about their sole distinctive contribution—as before—on inflation.

Of course that leads to the second fatal flaw—the Opposition's dislike of the enterprise economy and their gut reaction to every economic issue, which is to seek further intervention and control. The response yesterday of the hon. Member for Dunfermline, East (Mr. Brown) to my right hon. Friend the Secretary of State for Trade and Industry's statement on telecommunications was a litany of interference, regulation and control; a yearning, as my right hon. Friend observed, for a return to a nationalised system, self-regulated, with no choice and no competition. They simply do not understand what makes a free market economy tick. Once again, as their amendment reveals, they will pursue a so-called industrial strategy, which means taking from successful businesses to pursue the state control and the state-directed national investment plans—my right hon. Friend the Chancellor read out the catalogue of intervention and direction—which failed so markedly in the past.

That leads to the third fatal flaw, that the Opposition do not understand the benefits of competition and choice, even when they are so evident before their very eyes. It is competition in telecommunications that has produced the range of choice and degree of innovation in the products now available to consumers; the competition in long-distance transport that has produced the better services and lower prices. In education, the grant-maintained schools, the city technology colleges, the assisted places schemes, the competition being induced by open enrolment and the funding mechanisms of local management of schools are extending choice for parents and helping to raise standards.

They are proving popular with parents, but it is that very popularity that so bugs the Opposition. They embrace conformity. They dislike the very idea that parents may have the chance to choose the opportunity that they seek for their child, rather than being forced to do what a remote authority compels upon them. They do not realise that it is the release of energy, the flowering of talent and enterprise that competition and choice involve, which has done so much to raise living standards in the past 10 years.

It is the fourth fatal flaw that will once again destroy the Opposition. There is a huge credibility gap between their spending ambitions and their so-called tax commitments. If the Opposition really don't want a level of taxation that is going to depress effort as the Leader of the Opposition said in a recent television interview, why did they vote against every Budget that reduced income tax? There is no point in reading the lips of the Leader of the Opposition. They will tell one something different every week.

Once again the Opposition's sums simply will not add up. Before the last election I undertook the task of costing the Opposition's then programme. I remember clearly how the jaw of the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) dropped when I first gave him the figure—£28 billion. But try as he might, he could not refute it. By the time of the election, it had risen much further—to £34 billion. He simply could not resist his colleagues' spending urges. When we told the electorate what that would cost them in increased taxes, and the electorate responded with horror, the Opposition were rumbled.

That is why the right hon. and learned Member for Monklands, East is now trying to put the shackles on his Front-Bench colleagues. So now we have a new version—the latest great Labour con-trick. The Opposition criticise us for what they describe as the lack of resources devoted to the health service, education or the road programme. They therefore imply that the Labour party would spend more. The hon. Member for Copeland was at it again a few minutes ago, time after time. But they know they could not. They know that it is a sham. Again they are being rumbled.

Take education. A recent interview that the hon. Member for Blackburn (Mr. Straw) had in "The Walden Programme" was a classic. The transcript says: Brian Walden: … It turns out that Labour has a Big Idea for education … Jack Straw: Yes … Brian Walden: And you have a whole series of proposals. Jack Straw: Yes. Brian Walden: And when I say to you 'And have you got the money for these', you say 'Well, as a matter of fact, immediately, no, it's all a bit hypothetical … Jack Straw: No … we shall put more money into it. Brian Walden: You'll borrow to do that, will you? Jack Straw: No, we shall put more money into it than this Government. Brian Walden: Smith has told us the tax increases we're going to have, they're very well defined. He's also told us where the money's … going … education's not going to get a penny of it, it's going to go on child benefits and pensions. Now where's your slot coming from? Jack Straw: Our slot will come from the budget of the incoming Labour Government … Brian Walden: So, you are going to borrow it? Jack Straw: I don't know whether we shall borrow it … Brian Walden: Of course … and you're going to borrow the money? Jack Straw: No … Brian Walden: If you don't get it out of taxation—and you promised you won't. Jack Straw: Yes. Brian Walden: You have got to get it out of borrowing. Jack Straw: I've not promised you don't get it out of taxation. Brian Walden: Ah, so you might increase taxes beyond what John Smith has pledged? Jack Straw: … of course not … Brian Walden: Well, then, it doesn't add up, Mr. Straw. Jack Straw (hysterical): It does add up, it does add up, it does add up because this country is a country where, even under this Government there is some economic growth, we intend that there would be … Brian Walden: Ah, it's from hypothetical economic growth that you haven't got yet and you can't measure. That just about sums it up. Of course, the Labour party has not got the policies that will produce economic growth. The right hon. and learned Member for Monklands, East is not a very successful choir master. He has taught his members the chorus, "As resources allow", but they keep forgetting the words of the verse.

Already the strains are showing. The right hon. and learned Gentleman quoted this afternoon from a Midland Montagu Greenwell analysis. Let me quote from another, in June this year. Its economists estimated that the full cost of Labour's spending plans is £50 billion a year. At an absolute minimum, they say that public spending would rise by £12 billion in the first year of a Labour Government. By the third year, Labour would have turned a budget surplus into a deficit of between £16 billion and £27 billion, and they lave hardly even started.

