The Economy

HC Deb 07 November 1991 vol 198 cc586-674

Mr. Speaker

I have selected the amendment in the name of the Leader of the Opposition and also, for a Division only, the amendment in the name of the leader of the Liberal Democrat party.

In view of the pressure of time, I shall have to limit speeches to 10 minutes between 7 o'clock and 9 o'clock. I hope that the hon. Members who are fortunate enough to be called before will bear in mind that limit in fairness to their colleagues.

4.13 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 a deep and damaging recession, falling output and investment, rising unemployment and record levels of business failures and house repossessions; and call upon the Government to adopt a programme for recovery which will encourage investment and rising levels of employment by the promotion of sustained investment in the manufacturing sector, by encouraging industrial innovation through the application of science and technology and by fully exploiting the potential of the neglected regions through vigorous regional policies, and by providing new opportunities in education and training which are crucial to Britain's economic recovery and future prosperity. Once again, in his autumn statement yesterday, the Chancellor of the Exchequer was forecasting an economic upturn. There is, of course, nothing new in that. Month after month, as the British economy has languished in a deep and damaging recession, the only reaction from a puzzled and beleaguered Government is the claim that it is not as bad as it seems and that good times are round the corner.

Right from the beginning, it was even denied that there was a recession at all. At the time of last year's autumn statement, both the Prime Minister and the Chancellor of the Exchequer were deeply involved in just such an exercise. When it could no longer be denied that there was a recession, the Chancellor retreated to his second line of defence. He told the Treasury and Civil Service Select Committee that the recession would be "shallow and short-lived". As we know, however, from the evidence contained in yesterday's autumn statement, the recession has been deeply damaging to Britain's economy.

In 1991, growth disappeared, falling to minus 2 per cent., instead of taking the upward direction predicted by the Prime Minister when he was Chancellor, only 12 months ago. Fixed investment has collapsed by almost 11 per cent. Manufacturing investment has fallen by almost 20 per cent. Manufacturing output is expected to decline by 4.25 per cent. this year.

No one could possibly pretend that this debilitating economic experience was, or is, shallow or short-lived. But never a word of apology, let alone a word of explanation, ever comes from Ministers whose incompetence has caused Britain to be at the bottom of the league tables among the leading industrial nations: bottom of the league for growth, bottom of the league for investment, bottom of the league for job creation. Not a word of apology, or even of explanation, to those who have suffered the consequences of their mismanagement of the economy—those who owned and worked in the 45,000 business enterprises that failed this year, with 860 failing in every week of the year, and the 85,000 families who have lost their homes as a result of the record level of repossessions, running now at 1,635 every week.

Mr. Conal Gregory (York)

Will the right hon. and learned Gentleman also confirm that this Government have achieved the highest fall in inflation of any country in the European Community?

Mr. Smith

But it was a fall from a very high level of inflation. In case the hon. Gentleman's purpose is to divert me from the consequences of the recession, let me remind him that I was referring to the 85,000 families who have lost their homes.

Most of all, however, one should have regard for the 750,000 people who have lost their jobs since last year's autumn statement, which blithely proceeded on the wholly mistaken assumption that there would be no increase in unemployment. Once again—as the Chancellor revealed in a reply yesterday to my hon. Friend the Member for Durham, North (Mr. Radice)—the Government are assuming, in this year's autumn statement, that there will be no rise at all in unemployment in the year ahead. Frankly, no one should take that seriously. None of the economic commentators who the Chancellor claims agree with him in his assessment is prepared to go along with that assumption. That is an error right at the heart of all the calculations in the autumn statement, just as it was an error right at the heart of all the calculations in last year's autumn statement.

Mr. Tony Marlow (Northampton, North)

The right hon. and learned Gentleman says that he is concerned about unemployment. We accept that he is concerned about unemployment, but he knows—although I am sure he will not admit it—that if the heavens were to fall in and there were to be the return of a Labour Government, there would be the mother and father of a financial crisis. In those circumstances, what would the right hon. and learned Gentleman do? Would he increase interest rates and abort the recovery? Would he devalue the pound and embark upon another cycle of inflation? Or would he—the only other alternative available to him—cut the necessary expenditure on sensible and sensitive issues like the national health service? What would he do?

Mr. Smith

My concern about unemployment is so generous that I am prepared to consider the future of the hon. Gentleman, who I think is going to be unemployed a little sooner than he thinks. He is one of those who are arguing for the general election to be delayed for a personal reason. What I shall be concerned about in the economic policies that I shall follow will be to seek to rescue this country from the financial consequences of this Government's period in office. The next Labour Government will not have a fortunate inheritance, but the hon. Gentleman cannot blame Opposition Members for that. The Conservatives have been in power for 12 years; it is a little late for the hon. Gentleman to notice the problem.

The price of the recession has been and remains high in economic, political and human terms. After all, this is the second worst recession since the second world war, exceeded in severity only by the recession in the early part of the Government's period in office. Neither the Government nor the hon. Member for Northampton, North (Mr. Marlow) should be under any illusions that the public may be in an easily forgiving mood.

Indeed, I notice that one business man is so furious and frustrated with the Government's economic mismanagement and its effects on his business and livelihood that he is suing the Treasury in the High Court. As was reported in the Financial Times on 1 October, the Government sought to have the action struck out before the High Court, but the motion failed and the case appears to be proceeding.

The plaintiff is a Mr. Mark Harries, a Cardiff business man. He accuses the Government of, among other things, the following errors: Selling valuable public industries, such as water and the telephone service, at one quarter of their worth". [HON. MEMBERS: "Guilty."] Mr. Harries has a strong case, as the House will realise as I proceed through his pleadings. The other charges are: Creating a false economy in the 1980s and causing property prices to inflate at a time when he purchased four properties on mortgage; Not keeping proper control over the Bank of England, so that interest rates almost doubled and he had difficulty keeping up payments on his mortgage loans; Creating an economic climate in which demand for properties diminished dramatically, so that he was deprived of his collateral and was unable to borrow more money…or diversify into other business; Causing continual and increasing unemployment which deprived him of enough customers with money to use his services; Causing him great emotional stress owing to the danger of total business failure and subsequent 'unemployment, penury and destitution'". These views are wholly objective: Mr. Harries says that he has no political affiliations and no personal animosity towards the government or any of its members. In saying so, he shows himself a man of great generosity as well.

I remind Treasury Ministers that the case is still proceeding and they may have to give evidence at some stage. After the initial hearing, Mr. Harries said: We are prepared to go the whole way to win the point. It will cost thousands of pounds, but it's a matter of principle. You can forgive the odd one or two mistakes, but you can't forgive mistake after mistake, blunders all the time. How true.

The case will be interesting. I shall be fascinated to see what defences the Government produce to Mr. Harries's case. I must confess that I would not mind presenting the case in the High Court myself, even though I see some potential problems. Too many witnesses will probably want to give evidence against the Government. Those could include the 45,000 businesses that have gone under this year, let alone the 85,000 families who have lost their homes and the 750,000 extra unemployed people.

I wondered whether the Chancellor had remembered that litigation when he presented the autumn statement yesterday, for that could provide useful material for the plaintiff and his advisers. After all, it revealed how much of a confidence trick last year's autumn statement was. When he speaks today, the Chancellor should have a care not to undermine further the Treasury's case for the defence.

I have in mind some of the misleading answers that the right hon. Gentleman gave to questions following his statement yesterday. The House may recollect an exchange that took place between my hon. Friend the Member for Neath (Mr. Hain) and the Chancellor during questions on the autumn statement yesterday. My hon. Friend asked the right hon. Gentleman about the Government's prospective intentions to increase VAT, and asked him to answer the question yes or no. A similar matter was canvassed on the "Today" programme on Radio 4 this morning. In reply to my hon. Friend's allegation, the Chancellor said: The hon. Gentleman is totally wrong", and went on to give us this pearl of wisdom: One can increase spending and cut taxes at the same time. I do not know where the hon. Gentleman has been—he has not been in this House very long—but we have been doing that ever since 1979."—[Official Report, 6 November 1991; Vol. 198, c. 468.] That is simply not true. The Government have not been cutting taxes since 1979. In fact, it is not a matter of dispute between hon. Members on each side of the House that the proportion of national income going in taxation has risen—from 34.25 per cent. in 1979 to 37.75 per cent. in 1991. How can the Chancellor have been cutting taxes since 1979? When the Chancellor was taxed with the matter this morning, he said that the Government had been cutting taxes since the early 1980s. That is the oldest trick in the book.

The Government get into power in 1979. They increased national insurance contributions by 2.5 per cent.—[HON. MEMBERS: "Come off it."] They do not like to hear this: they hope that the public have forgotten all this. The Government increased national insurance contributions by 2.5 per cent., which is almost the direct equivalent of 2½p on the standard rate of income tax: to most people, it means much the same thing. The Government then almost doubled VAT, from 8 to 15 per cent. Although they had said in the election campaign that the Labour charge that they would double VAT was deplorable gutter politics, they did it within a couple of weeks of getting into power.

Mr. David Ashby (Leicestershire, North-West)

Will the right hon. and learned Gentleman give way?

Mr. Smith

Before the hon. Gentleman leaps to his feet, I should just like to finish my point.

The change in the proportion of income going in taxation since 1981 is quite different from the change since 1979, and to use 1981 as the starting point is conveniently to leave out the years in which taxes were actually increased. The House and the nation need to be treated somewhat more seriously than the Chancellor has been treating us. We are not as gullible as all that.

Mr. Ashby

Will the right hon. and learned Gentleman say by how much he would increase taxation were a Labour Government to get into power?

Mr. Smith

We believe that we need to introduce a much fairer system of income tax, and we have spoken about that on many occasions. [HON. MEMBERS: "How much?"] The proposals are well understood by the public.

Mr. Ian Taylor (Esher)

The right hon. and learned Gentleman says that he will increase public expenditure—presumably over and above the increases announced yesterday. To finance such a move, he will have to have recourse to higher taxation or higher borrowing and interest rates. By how much will taxation be increased? How much more will the basic rate taxpayer have to pay under his Government?

Mr. Smith

The hon. Gentleman completely fails to take account of how much of yesterday's public expenditure increase was committed to the costs of recession—about £4 billion of that money was committed to such costs. The answer to his question is that, if we run an economic policy that does not lead us into recession, we shall have the resources to increase public expenditure.

Despite the Government's recent experience, they appear to have learnt very little. Once again, when they talk about the future of the economy, they advance a case based on bogus reassurances about sustained and successful recovery. It is the same technique as they have used month after month, as the recession has deepened and spread through all parts of the economy and all parts of the nation. In June, the Chancellor detected what he chose to call "vague stirrings" of recovery, which he thought would first manifest themselves in the housing market. He told David Frost on his morning programme, "The signs are there."

Hon. Members will recall that in an earlier debate I referred to the robust rubbishing of that proposition by the president of the House-Builders Federation, Mr. Upsall. When Mr. Upsall heard about these "vague stirrings", particularly in the housing market, he wrote to the Chancellor the following day: I have consulted widely within the housebuilding industry and there is no foundation whatsoever for your assertion. In case the Chancellor believes that that is the only evidence that I am going to introduce on that point, I noticed that, undeterred by the Chancellor's experience of being rubbished by the president of the very industry on which he was commenting, the Secretary of State for the Environment, that bold gentleman, claimed only this week that recovery was evident in the housing market. In The Guardian on 5 November, he claimed that the evidence of housing starts powerfully reinforce the Chancellor's message. He went on to say: They herald renewed hope for all those anxious to move house. Britain is pulling out of recession. However, the House-Builders Federation was once again alert to the Government's claims. I am glad that it pays such close attention to Ministers' comments. The federation represents builders accounting for 70 per cent. of national output. Again on 5 November in The Guardian, Mr. Roger Humber, a director of the federation, gave an equally sharp response. He said "Rubbish" to the Secretary of State for the Environment. He also said: Customer confidence is falling, house sales are weakening, and confidence is clearly undermined by rising unemployment. So much for the "vague stirrings" that we were promised last June.

In support of the case made by the House-Builders Federation, house prices fell for the third month in succession in September. According to the Halifax building society, there is no sign of an early recovery. The latest figures for mortgage lending issued by the Building Societies Association show a further decline in September.

Mr. Dennis Skinner (Bolsover)

I am pleased that my right hon. and learned Friend has referred to the housing market. The situation has become so bad that the ex-Prime Minister has her house in Dulwich on the market and she has had to cut its price twice. According to the newspapers, she has now resorted to placing it in the Evening Standard's small ads in an attempt to sell it.

Mr. Smith

My hon. Friend's kindness takes me aback. His generosity is as great as his perspicacity, and I am grateful to him for drawing that point to my attention.

One of the executives of the Building Societies Association told The Financial Times on 24 October: There is normally a clear upturn in the market when people return from holiday at the end of August, but there has been absolutely no indication of any renewed activity this autumn. As the Chancellor's "vague stirrings" seemed to lack persuasive power, he has taken to gardening metaphors. In Blackpool he claimed to have detected "green shoots" of recovery. Against that background of blinding blue, he saw some green shoots of recovery.

I had the pleasure of listening to the Chancellor at the Guildhall. On that occasion, he talked about being on the road to recovery on the basis of a claim that retail sales were on an upward trend. Unfortunately for the Chancellor, Sir Ian Maclaurin of Tesco was in the audience. Immediately after that speech, he pointed out on "Newsnight" that that was not the case. He said that there was no rise in the trend in retail sales—[Interruption.] I do not think that the Chancellor heard what Sir Ian Maclaurin said, but I did. I took part in that programme. He said that he worked in the industry, was in the retail trade and, I believe, is a chairman of one of the federations. He denied what the Chancellor had said.

The Chancellor of the Exchequer (Mr. Norman Lamont)

I rushed back from Mansion House especially to hear the right hon. and learned Member for Monklands, East (Mr. Smith), because I am always entertained by his interventions. Sir Ian Maclaurin made it clear that he was talking about grocery sales. Will the right hon. and learned Gentleman tell us whether retail sales over the past three months were higher than in the previous three months, and were they higher than retail sales in the first three months of the year?

Mr. Smith

I am glad that the Chancellor raised that point. I have the retail sales figures in September issued by the Central Statistical Office—[HoN. MEMBERS: "Answer the question."] I am entitled to produce the evidence. The Chancellor's case was that retail sales were on a rising trend. Let us consider the figures. In July, they were 120.8; they fell in August to 119.3 and were unchanged at 119.3 in September. During the immediately preceding three months the trend was downwards—from July to September—not upwards. Perhaps even more significantly, the trend was down in September 1991 as against September 1990. How on earth can it be claimed that there is a rising trend when, over the past three months, it has been going downwards and is lower than it was a year ago?

Only yesterday, the Society of Motor Manufacturers and Traders published the most recent figures on car sales. Almost unbelievably, in October, the sale of new cars was down by 22.5 per cent. on the same month last year. That reversed the trend of the previous three months when the rate of decline and demand had begun to ease. The motoring correspondent of the Financial Times gives his opinion today: The sharp drop in sales appears to confirm industry fears that the intense marketing campaigns of recent months served merely to pull sales forward from the final quarter. Vauxhall said that there was no sign of an end to the current sales slump. Those worrying trends in the car industry come on top of the latest manufacturing output figures, which show a drop of 1.1 per cent., and a 2.7 per cent. fall in engineering output.

Having failed to produce very much in the way of facts for his Guildhall audience, the Chancellor hit on a new theme. The vital ingredient, he said, was confidence. With perhaps unconscious irony, he said: Confidence doesn't come from politicians' speeches. How certainly true that is, particulary of this discredited and incompetent Administration, who specialise not in creating by their policies a basis for real confidence about our economy but in the year-in, year-out peddling of worn-out and increasingly unconvincing confidence tricks. What could be the basis for confidence would be an investment-led recovery from recession. That is exactly what the Government are not achieving. Although the Government forecast an extremely weak recovery in fixed investment last year—in the autumn statement, it was predicted to be 1.25 per cent.—we know from experience and from comparing last year's autumn statement with this year's that we should not accept Government predictions uncritically.

Since we heard the Chancellor on the radio this morning claiming that one should accept his forecasts because other forecasters agree with him, we should look at what other forecasters predict for fixed investment in 1992. The Chancellor says—

Sir Peter Tapsell (East Lindsey)

Will the right hon. and learned Gentleman give way?

Mr. Smith

If the hon. Gentleman will allow me, I am, as he must know, in the middle of giving some statistics.

A range of other forecasters—[Interruption.] I am very good at giving way. Conservative Members cannot complain. I have given way to every hon. Member who asked me to give way. I shall give way to the hon. Member for East Lindsey (Sir P. Tapsell), who is quite happy to wait for me to finish the part I am dealing with, and if he could nod to the unruly members of the Cabinet on the Government Front Bench and ask them to cool it a little, I will get round to him all the more quickly.

Plus 1.75 per cent., says the Chancellor. The IMF forecast minus 2 per cent., the CBI minus 2.3 per cent., the London business school minus 1.9 per cent., Phillips and Drew minus 2.4 per cent., Greenwell Montague minus 2.5 per cent., NatWest bank minus 2.7 per cent., Shearson Lehman minus 2.1 per cent. [Interrupton.] They are all out of step except our Norman when it comes to those predictions. Even more ominously, both the CBI and the National Institute of Economic and Social Research forecast manufacturing investment to fall next year by between 8 and 9 per cent. Of course, that fall is after taking account of the precipitous decline in manufacturing investment this year.

Sir Peter Tapsell

As the right hon. and learned Gentleman is making, as he is fully entitled to do, a most interesting tour d'horizon of the economic scene, what does he criticise, if anything, in the autumn statement? In particular, does he think that the Government should have announced further increases in expenditure for 1991–92 above those that were announced yesterday?

Mr. Smith

I do not want to be discourteous to the hon. Gentleman, but I spent some time criticising precisely those matters when we discussed the autumn statement yesterday.

I should, however, like to make one relevant point on that matter. One substantial omission from the autumn statement was the Government's failure to increase investment in industry and training. There is no question about that. The Government talk about priority areas, but as soon as one identifies a priority area, one also identifies non-priority areas and, sad to say, the Government's non-priority areas include industry and training. What really needs to be done—[Interruption.] The Government should finally realise—[Interruption.] This is relevant to my response to the hon. Member for East Lindsey.

The Government should finally realise the importance of the manufacturing sector to the British economy. I suspect that the hon. Gentleman would agree with Opposition Members when we emphasise the fact that manufacturing is the basic wealth creator for our economy and our society. It is also—this should concern the Government, who are predicting a deterioration in our balance of payments—the indispensable, internationally tradeable part of our economy.

As we face the challenges of the single market after 1992, which are coming nearer by the day, the Government should realise that Britain will remain at the bottom of the economic league unless we consciously stimulate sustained investment in manufacturing and promote science and technology, so that our economy operates at the leading edge of innovation and produces new products, and unless we embark on a skills revolution to mobilise the undeveloped skills of our people, especially our young people, for the benefit of our economy and society.

The Queen's Speech does not show a proper appreciation of the deadly damage that has been done to our economy by a Government who are now running out of time, just as they have already run out of ideas. As Mr. Harries, that determined plaintiff to whose action I wish every success as he proceeds with it in the High Court, reminded us, You can forgive the odd one or two mistakes, but you can't forgive mistake after mistake, blunders all the time. No matter how long the Government seek to delay the election, that will remain the judgment of the electorate.

4.42 pm

The Chancellor of the Exchequer (Mr. Norman Lamont)

I apologise to the House because I have been caught by surprise. I thought that the right hon. and learned Member for Monklands, East (Mr. Smith) was just beginning his attack on the Government.

The right hon. and learned Gentleman devoted a certain amount of time to the economic forecast, but it must have been quite clear to my right hon. and hon. Friends that what really upset the right hon. and learned Gentleman about the forecast that I published yesterday was that it is good news for the economy and therefore bad news for the Labour party. It shows that we are on track for recovery, and that recovery will gather momentum next year.

The right hon. and learned Gentleman also talked about the forecast that was made at this time last year, when we said that we would make dramatic progress on inflation. He has not told the House his view of that forecast on inflation. When we said at this time last year that we would get inflation down to 4 per cent., the right hon. and learned Gentleman scoffed, but that forecast has been vindicated. Today, inflation is 4.1 per cent. and it is set to fall further. With unit labour costs actually falling, underlying inflation will continue to fall throughout next year. As I have made clear, inflation according to the retail prices index may rise a little early next year as special factors, especially mortgage interest payments, drop out of the calculation before falling back again to 4 per cent. by the end of 1992. Factory gate inflation will be at its lowest level since the 1960s. That is the measure of our considerable achievement.

I do not think that the right hon. Gentleman mentioned inflation but, unlike him, we have never wavered from the view that the defeat of inflation is a necessary condition for growth and economic success. Unlike the right hon. and learned Gentleman, we have never flinched from the measures that are necessary to deal with opposition—[Interruption.]—to deal with inflation—[Horn. MEMBERS: "Ah."] we have never flinched from the measures that are necessary to deal with both of them. The story of the past year has been about the dramatic progress that we have made and the lack of support and the lack of determination to defeat inflation that has been evident from the Opposition.

As inflation has fallen, we have cut interest rates, but after each of those cuts, the right hon. and learned Gentleman for Monklands, East has leapt to his feet, rushed to the television studios and demanded another cut, another 1 per cent. As one of the newspapers said, he is "Mr. One Per Cent." Whatever the level of interest rates, the right hon. and learned Gentleman thinks that they should be lower. He was at it again the other day immediately after the Mansion House speech when he said that, if he were Chancellor, he would hope to cut interest rates "quite quickly". The truth is that, if he were ever to become Chancellor of the Exchequer, the only thing that he would do "quite quickly", would be to put up interest rates. He would have to do that. "Mr. One Per Cent." cut would become "Mr. One Per Cent." rise.

The right hon. and learned Gentleman does not understand that it is precisely because our approach has been prudent that our interest rate cuts have been sustained. As a result, businesses and the foreign exchange markets have realised that we are on course for stable and lasting low inflation. That is, and will continue to be, the achievement of this Government.

Mr. Robert Sheldon (Ashton-under-Lyne)

If those changes have been the consequence of prudence, what has been the cause of the rising levels of interest rates that we have seen in the past two years?

Mr. Lamont

The right hon. Gentleman knows well that we increased interest rates, and that we did not flinch from doing so, to deal with inflation. That has been the main object of our policy and it is the basis for achieving growth again. It is because I can reply to the right hon. Gentleman in that way that the markets have confidence in us. They know that we will stick to the policies that are needed. That is why confidence in our prospects is beginning to show through.

The right hon. and learned Member for Monklands, East ridiculed the latest CBI survey that showed that business optimism is at its highest level for three years. He did the same thing the other night on television, but if the right hon. and learned Gentleman had done his homework, he would know that that survey has a well established track record as an excellent predictor of output.