As the election approaches, the shadow Chief Secretary will be submerged in a flood of spending promises to every conceivable pressure group to which the Labour party has never been able to say no. We would be back to the high spending, high taxation, Labour party of the past, and every Opposition Member knows it. Just about the most astonishing statement in the Opposition amendment today is that which calls upon the Government to prepare for the competitive challenges of the Single Market after 1992". Astonishing, because, as the CBI recognised on many occasions recently, the 1980s has been the decade when the competitive position of British companies and the British economy have been so greatly improved. But even more astonishing because it was only comparatively recently—in June 1986—that the Leader of the Opposition said: The Single Market is an abdication of responsibility…an apology for action". As in so much else, he has had to swallow his words and come closer to our policies, because time and again they have been proved right.

It was not many elections ago—in 1983, to be precise—that the Leader of the Opposition was still calling for British withdrawal from the European Community—complete withdrawal. There are rather too many recent converts in the Labour party among those who have spent a lifetime fighting British membership of the Community, and who now do not know what it is about. They have changed their minds not once or twice, but six times in the past few years.

No wonder the right hon. and learned Member for Monklands, East blustered and flustered in reply to the question of my right hon. Friend the Member for Guildford (Mr. Howell) about the number of anti-European Labour Members. He was afraid to admit the figures, but I believe that Labour's Common Market safeguard committee claims to have the support of about one quarter of Labour Members.

By contrast, the vast majority of us on Conservative Benches are not only committed wholeheartedly to Britain's membership of, and full participation in, the European Community, but always have been. One of the first things that I did in politics was to propose a resolution at a university student conference urging the Government of the day to seek Britain's membership of the then Common Market. That was in the late 1950s, well before the Macmillan Government's first negotiation for entry. My commitment has remained complete ever since, in common with so many of my right hon. and hon. Friends, who took a similar view in their early life in politics.

That is why I so much agree with the comment of my right hon. Friend the Prime Minister in her Guildhall speech on Monday night, when she highlighted the breakthrough of the British and French tunnel deep below the channel as the really significant European news because it was "history in the making". She went on: As I have many times said, so much of our history has been in Europe and our destiny lies in Europe". But equally, my experience of the day-to-day reality of Community negotiations—and I had four intense years of it—has always led me to distinguish between grand designs and great phrases, and the reality of building our common Community. And the reality is that, in the practical business of developing the plans and implementing the decisions, it is so often the United Kingdom that takes the lead and gets actual results.

It does need constantly to be said that, during my right hon. Friend's premiership the United Kingdom has been, and still is, in the lead in the implementation of the specific measures needed to bring into effect the single market programme. We have all put massive effort and commitment into that.

The United Kingdom played a leading part in getting the earlier reforms of the common agricultural policy through. As one who was involved in that, in the engine room, I can testify to the degree of commitment and knowledge that my right hon. Friend displayed. In the past few months and weeks, it was the United Kingdom that supported the Commission against French and German opposition in ensuring that we do now—very belatedly, indeed dangerously late—have a Community stance on agriculture in relation to the GATT Uruguay round. The United Kingdom developed the practical plans for the next stage of economic and monetary development.

Yes, we may have a tendency to cut through the waffle and get down to brass tacks, the practical work. But the Community is very often the better for it. As the right hon. Member for Plymouth, Devonport, (Dr. Owen) said last week about the next stages of European monetary union: The detail is everything. It is a crime to hold out for the detail and to argue that those are fundamental questions? Of course it is not."—[Official Report, 7 November 1990; Vol. 180, c. 62.] I agree, and this afternoon my right hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) also had some salutary worth to say about the importance of getting the detail right.

Two other aspects of Community reality during my right hon. Friend's 'premiership need constant stressing. The first is that, as I have so constantly seen myself, every Minister stands up for national interests quite regularly—and some do that on points of detail, and some with great obstinacy. We all understand that in the Community. We have seen one of the clearest examples in these past few weeks—not by Britain, but by France and Germany, in the agricultural discussions for the Uruguay round. It was the United Kingdom that was so clearly communautaire.

At the United Kingdom's instigation, the Commission and other member states are now paying much closer attention to the vital question of the implementation of single market legislation. The latest figures show that the United Kingdom has maintained its excellent record. We and Denmark remain in the lead. During the past decade, the United Kingdom has had the second best record, after Denmark, on the number of references to European Court of Justice.

I pay tribute to all that my right hon. and learned Friend the Member for Surrey, East has done to further Britain's work in the Community. He has indeed played a leading part throughout, but I have to say that I simply do not believe that our European credentials are in doubt. I agree with him that our business people, our financiers, our young people and many others want us to play a full and constructive part. I believe that that is what we are doing. With my right hon. and hon. Friends, I intend to continue doing all that I can to see that the Community develops effectively and constructively.

I referred earlier to the spending trap that the Labour party is already getting into. As my right hon. Friend the Chancellor said this afternoon, that is in stark contrast with our record. By the end of this year, we expect to have repaid £29 billion-worth of public sector debt over four years, a saving of £2.75 billion in annual interest payments, giving us the strongest fiscal position of any G7 country apart from Japan. That is far from being the only way in which the policies of the past 10 years have strengthened Britain's economy. The right hon. and learned Member for Monklands, East mentioned employment. Employment in Britain is at its highest level ever. The work force has increased by 3.75 million in the past seven years. Some 71 per cent. of the United Kingdom's population is in employment. We are well ahead of the EC average—indeed, we have the second highest figure in the EC.

The right hon. and learned Member for Monklands, East mentioned capital investment. Private sector business investment has risen dramatically, as my right hon. Friend the Chancellor said. It went up by 45 per cent. over the three years to 1989 and it is expected to be high again this year—more than £57 million. When my right hon. Friend the Chancellor said that it is more than 50 per cent. higher than it was in 1979, I heard someone on the Opposition Front Bench mutter, as another has just done, "What about manufacturing investment?" I can tell Opposition Members that manufacturing investment in 1989 was up 9 per cent. on the previous year and reached its highest ever level.

Public sector capital investment will be £30 billion this year and there is a further £1.5 billion in the autumn statement. Private sector investment on training, which the right hon. and learned Gentleman went on about, amounts to more than £20 billion a year and the number of employers who are reporting recent training for their work force has gone up by 70 per cent. during the past five years. There is also a splendid response by employers to the training and enterprise councils.

The right hon. and learned Member for Monklands, East continues to spew out rhetoric about investment and training, but the facts about Britain's recent performance refute utterly his charge. We are succeeding. We have been laying the basis for a sound and competitive economy in the 1990s.

As my hon. Friend the Member for Surrey, North-West (Mr. Grylls) said, the enterprise ethic in Britain is now thoroughly re-established. The latest figures show a net increase in business—after losses—of about 1,700 a week, compared with 300 in 1980. I pay tribute to my hon. Friend's work in helping the small business movement. My right hon. Friend the Member for Chingford rightly said that there has been a substantial improvement in management performance.

We are witnessing a substantial change in the underlying strength of the British economy. That is the most important issue before the country tonight. It has been achieved by pursuing our policies during the past 10 years.

The Loyal Address is also about the major programme of legislation in the Queen's Speech, upon which we are about to embark. It is a full programme of work. As before, it does not identify all the measures that may be brought before Parliament. Indeed, seven which were not in the Queen's Speech have already been introduced. The main programme, however, is concentrated on carrying forward the continuing fight against crime, continuing to strengthen family responsibility, improving efficiency and safety in transport, carrying forward the privatisation programme, new pay negotiating machinery for teachers, new benefits for the disabled and a good deal more. All those issues are important and of great concern to our constituents, as we know from our constituency meetings, surgeries and postbags. I commend them, and our economic policies, to the House.

Question put, That the amendment be made:—

The House divided: Ayes 225, Noes 333.