In addition. the rate of growth of narrow money—another good indicator of GDP—is now above the centre of its target range. Export optimism and output expectations are up. Manufacturing output, exports and retail sales—I shall come to the right hon. and learned Gentleman's point on retail sales in a moment—have all increased in the past three months compared with the previous three. There is every reason to believe that we are emerging from recession.

The whole House will have heard what the right hon. and learned Gentleman said about retail sales. The facts are that, in the last three months for which there are published figures—July, August and September—retail sales are up 0.5 per cent. on the previous three months—[Interruption.]—0.5 per cent. was what I said—[Interruption.]—on April. May and June. In the three months to September, the index was 119.8 compared with 119.1 for the three months to June. I ask the right hon. and learned Gentleman to withdraw his earlier remarks, which were quite wrong.

Mr. John Smith

I ask the Chancellor to explain why, if this is a recovery, the figures are down 0.5 per cent. on the same period last year.

Mr. Lamont

The right hon. and learned Gentleman knows perfectly well that I was making the point that retail sales are beginning to recover from their low point. The whole House will have observed that the right hon. and learned Gentleman did not only misrepresent the facts, but sought to misrepresent the views of the other people on that television programme.

Mr. Smith

In that case, and if it is a rising trend, will the Chancellor explain why the figure in September—[Interruption.] I am sorry, I mean July. Will the Chancellor explain why the figure for July is higher than the figures for August and September? [Interruption.] Perhaps the House will listen for a moment because this is an important point which is crucial to the Chancellor's case. How can there be a rising trend when the July figure drops in August and drops again in September?

Mr. Lamont

The right hon. and learned Gentleman is being absurd. He takes one month's figure and says that—[Interruption.] No. The right hon. and learned Gentleman is utterly absurd. I quoted the figures to the House. The House heard the figures and heard clearly that the level of retail sales for the past three months is up on the previous three months. It is also higher than for the first three months of this year. I ask the House whether in its opinion that is or is not the beginning of a trend.

Mr. Geoffrey Dickens (Littleborough and Saddleworth)

Does my right hon. Friend concede that his autumn statement yesterday and his remarks today in the House have been so well received by the City, the confidence of which we must always maintain, that shares are rapidly rising today? That is how confident the City is.

Mr. Lamont

I am glad to have that up-to-date and welcome news from my hon. Friend.

The second half of this year will see a modest rise in output, just as I predicted in the Budget. I forecast that in 1992 the economy will grow by about 2.25 per cent. That is a cautious forecast. It is a realistic one. It is similar to that made by the London business school, the National Institute of Economic and Social Research, the International Monetary Fund and, indeed, the majority of City forecasters, contrary to what the right hon. and learned Gentleman sought to imply.

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

Repeatedly in recent months, the Chancellor has gone on television and tried to assure the British people that manufacturing output was rising. Yesterday, he said: manufacturing output may also now be picking up".—[Official Report, 6 November 1991; Vol. 198, c. 452.] Why is he changing his position? Why was it "may" yesterday when he was sure that manufacturing output was rising only a few weeks ago?

Mr. Lamont

The hon. Gentleman is mistaken. Manufacturing output for the past three months is higher than that for the previous three months, as is industrial production. I was referring to total output in the whole economy, for which we do not yet have the figures.

As the impact of the interest rate cuts that we have made continue to feed through to demand, the recovery will gather momentum. We predict that the increase in output from the second half of this year to the second half of next year will be 2.75 per cent. In 1992 exports will rise by about 6 per cent., manufacturing output will rise by about 3.25 per cent.—the right hon. and learned Gentleman professed to be interested in manufacturing—and domestic demand will rise by about 3 per cent.

Of course, the right hon. and learned Gentleman does not want to know. He has to distort the figures. He does not believe in recovery. He does not want a recovery. He is terrified that there will be a recovery. That is why he and some of his hon. Friends have sought on television and in the House to say that we shall be in recession until investment starts to rise and unemployment starts to fall. That is their definition of recession, and it is an interesting one. Business investment was falling during half the term of office of the last Labour Government, and unemployment was rising for four years out of five. So under that definition, the economy was in almost permanent recession under Labour.

Next year non-oil GDP is forecast to grow by 2.25 per cent. If that is a recession, we were in recession for the entire period during which Labour was last in power. Growth in non-oil GDP was never higher than 2 per cent. in any year of Labour's term of office.

Mr. Neil Kinnock (Islwyn)

On the subject of the growth rate, could the Chancellor tell us whether the estimate of 2.25 per cent. of non-oil GDP growth next year was made by the same person or the same group, or on the same basis, as the forecast that this year growth would be 0.9 per cent. when it has been minus 2.5 per cent.?

Mr. Lamont

The right hon. Gentleman knows very well that that estimate is in line with the majority of forecasts. It is not simply an optimistic Government forecast: it is one which is supported by the IMF, the Confederation of British Industry and many other reputable organisations.

The Labour party has sought to deploy another argument. It seeks to belittle bringing inflation down. Its line of argument is that getting inflation down is easy in a recession. That is the point that the Leader of the House keeps making. There is just one problem with that argument. If it is so easy, why did not the last Labour Government do it when they had the chance? In their recession in 1974–75, GDP fell by 3.25 per cent. Manufacturing output fell by almost 11 per cent. Unemployment rose and disposable incomes fell. But did Labour's recession help to get inflation down? In 1974, prices rose by 16 per cent. In the following year, they rose by 24 per cent.

The Leader of the Opposition conceded in the House the other day that we were on track to get inflation down to German levels, but he then dismissed that achievement by saying that Germany was growing while we were in recession. The right hon. Gentleman might like to know that, again according to the IMF, we will grow faster than Germany next year. He did not admit that.

Britain is on track for a steady, non-inflationary recovery. That is precisely what business and industry need—a recovery that will gather in strength and will be sustained. It will be sustained because it will be soundly based. It will be based on low inflation and the supply-side reforms that have transformed the British economy during the past decade: lower taxes, simpler taxes, less regulation, privatisation and trade union reforms. Those are the reforms that have revolutionised the competitiveness and productivity of the British economy.

Mr. John Smith

The right hon. Gentleman mentions lower taxes. Will he now justify to the House of Commons his remark in this place that the Government have been cutting taxes since 1979? Given the increase in national insurance and the huge increase in value added tax from 8 per cent. to 17.5 per cent., how can he possibly justify what he said?

Mr. Lamont

The right hon. and learned Gentleman knows that we have cut tax rates. On almost every occasion that we have done so, the right hon. and learned Gentleman has voted against the cut. The right hon. and learned Gentleman says that the burden of taxation in the whole economy has increased since 1979. We have admitted that. It is true. We replaced excessive borrowing amounting to up to 9 per cent. of GDP with sound finance.

Let me ask the right hon. and learned Gentleman a question. If the burden of tax has increased, that seems to me a good reason to try to bring it down. Why does not the right hon. and learned Gentleman agree? Why does he say that we are wrong to reduce taxes? Why does he vote against tax reductions every time that we make them? Why does he want to fight the next election on a platform of increasing taxes? That seems a most extraordinary thing for the right hon. and learned Gentleman to do.

Mr. Smith

The right hon. Gentleman just admitted that the burden of taxation has increased in the way I described. How then can he say that the Government have been cutting taxes since 1979? Will he be a man and withdraw that claim?

Mr. Lamont

I admitted what has been admitted many times in the House before. In the first two years, where did the burden come from? To some extent, it came from increased North sea oil and corporate taxes. We have been reducing income tax rates steadily since we have been in office, and we intend to continue doing so.

Another matter in which the right hon. and learned Gentleman was not interested was export performance, which, of course, has been outstanding. We are not only holding our share of world markets but increasing it. It looks likely that our share of world trade in manufactures will rise for the third year running, for the first time in at least a quarter of a century. That again gives the lie to those who said that Britain's businesses could not compete within the exchange rate mechanism.

The right hon. and learned Gentleman talks a lot about investment. What about the £19 billion-worth of direct investment which flowed into the United Kingdom last year—investment which shows the confidence that our policies command with overseas investors. The right hon. and learned Gentleman went to Tokyo recently. We know why he had to go. I am sure that we all sympathise. He had to try to convince the Japanese that they could trust a Labour party run by the unions. Did he tell them about Labour's plans to introduce a minimum wage? Did he tell them about his plans to legalise secondary picketing? Did he tell them about the unions who, at the Trades Union Congress denounced Japanese investment as "alien"?

Who would want to invest in Labour's Britain? The foreign investment we are now seeing would be inconceivable under a Labour Government. That investment is already helping to reduce the trade deficit, and by the mid-1990s, that investment will make Britain a net car exporter for the first time in two decades.

Mr. Alan Williams (Swansea, West)

Will the right hon. Gentleman give way?

Mr. Lamont

I shall give way, but I am anxious to make some progress after this intervention.

Mr. Williams

I was in charge of inward investment in the last three years of the last Labour Government. By the time that we left office, there were more than 1,500 foreign companies operating in Britain. I negotiated with Hitachi, Toshiba, Aiwa, Hoffman-La Roche, and with Ford to bring that company to Bridgend. The right hon. Gentleman need not lecture us about inward investment. The Government did not invent it—it was there when they arrived.

Mr. Lamont

I am well aware of what the right. hon. Gentleman did and I congratulate him. He should communicate his enlightened attitude to his friends in the trade union movement.

Overall, business investment rose by 45 per cent. in the three years to 1989 and was at a record level in the first half of 1990. At that time, businesses in this country were investing a sixth of national income—the highest share for the past 30 years.

Even after the fall during the past year, business investment is still higher than in the first half of 1988, itself a record at the time. In fact, the proportion of national income going into business investment today is higher than at any time under the last Labour Government. Business investment lags the cycle, but it will recover during next year, picking up as the recovery gathers pace. It will increase by more than 4 per cent. in the year to the second half of 1992.

I heard the Leader of the Opposition refer to manufacturing investment. As in many things, the right hon. Gentleman is a bit behind the times. He has quoted figures on manufacturing investment, but what he does not always understand is that much investment which used to be done by manufacturing companies is now subcontracted to service companies. What is the result? If one studies the figures, one will find that core investment in plant and machinery—which is what Opposition Members are really interested in—is 50 per cent. higher today than it was in 1979. That tells us about investment in manufacturing industry.

Nor should we forget that the quality of investment, by which I mean its profitability, has improved dramatically at the same time. The corporation tax reforms of 1984 made the system simpler and fairer. The right hon. and learned Member for Monklands, East wants to reintroduce those tax breaks, at a cost of billions. Perhaps he would put corporation tax back up again to pay for them. Whenever the right hon. and learned Gentleman is asked a difficult question, he recites his favourite phrase—investment and training, investment and training, investment and training. I must warn him that he is beginning to sound like a parrot that has learnt one thing. It is true that he has some colourful markings, fine feathers and a wonderful beak, but his repertoire is very limited.

The right hon. and learned Gentleman ought to learn a few new words and themes. What he cannot grasp is where money for training and investment comes from. Business does not need his tax breaks to invest it needs profits—the word that he never mentions. In the 1970s, profits were eaten away by inflation, but in the 1980s they rose sharply. As we come out of recession, profits are beginning to rise again. That is exactly what British business needs to train more, invest more, and create more jobs. It does not need the help of the right hon. and learned Gentleman: it just needs the right conditions—low inflation and high profits.

In the past few months, the rate of increase of unemployment has fallen sharply. Unemployment may continue to rise for some time yet, but it will peak sooner and at a lower rate than it did following the last recession.

The way to get unemployment down is to get inflation down. That is the lesson from all the best performing economies in the world. Delivering low inflation is the most important way that the Government can help people back into jobs. But it is not the only thing that we can do. We can reduce unemployment by making the labour market work better, so that, when jobs are created, the people are there to fill them at a wage that employers can afford to pay.

That is why we have introduced training credits for 16 and 17-year-olds. By the end of the next Parliament, they will cover the whole country, and we are expanding initiatives to help the unemployed.

Next year we shall spend more than two and a half times as much in real terms on training, enterprise and vocational education as the last Labour Government. However, publicly funded training is only part of the story. Employers' training expenditure, as the latest CBI survey reveals, shows clearly that businesses are spending at record levels on training even in a recession. That is a measure of how business has become better and more energetic in its training, and it is partly a tribute to my right hon. Friend the Secretary of State for Employment and his policies.

Yesterday, we announced extra resources to help to increase student numbers. In 1979, in Labour's "Opportunity Britain", only a privileged few—12 per cent.—of our young people went on to higher education. Next year, it will be one in four—60,000 students more than this year. By the end of the decade, it should be one in three. That is a remarkable achievement. It is a Conservative Government who hold out the ladder of opportunity to our people. As a result, Britain has the best educated, most skilled, most highly trained work force in its history.

There was one remarkable omission in the speech of the right hon. and learned Member for Monklands, East. Earlier in the debate on the Queen's Speech, my right hon. Friend the Prime Minister spelled out at some length our position on the intergovernmental conference on monetary and political union. We cannot say that the right hon. and learned Gentleman made the position of the Labour party at all clear.

The Leader of the Opposition talks about what he calls the illusion of sovereignty, as he called it on the "Today" programme, and he attacks the Government for not being positive enough. However, when I asked him what he meant and why he said that, he would not answer. He avoided the question by saying that he wanted more regional policy and that he wanted to give away our fiscal freedom. He wanted more of our taxpayers' money to be spent not by the British Government in Britain on what the House decides, but by the Community elsewhere in Europe on what the Commission decides. The right hon. Member for Bethnal Green and Stepney (Mr. Shore) agrees with me and knows that what I am saying is precisely right.

So I ask the Leader of the Opposition again. In the national executive committee document, the Labour party says that it supports a single currency and that it thinks that that is the only way to stop the currency speculators. The Opposition are still living in the 1960s world of Harold Wilson, obsessed with currency speculators. What we need to know now is which of the conditions that we set during negotiations they would drop. Are they urging us to give a firm commitment in favour of a single currency? We have made our position clear. The right hon. and learned Member for Monklands, East has said that they favour an unconditional commitment to a single currency. Unless the right hon. and learned Gentleman denies it, that is the only conclusion that we can draw.

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

I would like to be clear about what the Chancellor is saying. Is he saying that the Government will accept a single currency on conditions that he can now define?

Mr. Lamont

The Government have made it clear that we are not prepared to give a commitment to move to a single currency. We believe that, if monetary union happens, it should be on an evolutionary basis, driven by the market. That is and always has been our position. It is the position of the Opposition that is shrouded in obscurity. When we listened to the right hon. Gentleman, we heard that he wants to give a commitment to a single currency without any conditions whatsoever. That appears to be his position.

Dame Elaine Kellett-Bowman (Lancaster)

Would my right hon. Friend make it clear to the Opposition that their illusion of a regional policy in an enlarged EC may be a different kettle of fish from what it used to be. Few, if any, of our regions would qualify for assistance under regional criteria, and Opposition Members ought to know that.

Mr. Lamont

My hon. Friend makes a shrewd point and is precisely right. Any expansion of regional policy is not likely to be to the benefit of this country, and I am grateful to her for drawing our attention to that fact.

Yesterday, I announced our public spending plans for the next three years. Once again, we have shown that there is no contradiction between our prudent policies and high-quality public services. We have honoured our commitments and allowed expenditure to rise to meet the unavoidable consequences of the recession. But neither spending nor the PSBR will rise to the heights of previous recessions. Government expenditure will peak at 42 per cent. of GDP, compared to 47.5 per cent. in 1982–83 and a skyscraping 49.25 per cent.—very nearly half the nation's income—under Labour.

We remain committed to balancing the budget over the economic cycle. In 1987–88, we repaid debt equivalent to 3 per cent. of GDP, comparable to our assumption next year of a 3 per cent. PSBR. Compare that with Labour's peak of 9.5 per cent.—the equivalent of £55 billion today.

Our objective remains to balance the budget over the cycle. Just imagine how preposterous a goal that would be for the right hon. and learned Gentleman to state. Even yesterday, he wanted more money for training, for transport and for industry. Now that he has had a day to reflect, the whole House will be waiting for his answer to some vital questions. Does he accept the pledges made by Opposition spokesmen to spend more than we plan to? How would he pay for them? [HoN. MEMBERS: "Answer."]

Let us start with the National Health Service. I announced an increase in plans of £1.5 billion for the NHS—£1.5 billion which will help the NHS upgrade buildings and hospital equipment. Spending on hospital and community health services will rise by more than 5 per cent. in real terms between this year and next, bringing the total real increase in NHS spending since 1979 to well over 50 per cent. We could not have made our commitment to the NHS clearer. What a contrast with the Labour party—the party that cut nurses' pay and, in one year, cut NHS capital spending—hospital building—by 22 per cent. Fine words but poor action from the Labour party. So would the right hon. and learned Gentleman spend more? Now is his chance to tell us how much. [HON. MEMBERS: "Answer. "]

We also announced an extra £1.4 billion for British Rail and London Transport. Next year they will invest more than three times as much as they did in 1979. If the right hon. and learned Gentleman were standing here, would he spend more? His hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott) would like to, but would he? Now is his chance to tell us how much. [HoN. MEMBERS: "Answer."]

What about education? We have more students in higher education than ever before. Pupil-teacher ratios in our classrooms are at their lowest ever, and spending per pupil is up more than 40 per cent. The leader of the Opposition plucked a figure our of the air and said that he would spend £2.6 billion more. We he licensed to do that? Would the right hon. and learned Gentleman give him the money? If he would, how much? [HON. MEMBERS: "Answer."]

Next year, the aid budget will increase by 2 per cent. in real terms. Again that is not good enough for the hon. Member for Cynon Valley (Mrs. Clwyd). She wants to put it up in a single Parliament by more than £3 billion. Would the right hon. and learned Gentleman give her the money? Now is his chance to tell us. How much? [HON. MEMBERS: "Answer."]

In April, the right hon. and learned Gentleman published what he called a shadow Budget. Why does not he publish a shadow autumn statement? Then he could give us the answers. He must tell us this; is the level of spending that we have announced too high, too low or just about right? Is the level of borrowing too high, too low or just about right? We have set out our expenditure plans for the next three years, on which we shall fight the election. The country wants the same from the Labour party.

In the document "Meet the Challenge, Make the Change" the Labour party promised that it would publish its detailed spending plans at the time of the election. now that the election is a little closer, the hon. Member for Copeland (Dr. Cunningham) tells us that it will not publish its plans. What is the Labour party hiding? We know what it is hiding: the cost of unaffordable spending plans and the massive increases in taxation that it knows are needed to pay for them.

We have costed the hundreds of pledges made by the right hon. and learned Gentleman and his colleagues, and we know that they add up to £35 billion. The right hon. and learned Gentleman has never quarrelled with the detail of any of our estimates. The £35 billion of extra spending means £35 billion of extra tax—perhaps not right away. Perhaps he would try to borrow some more, but he could not delay the evil day for long. Eventually, it would mean skyscraping taxes, not only for the better-off, but for everybody. The right hon. and learned Gentleman always forgets that what the Government give, they first must take away, and a Labour Government would take away a lot from the British people.

The right hon. and learned Gentleman claims that he would get the money from growth. We have heard that one before. That is what Labour Oppositions always say, but Labour Governments always fail to deliver, because their policies of intervention and regulation throttle recovery. Growth would peter out under Labour.

Even if Labour could somehow spend the growth created by Conservative policies, the right hon. and learned Gentleman still would not have the money. He clearly has not read the public expenditure plans any more carefully than he has read the forecast. The plans that we have published for the next three years already take account of growth. Those plans are consistent with our objective of balancing the budget over the medium term. If the right hon. and learned Gentleman wants to spend more, he must either borrow more, or tax more, or both.

The British people have seen through Labour's deceit. They know what a Labour Government would mean. Since the war, living standards have risen half again as fast under Conservative Governments as under Labour. Since 1979, living standards have risen by almost 37 per cent. We have cut income tax rates. The plans that I announced yesterday show that, even when times are difficult, we will continue to improve public services and to honour our commitments.

It is this argument that leads to the right hon. and learned Gentleman's increasing desperation—a desperation that manifests itself in his peculiar determination never to have one consistent policy when he can have two contradictory ones. He thinks that we should cut interest rates further and faster; but at the same time says that we should stay in the exchange rate mechanism. We know that it is our cautious approach that has enabled us to cut interest rates and keep the pound stable. He wants to increase spending; but he claims that he will not put up taxes. We know that it is our firm control of public spending that has enabled us to cut tax rates. He says that we should improve competitiveness and strengthen the supply side; but he wants to introduce a minimum wage and bury business under a mountain of bureaucracy. We know that low inflation and a more flexible labour market is the way to create wealth and jobs. He says that there is no recovery. A few weeks ago on the radio, he said that the recovery would be weak and faltering. His right. hon. Friend the Leader of the Opposition has told us that the recovery is heading for an inflationary boom. We know we are headed for sustained, non-inflationary growth.

A Labour Government would bring higher taxes, higher inflation, higher interest rates and higher unemployment. Their policies would leave the nation with no prospect of economic recovery and no hope of improving the public services. This Government are dedicated to a sustainable, economic recovery based on stable, low inflation.

We are dedicated to a tax system that gives people the incentive to work and the opportunity to save. We are dedicated to using the fruits of these policies to improve the public services of the nation—not only providing our health, education and transport systems with increased resources, but securing improved performance from them.

This Government's objectives are shared by the nation, and the economic policy which serves those objectives deserves the support of this House. I ask the House to reject the amendment and to support the Loyal Address.

5.18 pm

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

There could hardly be more of a contrast between this year's debate on the Loyal Address and our debate last year. Hon. Members may have forgotten in the interval what happened.

Last year's debate was marked by a speech by the right hon. and learned Member for Surrey, East (Sir G. Howe), who was in the Chamber a moment ago, rather like Banquo's ghost, but has disappeared, in rather the same way. That speech was probably one of the most dramatic and remarkable, although it was quiet in delivery, that many of us have heard in the whole of our time in this House, because it was the undoing of a Prime Minister.

The speech pointed to the impossibility of papering together deep divisions over Europe by the use of sophisticated language. It blew open those divisions, but did not stop the present Prime Minister saying, when he spoke as Chancellor in that debate: 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."—[Official Report, 14 November 1990; Vol. 180, c. 599.] Conservative Members did not wait to find out whether people would vote for that courage and conviction, but bundled out the then Prime Minister, the right hon. Member for Finchley (Mrs. Thatcher) pretty quickly once they had had the encouragement of a Liberal Democrat by-election win and the exposure of the divisions by the right hon. and learned Member for Surrey, East.