Division No. 2] [10 pm
Abbott, Ms Diane Callaghan, Jim
Allen, Graham Campbell, Menzies (Fife NE)
Alton, David Campbell-Savours, D. N.
Anderson, Donald Canavan, Dennis
Archer, Rt Hon Peter Carlile, Alex (Mont'g)
Armstrong, Hilary Cartwright, John
Ashdown, Rt Hon Paddy Clark, Dr David (S Shields)
Ashley, Rt Hon Jack Clay, Bob
Ashton, Joe Clelland, David
Banks, Tony (Newham NW) Clwyd, Mrs Ann
Barnes, Harry (Derbyshire NE) Coleman, Donald
Barnes, Mrs Rosie (Greenwich) Cook, Robin (Livingston)
Barron, Kevin Corbett, Robin
Battle, John Corbyn, Jeremy
Beckett, Margaret Cousins, Jim
Beith, A. J. Cox, Tom
Bell, Stuart Crowther, Stan
Bellotti, David Cryer, Bob
Benn, Rt Hon Tony Cummings, John
Bennett, A. F. (D'nt'n & R'dish) Cunliffe, Lawrence
Benton, Joseph Cunningham, Dr John
Bermingham, Gerald Dalyell, Tam
Bidwell, Sydney Darling, Alistair
Blair, Tony Davies, Rt Hon Denzil (Llanelli)
Blunkett, David Davies, Ron (Caerphilly)
Boateng, Paul Davis, Terry (B'ham Hodge H'l)
Boyes, Roland Dewar, Donald
Bradley, Keith Dixon, Don
Bray, Dr Jeremy Dobson, Frank
Brown, Gordon (D'mline E) Doran, Frank
Brown, Nicholas (Newcastle E) Duffy, A. E. P.
Bruce, Malcolm (Gordon) Dunnachie, Jimmy
Buckley, George J. Eadie, Alexander
Caborn, Richard Evans, John (St Helens N)
Ewing, Harry (Falkirk E) Martlew, Eric
Field, Frank (Birkenhead) Meacher, Michael
Fisher, Mark Meale, Alan
Flannery, Martin Michael, Alun
Flynn, Paul Michie, Bill (Sheffield Heeley)
Foot, Rt Hon Michael Michie, Mrs Ray (Arg'l & Bute)
Foster, Derek Mitchell, Austin (G't Grimsby)
Foulkes, George Morgan, Rhodri
Fraser, John Morley, Elliot
Fyfe, Maria Morris, Rt Hon A. (W'shawe)
Galbraith, Sam Morris, Rt Hon J. (Aberavon)
Galloway, George Mowlam, Marjorie
Garrett, John (Norwich South) Mullin, Chris
George, Bruce Murphy, Paul
Gilbert, Rt Hon Dr John Nellist, Dave
Golding, Mrs Llin Oakes, Rt Hon Gordon
Gordon, Mildred O'Brien, William
Gould, Bryan O'Hara, Edward
Graham, Thomas O'Neill, Martin
Griffiths, Nigel (Edinburgh S) Orme, Rt Hon Stanley
Griffiths, Win (Bridgend) Parry, Robert
Grocott, Bruce Patchett, Terry
Hardy, Peter Pendry, Tom
Harman, Ms Harriet Pike, Peter L.
Hattersley, Rt Hon Roy Powell, Ray (Ogmore)
Heal, Mrs Sylvia Prescott, John
Healey, Rt Hon Denis Primarolo, Dawn
Henderson, Doug Quin, Ms Joyce
Hinchliffe, David Radice, Giles
Hoey, Ms Kate (Vauxhall) Randall, Stuart
Hogg, N. (C'nauld & Kilsyth) Rees, Rt Hon Merlyn
Home Robertson, John Reid, Dr John
Hood, Jimmy Richardson, Jo
Howell, Rt Hon D. (S'heath) Robertson, George
Howells, Geraint Robinson, Geoffrey
Howells, Dr. Kim (Pontypridd) Rogers, Allan
Hoyle, Doug Rooney, Terence
Hughes, John (Coventry NE) Rowlands, Ted
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 Skinner, Dennis
Jones, Barry (Alyn & Deeside) Smith, Andrew (Oxford E)
Jones, leuan (Ynys Môn) Smith, C. (Isl'ton & F'bury)
Jones, Martyn (Clwyd S W) Smith, Rt Hon J. (Monk'ds E)
Kaufman, Rt Hon Gerald Smith, J. P. (Vale of Glam)
Kennedy, Charles Snape, Peter
Kinnock, Rt Hon Neil Soley, Clive
Kirkwood, Archy Spearing, Nigel
Lambie, David Steel, Rt Hon Sir David
Lamond, James Steinberg, Gerry
Leadbitter, Ted Stott, Roger
Leighton, Ron Strang, Gavin
Lestor, Joan (Eccles) Straw, Jack
Lewis, Terry Taylor, Mrs Ann (Dewsbury)
Litherland, Robert Taylor, Matthew (Truro)
Livingstone, Ken Thomas, Dr Dafydd Elis
Livsey, Richard Thompson, Jack (Wansbeck)
Lloyd, Tony (Stretford) Turner, Dennis
Lofthouse, Geoffrey Vaz, Keith
Loyden, Eddie Wallace, James
McAllion, John Walley, Joan
McAvoy, Thomas Warden, Gareth (Gower)
McCartney, Ian Wareing, Robert N.
Macdonald, Calum A. Welsh, Andrew (Angus E)
McKay, Allen (Barnsley West) Welsh, Michael (Doncaster N)
McKelvey, William Williams, Rt Hon Alan
McLeish, Henry Williams, Alan W. (Carm'then)
Maclennan, Robert Wilson, Brian
McNamara, Kevin Winnick, David
McWilliam, John Wise, Mrs Audrey
Madden, Max Wray, Jimmy
Mahon, Mrs Alice Young, David (Bolton SE)
Marek, Dr John
Marshall, David (Shettleston) Tellers for the Ayes:
Marshall, Jim (Leicester S) Mr. Frank Haynes and Mr. Ken Eastham.
Martin, Michael J. (Springburn)
Adley, Robert Dunn, Bob
Aitken, Jonathan Durant, Tony
Alexander, Richard Dykes, Hugh
Alison, Rt Hon Michael Eggar, Tim
Allason, Rupert Emery, Sir Peter
Amery, Rt Hon Julian Evans, David (Welwyn Hatf'd)
Amess, David Evennett, David
Amos, Alan Fenner, Dame Peggy
Arbuthnot, James Field, Barry (Isle of Wight)
Arnold, Jacques (Gravesham) Fishburn, John Dudley
Arnold, Sir Thomas Fookes, Dame Janet
Ashby, David Forman, Nigel
Aspinwall, Jack Forsyth, Michael (Stirling)
Atkins, Robert Forsythe, Clifford (Antrim S)
Atkinson, David Forth, Eric
Baker, Rt Hon K. (Mole Valley) Fowler, Rt Hon Sir Norman
Baker, Nicholas (Dorset N) Fox, Sir Marcus
Baldry, Tony Franks, Cecil
Banks, Robert (Harrogate) Freeman, Roger
Batiste, Spencer French, Douglas
Beaumont-Dark, Anthony Fry, Peter
Beggs, Roy Gale, Roger
Bellingham, Henry Gardiner, George
Bendall, Vivian Garel-Jones, Tristan
Bennett, Nicholas (Pembroke) Gill, Christopher
Benyon, W. Gilmour, Rt Hon Sir Ian
Bevan, David Gilroy Glyn, Dr Sir Alan
Biffen, Rt Hon John Goodhart, Sir Philip
Blackburn, Dr John G. Goodlad, Alastair
Blaker, Rt Hon Sir Peter Goodson-Wickes, Dr Charles
Body, Sir Richard Gorman, Mrs Teresa
Bonsor, Sir Nicholas Gorst, John
Boscawen, Hon Robert Grant, Sir Anthony (CambsSW)
Boswell, Tim Greenway, Harry (Eating N)
Bottomley, Peter Greenway, John (Ryedale)
Bottomley, Mrs Virginia Gregory, Conal
Bowden, A (Brighton K'pto'n) Griffiths, Peter (Portsmouth N)
Bowden, Gerald (Dulwich) Grist, Ian
Bowis, John Ground, Patrick
Boyson, Rt Hon Dr Sir Rhodes Grylls, Michael
Braine, Rt Hon Sir Bernard Gummer, Rt Hon John Selwyn
Brandon-Bravo, Martin Hague, William
Brazier, Julian Hamilton, Hon Archie (Epsom)
Bright, Graham Hamilton, Neil (Tatton)
Brown, Michael (Brigg & Cl't's) Hampson, Dr Keith
Bruce, Ian (Dorset South) Hargreaves, A. (B'ham H'll Gr')
Buchanan-Smith, Rt Hon Alick Hargreaves, Ken (Hyndburn)
Budgen, Nicholas Harris, David
Burns, Simon Haselhurst, Alan
Burt, Alistair Hawkins, Christopher
Butler, Chris Hayes, Jerry
Butterfill, John Hayhoe, Rt Hon Sir Barney
Carlisle, Kenneth (Lincoln) Hayward, Robert
Carrington, Matthew Heath, Rt Hon Edward
Carttiss, Michael Heathcoat-Amory, David
Cash, William Heseltine, Rt Hon Michael
Channon, Rt Hon Paul Hicks, Mrs Maureen (Wolv' NE)
Chope, Christopher Hicks, Robert (Cornwall SE)
Churchill, Mr Higgins, Rt Hon Terence L.
Clark, Hon Alan (Plym'th S'n) Hill, James
Clark, Dr Michael (Rochford) Hind, Kenneth
Clark, Sir W. (Croydon S) Howard, Rt Hon Michael
Clarke, Rt Hon K. (Rushcliffe) Howarth, Alan (Strat'd-on-A)
Colvin, Michael Howarth, George (Knowsley N)
Conway, Derek Howarth, G. (Cannock & B'wd)
Coombs, Anthony (Wyre F'rest) Howe, Rt Hon Sir Geoffrey
Coombs, Simon (Swindon) Howell, Rt Hon David (G'dford)
Cormack, Patrick Howell, Ralph (North Norfolk)
Couchman, James Hughes, Robert G. (Harrow W)
Cran, James Hunt, Sir John (Ravensbourne)
Currie, Mrs Edwina Hunter, Andrew
Davies, Q. (Stamf'd & Spald'g) Irvine, Michael
Davis, David (Boothferry) Irving, Sir Charles
Day, Stephen Jack, Michael
Devlin, Tim Jackson, Robert
Dickens, Geoffrey Janman, Tim
Dorrell, Stephen Jessel, Toby
Douglas-Hamilton, Lord James Johnson Smith, Sir Geoffrey