In the same debate, the then Chancellor forecast the same growth that has been forecast today—a growth that did not happen. It was the beginning of the protracted end of the Government. The next stage in that process has been a Gracious Speech full of apologies. The apologies may be veiled and may take the form of a reversal of previous policies, but they nevertheless constitute the admission of how wrong the Government have been. The council tax Bill exists because the poll tax was the disaster that so many hon. Members said it would be. That view was expressed by everyone on the Opposition Benches and a few Conservative Members, but was ignored as the Government arrogantly used the power of an artificial majority to force the poll tax through.

Similarly, the Gracious Speech is an apology for the privatisation process that has taken place, because it has led to the wholesale transfer of monopolies from the public to the private sector without serious competition, or adequate regulation to replace competition where it could not exist. That is why the Queen's Speech contains a commitment to introduce legislation to reinforce the regulation of privatised utilities. It concerns privatisations that have taken place in the past few years under processes and with measures of regulation which the Government said were more than adequate, dismissing all our criticisms. The Government's admission that they must return to that issue is another apology, but return they must, as anyone who considers what is happening in British Telecom—the bills paid by the customers or the salary received by the Chairman of that company—will be quick to point out.

Another apology has been made in all the charter proposals for public services. It is an apology for the steady decline in public services during the decade or more in which the Government have been in power. That decline will not be arrested by charters of citizens' rights in those services, desirable though some aspects of those may be. Yet again, it is an apology for failure.

The apology that is missing from the Queen's Speech is for the recession. Nowhere do the Government admit that they have produced a recession which they regret, or that they have magnified the extent of that recession by past policies. Rather, they tell us what they told us last year—that they will maintain conditions for sustained growth. Are those the conditions that provided the recession or are they something different? Sustained growth sounds unconvincing in the mouth of the Government because, in the past few years, Britain has grown at a rate well below trend growth and below the OECD average, managing a paltry 0.75 per cent. in 1990 and with a projected fall of 2 per cent. during 1991.

The Government cannot maintain conditions for sustained growth if they do not introduce such conditions. That must include long-term investment in key areas of training, education, research and development, and transport. Governments should concentrate on such matters. They are no good at running industries, and probably not much good at picking winners and deciding where in the economy investment can best be directed. They must ensure that the matters for which Governments must be relied on are properly provided. Education and training are at the heart of that list, as is an adequate transport system.

The conditions for sustained growth outlined in the autumn statement appear to be based on the idea of a revival in consumer spending rather than an investment-led recovery. It is hard to envisage how that will happen. Much of the consumer spending boom of the 1980s was based on rising house prices and the enormous withdrawal of equity from housing that fuelled the inflation of that period. That will not happen now. House prices will not rise in the same way and consumers who have been through that experience have been hard bitten by it. In many cases, the victims of that period cannot engage in much consumer spending now. If they can, they are much more cautious as a result of the experience of the past few years than they have ever been.

The autumn statement contains something that I have never seen in an autumn statement before—a chart designed to show not figures showing what might happen in the economy but estimates of consumer confidence based on Gallup poll evidence. The Treasury Select Committee will have fun discussing the precise significance of that measure, which is another attempt to talk up the economy and persuade consumers that it is all right to spend now. People will not be kidded that easily. They have seen what it is like to be unable to meet their mortgage repayments and be faced with redundancy and unemployment.

The Gracious Speech also refers to policies designed to reduce inflation further". I am in favour of such policies, but a little confused about the Government's current attitude. Only recently, the Prime Minister said that the Government had inflation "licked". I am sure that he is honest and believes that that is so. He must believe, then, that 3 or 4 per cent. inflation is a reasonable long-term rate for the United Kingdom economy. That view is not shared by many pensioners. Many hon. Members will have had the experience of constituents who say, "I don't understand how inflation can be coming down when prices are still going up." That may be expressed in simple terms, but it is the reality. As long as inflation exists, prices go up. Lower inflation may please economists and be an index of an improving trend, but it is not what most people want. They want price stability. We need an economy that is dedicated to price stability.

The most effective proven mechanism to achieve price stability is an independent central bank dedicated to that objective. I still wonder what happened to the paper produced by the right hon. Member for Blaby (Mr. Lawson), which the former Prime Minister, the right hon. Member for Finchley, threw into her waste paper basket with what oaths and cries we shall never know.

The right hon. Member for Blaby may not like the idea of a European central bank, but he is clearly on record as saying that he believes that in this country's economy an independent central bank would be a guarantee against inflation. Indeed, it would have done some good to have one when he was Chancellor of the Exchequer, as it would have made a significant difference to some of the measures that he took, which stoked the fires of inflation. I am not yet convinced that the Government have the policies to counter inflation. They are in danger of becoming complacent now that we have reached welcome lower levels of inflation, and are lulling themselves into believing that the problem has been "licked".

The Government make commitments in the Gracious Speech in which there is no substance. The commitments have been abandoned before they have been voted on. It is unusual to have an autumn statement in the middle of a debate on the Queen's Speech, but it has at least given us an opportunity to test the veracity of the promises that have been made.

One of the promises is that the Government will promote enterprise and training. Before we have had the opportunity to vote on that policy, the autumn statement has informed us that the Government will not promote training or fill the training gap that has developed in recent years. It says that the money which it was prepared to commit to training will not meet the pleas of the training and enterprise councils, which are struggling to deliver the training guarantees which the Government have committed them to providing, and which cannot go beyond the delivery of that guarantee to extend training opportunities in a serious or significant way.

The £470 million announced yesterday will be taken up in large part by programmes that have already been announced, such as the employment action programme, by money for job clubs and by funds for departmental redundancy payment schemes. The money left over is unlikely even to provide for the current training budget to keep pace with inflation.

The Government say that they will promote enterprise. Why, then, do they not do more for small business and look again at legislation on the late payment of debt? Even the chairman of the National Westminster bank has conceded that they should look at that issue. It is a matter of deep concern to many small businesses—it is killing some of the most enterprising small firms—that they are not able to obtain proper payment of debt, often from larger and better-funded institutions than themselves.

Another commitment in the Gracious Speech to which, I suspect, there is little substance is the commitment to introduce legislation to reinforce the regulation of privatised utilities. We shall look with interest to see what that legislation will be.

We would support any moves to increase the powers of the regulators to give them stronger teeth. That is particularly necessary in the water industry, where there is no prospect of competition. The idea put about by Ministers at the time that there would be competition in the water industry—because people would compare one region of the country with another—is unrealistic. That is not how competition works. Competition works if one can buy an alternative product at a better price from somebody else. That cannot happen in the water industry, so there must be much more effective regulation than has existed in the past.

We must look also at other areas of privatised industry. The recent profit figures of British Telecom tell their own story. We must examine the Office of Fair Trading's recent comments on British Gas. We argued from this Bench that the regulatory machinery for British Gas was totally inadequate and that the basis of the privatisation was wrong. We shall also have to look at the electricity industry, where the Government produced two large generation companies solely to try to privatise nuclear power. They had to abandon the privatisation of nuclear power, leaving themselves with a highly monopolistic structure.

I do not believe that, deep down, the Government are committed effectively to fighting monopoly and promoting competition. Some Conservative members may have a desire to do so, but there is no real strength of commitment to the promotion of competition and, for example, to the toughening up of the Monopolies and Mergers Commission and the greater detachment of that body from the powers of the Secretary of State for Trade and Industry, who seems more interested in the argument about French nationalised industries than in the promotion of competition in our domestic economy.

There are significant and eloquent omissions from the Gracious Speech. For example, there is not a mention of the words "single currency", despite the fact that it is one of the most fundamental issues facing the country today. That is recognised by its supporters and opponents alike. Although it is the subject of a crucial conference which is about to take place, the Government do not have a real policy on it. Indeed, their policy is not to have a policy. Their policy is to try to avoid making a decision this side of the general election. That is precisely what the right hon. and learned Member for Surrey, East described a year ago. It is an attempt to find a form of words around which people of different views can unite.

The Labour party has had similar problems and has gone a step further. Labour Front-Bench Members seem to have committed themselves to a single currency despite the fact that some of their Back-Bench supporters continue strongly to oppose it, although they are having difficulty with the question whether a European central bank would be independent. Their recent policy statement will cause some heart searching on the part of the hon. Member for Bolsover (Mr. Skinner) and some of his hon. Friends.

Mr. Skinner

My position is quite clear.

Mr. Beith

The Government are still trying to get away with having no policy. Imagine what would happen if Britain sought to remain outside a single currency and European monetary union. That is ultimately the issue facing Britain.

Mr. Skinner

It would be a good day's work.

Mr. Beith

I appreciate that the hon. Member for Bolsover and the right hon. Members for Bethnal Green and Stepney (Mr. Shore) and for Chingford (Mr. Tebbit) believe that that would be a good day's work. Neither of their respective leaderships agree with them. I do not think the Prime Minister imagines that this country's future would be secure if we remained outside.

A single currency and European monetary union are coming: there is no question about that. The issue is whether Britain is in or out. If we are outside, we shall not enjoy the advantages of a single currency or have the investment in this country of those companies—our own and overseas firms—which want to invest in the core of Europe and enjoy full access to all that goes on in Europe. We shall not be able to influence events that control our destiny. Anyone who imagines that a British Chancellor of the Exchequer could, wholly independently, determine interest rates here without considering what was going on in a Europe with a single currency, with all the other member countries belonging to it, is totally wrong.

Mr. John Butcher (Coventry, South-West)

Is the hon. Gentleman aware that one estimate of the costs saved by industry by our joining EMU is 0.05 per cent., while other estimates show that there would be an unnecessarily high increase in unemployment from being locked into EMU under current trading conditions? Has his party analysed those comparative costs?

Mr. Beith

The hon. Gentleman is talking about transaction costs. I believe that the saving in those costs would be higher. But that is only a small part of the single currency argument. The most crucial aspect is whether we want our currency to be locked into a stable currency in Europe or whether we want to be able to devalue our currency in the hope of averting unemployment. What we almost certainly would do by such a devaluation process—from which the Labour Front Bench is now trying to distance itself—is to postpone decisions which industry would have to take in the end, anyway. The benefit to competitiveness would be short-term, while the damage to our credibility as an economy would be massive.

That is why there are only a few recalcitrants on the Back Benches on either side of the House—among whom the hon. Member for Coventry, South-West (Mr. Butcher) is an honoured member—who still advocate a devaluation-based policy and the maintenance of our ability to devalue.

Mr. Skinner

Why does the hon. Gentleman's party believe that, because the Common Market has been in existence for a few decades, it will continue as though nothing is happening to stop it? Spanners are being put in the works of that gravy train. Through a thousand years of European history, nation states have come closer together. Every so often, they have become so close that they cannot stand the sight of one another. Then they begin to fall apart. That is happening in Russia, Yugoslavia and to some extent in Canada.

I urge its adherents not to believe that philosophically the members of the Common Market will continue to get ever closer, even towards the end of this century. Eventually we shall see—I know that I shall see it—the breaking up of the Common Market.

Mr. Beith

The hon. Gentleman should devote his time and energies to trying to convince his hon. Friends on the Labour Front Bench of that. They have rejected the view which he espouses, just as the Government have rejected it and as we have rejected it since the 1950s. We believe that there is a determination in Europe to create institutions through which Europe can be economically more successful.

That is not to say that we shall lose difference and divergence in Europe. Anyone who imagines that a single currency, or even the steps for political union that we advocate, means an end to divergence is imagining things. Differences in national view and culture will remain, just as they remain within the United Kingdom. Indeed, it comes ill from the Government to argue that power would become too centralised in a European system when they have centralised power in Britain, taking power away from the nations that make up the United Kingdom to bring them to the centre.

The costs to Britain of staying out would be immense, as would be the costs of remaining in the slow lane. If we remain ambiguous about whether Britain should be fully in the European Community and in the single currency, the same adverse effects on investment will apply. The Gracious Speech should have made it clear that Britain is committed to the achievement of a single currency and monetary union, in which we shall be a full participant.

5.38 pm

Mr. Terence L. Higgins (Worthing)

The Treasury Select Committee will look forward to taking evidence from the Chief Secretary and from the Chancellor of the Exchequer on the autumn statement before reporting to the House, and it would be wrong of me to anticipate what that report might say.

However, I think that I shall carry the Committee with me in welcoming the fact that the Chancellor has accepted the recommendation we made after the Budget this year when we said strongly that he should not inhibit the operation of the so-called automatic stabilisers which were likely to increase the deficit, and that he should take the opportunity to make some supplementary discretionary increases in public expenditure. Both those actions, while they increase the deficit, will be of great help in reducing the depth and duration of the recession.

I welcome the increase in expenditure on the national health service announced in the autumn statement. It is significant that the shadow Chancellor made no reference to it in his speech, although I have noticed that in the press some Opposition Members have been saying that the increase in national health expenditure is in some sense an election bribe. If that is so, it is necessary to look at the massive increases in extra expenditure on the health service which took place last year, the year before and the year before that. If it is an election bribe, it has been going on for a long time, probably since the last election.

The Gracious Speech says that the Government will continue to play a constructive role in the two Inter-Governmental Conferences on Political Union and Economic and Monetary Union". I want to refer particularly to economic and monetary union, to which the hon. Member for Berwick-upon-Tweed (Mr. Beith) also referred. The single currency is not mentioned in specific terms, but the IGC is mentioned in the speech. I want to make some important points. I am neither a Euro-sceptic nor a Euro-maniac. I should form a group slap in the middle. I have always believed that it is right for Britain to be a member of the European Community.

There has always been something of a trade-off between the costs and disadvantages of the common agricultural policy on the one hand and the potential advantages of the single market on the other. What gives me grave cause for concern in present circumstances is the way in which the Commission seems to be extending its operations into other areas such as the environment and whether a bypass should go here or there. We get no quid pro quo, and the principle of subsidiarity, about which we used to hear a great deal but have heard very little recently, seems to have been forgotten.

I hope that we shall have an opportunity to speak about economic and monetary union in the debates that are scheduled to take place shortly. However, some points in the negotiations need to be dealt with at this stage, and hon. Members should be able to express an opinion at this stage. It would be totally wrong to have a referendum in any shape or form on this issue. I am totally opposed to referendums on any issue. We operate in a representative parliamentary democracy. If there is any issue that should not be dealt with by a referendum but which should receive the considered opinion of people in the House, it must be the single currency. One has only to speak to members of the electorate to realise that the crucial distinction between a single currency and a common currency is not generally understood by members of the public. Therefore, the issue should be considered in the House.

The basis of power of the House of Commons and this Parliament has always rested on the control of money—taxation and public expenditure. It rests on our supply procedure, ways and means resolutions, the argument that money should not be handed over to the Executive until grievances have been redressed, and so on. Therefore, I am profoundly concerned at the proposals in the Dutch draft treaty with regard to control of budget deficits of members of the EC.

The proposals in the draft are unbelievably ludicrous. They are quantitative with regard to borrowing and the national debt, and propose to impose penalties and reports from the Commission for those who do not comply. Option clauses or not, that is totally unacceptable. I am not sure whether my right hon. Friend the Chancellor has fully taken this point, hut, even if one were in favour of a single currency, as a number of people in Europe are, it is still not necessary to control deficits in order to achieve it. The extension into fiscal policy is something else.

Mr. Denzil Davies (Llanelli)

Will the right hon. Gentleman give way?

Mr. Higgins

I want to continue, because this is a complex argument.

It is being shuffled in as a side wind, as if it is necessary for a single currency. That is not so. The evidence that the Treasury Select Committee has received on this issue shows that, even if one has multiple currencies, it is not possible to tell in which direction an exchange rate would move in response to an increase or decrease in the deficit. This is a complex issue, and no doubt one can pursue it elsewhere. However, that is the evidence that we have had from Treasury officials, and it is important to bear it in mind.

Because of its complexity, I wondered how it could be explained in more simple terms. While talking to my right hon. Friend the Member for Guildford (Mr. Howell) this afternoon, it suddenly occurred to me how it could be done. A massive deficit in Illinois or Texas would in no way prevent the United States from having a single currency. If the deficit were of sufficient scale, it might alter the relative position of the dollar against the deutschmark or sterling, but it would not mean that the deficits of individual states would have to be controlled. Therefore, the basic argument put forward by Delors and others that there must be control of deficits in order to have a single currency is totally invalid.

Mr. Denzil Davies

There is a fallacy in the right hon. Gentleman's argument. There will be no united states of Europe. It is necessary for the Commission to control budgetary deficits because we will be transferring monetary policy to a supranational central bank. Therefore, there has to be some control over the national deficits. If we had a united states of Europe, the position would be different.

Mr. Higgins

That is not the case, for the reasons that I have pointed out. There may be a wish to transfer greater authority from here to the Community, but the single currency does not require control of the deficits. It may be that the argument for economic union as against monetary union is put in those terms, but, as I have said, the House should not give such authority to the Community, because it is the basis of our power.

The so-called opt-out clause has been given a great deal of publicity in the press. In the words of the draft treaty, one can be an "exempt" country. In fact, the opt-out clause opts out of only a very small part of the draft treaty. The Delors report put forward the argument for a single currency which would mean giving up for all time the main means of adjusting for differential movement in costs and prices over a wide geographical area. The argument at that time was that, if that causes distortions and so on and there is a variation in costs and prices in a particular part of the Community, there is no need to worry, because there could be a transfer of regional and structural funds from one part of the Community to another. One may think that doing that for Liverpool has not been terribly effective, and there is no guarantee that, if we accept a single currency, the Germans will he prepared to perpetually subsidise, for example, the Spaniards.

Mr. Butcher

Quite the opposite.

Mr. Higgins

Indeed.

If the others go along with a single currency and we make use of the exemption clause, it is not likely that they will say that we are also exempt from the cost of the transfer funds that are necessary because they have a single currency. That will not be the case.

My right hon. Friend the Chancellor has a slightly difficult task ahead of him. His attitude so far has been appropriate. I do not think that it is true that we do not have a policy. We have a policy to negotiate a deal that is appropriate for the United Kingdom. I hope also that, during the negotiations, we will consider not only our own interests. I profoundly hope that my right hon. Friends the Chancellor and the Prime Minister will seek to avoid the dangers for Europe as a whole that will arise if we rush prematurely along a particular direction with disastrous consequences.

5.49 pm

Mr. Robert Sheldon (Ashton-under-Lyne)

The speech of the right hon. Member for Worthing (Mr. Higgins) was impressive. The House will accept that he devoted much time and thought to it. He began by saying that he was neither a Euro-maniac nor a Euro-sceptic. I think that that precisely defines my position. I remain one of the few hon. Members who in 1971 voted against a three-line Whip to join the Community. I find myself outflanked by hon. Members who are more recent converts, but I still maintain my position roughly in the centre. We needed to enter Europe because the advantages and disadvantages weighed in our favour. That must be our position. There must be no Euro-mania and no Euro-scepticism—only, what can we negotiate and how is it to our advantage? If we can negotiate a deal that is to our advantage, I shall be delighted, but if not, we shall have to find some other way of proceeding.

The autumn statement, perhaps because an election is approaching and spending is becoming more important politically, has received much more attention than previous ones. It is useful to hold this debate so soon after the autumn statement because we shall consider its detail in a public expenditure debate early in the new year, by which time we should have the most valuable comments of the Treasury and Civil Service Select Committee.

The autumn statement is one of the few decisions taken when it is known that there will be an election before the next year is out. As in 1964, when there was a similar situation, spending is rising rapidly, partly for good reasons, partly because these matters have become more intensely political, and partly, too, because dogma and ideology tend to take second place to the realisation of the need to win an election. When the Labour party took office in 1964, we found the cupboard bare. In fact, it was more than bare—it was overdrawn. I suspect that we would find a similar situation today.

Privatisation will be one of the main sources of finance for the extra expenditure. Previously it was thought that privatisation proceeds would amount to £5.5 billion a year. We now understand that those proceeds will rise to £8 billion a year in the years 1991–92 and 1992–93 before dropping again. That is a major change. Where will the Government get that money from? I suppose that it will come from privatising the Post Office, British Coal, British Rail and London Transport. But those are only thoughts—I assume that there are no plans yet—and what frightens me is that they will lead to the hurried reconsideration that we have experienced in the past. That money will not be made available to a Labour Government, which is one of the big problems that we shall face.

I feel very strongly about the way in which we rush forward into privatisations. Of course I have political differences with the Government, but I also have differences about the way in which these matters are handled. Again and again, the Public Accounts Committee has stated that sales should be dealt with in tranches. The Government should not flog assets in one go but should try to establish the right price and to achieve that price.

The Government sell gilts every month. They do not sell off the year's Government gilts but wait for the market to decide how much they are worth, and if they get that wrong they get it right in the next tranche of sales. Again and again, we have had hurried sales and have failed to get financial advantages that might accrue, at least in part. If the Government are going to sell the family silver, for heaven's sake let them get a proper price for it.

The proposed privatisations are not based on ideology, as the first ones were, but, increasingly being used to provide money for expenditure, and there is a limit to how far the Government can go in that direction. I urgently plead: for heaven's sake, let us have proper valuations on assets. In several sales the Government did not bother with a valuation of the component parts of the assets. Again and again, the Public Accounts Committee has asked for proper valuations before sale. It is the only way that one can be sure of getting a decent price.

The rise in unemployment has had financial consequences. The extra 1 million unemployed people will cost between £3 billion and £4 billion. We would be delighted to see that money used for other public expenditure that has a more useful output. That will only be paid for by manufacturing industry. My right hon. and learned Friend the Member for Monklands, East (Mr. Smith) points out again and again—I am delighted that he has taken on board the importance of manufacturing industry—that only through manufacturing industry will we pay for the measures that we want. It is not so much the employment created in manufacturing industry, desirable though that is, as the exports and currency earned overseas.

Manufacturing output is so important. The Chancellor frequently speaks of manufacturing exports, but fails to take into account the problems of manufacturing imports; and the two have to be taken together. It is just as bad for imports to close our factories as it is for us to fail to capture export markets.

The forecasts show that at the time of the last Budget it was assumed that there would be a 3.75 per cent. increase in manufacturing output over the three years 1989 to 1991. The summary in the autumn statement shows figures of minus 0.5 per cent., minus 4.25 per cent. and 3.25 per cent.—a total of minus 1.5 per cent. A move from plus 3.75 per cent. to minus 1.5 per cent. is a loss of about 5 per cent.—a serious loss. The Chancellor mentioned the skills that we have in manufacturing industry, but he should travel around the country and talk to people who understand the problems of training for the skills that are needed.

I should like briefly to mention European monetary union. When we consider convergence, we should be clear what we mean. To some people, it means interest rates and inflation. That is not too difficult to achieve. What I mean by convergence is convergence of enterprise, industrial performance and wealth creation. It is what it means to ordinary people when they see their living standards rise, and it is the convergence of economic effects that I really wish to see. That is much harder to achieve. No one knows precisely how to deal with growth rates. There are some indicators and some ways in which it is obviously sensible to proceed, but the outcome cannot be delivered in the same way as that on interest rates and inflation. The extent to which we can influence growth rates determines my attitude to economic and monetary union.

I am aware that our control of the Bank of England is not as good as it should be. Often, control has not been exercised. There must be day-to-day independence in the running of the Bank of England, but that can lead to much wider independence and to the problems that every Chancellor of the Exchequer has had. That is why we nationalised the Bank of England; and many Tories agreed because of their direct experiences.

In future, we will not just give the Bank of England independence; we will transfer that independence to others in other countries and rely on ECOFIN. What is that? The Economic and Finance Council consists of 12 Finance Ministers. They will meet once a month. At least now we can just ring up the Governor and ask him to come along. In future, we shall have to rely on a Finance Minister going to the central bank—which, unfortunately, may not be situated in London—and he will have to argue with the other Ministers. There will be indecision, or perhaps no decisions.

I hope that we find solutions of the kind that I want to see—and I am delighted to support my party's statement on this matter. Let us hope that we find regional aid solutions. I am willing to be convinced, but I am afraid that the argument is only just beginning. If we find the right solutions, obviously we can proceed a little further.

The figures for Department of Trade and Industry expenditure have been £1.6 billion in 1989–90, £1.1 billion in 1990–91, £900 million in 1991–92 and £800 million the year after—the amounts are declining rapidly. Does that matter? Yes. I spoke to Lord King, the chairman of British Airways, earlier this week. I was worried about the treatment of Rolls-Royce over the purchase of Boeing aircraft. Boeing aircraft are being bought by British Airways, and in a parallel deal General Electric has been granted some form of entry into Cardiff to renovate engines. Rolls-Royce is being dealt a double blow: because its competitors are being brought into this country, and because of the failure to purchase Rolls-Royce engines.

Rolls-Royce is one of the most important companies in Britain. Much was expected from it. I asked Lord King why those decisions were made. He pointed out that it was because of commercial considerations. I asked him what discussions he had had with the Department of Trade and Industry, and he had had none. I asked him whether he had approached the Department, and he said no. I asked him whether the Department had approached him, and he said no. I do not believe that any other country—first world, second world or third world—would conceivably have dealt with the matter in that way. It is totally absurd. Rolls-Royce did not think that it was worth thinking about the country's importance, and the country did not think that it was worth thinking about Rolls-Royce's importance. Japan, Germany or France would not have acted in that way.

I am not a believer in total intervention or in totally free markets. We must look at the arguments on their merits and, in this case, the merits were outstanding. Instead of waffling on to the Confederation of British Industry, the Secretary of State for Trade and Industry should have been looking at Rolls-Royce and British Airways and trying to find a way to reconcile their differences in the interests of our country, of the people who work there, and of our science, technical and engineering efforts. What happened is scandalous, especially at a time when there is a need for the Department of Trade and Industry. Thank goodness my hon. Friend the Member for Dunfermline, East (Mr. Brown), who has the right ideas, is likely to be taking these matters further.

We are in a recession, although the Government have denied it. I called it a slump, which was not an exaggeration. The way in which the Government have let the decline continue is scandalous. When a Parliament runs its full term, there is always a danger that the Government will spend without caring too much about the consequences. The balance of payments is in deficit—it is, they say, at the bottom of the trough. If we are at the bottom of the trough, what will happen when we start rising out of it? How will we recover? The Government have not told us anything, but this is the most serious matter of all. We have had our second deepest recession, bringing unemployment up to 3 million. Even with our balance of payments figures, we have not been able to achieve the steady increase in growth which was predicted.

This gloomy picture is made more gloomy by the fact that much of the money will be spent before the Labour party forms the Government. It will be a tough time for the Labour Government, but luckily we have the people and the means to deal with it.

6.6 pm

Sir John Farr (Harborough)

I congratulate my right hon. Friend the Chancellor on what he said yesterday and today. He dealt effectively with the two points that were made from the Opposition Front Bench. His comments yesterday were excellent. People in my part of the east midlands, in Leicestershire, believe that his statement was excellent.

I congratulate my right hon. Friend the Chancellor not only on what he said and the manner in which he said it but on doing what many people want. How on earth can the Opposition fight, for instance, his plans to improve expenditure on health? Although I know that the NHS and hospital services should be improved even more, my right hon. Friend has struck the right note at the right time. People are determined to enjoy a better health service. Increasing expenditure by the amount planned—5 per cent. in real terms next year—is a feather in the Government's cap.

Yesterday, in highlighting the Government's expenditure plans, my right hon. Friend the Chancellor also spoke about the transport industries. British Rail and London Transport will have £1.4 billion extra in 1992–93. I have heard much of the debate, but not much mention has been made of the fact that, during the past 10 years, our national trunk road network has been transformed. Ten years ago, there was a dreadful backlog. Bypasses were much needed and our motorway programme needed to be extended. One can never say that we have a modern road network and that that is sufficient.

Wherever one goes, work is still being carried out, even in the remotest parts of Wales and elsewhere, and it is a delight to visit such places. Unfortunately, one cannot get to Northern Ireland in that way, but perhaps that is coming. One now takes for granted the many billions of pounds that the Government have spent on roads in the past 10 years, and I congratulate them on what they have done.

My right hon. Friend also touched on the issue of extra expenditure for defence. I should like to take this opportunity, looking away from the European scene, to congratulate my right hon. Friend the Secretary of State for Defence on sticking to his planned defence cuts. It would have been so easy to give way to—one could say—the regimental pressure which was applied to many in another place.

However, the world has been transformed. It is no longer divided into two blocs—the east and the west—glowering at each other and armed with nuclear weapons. Therefore, bearing in mind the continuing impact of the Gulf, it makes sense that defence spending is planned to fall between 1990–91 and 1994–95 by about 6 per cent. In real terms. In view of the transformation of the international scene, that is the least that my right hon. Friend could have done.

However, there is one issue that has not been dealt with to my satisfaction at least, and that is employment. One of the plans announced by my right hon. Friend yesterday takes account of the additional employment measures which were announced in June. Total provision for employment spending in Great Britain in 1992–93 has been increased by £0.5 billion. But is that enough? From the evidence of my daily post bag, I do not believe that it is anything like enough, and I shall tell the House why in a moment.

Yesterday, all my right hon. and hon. Friends rejoiced at the continued decline in public expenditure. I remember that, a few years ago, public expenditure as a proportion of gross domestic product was more than 40 per cent. Ten years ago, the Government promised to reduce public expenditure and, as my right hon. Friend said yesterday, in the past 10 years the ratio of public expenditure to the national economy has declined by more than five percentage points.

There is still a long way to go, but progress has been made, and in the next few years I hope that the proportion of public expenditure as a percentage of our national economy will continue to decline. It is still far too high, but a new Conservative Government after the general election can consider aiming for a target of about 20 per cent. as the maximum public expenditure element in our national economy. There will be many further candidates for privatisation—British Rail and British Coal to name but two—so it is clear that that figure can be reached in a few years, given a new Conservative Government.

One would have been ridiculed if one had said even 10 years ago that we should seek to achieve a public expenditure percentage of only 20 per cent. of our national economy. That is no longer so because, apart from the effectiveness of our policies leading to the next century, Britain, led by my right hon. Friend the Member for Finchley (Mrs. Thatcher) and followed by my right hon. Friend the present Prime Minister, has pioneered a great shift from the policy of the state knowing best, of state intervention and of the individual counting for so little. We have pioneered a policy that the rest of the world is following, a policy of rejecting state controls and state interventions, of freeing the individual to do his own thing—good or bad—with self-respect and dignity and of being one's own master, as my right hon. Friend told the Commonwealth in Harare the other day.

Unfortunately, the Commonwealth is still one of the worst offenders with regard to human rights. I was glad to see the other day that Kenneth Kaunda of Zambia put his repressive policies to the test and secured the correct democratic answer. I hope that what happened in Zambia will soon happen in the rest of Africa and the world.

As I said, I want to refer to what I believe to be the too little that we have done for jobs. My right hon. Friend said that more would be given to the Department of Education and Science. He said that the number of university students, which is already high, would increase to the highest ever level by the end of the century. He rightly took pride in that, but I do not think that he has taken on board what I call ABE—adult basic education. Every day my post bag contains letters about ABE. I receive 15 or 20 letters a day about the failure—as the writers see it—not of the education of young people but of the training and retraining of adults. As technology grows apace, as—I hope—the job situation begins to improve, and as the number of unemployed begins to fall, I trust that there will be more demand for expert retraining for adults.

It is wonderful to have a pattern to which youngsters can look forward. One in three will go to university by the turn of the century, but there are still many people who may be at work today but who, by the turn of the century, could be out of a job because of modern technology and the use of modern machinery. The purpose of ABE is to retrain adults, but it also plays an important role—more of a social role—in persuading people who have a mental or physical defect that they are not finished and are not for the scrap heap.

I could cite to the House numerous examples of people who, only through personal perseverance on an almost one-to-one basis and through devoted caring and teaching, have given tens of thousands of people hope and a purpose in life. Without ABE and without substantial funding of training, some people would be on the scrap heap of life. I want more money to be spent on retraining older people, particularly on the training in basic skills of those who are not physically equipped to do a job.

The recession has not yet ended. According to a report today in The Times, some parts of the country are now doing better, but unemployment in the midlands is climbing alarmingly. It is all very well for my right hon. Friend to say that unemployment is not increasing so quickly now and that there will be an improvement shortly, but many small businesses, employing two or three people, are still going to the wall. They say that it is because of the cost of repaying loans for essential new machinery and other new equipment.

The Chancellor should have reduced interest rates even further. He told the House that he has done as much as he can, but has he been entirely honest? Has he done as much as he could have done? Is not one of the bitter rewards of being in the exchange rate mechanism the fact that we are no longer free agents when it comes to interest rates? My right hon. Friend had to calculate whether a further 0.5 per cent. cut would cause us to bump along the bottom even more under the constraints of the exchange rate mechanism. We are already very close to doing that. However, unless my right hon. Friend cuts interest rates by a further 1 per cent. by Christmas, many companies will go to the wall, with the result that the economy may be beyond repair.

The exchange rate mechanism has provided a discipline for many companies. It may be an unwelcome discipline for the Chancellor. In my view, it has prevented him from reducing interest rates still further. Nevertheless, as a member of the exchange rate mechanism, we have been provided with independence. I do not believe that the Labour party would do anyone a favour if it introduced a single currency forthwith, were it to form the next Government. The adoption of a single currency after the next election would be disastrous for Britain, and disastrous for British jobs.

6.23 pm

Mr. James Molyneaux (Lagan Valley)

I am delighted to follow the hon. Member for Harborough (Sir J. Farr). In particular, we appreciate his comments on the improved road network throughout the United Kingdom that has been brought about during the last 10 years. We on this Bench have good cause for feeling grateful to him for his support in times past in our modest request that communications between the constituent parts of the United Kingdom should be improved, yet avoiding falling into the trap of demanding exorbitant expenditure, thereby wasting national resources. The hon. Gentleman may be interested to know that a debate is raging elsewhere about the improvement of cross-channel routes being continued. My hon. Friend the Member for Antrim, East (Mr. Beggs) would be glad to speak in due course to the hon. Member for Harborough.

I paid close attention to the competent and impressive speech of the right hon. and learned Member for Monklands, East (Mr. Smith), but it was not clear, at the end, whether he had finished his speech or whether he was merely giving way to certain Conservative Members. I am thinking of a phrase that we used when the Labour party was in power: it sounded as though he had terminated prematurely. I had hoped that he would utter literally one word—Maastricht—with all that would flow from that and all that we should associate with it, but we were disappointed.

To be fair, the Chancellor of the Exchequer did not linger on the question put to him: why was it necessary to raise interest rates in the first place, and what was the root cause of inflation? I shall not press that question on either Chancellor of the Exchequer or the Leader of the House, but at some stage I hope that the Chancellor will risk embarrassing former colleagues and lift a corner of the veil, for the benefit of us all.

We are indebted to the right hon. Member for Worthing (Mr. Higgins) for what he said. He told us that it was important that European matters should be touched upon in the context of this most important debate of the parliamentary year. On the first day of the debate on the Gracious Speech, my hon. Friend the Member for Londonderry, East (Mr. Ross) supported the Prime Minister's earlier assertion: What this country needs is sound money".—[Official Report, 31 October 1991; Vol. 1, c. 39.] That ought to be the objective of any Government in their right mind. We have always supported that objective.

My hon. Friend the Member for Londonderry, East was justified yesterday in inquiring gently whether there had been a decisive shift away from that doctrine in the autumn statement. After a careful study overnight of the statement, I am bound to say that I share my hon. Friend's unease. We have travelled a long way away from the sound financial policies of the early 1980s when we—in particular, Enoch Powell—supported firm control of the money supply during the reign of the right hon. and learned Member for Surrey, East (Sir G. Howe).

In the mid-1980s, that control began to slip. The cause was a loss of nerve on the part of some—if not in the Government, certainly among those who sit on the Government Benches—in the face of criticism of the alleged cuts. I say "alleged". The Government contrived to get the worst of both worlds in the last 10 years. They appeared to extol and even to boast of the virtue of cuts when no real cuts were made. That is the view of the hon. Member for Harborough.

We have begun the 1990s with a budget deficit. I should like to share the Chancellor's optimism that this dip is a one-off feature in a cycle of years. I hope that it is a cycle, not a centipede. However, I am haunted by the fear that yesterday's autumn statement will give a degree of permanence to that deficit. unless the grip on expenditure is tightened.

I should also like to share the Chancellor's projection for economic growth. I hope, for all our sakes, that he is correct, but there can be no guarantee, no assurance, that will restore confidence. As the right hon. Member for Cirencester and Tewkesbury (Mr. Ridley) said today in The Times, if the expectations are not fulfilled, the £10.5 billion borrowing requirement may turn out to be an underestimate. The right hon. Gentleman was correct to warn of borrowing difficulties which would have an adverse effect on interest rates, inflation and capital investment.

Yesterday, the right hon. Member for Bethnal Green and Stepney (Mr. Shore) was right to confront the Chancellor—and, for that matter, those on the Opposition Front Bench—with one brutal reality. If the public sector borrowing requirement rises above 3 per cent. of gross domestic product, the Chancellor would, indeed will, be caught in a trap if Her Majesty's Government signed the present draft of the treaty of economic and monetary union.

I must not neglect Her Majesty's Opposition. This morning, I wondered whether their amendment to the Loyal Address was drafted before yesterday's autumn statement. If so, that was a great mistake. Today, it reads as though they were urging the Chancellor to go further and faster down the road to financial damnation. The Official Opposition are no help to Members on both sides of the House who are doing their best to save Britain from a suicide leap into a Jaques Delors-style superstate, with a growing roll of absurdities.

Both sides of the House would do well to heed the bugles sounding retreat from bodies ranging from the CBI to the National Farmers Union. Even in the City, many people are beginning to spot the traps, and they have not yet realised that the single currency referred to is merely a cover name for single economic authority.

It was all very well to give a nod of approval in 1972. I was then a member of the Conservative party, and the House was told that this was merely a body to promote economic co-operation in Europe. I was not certain whether I believed that, and one or two Conservative Members agreed with me and voted accordingly. Now, however, we have moved from general approval to consent to particulars. That is a different story, as the distinguished bodies that I have mentioned confirm.

The proverbial man in the street will, indeed does, increasingly resent Community intrusion into the nooks and crannies. The crucial test will come later, over the issue of control of supply. That issue was touched upon earlier. Control of supply has been the mainspring of our system of parliamentary democracy for hundreds of years. Whether we like it or not, and whether other people like it or not, that test will come at Maastricht next month, when the Government, pressurised no doubt by the Labour Front Bench, may be tempted to "sign up in principle". A form of words will be cobbled together by the Foreign Office in the vain hope that we as a nation can somehow escape the consequences of our commitment to a principle.

The two main parties in the realm cannot get away with that on the eve of a general election. What will their candidates say on the doorsteps? Will they be honest and confess that they represent parties which have sold the voters out? Will they admit that they will continue the process of reducing the House of Commons to the status of a county council? Will they assure the voters that they will not go through the pretence of redressing grievances, "Because, dear elector, you will have to approach Brussels, not Westminster."

Will the Labour and Conservative parties send a joint eve-of-poll message to the nation, exhorting the electors to make the most of the morrow's opportunity to vote in the final meaningful general election after 700 years of British democracy?

6.34 pm

Mr. David Howell (Guildford)

As the right hon. Member for Lagan Valley (Mr. Molyneaux) observed, with his usual perception, the shadow Chancellor's speech was remarkable for what it did not say—for what was left out. Indeed, the House quite expected a second half after the interval, but that did not come.

Notably, the right hon. and learned Member for Monklands, East (Mr. Smith) left out an exposition of the Labour party's official stance so far on taxation, with its official commitment to swingeing increases in the taxation of the incomes both of higher rate taxpayers and of standard rate taxpayers. [HON. MEMBERS: "Rubbish."] It is not rubbish, because the Labour party is officially committed to uncapping the national insurance contribution. I am surprised that Labour Members should say, "Rubbish." The official Opposition position—I use my words carefully here—is that they would increase the rate at which taxation is paid by higher rate taxpayers by about 22 per cent. and by many standard rate taxpayers by about 27 per cent. That is quite aside from any increases in income tax planned for later—those, too, have been threatened.

When one hears the right hon. and learned Gentleman speak about confidence, one stands amazed that he is not aware of the major torpedo effect that any such proposals for massive increases in personal taxation would have on confidence and on the British economy.

Bizarrely, the right hon. Gentleman also omitted any reference to European monetary union. That issue is important, and my right hon. Friend the Chancellor, in a splendidly robust speech, dilated on it at some length. I do not want to speak too much about that matter; I simply marvel at one aspect of the Opposition stance. I understand the traditional position of the Labour party and the Labour movement—that the idea of a central bank, the Bank of England, being totally independent is anathema to them. For reasons dating back to their folk memory of the 1930s, they strongly believe that the Bank should remain under tight political control. For reasons related to their Keynsian love affair, they believe that they should have great freedom to operate ample budget deficits. Whatever the deficit may be, they would like the freedom to make it larger.

The Labour party holds those views sincerely, and has done so for most of the 20th century. Yet those two views are removed and totally undermined by its commitment to European monetary union and the draft Dutch treaty, which demands not only that the European central bank be totally independent, but that it includes central bank governors from completely independent banks and lays down all sorts of ferocious penalties for any deviation in budget deficits. Such are the wonders of the Opposition stance.

Let us leave the debate there until we return to it in a week's time, but it rather sounds as though the Labour party's attitude to the Dutch draft proposal is that it is yet another scrap of paper treaty—"Sign it and disregard it."

My right hon. Friend the Chancellor, in his projections, shows that he hopes for a steady non-inflationary recovery. He believes that it will come, and I hope that he is right. I think that the recovery will come, but it will develop in hostile surroundings. Conditions outside this island will be unfavourable.

The United States economy was not much mentioned either in the autumn statement or in today's debate. At the moment, it is faltering disastrously. One has only to look at the daily headlines in the Wall Street Journal to see the most catastrophic figures—plummeting house sales and retail sales, faltering confidence and weakening investment. Sadly, we see in the United States the classic double dip shape—the W shape of recovery. The line went up a bit in the summer, but now it has gone rapidly down again. That is very serious for us—perhaps not as serious as in the 1930s, but the United States still represents 28 per cent. of the world's GNP.

If the United States economy will not move—clearly, it is not moving yet, despite the further cut in interest rates there—that will have a depressing effect on the entire world economy, including the economies of Europe, and on our own economy. We might as well be realistic about that. Certainly, the present situation is sending President Bush into something of a spin as he realises that his political popularity and position may not be quite as impregnable as he thought. That is a difficulty that he must now face. The question is to what extent he can correct and overcome the debt-sodden, debt-deflated state of the United States economy by lowering interest rates further or urging Mr. Greenspan to do so. His efforts may have some effect, but it may be a very slow process and we must make that a factor in our equation.

After America, with 28 per cent. of the world's GNP, the next greatest economy in the world is Japan, with 14 per cent. The Japanese economy has been slowing down markedly, with the corporate earnings returns of the major Japanese companies now looking utterly miserable. What the Japanese call "slowing" may still be quite fast by European standards, but, as a motor of economic growth in the early 1990s—in 1992 and 1993—Japan will not be as powerful as it has been, and we must take that, too, into account.

If we look further through the gloomy catalogue, we may note in passing that the Scandinavian financial system seems to have collapsed and that the whole of Scandinavia is ridden with bankruptcies. We may also note that, as the former Soviet Union disintegrates, it is dipping into the abyss of hyperinflation, already running at 200 per cent. The most serious deficiency of all is that the former Soviet Union is not too clear what its currency should be—let alone how it should be stabilised.

As yet, there is no agreement on whether to have a single currency—echoes of western Europe, here—or on whether that single currency should be the rule and, if so, how it should be stabilised. The former Soviet Union may go for several different currencies—a Ukrainian rouble or dollar or whatever, for instance—in which case, no agreement has been reached on how they should be stabilised. That issue has not begun to be resolved and, until it is, the effects on the rest of us will not be negligible. The process will have a destabilising influence on the rest of the world economy.

I come to the final factor in my catalogue of gloom. We must remember that, despite the promise of at least getting some of the participants who contribute to the instability of the middle east to talk to each other in Madrid and elsewhere, that deeply dangerous man, Saddam Hussein, is still alive and well and living in Baghdad. He is beginning to wait for the time when he can use renewed oil revenues to build up his arms once more and so increase instability, and when he can again threaten his neighbours in the middle east—as he will do as long as he is there. All that adds to our difficulties and to the weakening of confidence at a time when we want confidence strengthened to produce a good world recovery.

It may be said that I have painted too gloomy a picture. I have done so deliberately, to set out the context in which we must struggle to move out of our recession—which we are undoubtedly doing. It will be very tough going indeed, and we should have no illusions about that. I draw hope, nevertheless, from some of the things that are happening—sufficient hope to lead me to agree with my right hon. Friend the Chancellor that we are on the path to a recovery.

This island's exports are strong; we are performing remarkably well on that front.

We have heard a great deal about the state of our manufacturing industry. In fact, the manufacturing position is not nearly as miserable as Opposition Members keep insisting it is. As my right hon. Friend the Chancellor said, our manufacturing output is 25 per cent. higher than it was in 1979. Moreover, in its latest document on manufacturing, the CBI says specifically that it has deliberately understated the size of the manufacturing sector because—as my right hon. Friend the Chancellor rightly pointed out this afternoon—throughout the 1980s, and as the information revolution has taken place, increasingly large numbers of the activities previously designated as manufacturing activities have been contracted out to other firms.