Dover, Den Jones, Robert B (Herts W)
Jopling, Rt Hon Michael Porter, David (Waveney)
Kellett-Bowman, Dame Elaine Portillo, Michael
Key, Robert Powell, William (Corby)
Kilfedder, James Price, Sir David
King, Roger (B'ham N'thfield) Raffan, Keith
Kirkhope, Timothy Raison, Rt Hon Timothy
Knapman, Roger Redwood, John
Knight, Greg (Derby North) Renton, Rt Hon Tim
Knight, Dame Jill (Edgbaston) Rhodes James, Robert
Knowles, Michael Riddick, Graham
Knox, David Ridley, Rt Hon Nicholas
Lamont, Rt Hon Norman Ridsdale, Sir Julian
Lang, Ian Rifkind, Rt Hon Malcolm
Latham, Michael Roberts, Sir Wyn (Conwy)
Lawrence, Ivan Ross, William (Londonderry E)
Lawson, Rt Hon Nigel Rossi, Sir Hugh
Lee, John (Pendle) Rost, Peter
Leigh, Edward (Gainsbor'gh) Rumbold, Mrs Angela
Lennox-Boyd, Hon Mark Ryder, Richard
Lester, Jim (Broxtowe) Sackville, Hon Tom
Lilley, Peter Sayeed, Jonathan
Lloyd, Sir Ian (Havant) Scott, Rt Hon Nicholas
Lloyd, Peter (Fareham) Shaw, David (Dover)
Luce, Rt Hon Richard Shaw, Sir Giles (Pudsey)
McCrindle, Sir Robert Shaw, Sir Michael (Scarb')
Macfarlane, Sir Neil Shephard, Mrs G. (Norfolk SW)
MacGregor, Rt Hon John Shepherd, Colin (Hereford)
MacKay, Andrew (E Berkshire) Shepherd, Richard (Aldridge)
Maclean, David Shersby, Michael
McLoughlin, Patrick Sims, Roger
McNair-Wilson, Sir Patrick Skeet, Sir Trevor
Madel, David Smith, Sir Dudley (Warwick)
Maginnis, Ken Soames, Hon Nicholas
Major, Rt Hon John Speed, Keith
Malins, Humfrey Speller, Tony
Mans, Keith Spicer, Sir Jim (Dorset W)
Marland, Paul Spicer, Michael (S Worcs)
Marlow, Tony Squire, Robin
Marshall, John (Hendon S) Stanbrook, Ivor
Martin, David (Portsmouth S) Stanley, Rt Hon Sir John
Mates, Michael Steen, Anthony
Maude, Hon Francis Stern, Michael
Mawhinney, Dr Brian Stevens, Lewis
Maxwell-Hyslop, Robin Stewart, Allan (Eastwood)
Mayhew, Rt Hon Sir Patrick Stewart, Andy (Sherwood)
Mellor, David Stewart, Rt Hon Ian (Herts N)
Meyer, Sir Anthony Stokes, Sir John
Miller, Sir Hal Sumberg, David
Mills, Iain Summerson, Hugo
Miscampbell, Norman Tapsell, Sir Peter
Mitchell, Andrew (Gedling) Taylor, Rt Hon J. D. (S'ford)
Mitchell, Sir David Taylor, John M (Solihull)
Molyneaux, Rt Hon James Taylor, Teddy (S'end E)
Monro, Sir Hector Tebbit, Rt Hon Norman
Montgomery, Sir Fergus Temple-Morris, Peter
Morris, M (N'hampton S) Thatcher, Rt Hon Margaret
Morrison, Sir Charles Thompson, D. (Calder Valley)
Morrison, Rt Hon P (Chester) Thompson, Patrick (Norwich N)
Moss, Malcolm Thorne, Neil
Moynihan, Hon Colin Thornton, Malcolm
Mudd, David Thurnham, Peter
Neale, Gerrard Townend, John (Bridlington)
Needham, Richard Townsend, Cyril D. (B'heath)
Neubert, Michael Tracey, Richard
Newton, Rt Hon Tony Tredinnick, David
Nicholls, Patrick Trimble, David
Nicholson, David (Taunton) Trippier, David
Nicholson, Emma (Devon West) Trotter, Neville
Norris, Steve Twinn, Dr Ian
Onslow, Rt Hon Cranley Vaughan, Sir Gerard
Oppenheim, Phillip Viggers, Peter
Page, Richard Waddington, Rt Hon David
Paice, James Wakeham, Rt Hon John
Parkinson, Rt Hon Cecil Waldegrave, Rt Hon William
Patnick, Irvine Walden, George
Patten, Rt Hon John Walker, Bill (T'side North)
Pattie, Rt Hon Sir Geoffrey Walker, Rt Hon P. (W'cester)
Pawsey, James Waller, Gary
Peacock, Mrs Elizabeth Walters, Sir Dennis
Porter, Barry (Wirral S) Wardle, Charles (Bexhill)
Warren, Kenneth Winterton, Nicholas
Watts, John Wolfson, Mark
Wells, Bowen Wood, Timothy
Wheeler, Sir John Woodcock, Dr. Mike
Whitney, Ray Yeo, Tim
Widdecombe, Ann Younger, Rt Hon George
Wiggin, Jerry
Wilkinson, John Tellers for the Noes:
Wilshire, David Sir George Young and Mr. David Lightbown.
Winterton, Mrs Ann