I beg the Opposition to understand that, in the past 15 years, the essence of the manufacturing process has changed. The trend has been to increase the knowledge content—the software content—in the manufacturing process, and to reduce the hardware content. That makes for smarter, better, more efficient manufactured goods.

In reality, the word "manufacturing" itself is a bit out of date. The "manu" element is no longer the main element. We are now talking more about the brain and, if anything, the word ought to be "mentefacturing" or just "facturing". The essence of the process by which the key exports that will drive the economy forward are produced is the very high degree of knowledge content—much of it contracted out from the traditional manufacturing sector. By harping constantly on the old traditional manufacturing process, Opposition Members betray their lack of understanding of the fast-changing nature of the industrial process and of where we should really be putting our muscle.

There is another cheerful conclusion to be drawn from the British scene—despite the world gloom that I have described—based on the enormous inflow of foreign investment, notably from Japan, which has now invested no less than £13 billion in the United Kingdom. As the CBI again pointed out, in 1990 the Japanese invested more in the United Kingdom than in the whole of the rest of Europe. Those investments are accompanied by Japanese assertions—which we must take at face value—that the Japanese now regard Britain as the best European country and the one in which they will enjoy the best and most favourable welcome.

Above all—I hope Opposition Members will share my pride about this—the United Kingdom is the country in which the Japanese find work practices and co-operation at the workplace by representatives of the trade union movement by far the most satisfactory. The Japanese know that, whereas 12 years ago this country was cursed by perhaps the most counter-productive, difficult and destructive trade union movement on the planet, today—partly as a result of the many trade union reforms, partly as a result of the enlightened views of modern trade union leaders and partly as a result of changed work practices induced precisely by that heavy investment from Japan—we have one of the best trade union movements and some of the best work practices in the world. That is something in which we can all take pride.

Mr. Frank Dobson (Holborn and St. Pancras)

That is not what the Chancellor would say.

Mr. Howell

I am glad that the Opposition like that.

I draw cheer also from the German performance. Of course, the huge onward rush of the German economy is set to slow down a bit as the Germans run into a vast deficit to finance what was formerly east Germany, but a sort of German miracle is rolling along none the less. Many people may have doubted that this would happen, but there is now no doubt that the economy of east Germany—in sharp contrast, I am afraid, to those of Poland, Hungary and Czechoslovakia—is being turned round at a colossal speed.

It is also being turned round at a colossal cost, and the former west German taxpayer is having to put his hand deep into his pocket in order to finance the process. The net effect, however, is that east Germany will be operating in the way in which west Germany used to operate, not in five or 10 years but in two or three. That will provide a vast additional motor, as well as a vast additional competitive force, in the world market. Given that our exports to Germany are doing very well, they should do better still.

Finally, I suggest that we raise our eyes and look outside Europe. We may think that the structure of Europe is changing, but so is the structure of Asia, and there too, there are real prospects that might help increase our exports, provided that we get our policy and posture right. Around the southern edge of China, in Guandong and Fujian—the area of which Hong Kong is the pivot—the most fantastic growth is taking place, and a new miracle is unfolding even as we speak. The economy of an area of roughly the same size and population as Japan is beginning to grow at rates that make all our percentages in Europe look minuscule.

In the past year, Hong Kong has increased its exports to the surrounding areas by 29 per cent., and I am told by those who have travelled up the Pearl river recently that one can hardly tell where the Manhattan-like outline of Hong Kong ends and the Manhattan of the Pearl river, in the People's Republic, begins—so fast is the growth there of great new cities, skyscrapers and industries, all of which will produce a vast amount of wealth and products that will be highly competitive and all of which will offer opportunities for British investment, exports and markets in due course. That reinforces our need to get our management of the Hong Kong situation and its politics right so that we can benefit as mightily in Asia as we can in Europe.

Set against the gloomy tone in which I began my speech, those reasons show that we have opportunities. We have secured low inflation and that is very good. Interest rates need not rise, although there is much talk about upward pressure on interest rates. As dollar interest rates have gone down, the Germans have found that the pressure on them to raise their rates is drifting away. We will not be troubled by such problems. However, it will be very hard to seize the opportunities that are now opening out.

I have four brief propositions for my colleagues on the Treasury Bench to consider as they ponder how best to seize the opportunities that have been created by their policies as we come out of the recession. I will make the four points in question form, but of course we obviously want answers.

First, how do we mobilise more private sector funds for the infrastructure of this country? On the first day of the debate on the Queen's Speech, the Leader of the Opposition referred to private funds in public transport and said that the Government would not do that. The day before he said that—I know that 24 hours is a long time for the Leader of the Opposition—the Dartford bridge was opened. That enormous project involved private money mobilised in public transport. I hasten to declare an interest, as I am director of Trafalgar House, the company which designed, built, owns, operates and will eventually transfer back to the public sector, that enormous structure. I hope that that is one of many such projects to come.

I hope that my colleagues in the Treasury will learn lessons from that project. They will know that the restraints and constraints on the project were considerable and at one point threatened to sink the whole affair. If we are to develop such techniques, we must overcome some of the shibboleths and delays and difficulties that were embodied in the Ryrie rules back in the 1980s. They declared the mobilisation of private sector funds in infrastructure to be virtually out of bounds.

Secondly, how are we to build on the amazing capital-owning democracy that we have constructed which has brought millions of people into share-holding? Those shareholdings are shallow and passive. The dream of those of us who considered the capital-owning democracy a decade ago was of turning earners into owners in millions. We believed that that should give the capital-owning democracy real depth and involvement and that it should not simply be a matter of millions of people owning only a few shares. We must develop our ideas on that most aggressively.

Thirdly, how are we to create much stronger links between business and local administration and local government? I regret the fact that the uniform business rate has broken that link. There is a missing element in the regeneration and new dynamism in this country. We must recreate effective links between local administration and local business development around the country.

Finally, given that, like the United States, we have deep Anglo-Saxon liquid capital markets—which is fine, as they have mobilised capital very well—how do we combine them with more involved ownership and backing for long-term investment? The trouble with deep capital markets is that there is an easy availability of capital and a rapid transfer of capital and assets, but people are not prepared to hang on to those assets in equity long enough for long-term investments, particularly in research and development, to be mobilised and held.

I hope that my Treasury colleagues will address those four issues. They have set a good scene and there are many opportunities for us to pull ourselves out of the recession despite the unfavourable world circumstances that I have described. I congratulate them on the point that they have reached, but there is much more work to be done.

Several Hon. Members

rose——

Mr. Deputy Speaker (Sir Paul Dean)

Order. Mr. Speaker announced at the beginning of the debate that it may be necessary to impose a 10-minute limit on speeches. In view of the current state of play, I am glad to inform the House that that will not now be necessary. However, if everyone is to be called, I appeal most strongly for speeches to last not longer than 15 minutes.

6.54 pm

Mr. Denzil Davies (Lianelli)

The trouble with the right hon. Member for Guildford (Mr. Howell)—I say this without malice—is that when he says that he is being cheerful, he still sounds gloomy. He was right to be gloomy, and he should have remained gloomy to the end. There is probably more gloom about the British economy than about several of the economies that he mentioned in the gloomy passage at the beginning of his speech.

This debate is unusual because it comes against the background of the autumn statement, which is often debated separately, and the meeting in Maastricht at the end of the year, which may decide on economic and monetary union. No doubt we will have another debate before then on economic and monetary union. However, while the views of my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) on Europe have not always been similar to mine, I was pleased to hear him say that he could not see how it was possible for 12 Finance Ministers in ECOFIN—about which we hear a great deal these days—to control a European central bank established on the model set out in the present draft treaty prepared by the Dutch Government.

If we sign that treaty or accept its principle, that European central bank will be totally independent. It will be more independent than the Bundesbank, because no Government will be able to control it. If we pursue that path, we must realise that we will be transferring basic fundamental power over our economy to a supranational body of unelected, well-heeled bankers who will be able to take economic decisions that affect the livelihoods of millions of people. We should not allow that, because that would be a contempt of democracy.

The spirit of the age, and of Europe in particular, is for more, better and wider democracy. However, some people want to entrench canons and principles of economics into an absolute treaty. Devaluation, monetary control and inflation are important issues, but some people believe that they are absolute rights which should be enshrined in a treaty. I hope that we will debate those matters again.

Over the past six or 12 months, public discussion about the British economy has been more sterile than usual. The only questions that seem to have excited the commentators are: is the recession over? When will it end? Why is it not over? So far as I can see, unless there are fundamental changes in the British economy, the recession ain't going to be over for a considerable time because the economy is in such a state.

I disagree with the right hon. Member for Guildford. He does not like to talk about manufacturing. All right, let us talk about the production of goods that people buy in shops and the production of machine tools that industry wants to buy. Unless we can raise our production of goods, unless we can become more efficient and unless our manufacturing sector can become larger, there will be fundamental defects in the British economy and we will never get out of the recession.

Mr. David Howell

I am sure that that is a very good definition. However, the right hon. and learned Member for Monklands, East (Mr. Smith) asserted that we were at the bottom of the league. The CBI report on manufacturing, even in its narrow understated way, shows that we are not at the bottom. Some countries are above us and some below. In terms of manufacturing value added, we are doing reasonably well. It is not the miserable story that the right hon. Gentleman and his colleagues keep recounting.

Mr. Davies

The problem is that our manufacturing sector is shrinking. Perhaps certain parts of it are more efficient than they were 10 or 15 years ago, but the sector is shrinking. It now accounts for only 20 to 25 per cent. of the total gross domestic product of Britain. If we are to come out of the recession without increasing inflation, we need to sell more goods abroad and at home in competition with imports, but we will not be able to do that.

One has only to look at the economic forecasts. The forecast for next year is for a £9.5 billion balance of payments deficit. That is described in the Treasury's paper as a modest increase. It is an increase from about £6 billion to about £9 billion. On my mathematics, that is a 50 per cent. increase, against a background of, probably, rising unemployment, growth not exceeding 2 per cent., and, if not a recession, certainly no expansion in the economy. Our problem is that, however efficient it might be, our manufacturing sector is just too small to enable us to rely upon it. Its expansion could take us out of the recession without further inflation and increasing unemployment.

Sadly, whether we like it or not, Britain is now a service economy. Large sections of Britain, especially in the south of England, have opted out of the production of goods. In many parts of the south of England, only about 7 or 8 per cent. of the total employed population are employed in production—in making goods that can be sold and bought. Our service sector is now so large that it is an obstacle. It is concentrated in one part of the country, and it is an obstacle to economic growth and to our coming out of the recession without increasing inflation.

The service sector does not help the balance of payments. Only about 20 per cent. of what is produced in the service sector can be traded internationally. Everything else is consumed within the national economy. If the economy were boosted, most of the extra revenue and income would go into the service sector, money would be spent on our imports, and the balance of payments would get worse.

Also, the service sector is inflationary. In most countries, a service sector is inflationary. For instance, Japan's service sector is very inflationary, but Japan is able to keep down its general rate of inflation because its manufacturing sector is so large and efficient. That is not the case in Britain. Until last October, the RPI showed that the service sector component in terms of inflation was 9 per cent. The ability to be more productive is more limited in the service sector. By its nature, the service sector of any economy is bound to be an inflationary part of that economy. Of course, unless we have a large efficient manufacturing sector, inflation will always be higher than it otherwise should be.

During the debate on the exchange rate mechanism, we were told that entry of the ERM would exert discipline and that inflation would come down as a result. That will happen in respect of manufacturing industry, but entry into the ERM has very little effect upon the service sector. The service sector is not affected by the ERM, because the services are not internationally competitive. A large service sector and a small manufacturing sector inhibit growth in the economy.

Ironically, we have a problem with unemployment in the service sector in the south of England. One reason for that is that most of the thousands of people who travel on those wretched trains to come to London to work are either unskilled or semi-skilled, to use the terms of the manufacturing industry. They work in shops, offices, building societies and banks. They sit in front of little screens and press little buttons, but no skill is involved. It is no condemnation of those people, but that is semi-skilled or unskilled work.

When there is a contraction in the economy, when the money supply has to be cut, there are no other jobs for them, because they have no skills. When the people who buy and sell shares in the City lose their jobs, they have nowhere to go, either, because they have no skills. Indeed, in many parts of the south of England, there are no other jobs to go to because the manufacturing sector—the productive sector—has been almost wiped out.

Another irony is that the service sector needs inflation. The Government seem to think, "If we can keep inflation down, everything will be fine and we will be electorally popular." Not at all. There will be inflation, an increase in the money supply and, especially, house price inflation. I was going to ask the Chancellor whether his views about defeating inflation apply to house price inflation. I am not sure whether they do. Of course, with house prices stagnant or falling, there are not many votes for the Government—certainly not in the south of England.

The service sector—the financial sector which produces nothing—needs inflation. It needs an increase in the money supply and high house prices to fuel conveyancers, estate agents, building societies and lending institutions. The Government wanted to create a property-owning democracy, and they did so, but that property-owning democracy needs inflation to maintain itself.

If we are to move to an era of low or nil inflation and to the European way of doing things, whereby house prices will not increase, I do not know what will happen to the economy of the south of England or to unemployment. Perhaps the Government have not considered those matters. The size of the service sector is an impediment to economic growth because it depends upon inflation to a considerable extent.

Another way of getting out of the recession is by increasing public expenditure. The Chancellor did his best in the autumn statement. His statement implies that we are not yet out of the recession, so let us borrow some more, increase the PSBR, and do the Keynesian thing which, a few years ago, we did not think we should do, and perhaps that will get us out of the recession by the time of the election. That will not work. Interest rates will go up.

The PSBR is also back. The PSBR was supposed to disappear—that terrible thing that Labour Governments had. Under the sound money party, it is back with a vengeance—£20 billion next year. If we take privatisation receipts out of the fiddle which is contained in the heart of the forecast, the figure will be £20 billion or £25 billion. Of course interest rates will go up. I do not believe that the PSBR can be financed. The Government are hoping that the election will have come and gone and that interest rates will go up to try to finance that PSBR.

My right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) said that, if the PSBR exceeds 3.5 per cent. or whatever, the ghost of Jacques Delors will descend upon Great George street. He will be there all the time. When the IMF people came to us, they stayed in Brown's hotel for about two months and then they went. They filled in their forms and off they went. But Jacques Delors's ghost will be here all the time. He will not move. He will watch the PSBR every year.

The right hon. Member for Worthing (Mr. Higgins) seemed to think that somehow—I take issue with him, despite his great knowledge—it is because of a common currency that we need controls over public sector borrowing. If we transfer monetary authority and control of our interest rates to a European central bank and still retain 12 national Governments, there must be control over the amount of money that those 12 national Governments borrow, because that borrowing will affect the interest rates which the central bank will lay down.

A consequence of monetary union is control over our public borrowing. It must happen. If we are to accept the transfer of monetary authority, we must accept control over the public deficit or the public sector borrowing requirement, or whatever it is called. Therefore, there is no salvation in increasing public expenditure unless we deal with the fundamental problems of the British economy. Nor will there be any salvation through cutting interest rates, unless we deal with inflation and its associated problems.

The Government are in a hole, as, unfortunately, is the British economy. The trouble is that the British establishment—we have heard from some of its members tonight—do not really believe in production or in manufacturing industry. They do not want to know about manufacturing; nor do the so-called "chattering classes", who like to think of themselves as outside the establishment but who are really part of it.

They are prepared to march for all sorts of worthy causes. They will march against the bomb and for the ozone layer. They will write constitutions and entrench a Bill of Rights, but they will not march for manufacturing industry. They will not meet in Manchester, Birmingham, London or anywhere else to discuss the problems of wealth creation and of manufacturing, because such matters are too difficult. Instead, they chatter away about all sorts of things. The pressure groups are the same. They come along with their begging bowls, not caring about the other pressure groups, because all they want is more money. Again, however, there are no pressure groups for manufacturing industry,.

As I have said, British society is not interested in manufacturing industry, but if we continue to take no interest in manufacturing and if we do not do anything to help it in the 1990s, our public expenditure will have to be restricted. Our public services will be run down and we will not have the trains, the roads or the health service that people want.

Our first priority must be the production of goods. In the 1980s, the Government lost a marvellous opportunity to try to do something about producing goods. They threw away that opportunity, and with it a chance that no other Government have had since the war. Although that opportunity has gone, my right hon. Friends know what has to be done and they understand the difficulties of doing it, but only a Labour Government can do it.

7.11 pm

Mr. Malcolm Thornton (Crosby)

The right hon. Member for Lianelli (Mr. Davies) tempts me, as someone who comes from Merseyside, to say that I will not be lectured by him about the problems of manufacturing industry. The policies of the Government whom he served left a bitter legacy on Merseyside. Job after job was destroyed because of Government intervention and because of pandering to trade union practices which were a disgrace. That legacy is still with us today, not only on Merseyside but in many other parts of the country. That is a matter of fact which we must all accept.

The right hon. Gentleman began by saying that this is a rather unusual debate on the Queen's Speech. He referred to the forthcoming summit in Maastricht. None of us would disagree with him about its importance. One of the reasons for its importance is that it marks the start of a general election campaign. Let us be honest about it—it marks the last Session of this Parliament: some time, within the next six months or so, we will be going to the electorate. The electorate have the right to expect the political parties to set out their stalls and to say what they stand for and what they will do.

Today's debate on the economy is central to any political party's presentation of its future policies. That is why I spent some time this morning looking at some of the things that have been said about this matter. I read some of the comments of the Chancellor of the Exchequer who said that the latest forecast showed a PSBR of £10.5 billion this year and of £11.5 billion for the following year. That does not quite square with what we have heard, but those were not the words of my right hon. Friend the Chancellor of the Exchequer, but of the right hon. Member for Leeds, East (Mr. Healey) on 15 December 1976, when he came to the House for the ninth time since the Labour Government had been elected with yet another series of measures designed to try to restore the fortunes of the economy that his Government had so signally destroyed.

The right hon. Gentleman said that he wanted to reduce the PSBR and that its level of £10.5 billion comprised about 9 per cent. of the gross domestic product. He added: To achieve these objectives, the Government are proposing adjustments to current plans amounting to £1½billion in 1977–78 and £2 billion in 1978–79… The fiscal adjustment in both years will come mainly from savings in public expenditure rather than increases in taxation. This is for two reasons. First, although the level of our public expenditure, as a proportion of GDP, is no higher than in some other industrialised countries, it has grown much more rapidly in recent years than has our industrial output, and our industrial output itself is relatively low. The House should remember that that was said by a Labour Government in 1976.

The right hon. Gentleman continued: Secondly—and perhaps this is not unconnected with our low level of industrial output—people at work are already highly taxed on their incomes, and face a further drop in their living standards in the coming year…Inadequate financial incentives to work and to invest could put our economic recovery at risk. Who could possibly disagree with that? Is not that exactly what we have been saying—that if a Government overtax people, they destroy the incentive to work?

However, much more was revealed that day, when the right hon. Member for Leeds, East reduced local authority expenditure and said: There will be a reduction in housing capital programmes…New construction will be suspended or curtailed in several other central and local government programmes, including roads, other environmental services, school building…and capital spending by the water authorities. That was the start of the legacy that we inherited when we took office in 1979.

However, that was not all. Let us consider education, a subject in which the House knows that I take a keen interest. The right hon. Member for Leeds, East said: Besides reductions in school building…the programme for current expenditure on education will be reduced by economies in the administration of school meals, by deferring the operation of Section 9 of the Education Act 1976 dealing with school milk, and by other minor savings". That is the real effect of socialism, but there was still more. The right hon. Gentleman also reduced the defence budget, saying: Despite the big cuts which we have already made in defence expenditure…We are looking to defence for further savings of £100 million in 1977–78 and £200 million in 1978–79. Even overseas aid was cut, when the right hon.Gentleman said: There will be reductions in the provision for overseas aid."—[Official Report, 15 December 1986; Vol. 922, c. 1525–29.] That was the speech made by the Labour Chancellor in 1976. It was an appalling indictment of the inability of a party that was elected, having made very much the same sort of promises that the Labour party is making today, to deliver its promises to the British people. What a contrast to my right hon. Friend's statement yesterday.

Strangely enough, the figures tie in. My right hon. Friend is expecting a PSBR of £10.5 billion, but instead of that accounting for 9 per cent. of GDP, it constitutes only 1.75 per cent. of GDP. Instead of cutting the public sector programmes, we are increasing them. We are increasing expenditure on health, housing and education. I was delighted to note that the Government have adopted the recommendations of the Select Committee on Education, Science and Arts that we should increase expenditure to improve the standards in our schools. The House has heard me recommend that course many times. We have also seen increases for defence, transport and, yes, for overseas aid. What a contrast.

It would be foolish for any Conservative Member to pretend that mistakes have not been made. No Government have not made mistakes in their career. Sometimes those mistakes can be rectified and, indeed, we have gone a long way towards rectifying the mistakes that I believe were made about two years ago.

We have also shown that it is possible to expand services and maintain strong control of public expenditure. We have shown beyond peradventure that only with a strong economy can we expand the services that people want expanded.

We are seeing a new agenda being set for the 1990s. We have transformed the economy of Britain and done much to undo the damage done by the disastrous policies pursued in the 1970s, which led us into the position that we faced in 1979. We are seeing the benefits of that transformation flow through. Improved services are required, but they can be provided only with a strong economy and a Government who are determined to provide a strong economy. That means a Government who are not afraid to take tough and sometimes unpopular decisions.

We have taken those decisions many times. My right hon. Friend the Chancellor and his colleagues have shown their determination not to indulge in some cynical pre-election giveaway but to keep the economy firmly on track. A change in philosophy has brought about the transformation in the economy. My right hon. Friends show every sign of continuing to apply that philosophy with great benefits to the British people and the economy of Britain.

We cannot return to failed policies. They failed in the past and are doomed to fail again. When is a priority not a priority? I suggest that it is when everything is a priority. By definition, priorities stand out from other items. However, Opposition spokesman after Opposition spokesman says that every spending area is a priority. They do not seem to have learnt anything whatever from the past.

A study by Liverpool university's economic model shows that if Labour's policies were pursued they would result in declining growth, growing inflation, unemployment and worsening incentives. It estimates the cost to be at least £29 billion per year. It says: it hardly seems possible that they can so comprehensively ignore the lessons of the past decades…these lessons are:

1. 1. that high borrowing and its accompanying money supply growth lead to inflation.
2. 2. that worsening incentives, whether by taxation or regulation, reduce economic growth".