Question accordingly negatived.

Amendment proposed, pursuant to Standing Order No. 32 (Calling of amendments at end of debate), at the end of the Question to add:

But humbly regret the absence from the Gracious Speech of any coherent policy to secure for the people of the United Kingdom the benefits of the economic, monetary and political union of the European Community.—[Mr. Beith.]

Question put, That the amendment be made:—

The House divided: Ayes 20, Noes 323.

Division No. 3] [10.15 pm
Alton, David Kennedy, Charles
Ashdown, Rt Hon Paddy Kirkwood, Archy
Barnes, Mrs Rosie (Greenwich) Livsey, Richard
Beith, A. J. Maclennan, Robert
Bellotti, David Michie, Mrs Ray (Arg'l & Bute)
Bruce, Malcolm (Gordon) Steel, Rt Hon Sir David
Campbell, Menzies (Fife NE) Taylor, Matthew (Truro)
Cartwright, John Thomas, Dr Dafydd Elis
Howells, Geraint
Hughes, Simon (Southwark) Tellers for the Ayes:
Johnston, Sir Russell Mr. James Wallace and Mr. Alex Carlile.
Jones, Ieuan (Ynys Môn)
Adley, Robert Bright, Graham
Aitken, Jonathan Brown, Michael (Brigg & Cl't's)
Alexander, Richard Bruce, Ian (Dorset South)
Alison, Rt Hon Michael Buchanan-Smith, Rt Hon Alick
Allason, Rupert Burns, Simon
Amery, Rt Hon Julian Burt, Alistair
Amess, David Butler, Chris
Amos, Alan Butterfill, John
Arbuthnot, James Carlisle, Kenneth (Lincoln)
Arnold, Jacques (Gravesham) Carrington, Matthew
Arnold, Sir Thomas Carttiss, Michael
Ashby, David Cash, William
Aspinwall, Jack Channon, Rt Hon Paul
Atkins, Robert Chope, Christopher
Atkinson, David Churchill, Mr
Baker, Rt Hon K. (Mole Valley) Clark, Hon Alan (Plym'th S'n)
Baker, Nicholas (Dorset N) Clark, Dr Michael (Rochford)
Baldry, Tony Clark, Sir W. (Croydon S)
Banks, Robert (Harrogate) Clarke, Rt Hon K. (Rushcliffe)
Batiste, Spencer Colvin, Michael
Beaumont-Dark, Anthony Conway, Derek
Beggs, Roy Coombs, Anthony (Wyre F'rest)
Bellingham, Henry Coombs, Simon (Swindon)
Bendall, Vivian Cormack, Patrick
Bennett, Nicholas (Pembroke) Couchman, James
Bevan, David Gilroy Cran, James
Biffen, Rt Hon John Currie, Mrs Edwina
Blackburn, Dr John G. Davies, Q. (Stamf'd & Spald'g)
Blaker, Rt Hon Sir Peter Davis, David (Boothferry)
Body, Sir Richard Day, Stephen
Boscawen, Hon Robert Devlin, Tim
Boswell, Tim Dorrell, Stephen
Bottomley, Peter Douglas-Hamilton, Lord James
Bottomley, Mrs Virginia Dover, Den
Bowden, A (Brighton K'pto'n) Dunn, Bob
Bowden, Gerald (Dulwich) Durant, Tony
Bowis, John Dykes, Hugh
Boyson, Rt Hon Dr Sir Rhodes Eggar, Tim
Braine, Rt Hon Sir Bernard Emery, Sir Peter
Brandon-Bravo, Martin Evans, David (Welwyn Hatf'd)
Brazier, Julian Evennett, David
Fenner, Dame Peggy Jopling, Rt Hon Michael
Field, Barry (Isle of Wight) Kellett-Bowman, Dame Elaine
Fishburn, John Dudley Key, Robert
Fookes, Dame Janet Kilfedder, James
Forman, Nigel King, Roger (B'ham N'thfield)
Forsyth, Michael (Stirling) Kirkhope, Timothy
Forsythe, Clifford (Antrim S) Knapman, Roger
Forth, Eric Knight, Greg (Derby North)
Fowler, Rt Hon Sir Norman Knight, Dame Jill (Edgbaston)
Fox, Sir Marcus Knowles, Michael
Franks, Cecil Knox, David
Freeman, Roger Lamont, Rt Hon Norman
French, Douglas Lang, Ian
Fry, Peter Latham, Michael
Gale, Roger Lawrence, Ivan
Gardiner, George Lawson, Rt Hon Nigel
Garel-Jones, Tristan Leigh, Edward (Gainsbor'gh)
Gill, Christopher Lennox-Boyd, Hon Mark
Glyn, Dr Sir Alan Lester, Jim (Broxtowe)
Goodhart, Sir Philip Lilley, Peter
Goodlad, Alastair Lloyd, Sir Ian (Havant)
Goodson-Wickes, Dr Charles Lloyd, Peter (Fareham)
Gorman, Mrs Teresa Luce, Rt Hon Richard
Gorst, John McCrindle, Robert
Grant, Sir Anthony (CambsSW) Macfarlane, Sir Neil
Greenway, Harry (Eating N) MacGregor, Rt Hon John
Greenway, John (Ryedale) MacKay, Andrew (E Berkshire)
Gregory, Conal Maclean, David
Griffiths, Peter (Portsmouth N) McLoughlin, Patrick
Grist, Ian McNair-Wilson, Sir Patrick
Ground, Patrick Madel, David
Grylls, Michael Maginnis, Ken
Gummer, Rt Hon John Selwyn Major, Rt Hon John
Hague, William Malins, Humfrey
Hamilton, Hon Archie (Epsom) Mans, Keith
Hamilton, Neil (Tatton) Marland, Paul
Hampson, Dr Keith Marshall, John (Hendon S)