We are already seeing, in industry, the City and many other areas, shudders of horror at what it would mean if the Labour party were elected to government and pursued one half of the wild spending plans that it has put before us so far. However, Labour's Treasury spokesmen signally refuse to admit to the cost of those plans. They will not say what their proposals would cost. We have tried to cost the proposals. We have tackled Opposition Treasury spokesmen on whether they would back up the spending pledges. They have failed to do so.

In his speech yesterday, my right hon. Friend the Chancellor showed that the economy is firmly on track. I listened this morning, as I am sure that many hon. Members did, to the "Today" programme on the BBC. In the usual way, it had to scour the corners of the country to find Oliver Twists asking for yet more. As my right hon. Friend the Chancellor said this afternoon, it does not really matter whether we have given enough or whether we should give more or less. The fact is we have increased our spending programmes. When the Government do things which they are constantly urged to do, not only by the Oppposition but by other people, they receive little credit. I get tired of that.

I welcome yesterday's statement, because it sets out firmly the Conservative party's intentions not only for the general election year but for future years. It shows how we see the economy going and that prudent policies which are working will continue to work. The Conservative party puts that firmly before the British people.

We must expose the prospectus—if, indeed, it is a prospectus—that the Labour party put before the British people. We must show clearly that it is not costed and will not be costed. The only yardstick by which we can measure it is past performance. On past performance, the Labour party fails on every single count. My message to my colleagues on the Treasury Bench and all my right hon. and hon. Friends is that, during the next months, we must expose this sham. There is no quick and easy way to economic recovery, as the Labour party pretends, whether in manufacturing industry or elsewhere.

The Labour party must come clean and tell the electorate how it would create an economic recovery. It must cost its programmes so that the electorate can make a judgment. If the Labour party does not come clean and cost its programmes and continues to be unwilling to do so, the electorate will make their judgment. They will judge the party on its record, and that will mean that the Labour party will lose at the next general election.

7.26 pm

Mr. Richard Caborn (Sheffield, Central)

I do not know whether the hon. Member for Crosby (Mr. Thornton) has read the amendment tabled by my right hon. Friend the Leader of the Opposition. The amendment sets out a framework for manufacturing. It is interesting to see several Conservative Members now reading the amendment. The Gracious Speech offered nothing to the 7,500 unemployed people, or 21.7 per cent. of the population, in my constituency. The Gracious Speech does nothing for manufacturing industry in Sheffield. The hon. Member for Crosby referred to manufacturing industry.

The manufacturing base in Sheffield was just recovering from the first recession in the early 1980s only to be hit by the second recession. I do not know where some Conservative Members obtain their advice or whom they consult, but if they spoke to some of the industrialists in Sheffield and south Yorkshire, which was a major manufacturing area and a centre of excellence in engineering and steel, they would find that people are extremely disgruntled. They believe that the Government have abandoned manufacturing industry and allowed it to be opened up to competition from companies in European countries and elsewhere which had support from their Governments.

That was graphically illustrated by my right hon. and learned Friend the Member for Monklands, East (Mr. Smith), the shadow Chancellor. He set out clearly where the Government had abrogated their responsibility to manufacturing and for wealth creation. The social consequences of that decline in manufacturing have been picked up not only in my area but in many industrial areas by the local authorities. They have had to do so with reduced budgets. For example, Sheffield has to cope with a substantial reduction of £30 million in its budget, yet it must deal with all the social problems that have arisen from the decline of the manufacturing base.

Mr. Gregory

Why does the hon. Gentleman continue the Labour party's obsession with manufacturing? If he truly represented the people of Sheffield and south Yorkshire, he would give at least a cursory glance at the service sector. He has a major part of the Midland bank in the area and the area is a major centre for tourism. Yet we never hear from him or the Labour party about that. Instead, Labour Members constantly run down that part of the country and the electorate who work in the service sector.

Mr. Caborn

I am pleased with that intervention. I hope that the hon. Gentleman will take great care to listen to my speech because I shall cover many of the matters to which he refers. I think that he will agree that the Government have not supported industry in those sectors either.

As the amendment outlines, we need to create a framework within which commerce and the service sector as well as industry can flourish. That was once again graphically outlined by documentation on manufacturing industry put before the country by the CBI just before its conference. Yet again, the Government have ignored the advice. Yesterday, in the autumn statement, and today, they have walked away from the solutions that the CBI was asking to be implemented.

Like many other cities, Sheffield has tried in the face of adversity to develop a partnership not only between local commerce and industry but also including local authorities, the academic institutions, representation from the community, the development corporation and the TECs. That partnership has been operating for about six years, and it embarked upon a programme to find the highest common factor in the city rather than aiming for the lowest common denominator.

In the past three or four years, it has developed the infrastructure of the area—the airport and the supertram. Technology transfer has been developed. There is a new technology centre and science park, which is a partnership between the university, the polytechnic, the chamber of commerce and the local authority. Cable is another development, and Sheffield has developed an investment trust—the Hallamshire Trust—and Meadow Hall, a major service sector development. The partnership covered all those areas.

The development was an attempt to diversify away from a purely manufacturing base, to try to develop service industries, to introduce technology transfer into the structure and to ensure a transport system that was adequate to carry people and goods in and out of the area. There has been a combined effort, even in the face of all the obstacles that have been put in the way by the Government.

After a fairly meticulous survey throughout the country, about five years ago Sheffield decided to develop a centre of excellence for sport. We spent £150 million to develop some of the best sporting facilities in the world—the swimming complex in Sheffield is ranked as the best in the world—and we ran the world student games.

What was the Government's attitude? At first the Secretary of State for the Environment wrote to say that he would support the development but that there would be no financial commitment to it. After embarking on the project, we got little support from the media or from central Government. On 14 July 1991, we staged the largest sporting event that has taken place in the world this year. There were 6,000 participants and 100 countries were represented. When Princess Anne opened the games on 14 July 1991, seven Sports Ministers from around the world were present and more than 100 embassies were represented in Sheffield on that day. The International Olympic Committee was represented, and there were experts from around the world representing most of the 11 sporting disciplines to be performed in the following 10 days.

Those games were the first multi-sport event in the world to include athletes from the new nation of Namibia. That event on British soil was the first time that 200 young people marched under the flag of the new Germany. However, no senior Minister from the British Government was present—not even the Minister for Sport. When the Canadian Sports Minister asked, "Where is the Prime Minister for the biggest sporting event in the world this year?", we said, "We have not even got a senior Minister here."

I am telling the hon. Member for York (Mr. Gregory) what Sheffield, South Yorkshire and the north of England did—gave a window of opportunity to the world and left a legacy in Sheffield, and we shall reap the fortunes of it in years to come. The Government could not even acknowledge that type of development among the public and private sector, the academic institutions and 6,000 volunteers who made the event happen. Had it not been for the presence of my right hon. Friend the Member for Birmingham, Small Heath (Mr. Howell), the shadow Minister for Sport, the attitude of many sporting organisations from around the world would have been much worse. He at least smoothed over some troubled waters and said that, even if the Government did not support the event, at least the majority of the British people did.

I raise the subject because, as the amendment says, there needs to be a new structure within the regions to carry out the regeneration that the Labour party stands for and has been advocating for the past two or three years. A delivery mechanism is necessary. Many projects in the north of England such as the world student games are being stifled by centralisation of power. That applies not merely to central Government but to the media and to major decision-makers because they are domiciled in London or in the south-east.

A branch line of the civil service exists—a few puppets are put in an area and they feed back to central Government. All the decision-making is here. It is not influenced by what is happening in reality in the regions where wealth creation exists whether in the service sector or the manufacturing sector. The amendment challenges the structures that govern us, the structure of how decisions are made, decisions that impinge on industry and commerce in the regions.

The centralisation of power has once again been graphically underlined because hon. Members have been talking about public expenditure—where will we get money from and where will it be spent? The North of England Regional Consortium studied the distribution of public expenditure. I shall not bore the House with all the figures, but some should be given and probably the most graphic are the figures for expenditure per head of population.

In the north of England in 1989–90 total public expenditure per head of population was £1,707. In the south-east it was £1,876. If one takes investment-led expenditure by the Departments of Defence, Trade and Industry and Transport, more devastating figures emerge. The 1989 figure for the north of England is £248 per head, whereas it is £546 in the south-east. There is a major disparity in the distribution of public expenditure and, moreover, between 1981 and 1990 the trend was worsening.

The overheating in the south-east has been aided and abetted by the Government's decision to continue that trend. That is in stark contrast to what is happening in the rest of western Europe. Every country outside the United Kingdom has gone for some form of devolution or regional government. The West German experience has been mentioned many times, and it has been suggested that that is the way that we should proceed. If one studies the West German experience closely, one finds that the lander structure has asisted the development of wealth creation and of manufacturing industry far better than the centralised structure that we have in the United Kingdom.

The amendment begins to tackle the north-south divide and to make proposals that may start to regenerate the under-utilisation of the north of England. We have to stop this debacle. We have to stop the Secretary of State for the Environment going round the country like a modern-day Haile Selassie, dropping crumbs from the master's table in the form of city grants. We are a modern industrial nation, but authorities are having to bid for a small pot of money. It is like a Dutch auction. We are trying to regenerate our industrial base in the north of England. Surely civil servants and those in London are not the fount of all wisdom. There are industrialists and people in commerce, local authorities and the trade unions in the regions who know what is required for the regeneration of their area. Yet the Government pay them scant regard.

The amendment is constructive. It lays the framework that the CBI and British chambers of commerce have asked for—not to pick winners and losers, but a structure in which industry can operate. It would give industry a fighting chance. Industry is asking for no more and no less than what is happening across western Europe.

In support of that argument, Howard Davies, the controller of the Audit Commission, in his article in the Financial Times of 28 October, said: Yet the European Commission is open about its desire to create a Europe des regions. There's a European Assembly of Regions and regional and social policy are oriented towards regional needs. It's certainly arguable that without some sort of regional structure, the UK will be increasingly disadvantaged with no way of influencing Community regional policy. Clearly there is support for the type of structure described in the amendment of my right hon. Friend the Leader of the Opposition. What Tory Members have said does not hold with industrialists, chambers of commerce or, indeed, the British people.

Several Hon. Members

rose——

Mr. Deputy Speaker

I call Mr. Gregory.

Mrs. Audrey Wise (Preston)

On a point of order, Mr. Deputy Speaker. As there is now a special report from the Select Committee on Health about the breach of privilege, may I ask you to confirm two points of procedure? First, am I correct in thinking that the matter will go automatically to the Select Committee on Privileges? Secondly, what is the position of the hon. Member for Esher (Mr. Taylor), parliamentary private secretary to the Secretary of State for Health, who has disclosed only this week that he was in possession of confidential information as far back as July, pending the reference to the Select Committee on Privileges?

Mr. Deputy Speaker

As I understand it, the hon. Lady is saying that there may have been a breach of privilege. If that is so, I recommend her to follow the normal course: to write to Mr. Speaker and inform him of the matter so that he can consider it.

Mrs. Alice Mahon (Halifax)

Further to that point of order, Mr. Deputy Speaker. What is the position of the Secretary of State for Health, who acknowledged that the report was in the wrong hands and ordered its destruction, with reference to the Select Committee on Privileges?

Mr. Deputy Speaker

That would be a matter for the House to consider, if the Committee reported to the House. If there is an allegation of a breach of privilege, the correct procedure is to write to Mr. Speaker.

Mr. Bob Cryer (Bradford, South)

Further to those points of order, Mr. Deputy Speaker. I have not fully understood them, but is it true that they are about a leak from the Select Committee on Health, involving a Tory Member who is linked to the Department of Health, to weaken a report that was critical of hospital trusts? If that is the case, it is more than simply an individual breach of privilege; it undermines the whole Select Committee system that the House set up for the purpose of scrutinising and examining Departments.

It seems from my hon. Friends' remarks that a Tory Member has conspired with civil servants to leak information and even to arrange for amendments to he tabled to the report, which were then backed by Tory Members. I should be grateful for your guidance, Mr. Deputy Speaker, but it seems that all hon. Members who voted for those amendments in the knowledge that they were part of a shabby conspiracy should also be dealt with by the Select Committee.

Mr. Malcolm Thornton (Crosby)

Further to that point of order, Mr. Deputy Speaker. As the Chairman of a Select Committee that has suffered from the effects of a leak, I should like to ask for your advice. Is it not the case that there is a procedure which this House has laid down and which should be followed in this case? When the procedure is followed, the appropriate Committee investigates the matter and then makes appropriate recommendations. The matter raised is not a point of order that should be pursued in this way at this time.

Mr. David Hinchliffe (Wakefield)

rose——

Mr. Deputy Speaker

Is this on the same point?

Mr. Hinchliffe

On a different point of order, Mr. Deputy Speaker. As a member of the Select Committee on Health, my central concern is that we may well have witnessed——

Mr. Ian Bruce (South Dorset)

What is the point of order?

Mr. Hinchliffe

I shall come to the point of order. It seems that the Department of Health may well have drafted amendments that were moved in July by a Tory member of the Committee—[HON. MEMBERS: "What is the point of order?"] My point of order is this: will the Secretary of State for Health make a statement on this matter? The House has a right to know whether his senior officials and his parliamentary private secretary were directly involved in this shabby affair.

Mr. David Winnick (Walsall, North)

Further to that point of order, Mr. Deputy Speaker. You gave the advice to my hon. Friend the Member for Preston (Mrs. Wise) that the matter could be taken to the appropriate Committee and that she should write to Mr. Speaker. This is more serious than that. Surely it is a matter for the House to decide as early as possible.

In view of the serious allegation that civil servants were involved in framing amendments which were then put to the Select Committee in the name of a member of that Committee, and if the Secretary of State was in any way involved, may I suggest that he should make a statement? Even if he was not directly involved, he is responsible for his Department. A request should be made to the Secretary of State that he should make a statement tonight. We should not wait until next week.

The Select Committee system was established in 1979 on the basis that the Committees would be separate from the Ministries. If, however, they have become merely a forum in which the Secretary of State can use some Members for his own party's purposes, it is a serious matter. The Secretary of State should come here tonight to explain what has happened.

Ms. Harriet Harman (Peckham)

rose——

Mr. Deputy Speaker

Order. I will hear the hon. Lady, but I remind hon. Members that they are interrupting an important debate on the Loyal Address.

Ms. Harman

Further to that point of order, Mr. Deputy Speaker. We are facing an unprecedented situation. Would it not be right for the Minister to come to the House? It seems that the Government, having lost the arguments on the health service with their own Back Benchers, sought to interfere with the Select Committee to block its report on opting out. Should not the Minister be here to explain the complicity of his parliamentary private secretary in the activities surrounding this report?

Mr. Deputy Speaker

All I can say to the House is that, if it is alleged that there has been a leak from a Committee, there are well-established procedures for either the Committee or the House to deal with it, depending on the circumstances of the case. There is nothing more that I can say now.

Mr. Roger King (Birmingham, Northfield)

Further to that point of order, Mr. Deputy Speaker. Is it in order for copies of the report to be widely circulated on the Opposition Benches? Even the hon. Member for Peckham (Ms. Harman), the Opposition spokesman on health, seems to have a copy of the document. Is it on general release for all colleagues?

Mr. Deputy Speaker

Order. We have had a very good run on this. From what has just been said, the matter may be automatically referred to the Privileges Committee. We cannot take the matter further now.

Several Hon. Members

rose——

Ms. Dawn Primarolo (Bristol, South)

On a point of order, Mr. Deputy Speaker.

Mr. Deputy Speaker

Order. I said that I shall take no more points of order. An important debate has been interrupted——

Ms. Primarolo

On a point of order, Mr. Deputy Speaker.

Mr. Deputy Speaker

Order. I have done all I can to assist the House and explain the automatic procedures in such cases.

7.50 pm

Mr. Conal Gregory (York)

I return to the important matter of the Gracious Speech. I am sure that the House welcomes the opportunity to discuss the economy in detail.

The Government's approach to the economy is in stark contrast with that of the other political parties represented in the House. The Government are clearly committed to reducing inflation. Since we joined the exchange rate mechanism, interest rates have fallen from 15 to 10.5 per cent. and inflation has fallen from 10.9 to 4.1 per cent.—close to the level in Germany. Although the Opposition do not want to hear these words of wisdom, that means that in the past year, Britain recorded the largest fall in inflation in the European Community, which is no mean achievement. Manufacturers and those leading the service sector in insurance, banking, tourism and legal services, rightly fear that a forthcoming Labour Government would immediately opt for devaluation, and the rest of Europe recognises that genuine worry.

The Gracious Speech was heard against the background of encouraging reports from the Confederation of British Industry, the Association of British Chambers of Commerce and the Institute of Directors. Their combined view was that the end of the recession was in sight. Indeed, exports have risen to the point where the trade deficit with Europe has been eliminated.

The amendment in the name of the Leader of the Opposition refers erroneously to the Government pursuing policies that would damage investment. Quite the contrary: only the Conservative programme will ensure investment and reinvestment. It is in stark contrast to the Labour party's policy, because the Labour party is pledged by clause 4 of its constitution to renationalise companies such as British Airways, BAA, British Steel, British Gas, Rolls-Royce and even British Telecom.

Such socialist policies would be disastrous for Britain. They would mean stealing shares from employees, who had owned them perhaps for the first time, reversing companies' efficiency, putting union barons in control in place of competent managers, and raising taxes to record levels to pay for the dogma of greater socialist control. Not content with that, Labour's policies would reduce the scope for individuals to invest in the British economy, which is the envy of the western world.

One recalls with a shudder the view held by travel agents of British Airways before denationalisation. They rated it even lower than Ethiopian Airways. Today, the denationalised BA is a flag carrier which is envied throughout the world. Similarly, the chance of finding a clean working public telephone was slim under Labour. Today, consumers find British Telecom's services vastly improved. In the days under Labour, who would have thought that they would find a British Telecom that would compensate for delays in receiving telephonic messages? Competition and denationalisation together have achieved that.

However, it is not only in large companies that Labour would aim to reverse our recovery. Yesterday, the hon. Member for Dagenham (Mr. Gould) made the extraordinary comment: There will be no provision for capping in any legislation"—[Official Report, 6 November 1991; Vol. 198, c. 472.] that Labour introduces. That was not a throwaway remark but obviously a considered one. When my right hon. Friend winds up the debate, will he say whet her he agrees that such a spendthrift policy would mean no control over the loony left? We could expect the excesses of Camden in cities such as York. Just imagine studies by Karl Marx becoming the subject of a council presentation. Such are the heroes of the far left that they could even invade local government working.

For far too long, public services have not been adequately accountable. The citizens charter should reverse that, because it will ensure that the individual counts. My right hon. Friend the Prime Minister's initiative will certainly be attacked by the trade unions, which foresee their cosy world being put under the spotlight. Sadly, I predict confrontation between the Government and trade union barons like the newly elected Transport and General Workers Union chief, who is an avowed communist. Instead of seeing the benefits of the charter, union activists in York simply carp. One despairs that they will ever act constructively and champion the cause of the individual, rather than big brother.

The Gracious speech referred to plans to denationalise British Rail. Such a move is long overdue. It would benefit users—passengers and freight operaters—rail employees and taxpayers. We have already seen the success of those parts of British Rail that have become independent. I refer to British Rail Engineering—BREL—Golden Rail, Sealink, the former BR hotels, and on-station catering.

My right hon. and learned Friend the Secretary of State for Transport suggested last month that British Rail need not wait for the enabling Bill to accept competition. British Rail already accepts limited links with the private sector. In its publication, "Future Rail", it calculated private sector investment in freight as some £3 billion and has joint ventures in, for example, parcels, property development, station retail and catering outlets. Such collaborative arrangements are welcome, but do not ensure full competition, participation by employees in greater productivity or fair value for taxpayers.

Let the House consider a key part of British Rail that has been denationalised—BREL. In contrast to the days of the old socialist era, when BREL was under their control, its order books in York, for instance, are now full. There is today a spirit of confidence and export orders are being won. Let the House compare the figures for the basic weekly pay of BREL shop floor employees with the basic rate for staf at British Rail's maintenance division. Staff in the denationalised part of the company enjoy between 24 and 31 per cent. higher pay, although they do comparable jobs in comparable pay bands for the same 39-hour week.

In addition, when BREL was released from the shackles of the state sector and was privatised, most employees were awarded free shares which, according to their most recent valuation, were worth more than £450. Yet the Labour party threatens to renationalise such parts of British Rail, forcing staff in York and elsewhere to take a substantial drop in their earnings.

Although Conservative Members are disappointed that British Rail has not used its resources efficiently, we are not prepared to see its poor performance continue. That is why the Government announced yesterday that they have added almost £1 billion extra to their plans for British Rail for 1992–93. That means that British Rail's total external finance—borrowing and grant—will amount to more than £2 billion next year, which is substantial support. Indeed, it is greater investment in British Rail than in the days of steam. The high increase in taxpayers' support announced yesterday will allow British Rail to proceed with investment despite lower forecasts for revenue and asset sales. This will include the new passenger rolling stock through the channel tunnel from London and the north as well as freight wagons and infrastructure works.

Let us now see British Rail place its orders for better rolling stock—which can be built at its carriage works in York—and organise better on-train services, with catering in evidence on every train. I travel on trains frequently and I have yet to come across a train journey on which, throughout its length—unlike American and French trains—catering is available all the time.

Let us see more developments at railway stations. British Rail is one of the largest property owners in the United Kingdom, but its lack of imagination is deplorable. In the whole of Britain, there is only one railway station at which one can cash a cheque. Compare comparable cities—for example, York with Utrecht. At the railway station in Utrecht, one can find perhaps 250 shops, offices and restaurants to which people want to go. Is there a railway station anywhere in the United Kingdom to which one would take one's partner for a special lunch or evening out? There is not, and that will not be conceivable so long as British Rail stays shackled in the state sector.

Despite British Rail's lack of progress, the Conservatives are committed to the railway industry. We have given it the taxpayers' support it deserves and have not starved it of the working capital and investment in the way the socialists did. The paymasters of the Labour party—in this context, the NUR and ASLEF—deplore such success, deplore the idea of the staff having shares and deplore the export achievement and lack of dependence on the closed shop.

Looking introspectively and backwards, Labour refuses to say how far it will borrow, how much it will borrow and by how much it will increase taxes. Labour's policies could never achieve the Conservative success in terms of higher living standards. It is right to consider the Gracious Speech in that context.

Under Conservative rule, the real take-home pay of the average family man with a wife and two children has risen by over a third, compared with less than 1 per cent. under Labour. The Gracious Speech builds on that success, ensuring a stable, non-inflationary recovery, a form of success which allows the individual to take some responsibility. That should be heartily welcomed.

8.2 pm

Mr. Peter Shore (Bethnal Green and Stepney)

The hon. Member for York (Mr. Gregory) began by referring to membership of the ERM and attributed to our joining a number of beneficial results, which he cited. I shall comment on our experience in the ERM, an aspect of our economic situation which has not received the degree of attention it deserves. I shall also refer to certain developments in the economy in the period since we joined the ERM and make certain deductions from them.