Hargreaves, A. (B'ham H'll Gr') Martin, David (Portsmouth S)
Hargreaves, Ken (Hyndburn) Mates, Michael
Harris, David Maude, Hon Francis
Haselhurst, Alan Mawhinney, Dr Brian
Hawkins, Christopher Maxwell-Hyslop, Robin
Hayes, Jerry Mayhew, Rt Hon Sir Patrick
Hayhoe, Rt Hon Sir Barney Mellor, David
Hayward, Robert Meyer, Sir Anthony
Heath, Rt Hon Edward Miller, Sir Hal
Heathcoat-Amory, David Mills, Iain
Heseltine, Rt Hon Michael Miscampbell, Norman
Hicks, Mrs Maureen (Wolv' NE) Mitchell, Andrew (Gedling)
Hicks, Robert (Cornwall SE) Mitchell, Sir David
Higgins, Rt Hon Terence L. Molyneaux, Rt Hon James
Hill, James Monro, Sir Hector
Hind, Kenneth Montgomery, Sir Fergus
Howard, Rt Hon Michael Morris, M (N'hampton S)
Howarth, Alan (Strat'd-on-A) Morrison, Sir Charles
Howe, Rt Hon Sir Geoffrey Morrison, Rt Hon P (Chester)
Howell, Rt Hon David (G'dford) Moynihan, Hon Colin
Howell, Ralph (North Norfolk) Mudd, David
Hughes, Robert G. (Harrow W) Neale, Gerrard
Hunt, Sir John (Ravensbourne) Needham, Richard
Hunter, Andrew Neubert, Michael
Irvine, Michael Newton, Rt Hon Tony
Irving, Sir Charles Nicholls, Patrick
Jack, Michael Nicholson, David (Taunton)
Jackson, Robert Nicholson, Emma (Devon West)
Janman, Tim Norris, Steve
Jessel, Toby Onslow, Rt Hon Cranley
Johnson Smith, Sir Geoffrey Oppenheim, Phillip
Jones, Robert B (Herts W) Page, Richard
Paice, James Stokes, Sir John
Parkinson, Rt Hon Cecil Sumberg, David
Patnick, Irvine Summerson, Hugo
Patten, Rt Hon John Tapsell, Sir Peter
Pattie, Rt Hon Sir Geoffrey Taylor, Rt Hon J. D. (S'ford)
Pawsey, James Taylor, John M (Solihull)
Peacock, Mrs Elizabeth Taylor, Teddy (S'end E)
Porter, Barry (Wirral S) Tebbit, Rt Hon Norman
Porter, David (Waveney) Temple-Morris, Peter
Portillo, Michael Thatcher, Rt Hon Margaret
Powell, William (Corby) Thompson, D. (Calder Valley)
Price, Sir David Thompson, Patrick (Norwich N)
Raffan, Keith Thorne, Neil
Raison, Rt Hon Timothy Thornton, Malcolm
Redwood, John Thurnham, Peter
Renton, Rt Hon Tim Townend, John (Bridlington)
Rhodes James, Robert Townsend, Cyril D. (B'heath)
Riddick, Graham Tracey, Richard
Ridley, Rt Hon Nicholas Tredinnick, David
Rifkind, Rt Hon Malcolm Trippier, David
Roberts, Sir Wyn (Conwy) Trotter, Neville
Ross, William (Londonderry E) Twinn, Dr Ian
Rossi, Sir Hugh Vaughan, Sir Gerard
Rost, Peter Viggers, Peter
Rumbold, Mrs Angela Waddington, Rt Hon David
Ryder, Richard Wakeham, Rt Hon John
Sackville, Hon Tom Waldegrave, Rt Hon William
Sayeed, Jonathan Walden, George
Scott, Rt Hon Nicholas Walker, Bill (T'side North)
Shaw, David (Dover) Walker, Rt Hon P. (W'cester)
Shaw, Sir Giles (Pudsey) Waller, Gary
Shaw, Sir Michael (Scarb') Walters, Sir Dennis
Shephard, Mrs G. (Norfolk SW) Wardle, Charles (Bexhill)
Shepherd, Colin (Hereford) Warren, Kenneth
Shepherd, Richard (Aldridge) Watts, John
Shersby, Michael Wells, Bowen
Sims, Roger Wheeler, Sir John
Skeet, Sir Trevor Whitney, Ray
Skinner, Dennis Widdecombe, Ann
Smith, Sir Dudley (Warwick) Wiggin, Jerry
Soames, Hon Nicholas Wilkinson, John
Speed, Keith Wilshire, David
Speller, Tony Winterton, Mrs Ann
Spicer, Sir Jim (Dorset W) Winterton, Nicholas
Spicer, Michael (S Worcs) Wolfson, Mark
Squire, Robin Wood, Timothy
Stanbrook, Ivor Woodcock, Dr. Mike
Stanley, Rt Hon Sir John Yeo, Tim
Steen, Anthony Younger, Rt Hon George
Stern, Michael
Stevens, Lewis Tellers for the Noes:
Stewart, Allan (Eastwood) Sir George Young and Mr. David Lightbown.
Stewart, Andy (Sherwood)
Stewart, Rt Hon Ian (Herts N)

Question accordingly negatived.

Main Question put and agreed to.


That an humble Address be presented to Her Majesty, as follows:

Most Gracious Sovereign,

We, your Majesty's most dutiful and loyal subjects, the Commons of the United Kingdom of Great Britian and Northern Ireland in Parliament assembled, beg leave to offer our humble thanks to your Majesty for the Gracious Speech which Your Majesty has addressed to both Houses of Parliament.

To be presented by Privy Councillors or Members of Her Majesty's Household.

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