The hon. Gentleman referred to what he called our current account deficit having been effectively eliminated during the last two years. As he knows, the figures show that for this year we shall have a deficit on current account of £6.5 billion, that for next year we have a forecast deficit of £9.5 billion, that in 1990 we had a deficit of £14 billion and that in 1989 we had a deficit of £20 billion.

In other words, in a four-year period we have loaded ourselves with debt on external account, in our current account transactions, of no less than £50 billion. That is, for the most part, short-term money because it has been attracted in to cover those monumental trade deficits. In no period of British history—under Labour, Liberal or Conservative rule—have we fallen so grievously into deficit in our overseas current account and trading account. It gives me no pleasure to recite those facts because they are extremely serious, not only for the present but for the future.

Mr. Quentin Davies (Stamford and Spalding)

rose——

Mr. Shore

No, I will not give way.

The problem is not reflected simply in that appalling accumulated trade current account deficit.

The hon. Member for York went on to cite the falls in MLR or interest rates since we joined the ERM. He rightly said that from 15 per cent. in October 1990 it has now fallen to the considerably lower level of 10.5 per cent. But he omitted to set alongside that another highly relevant figure, which is that, when we had an MLR of 15 per cent., we had an inflation rate of 10.9 or, for ease of reference, 11 per cent., whereas today we have an MLR of 10.5 per cent. and an inflation rate of just over 4 per cent.

It is the difference between the rate of inflation and interest rates that gives the real effect of interest rates. The gap between the rate of inflation and interest rates of just over a year ago, when we joined the exchange rate mechanism, was a 4 per cent., as it were, real interest rate charge on borrowers. Today, 13 months later, the gap is 6.5 per cent. That is the real burden of interest rates on borrowers. In other words, far from the pressure of high interest rates easing, they have increased their squeeze, not only on domestic but on business borrowers, too. That has been a most unwelcome development.

We must take account of the fact that since October 1990, when we joined the ERM, our unemployment rate has risen by 50 per cent. Month after month there has been an appalling sequence of figures, from 1.6 million in October 1990 to 2.4 million today, and it will undoubtedly rise further.

I am not attributing the whole of the recession of the last 18 months or so simply to our membership of the ERM. But I am saying deliberately that it has accentuated and deepened the recession. Our membership of the ERM denies us one of the most important instruments of policy, and that is control over our exchange rate and interest rate policy by which we could have hoped to ease the recovery of our industry, growth rate and so on.

I believed at the time, and I still believe, that we joined at the wrong rate in October 1990, at DM2.95 to the pound, and that we joined, in a sense, against inadequate criteria for membership. The missing criterion in the series of criteria which the right hon. Member for Finchley (Mrs. Thatcher) laid down in Madrid was basically about inflation. Our inflation rate had to narrow to the rates in the Community before we could join, and she added some other criteria. The most important missing element was that we should have taken account of our trade and payments current account.

If we had deferred joining the exchange rate mechanism until we had reached an approximate balance in our current account, we would have been much better served, and a much better judgment about the rate would have emerged. A fixed rate in the ERM which is apparently consistent only with an unemployment level of 2.5 million—roughly the current level—a period of nil growth in GDP and falling investment is hardly the rate at which we should have joined.

Let us suppose that, when we joined the ERM in October 1990, the rate had been perfect. What could we say about that rate as the months and years go by? We are very much concerned with our relative progress against the dominant German economy and currency inside the ERM. If we take 1989—not a bad year—as the base of 100, industrial development in Germany hit 110 in that year. It is certain to reach over 120 this year, and the IMF forecast for year three is 126.9. In other words, in three years the Germans will have increased their industrial investment by just on 30 per cent. By the same IMF calculations, the British figures are modestly down from 100 in 1989 to 99.3 in 1990, 87.4 in 1991 and the forecast for 1992 is 85.6. Therefore, the Germans will have increased industrial investment by 30 per cent. in three years, but we will have suffered a decline of 15 per cent.

What would the effect of that be, particularly if it were to continue for some time? Our competitiveness will be deleteriously affected by the relative performance of the two nations in terms of industrial investment, which is one of the crucial elements for efficiency and competitiveness.

Mr. Quentin Davies

I have been listening with great interest to the figures for investment in this country and Germany. Does not the right hon. Gentleman realise that the pattern that he is describing is a reflection of the fact that Germany and Britain are at different stages in the economic cycle? Had he chosen the three years previous to 1989, he would have found that a reverse picture emerged, in which we had a much faster rate of growth and investment than Germany.

Mr. Shore

I chose those three years not to give a distorted impression but because they are the three years since we joined the exchange rate mechanism. I could not take 1990 as the base because that was the year in which we joined. Regardless of the different stages of the cycle, those are the facts that will have crucial effects on our competitiveness and costs.

At the heart of the argument about fixed exchange rates is the fact that different parts of an economic area or different countries in the trading world progress at different levels and achieve different levels of efficiency and competitiveness. If one country locks itself in for a period with another economy that is more efficient, as the German economy is and is continuing to be, it is bound to suffer closure of firms in its own domain, the growth of unemployment and, ultimately, the migration of labour to areas of new investment and higher competitiveness.

I fear that we shall find ourselves in that position. That is the argument against permanently fixed interest rates. The experience that I have related can be replicated all over the world. Nobody in their right senses thinks that the Americans should permanently fix the exchange rate of the dollar against the yen. Any such proposal would be greeted with hilarity. Japan's economic efficiency, based upon a huge industrial base and decades of high investment, is going ahead much faster than that of the United States. United States industry under those conditions would be progressively eliminated by the pressures of competition from the yen. The Americans are sensible enough to keep their currency in their own hands and adjust the dollar against the yen and any other currency.

I would have thought that we should be thinking hard about the experience of the past year and of how we are to deal with the problem in the time ahead. I believe that it would be excellent for not only Britain but probably most European countries if the German mark revalued and we all gained a certain benefit from that. I do not think that that will happen and we must take action if we conclude that it is necessary to do so. I fear that no action is being contemplated for the period ahead. We are imprisoned within the ERM at the present rate and within the first stage of EMU and the commitment to make a fixed exchange rate a permanent feature. We are facing the prospect of a single currency where there is no chance of any change in the rate of exchange. That is the major part of the treaty on economic and monetary union, and it has serious consequences for us.

I regret that we have not heard more from either Front Bench spokesman about the serious problems that will have to be faced in the next few weeks leading up to Maastricht on 7 December. Yesterday, I drew the Chancellor's attention to clause 109(b) in the draft treaty and the related protocol dealing with what is called "Excessive Government Deficits". The relevant articles describe what excessive budget deficits are. A budget deficit that is more than 3 per cent. of GDP will not be tolerated.

Not only that, but the Commission is giving itself power to take penal action against any offending country. Article 10 of the relevant protocol lists the measures that are being proposed. For example, an offending member should be made ineligible for European investment bank borrowing. An offending member should be required—this is interesting—to make a non-interest-bearing deposit of an appropriate size with the European bank in the same way as the Bank of England used to call up deposits from the commercial banks when we thought that that was a good way of correcting over-generous activities. The Commission will impose fines of an appropriate size and suspend new commitments by the structural funds, including the regional fund, until the excessive deficit has, in the view of the Council, been corrected. I am sure that I carry the House with me in asking whether we are really going to subject ourselves—this country, this Parliament and this people—to instructions and rules as though we were a rebellious, irresponsible council? Are we really to say that we are not fit to govern ourselves and that these disciplines must be imposed on us? My right hon. Friend the Member for Lianelli (Mr. Davies) referred to the International Monetary Fund, which came to Britain to get agreement and stayed away after only a few weeks. This proposal imports the European Commission, with all its bureaucracy and authority, into our country permanently. It will be sitting at the Cabinet table dictating to the Chancellor what he should do.

What is the Budget judgment other than the fiscal stance or the extent of the public sector borrowing requirement? I pointed out to the Chancellor yesterday that next year's borrowing requirement will certainly be 3 per cent. of GDP, and I am pretty certain that it will be higher. It may even hit 3.5 per cent. or 4 per cent. That is no sin. The country is in a state of deep gloom and depression and needs stimulus. Anyone who has the slightest knowledge of how economies move and to what extent they go into cyclical periods of slump and boom knows perfectly well that to regulate the economy effectively and make it serve human and national purposes, there must be the power to deal not only with booms and to slow them down but with slumps and to lift people and industry.

That is only one of the constraints. The other is the establishment of a central bank. The Bank of England will become a branch of the European central bank, no longer capable of deciding interest rate policy or exchange rate policy. We shall even pool our reserves. Under the rules that are being prepared, and under the treaty provisions, we will not exist as an economic entity. Some people say, "Perhaps we could bring the European bank under collective ministerial control." My right hon. Friend the Member for Lianelli and the right hon. Member for Worthing (Mr. Higgins) properly referred to such rather vain hopes. We know that it is difficult for the Treasury sufficiently to control the Bank of England, but it will be much more difficult to control as one of 12 finance Ministers in an ECOFIN council. How absurd it is.

In addition, the European central bank is forbidden to take instructions from any organisation. The Community or the national states sign a pledge that they will not seek to instruct, to govern or to erode the independence of the European central bank. What does that leave? They can talk to each other and express opinions, but that is not good enough. That is the danger in merely these two provisions.

I have one or two points to make—these matters are of much importance not only to every hon. Member but to the country—not only to the Government but to my own Front Bench. Labour produced a document called "Labour in Europe" on 31 October. It clearly was meant to be more accommodating to Europe and to its development than the Labour party has been in the past. It seems to labour under certain misapprehensions about what is in store. It says: The establishment of a monetary union would not require a uniform economic policy throughout the whole Community. The Commission has conceded that there should be no binding rules dictating the fiscal position of member states. Those binding rules are contained in the treaty, yet the authors of the document have misled themselves into believing that there would be no binding rules.

The document refers to the importance of ECOFIN and how it will be a necessary and important political counterpart to Eurofed. It says that it is heartening to see that Labour's proposals have been taken up by the French Government and belatedly by the British Government. Is that part of the Government's proposals? I am not aware of any French pressure to subordinate the European federal bank to the ECOFIN Committee. If that is true, it has failed to emerge in the draft treaty that is due to be signed in four weeks' time at Maastricht.

I take it as inconceivable for any British Government to accept such draconian, alien authority over such intimate and important matters governing our national affairs. I take it to be doubly inconceivable that any Labour Government, who believe most strongly in intervening in the economy and using powers of economic management, would find it other than terrible and tremendously difficult to accept any such restraints. I am sure that the document was prepared before the draft treaty appeared, and I very much hope that I shall receive a reassurance from both Front-Bench spokesmen before the end of the debate.

8.26 pm

Mr. Kenneth Warren (Hastings and Rye)

It is an honour to follow the right hon. Member for Bethnal Green and Stepney (Mr. Shore). I may not agree with many parts of his speech, but it was in the finest traditions of the House. The Conservative party is lucky that he is not displaying his intellect on Labour's Front Bench. The Labour party needs him badly, even if we do not agree with him. I hope to be able to deal with some of his comments because, as Chairman of the Select Committee on Trade and Industry, I share his grave concern about the future of manufacturing and trade in this country. My business interests are declared, but, contrary to some popular media suppositions, I am not connected with the Lonrho organisation.

The Gracious Speech offers a vision of the future that Conservative Members, and I believe the country, will welcome. Inflation is coming down; trade is going up and confidence is apparent. As Chairman of the Select Committee, I find that many people offer me their views and I am delighted to be able to report to the House that in the past several months those views have become not only more positive but aggressive in terms of the opportunity that Britain has to develop its trade and industry.

I should like to deal with three matters in the Gracious Speech, which I thoroughly support, where we can develop our ability to be more efficient, more constructive and more capable in the world of trade and industry. The first is where a company and the Government have a constructor-customer relationship, such as in the information technology industry, where annually the Government purchase £4 billion-worth of goods and services, half of which goes to the Ministry of Defence. Obviously, the Government's purchasing power is very important.

Secondly, the Government are a catalyst on which the efficiency of enterprise depends. Although I welcome yesterday's announcement in the autumn statement about increased investment in transport, greater consideration should be given to the value of efficient transport and to the efficiency of enterprises in general. Thirdly, the Government and enterprise are sponsors of economic development, as in research.

Whatever the political to-ing and fro-ing on manufacturing industry, we must remember that we have been suffering from a problem which has developed throughout the 20th century. At the beginning of the century, this country enjoyed 33 per cent. of world trade, but the level is down to 5 per cent.—the good news is that it is growing again. The Germans started at 22 per cent. and are now at about 12 per cent.; the Japanese started at 2 per cent. and are now at 15 per cent.; and the Americans started at 12 per cent. and are now still at 12 per cent. Most countries have managed to keep up their share. Unfortunately, we have suffered decreases. It is interesting that, in the post-second world war era, the main falls occurred at precisely those times when the Labour Governments devalued.

In looking at the Gracious Speech and the autumn statement, I welcome the increased receipts for the Department of Trade and Industry from the launch aid levy on airbus deliveries—the airbus is a magnificent aircraft, selling worldwide. I am pleased that the innovation budget will be increased from £100 million to £120 million, and that brings me to my second point about the relationship of the Government and those who supply them.

The top technologies in the United Kingdom could be listed as pharmaceuticals, chemicals and aerospace, and in those respects this country has an enormous, unchallenged capability in the world. There is some stiff competition, but no one doubts our capability. The tragedy lies in the second-order technologies—white goods, cars and so on. We have lost markets to companies that have shipped their goods across the world to take advantage of what, at one time, were our well-preserved domestic markets.

There is no doubt that, well led, the British worker and British management are unchallenged. They are not just blips on a screen—major achievements have been recorded. There is British Steel at Llanwern and Port Talbot. There is Nissan at Sunderland. There is also my old company, GEC Avionics at Rochester, which I left many years ago and which has managed to achieve far more without me than it did when I was there. We have many capabilities which are well worth acknowledging and we should not talk ourselves down when thinking about what we can do.

I should like to offer the House two maxims: good suppliers listen to their customers, and good customers listen to their suppliers. I hope that the Government will always take account of the problems that have beset us during this century and are still with us. We have had a declining share of the world market. Throughout the period of our membership of the European Community, imports have steadily grown in relation to exports. We must now consider the reasons.

The past 15 years are important in terms of the growth of industrial power in the world. That power is increasingly shifting towards the western Pacific rim. Jobs in manufacturing industry in the United Kingdom have steadily been lost and we now have only about two thirds the number 15 years ago. The Japanese have retained about the same level of employment in manufacturing industry. Japan and other countries such as Germany—which has retained its manufacturing capability—have managed to achieve a substantial positive balance of payments.

I am in favour of doing all that we can in the service industries. We in this country are successful, particularly in terms of financial services in the City, in ensuring that we capture and hold world markets. We must consider why our manufacturing capability appears to be dropping away, bearing in mind the quality of the management and workers, whom I have cited as examples. Manufacturing does not deserve that decline.

I should like to direct the House to one approach which was suggested to me. I seek information all over the place in industry. This approach comes from a group which I know well, the Society of British Aerospace Companies. I worked in that industry for many years. I asked the society what its relationship with the Government was like. It is particularly important for an industry involved in leading-edge technology to understand what should be, what can be and what is the relationship with its largest single customer, the Government.

The group expressed some concerns which I wish to pass on to my right hon. Friend the Chancellor and his colleagues in the Treasury, the Department of Trade and Industry and the Ministry of Defence as a customer. The group has already put those concerns to the Government, but they are worth retelling. The people involved are not looking for handouts or subsidies; they keep on saying that they want a dialogue—a dialogue of benefit to them and to the Government. The Government are both customer and, in the case of the civil aircraft industry—I referred earlier to the airbus—sponsor. They want a dialogue with the Government to find out what they can do to be even more successful and to work to the customer's advantage.

During the summer, there was a defence review. Ministers assured the trade association through the Defence Industries Council that industrialists could discuss matters relating to the economic, technological and defence implications of possible changes to the defence equipment programme. Unfortunately, that did not happen, which is sad. Some 200,000 people are employed by that business and probably another 200,000 depend on it.

We should not just say that we will do something. We should ensure that there is a dialogue so that those who want to sell know what they can do. While we are all enjoying the decline in defence requirements, it is particularly important for the highly skilled and highly qualified scientists and engineers to say how they would be better employed as we take advantage of the changes in "Options for Change".

Aerospace employs 10 per cent. of the national manufacturing work force. It has a turnover of £12.5 billion. In the past year, more than £8 billion of goods was exported—in other words, two thirds of the industry's capability. As in France, Russia and the United States, we have an industry that is self-sustaining. The Department of Trade and Industry should listen closely to industry representatives, and I hope that the Department will pass their views on to the Treasury.

My right hon. Friend the Secretary of State for Trade and Industry is in St. Petersburg today. I hope that he can also go to the Strand and Stanhope Gate, if a little alliteration may be allowed. British Aerospace and GEC are two examples. They would like to have a closer dialogue with the Government, and I hope to have the opportunity to talk about that matter with my right hon. Friend when he returns.

I said that I wished to refer also to the interface of business with government. It is not just a matter of the number of Ministries. I hope that, when I have my chance to stand down at the end of this Parliament, the Conservative party manifesto will call for the removal of all sorts of Ministries, such as the Department of Energy, that it will take training out of the Department of Employment and that it will get rid of the industry component of the Department of Trade and Industry and let trade stand on its own.

There are many jobs that do not need to be done in the Government nowadays. However, there is much more work to be done by the Government on the quality of communications, and that was touched on in the statement yesterday. I welcome the investment in railways, but there are so many people on the roads, at least when I am there. I should like a more innovative approach between the Ministry of Transport and other Departments to discover what the Government can do to facilitate transportation. It is not as if the roads are not there. One has only to look around Westminster to see masses of bus lanes, most of which are empty at all times. Perhaps a traffic authority for London would be welcome.

Let us consider an area to the east of Westminster. Today, I went on a tour of docklands. One would think that that area was designed as if no one understood that the motor car had been invented. There is a need for co-ordination among Departments—the Treasury and the Departments of the Environment, of Trade and Industry and of Transport—of an order that has not yet been achieved.

Another area in which the Government are a catalyst is the Export Credits Guarantee Department. I hoped that the Treasury would understand the necessity for British companies to be able to export successfully to the new markets of eastern Europe, including the Union of Soviet Sovereign States and Mongolia which said, "We have got rid of the communists, but you seem to have forgotten us. We have China on our border." Those places do not have the cover necessary for us to be able to export to them, but there are some major opportunities there. The Germans and the French know that.

Mr. Quentin Davies

Does my hon. Friend agree that it is very demoralising and demotivating for industrialists if they feel that their Government are not prepared to back them in, for example, export credits at least to the extent to which their competitors in the other major western countries are being backed by their Governments?

Mr. Warren

I endorse my hon. Friend's remark. We are in a very competitive world, and where the Government are a catalyst, they must play the part that only Government can. I am not an interventionist, but there is no question but that there will be a problem with ECGD and Iraq. I am certain that terrible losses will suddenly be revealed in trading with that country. However, the ECGD with its best endeavours believed that it should back companies that regarded Iraq as a good country to which to sell. I should not blame ECGD or the Government if major losses were announced suddenly. The point is that it was done, and the Government must support industry without qualification.

Another issue to consider is research, in which the Government are a sponsor in part if not in whole—certainly not in whole. Yesterday, the Chancellor announced a 3 per cent. increase in the research budget, which I welcome. However, it is worth mentioning the problem we face with the research base to ensure that industry—with the Government as catalyst through the ECGD and through the companies that I described earlier—achieves success during the next five to 15 years.

We have approximately the same population as Germany. The population of Japan is approximately double that of ours or Germany's and that of the United States is approximately double that of Japan. Let us consider the amount spent on research and development and acknowledge the fact that development usually accounts for 90 per cent. of all that is spent on research and development. There are some interesting figures which are worth retaining.

In the United Kingdom, we spend £212 a year per capita on research and development; the Germans spend £381, the Japanese £370 and the Americans £390. If we subtract from that the military component, the net amount spent on research and development in this country is £170 a year. In Germany the figure is £363, in Japan £368 and in the United States £379. In other words, we spend only 50 per cent. of the per capita spending of our major competitors.

If we add up the figures and take account of the volume of their populations, we discover that Germany is spending four times as much as we spend, Japan eight times as much and the United States 16 times as much. Of course, one cannot cover everything in one's research, but if we compare ourselves with, for instance, Germany, we realise that we must make greater efforts.

I hope that my right hon. and hon. Friends at the Treasury will consider what incentives they can generate in collaboration with trade and industry to encourage the further investment in research which we lack at the moment. We know that the research payback over 10 years is about three times that required from Japan, but the problem can be solved and I should like the next Government to tackle it. I have no doubt that a Conservative Government will be in office after the next election. I say that in apolitical terms, as I have heard the right hon. and learned Member for Monklands, East (Mr. Smith) today—it is inadequate for what is required for trade and industry.

The Government must understand that they are the largest single customer and they must therefore consider the way in which they purchase goods and services to make themselves a quality customer. What endears suppliers to Marks and Spencer and to Boeing and makes people queue up to sell to them is that they know that they are selling to quality customers and will be better off for that. That aim can be achieved. It would not be intervention but an acknowledgement of the Government as a catalyst and an acknowledgement of the fact that there are things that only the Government can do.

I support the proposals in the Queen's Speech, and I believe that the amendment is as ridiculous as one would expect.

8.46 pm

Mr. Geoffrey Robinson (Coventry, North-West)

It is always interesting to follow the hon. Member for Hastings and Rye (Mr. Warren). It is a pity that he will not continue to offer his services in Select Committee or in the Chamber. I feel that it must be something to do with his frustration with the Government over the past 10, 11 or 12 years, because his speech is in marked contradistinction to everything that they have said for most of that period. The Government have been singularly out of tune with the feelings and aspirations of manufacturing industry, which, as he says, wants not handouts but dialogue. It would perhaps go further and say that it wants above all an even playing field. We cannot allow the continuing exposure of our industry to unfair competitive practices which, as he knows from his experience as Chairman of the Select Committee on Trade and Industry, is very much par for the course in much of the industrial in-fighting.

The debate takes place against the background of the second deepest recession that the country has endured since the second world war. It is the second recession engendered by this Government. There has been immense social and industrial damage. Let us consider the social aspect. There have been 85,000 repossessions and 45,000 businesses have gone to the wall. Those of us who are close to our constituencies know what that means to the individuals with whom we deal at our surgeries and to our other contacts in industry. I shall not follow other hon. Members who have discussed the personal and social difficulties.

In the west midlands, we remain rooted in our conviction and commitment to the manufacturing sector. I emphasise the fact that, when we talk about manufacturing, it is not to denigrate the importance of the service industries such as tourism or banking. Indeed, Coventry city council—I have the honour to represent that area—has done an enormous amount to diversify and spread the manufacturing base with great success. I am sure that even my right hon. Friend the Member for Lianelli (Mr. Davies), who made a remarkable critique of the service sector and who tended by comparison rightly to emphasise the relatively greater importance of manufacturing, did not seek to downgrade the importance of the service sector. The most remarkable single achievement by this Government has been the creation of a recession on an unprecedented scale in both the servicing and manufacturing industries.

Our greatest charge against the Government is their malign neglect of manufacturing over the years. There has been no strategy to harness national resources along the lines suggested by the hon. Member for Hastings and Rye. There has been no attempt to have a dialogue with industry, or to use constructively the Government's purchasing power and interface with industry. All that is beyond them. We do not want them to do things that are almost intentionally designed to hurt the manufacturing sector. The hon. Member for Hastings and Rye referred to the attack, on the Export Credits Guarantee Department. That was a Treasury-inspired attack which hurt one of the organisations that was still helping our exporters. Why does there have to be such an unnecessary, wanton attack upon a highly expert, professional and efficient organisation?

We know that the United Kingdom car industry is 22 per cent. down. I declare an interest in the Jaguar car company, which is located in my constituency. I am also the chairman of a company that is heavily involved in manufacturing. What a time to persevere with a 10 per cent. car tax. What a time to mount another attack on the benefits of having a company car. The attack has been mounted at a time when the industry is at rock bottom and when one of our prestige companies, privatised only a few years ago, is reeling under the collapse of its market in the United States. What a time to take on that industry and try to destroy it. It is a well-known statistic—I am sorry to have to mention it—that Jaguar sold only 64 vehicles in July of this year. Silly things like that inevitably lead to damaging consequences, from which Coventry and other industrial areas are still suffering.

If time permitted, I should have read from the excellent report that has been sent to all hon. Members by the Society of Motor Manufacturers and Traders. It points out that one of the highest levels of car tax in the world is levied on the British consumer. No wonder that car manufacturers were 22 per cent. down at home and that those which survive are suffering from enormous cash flow difficulties and have had to make many people redundant.

Another example is the privatisation of British Airways. I refer to the interface between Rolls-Royce and British Airways. Would any other country have allowed a whole new generation of large, 90,000-plus thrust turbine engines to be placed with a United States company? I cannot believe that any other country would have allowed that to happen. The Government washed their hands of it and said that it was no concern of theirs. The consequences for Rolls-Royce will be dire—they may even turn out to be terminal.

At one time, we had a market in machine tools, but there has been a 50 per cent. drop in orders and the industry is in dire straits. Again, almost indifferent, malign and neglectful policies are at work. Why abolish 100 per cent. capital allowances? They have good effects. They provide money much more quickly, therefore easing cash flow and profitability problems and the financial deficit of the corporate sector from which manufacturing industry is suffering. If the money comes back more quickly, there is every incentive to invest. We are still living with the consequences of the Government's abolition of 100 per cent. capital allowances.

The west midlands welcomes overseas investment. The Labour Government laid many of the foundations upon which successful investment here by the Japanese has been built. However, Japanese investment can never be a substitute for our own domestically owned manufacturing companies. We do not have control over research and development, or manufacturing technology, or product development. At the end of the day, we do not have control. We welcome Japanese investment. I have to declare an interest, in that I am trying to promote a joint venture in the United Kingdom with a Japanese company. We want that to happen, but that can be no substitute for having our own nationally owned industries.

This Government have managed to engineer the second deepest recession in the post-war period. The first was between 1981 and 1983. If one took a view of that performance would as a manager, the Government's managerial performance have to be condemned as a dismal failure. The consequences should be dismissal. That is the sure and certain fate that awaits the Government whenever they have the courage to put their case to the electorate.

8.55 pm

Mr. Roger King (Birmingham, Northfield)

I welcome the reference in the Gracious Speech to the fact that the Government intend to privatise some of the railway services. I look forward to the publication of the White Paper. The autumn statement reveals that the Government are determined to ensure that investment in rail and roads takes place. I am happy about both. We need a balanced investment programme for our transport infrastructure. However, road development has not been given sufficient priority. There should be adequate investment in our roads programme. Manufacturers in the west midlands and elsewhere in the country are increasingly adopting lean manufacturing techniques which require the arrival of goods as they are needed on the production line. No longer are there large amounts of stock from which to draw. If the product is not there at the right time, production stops. Investment must continue, if not accelerate, in our roads system. I shall look closely at the Department of Transport and make sure that investment in the roads goes ahead.

My hon. Friend the Member for Bromsgrove (Sir H. Miller) has been vociferous in previous debates in his defence of the motor car industry. I pay tribute to him for his work. He has become the chief executive of the Society of Motor Manufacturers and Traders. He will make an outstanding leader of the organisation and bring to it the benefit of his political knowledge, as well as an ability to speak on behalf of the industry.

The car industry has been mentioned by several speakers, but no hon. Member has referred to it in complimentary terms. The industry has performed outstandingly well over the past few years and has stepped up its exports. Without such a performance, the Chancellor's statement yesterday about exports having improved dramatically over the past few years would not have been possible. The industry has been able to expand its production tremendously because it is more productive and more competitive than ever before, and we are gaining the advantage of inward investment and the introduction to this country of Japanese manufacturing techniques. That advantage lies not only in the Japanese car factories setting up here, but in the transfer of manufacturing techniques to other United Kingdom car manufacturing companies—Rover is an outstanding example.

The kind of manufacturing techniques that the Japanese adopt are no secret. In some respects, we have refined them further. It is a vital part of our investment programme that Japanese manufacturing companies come to the United Kingdom. We have seen the continuing development of the Nissan plant in the north-east, and rising up on the borders between the west midlands and the east midlands is the massive Toyota factory near Derby. There is also the development of Honda's manufacturing facility at Swindon. By the year 2000, those three Japanese companies will produce nearly 1 million vehicles between them.

I give my hon. Friend the Minister of State a word of warning. One of the problems of manufacturing industry is not the need for greater acceptability in the export market, but a decline in domestic demand. That decline, which has gone on far too long, is attributable partly to the recent economic position of the country, which is now progressing quite satisfactorily, and partly to the high taxation on the British car. There is the special car tax and VAT, now amounting to 27.3 per cent., which is higher than in any other European country except one, and twice as high as the German level. It is significant that German car manufacturers produce almost 3 million cars a year. Because of their dynamic home market, they can produce cars for the world market, too.

I ask my hon. Friend the Minister—and my right hon. Friend the Chancellor of the Exchequer, when he prepares his Budget in March, or whenever—to ensure that the tax burden on the British car industry is reduced. When the companies dependent on inward investment—Nissan, Toyota and Honda—become established and their manufacturing plants are up and running, it will not profit us much if United Kingdom plants are in difficulty because of the lack of demand in the home market. We have to get the two activities in phase. I am looking for some reductions in tax in the next Budget. That will be vital for the progress of the British car industry, especially in the west midlands.

Alas, the truck industry is in a bad position at the moment—again, possibly because of the effects of the recession in British industry and in the rest of Europe. The problems are common and the truck manufacturing position is the worst since 1954. As the economy picks up, that is bound to improve.

Some significant threats hang over the British car industry. We have heard rumours that petrol tax may be increased to persuade both business people and ordinary users to choose more fuel-efficient cars. I give one warning about that, especially in the light of what was said by the hon. Member for Coventry, North-West (Mr. Robinson) about Jaguar. If petrol prices go up, there will be an even more reduced market for the cars made by Rolls-Royce, Jaguar, Aston Martin and other specialist car manufacturers.

We must be careful about embracing extra taxes on fuel. They may have a significant and disastrous knock-on effect, to the disadvantage of large sections of the British car industry. By all means let us use the 10 per cent. special car tax. Let us reduce taxation, not increase it. If we wanted to encourage customers to buy more fuel-efficient cars, we could reduce that tax or abolish it altogether for such cars. There is a great opportunity there.

The United Kingdom motor industry is our biggest manufacturing industry, and it is still in good health, but it needs help in the United Kingdom market. The retail sector is feeling the effects of a prolonged recession. Unless we re-establish demand and start building it up, we are likely to jeopardise the tremendous growth in exports that we have achieved.

9.3 pm

Mr. Keith Vaz (Leicester, East)

Some things never change. Exactly a year ago, I was the last Back-Bench speaker in the six-day debate on the Queen's Speech, and I was followed by my hon. Friend the Member for Copeland (Dr. Cunningham). I spoke at 9.6 pm. This year I have done a little better, in that I am speaking at 9.3 pm.

I am often told that, as the youngest Opposition Beck-Bench Member, I should know my place, so I have decided to keep my words of wisdom until the very end. When my hon. Friend the Member for Copeland speaks, he will be able to sum up most ably.

I reviewed my speech of last year, which is always dangerous because one finds oneself wanting to repeat so much of what one said the previous year. So much should have changed and so much has not changed. A year ago, we were in the middle of a Conservative party leadership election, and I predicted that, no matter whether the present Secretary of State for the Environment or the present Prime Minister won it, the result would be the same—the devastation of our basic industries would continue over the ensuing 12 months. That is precisely what has happened.

I want to speak briefly about the footwear and textile industries, because I believe that the measure of the success—or lack of it—of our economy is reflected in the way in which those two vital industries are run. Representing a Leicester constituency, I know just how important those two industries are to Leicester, Leicestershire and the east midlands. The east midlands accounts for almost 30 per cent. of all the textile jobs and about 40 per cent. of all the footwear jobs in this country.

The hon. Member for Harborough (Sir J. Farr) and I have spoken about these two industries in many debates. The hon. Gentleman is chairman of the all-party textile committee. He knows very well what has happened over the past months and years, because he and I constantly have to react at local level to the devastating cuts in jobs in those industries. I was present to hear the hon. Gentleman's speech, and I must say that I agree with his view that there should be immediate cuts in the level of interest that industry pays on the money that it borrows from the banks. Those in footwear and textiles believe that only in that way can they cling to what is left of their industries.

Since 1979, footwear and textile employment nationally has fallen by some 46 per cent. That represents the loss of 203,000 employees—15,000 per year, nearly 1,500 per month, 75 per working day or around 10 every hour. By the time the debate on the Gracious Speech is over, still more jobs will have been lost in those two basic industries.

My plea today is that the Government should look favourably on the industries because a favourable climate and favourable conditions are necessary to generate business for the kind of enterprise of which they are made up. The manufacturers' plea is that they simply cannot cope with the large number of imports that are coming into Britain.

I recently obtained a list of aid given by the Turkish Government to the Turkish textile industry. A maximum of 40 to 50 per cent. is available in grant aid, depending on the geographical location. In respect of customs duty or VAT, exemptions are granted for the importation of fixed assets where those assets are used in the textile industry. In terms of investment incentives, up to 100 per cent. of corporate tax relief is available in the year of investment, and 40 per cent. thereafter. In terms of subsidised finance, 11-year loans are normally granted at subsidised interest rates and with four-year periods of grace. That is the kind of support that other countries give these two very important industries.

In Leicester and the east midlands, the industries do not want special treatment. They realise that they are private companies that need to compete, but they want to be able to compete fairly, and the way in which the Government have managed—or mismanaged—the economy has meant that they have suffered especially severely.

The knock-on effect is devastating. The closure of factories such as Corahs and Kemptons, in my constituency and in the constituency of the hon. Member for Harborough, have left whole families devastated. The history of the city of Leicester—and, indeed, the history of Nottingham and other east midlands cities—is enmeshed in the history of the footwear and textile industries. If the present trend, and the present rate of job loss, continue, in a decade and a half, there will be no footwear and textile industries left in Leicester. That is our serious message for the Government and the Leader of the House.

I know that my hon. Friend the Member for Copeland is eager to give us a summary of what has happened over the past six days, but I wish, none the less, to make a short plea about the banking system. It would be strange, after all, if I did not mention the Bank of Credit and Commerce International. The closure of the bank on 2 December and its liquidation will result in billions of pounds of lost export orders and will have the knock-on effect of causing more job losses and affecting a large number of depositors.

There are 40,000 BCCI depositors in this country. Some of them are sterling depositors, but the majority are non-sterling depositors. Nine hundred members of staff have lost their jobs over the past four months.

The depositors protection association has produced a Bill today, and it has sent copies to several hon. Members. Indeed, I understand that a copy has been sent to the Chancellor of the Exchequer. If the Government adopt that Bill as part of their legislative programme, that will benefit our economy.

In a modest way, that Bill would amend the Banking Act 1987 to raise the amount of money to be given to depositors when the deposit protection fund is triggered. The current limit of 75 per cent. of £20,000 is not sufficient. The Bill suggests that the figure should be raised to 75 per cent. of £75,000. The Bill's other main thrust is to ensure that non-sterling deposits are covered. That would be a direct benefit to the reputation to the City of London, because we have been very worried about the number of overseas investors who have threatened to withdraw their money from Britain because of the mean protection provided under the deposit protection legislation.

As I said, some things never change. I have spoken for a minute longer than I spoke last year. My one comfort is that next year I will be speaking not from the Opposition Back Benches, but from the Government Back Benches. Instead of making the last but one speech, my hon. Friend the Member for Copeland will be the Leader of the House and he will make the final speech. By this time next year, we will have a Labour Government.

9.11 pm

Mr. Quentin Davies (Stamford and Spalding)

I n my brief political life, I have experienced few things more unedifying than the sight and sound over the past few weeks of Labour Members hoping desperately that, despite everything, somehow the recovery of the economy can be postponed, and scratching around frantically trying to find a nugget of bad news about the British economy. That will do them little good. When the general election comes, the recovery in the economy will be palpable and incontrovertible and the British electorate, as before, will take a view of the Government's record as a whole over the past 12 or 13 years. As has been recognised internationally, that record has been remarkable by international standards.

The British people will also look for policies that give them confidence in the future. There are some striking contrasts between our policies and those of the Labour party in economic and other areas. For example, the Labour party remains as it has been throughout its history—the party of high and higher taxation. We are committed over time to a reduction in the tax burden on the economy.

With regard to industrial relations, the Labour party appears to have learnt so little from its unhappy experiences of the 1970s. Labour is once again committed to reversing several crucial aspects of our trade union reforms, including the banning of secondary picketing.

We have already examined the minimum wage on many occasions in the House. There can be few policies so utterly perverse as the minimum wage. It is certain to bring substantial economic damage to the country, and it will not benefit those whom it is designed to help because since those people are, by definition, on the lowest incomes, they are beneficiaries of family credit and that would simply be reduced pound for pound in line with the minimum wage.

Above all, one great contrast between ourselves and the Labour party concerns inflation. That contrast has been made clear this evening. The Labour party never even mentions inflation. That is the most revealing point of all. Once again today, my right hon. Friend the Chancellor made an absolutely explicit commitment to achieve and to maintain price stability. My right hon. Friend, in his first speech as Prime Minister, made it absolutely clear that the central priority was to defeat inflation.

We never hear about inflation from the Opposition. All we hear about are policies that they have devised without taking account of the risks of inflation which inevitably would ensue if their policies were adopted—that is, their policies of higher borrowing, higher spending, and deliberately increasing the cost of industry, for example through the minimum wage proposals. The British people simply will not fall for that.

Inflation is a terrible scourge. It has a terrible human cost—a cost to those on fixed incomes and to those on private sector pensions which are not index linked. Inflation is a very cruel scourge for those most defenceless sections of the population. It also has a major social cost. Inflation inevitably causes everyone to panic because their real incomes are being eroded with every day, week and month that goes by. In a desperate attempt somehow to defend their real income, people find themselves almost forced into militancy and strife and into competitive strikes and competitive demands for increases in nominal wages to keep up with the terrible inflation that they are suffering. Socially, inflation is an extremely divisive and destructive disease.

Of course, inflation has fundamental economic costs. The fundamental economic costs that are referred to generally in text books concern the fact that inflation erodes the effectiveness of the price mechanism. Beyond that, it fundamentally changes the savings pattern of people in the private and household sector. It means that no longer are people induced to invest in productive assets. They are looking for stores of value that will somehow hold their real value despite inflation. We suddenly find people investing in residential property, real estate of various kinds, gold, works of art and antiques—anything—but not in productive assets. Also, of course, inflation increases uncertainty in the economy.

Labour Front-Bench Members are not enjoying this, because they are rightly embarrassed by what I am saying. They have not even begun to address the dangers of inflation. They realise that that is an Achilles' heel of their policies, which will mean that they will be completely incredible during the general election.

Hon. Members are apparently agreed on the need for investment. We all talk about investment. I say "apparently" because the Opposition's policies would not generate a climate that is favourable to investment. Inflation is highly destructive, because investment depends on relative certainty or on a reduction in uncertainty within which investment decisions are taken. Anything that increases risk reduces the inducement to invest. Inflation creates a climate of uncertainty. It means that anybody who proposes to invest must look for even higher prospective returns to justify the enhanced risk.

The Government have recently taken two vital measures to reduce the risk surrounding investment decisions. The decision to join the exchange rate mechanism has effectively fixed the parity and has reduced the uncertainty of one of the major variables in investment decisions—the exchange rate. Anything that produces the danger of a revival of the hyperinflation that we saw under previous Labour Governments would, as automatically as night follows day, lead people not to invest who might otherwise do so. Hyperinflation would undermine the confidence of industry upon which this country's prosperity ultimately depends.

Nothing has been more revealing throughout the debate than the fact that the Opposition have not said anything to give the slightest sign that they have any understanding of the dangers of inflation. That lesson will be learned by those outside the House who listen to our debates and it will be taken into account when they come to take their important electoral decision next year.

9.20 pm

Dr. John Cunningham (Copeland)

It is my duty to review the past six days of debate, which is a considerable challenge, but it is nice to begin with a point of agreement between the hon. Member for Stamford and Spalding (Mr. Davies) and myself. He was right—we did not enjoy his speech.

It is conventional to begin by referring to the speeches of the mover and seconder of the Loyal Address, and I do so with some pleasure. The right hon. Member for Worcester (Mr. Walker) has, on any test, enjoyed an outstanding parliamentary career, which may well continue in another place after the general election. His speech amused and engaged the House. His recent role in the Cabinet of the right hon. Member for Finchley (Mrs. Thatcher) must have seemed rather like walking with great care over the fine porcelain for which the city of Worcester is famous. I suspect that occasionally the right hon. Gentleman deliberately cracked a few pieces just to remind the right hon. Lady that he was around.

The hon. Member for Thanet, South (Mr. Aitken) has always been an independent-minded Conservative. His speech again demonstrated his consistent commitment to the views that he holds. I thought, however, that as an old Etonian he was a somewhat unlikely herald of the classless society.

I should also like to pay my own tribute to those Members who are no longer with us. Alick Buchanan-Smith and I were neighbours in London. Early most mornings we would bump into each other when he was on his way for his regular morning swim, and I shall miss him. Alick was a most courageous and admirable man, and we shall all miss him here.

I also salute the courage and commitment of George Buckley throughout his life as a socialist who was taken from his family and from us much too soon.

No one, least of all you, Madam Deputy Speaker, could fail to miss the pugnacious Richard Holt. We always knew when he was in the Chamber, but I believe that even the sometimes irascible Richard would not have condoned the contemptible tactics of gratuitous abuse, innuendo and vilification that are being deployed against Ashok Kumar in the Langbaurgh by-election by both Conservatives and Liberals alike. It demeaned the Leader of the House to launch into such personal, abusive and unsubstantiated attacks on a Labour candidate. The Conservatives' losing campaigns have taken a very nasty turn, with undertones of racism that have no place in any decent political party. I believe, however, that Ashok Kumar will make history tonight and that his election victory will be to the great credit of the electors of Langbaurgh.

This is the 13th consecutive Gracious Speech from a Conservative Government. It is longer than most of its predecessors and more shallow. It is the first Gracious Speech from the Prime Minister and, in all honesty, it cannot be described as a blueprint for the classless society; nor is it a pathway for the more effective advancement of women. It completely fails to match the Prime Minister's fine words.

Of course, that should not surprise us, because the candour of the Secretary of State for Energy was disarming when he said recently on "Panorama" that the only difference between the right hon. Member for Huntingdon (Mr. Major) and the right hon. Member for Finchley was one of style, not substance—there has been a change in style, yes, but a change in substance, no. After almost one year in office, the Prime Minister is failing even his own tests. He has no mandate. He has twice run away from his premeditated attempts to plan opportunities to secure one.

The real issue for Britain is not what is included in the Gracious Speech or what is left out. The real issue is that a Gracious Speech was made at all when the whole country really wanted and expected a general election. The real issue is the need for a new programme and a new agenda for Britain from a Government with the authority of a fresh mandate from the people.

Mr. Winnick

Will my hon. Friend give way?

Dr. Cunningham

I am sorry, but I cannot give way. I have already given up 10 minutes of my time in the debate and it is incumbent on me to move on.

The Government are a deadbeat Government whose authority has been undermined by every recent test of public opinion, in local elections and in parliamentary elections. The Prime Minister and his party have failed to win a single one of the eight by-elections since the last Gracious Speech in November last year, and they will lose three more tonight.

Nothing betrayed the lack of courage in the Government more than the manner in which the electors learned that they were to be denied a choice of Government today at the ballot box. The news was sneaked out by telephone calls to sycophantic editors by the Secretary of State for Energy. Apparently, even that task could not be trusted to the chairman of the Conservative party.

The Gracious Speech attempts to wipe the slate clean of the record of the past 12 years. Ministers and their Back Benchers pretend that all that has gone before, everything that they got wrong, everything that they supported and everything that they drove through this House can be obliterated by a change of Prime Minister. They will fail in that attempt at deception. Even though the Tory party made history last year as the first group of politicians to make a monkey of the organ grinder, it simply will not get away with it.

So apparently we are to be treated to an orgy of de-Thatcherisation. Or are we? Poll tax, the right hon. Lady's flagship, certainly is a rotting hulk—that is true. Then and at other times Opposition Members said some pretty hard things about the right hon. Lady when she was Prime Minister. But they are not half as hard as the things that Tory Back Benchers are saying about her now.

The present Prime Minister's U-turn on poll tax is interesting. He was an unswerving supporter of poll tax in every vote in the House, including when he opposed the so-called Mates amendment on banding. He said of poll tax: I believe the new system will prove enduring and a vast improvement on the status quo. He said that at the Association of District Councils conference in 1988. He described the poll tax as a very much fairer and more acceptable system in a letter to one of his constituents in April 1990.

But later, when the right hon. Member for Huntingdon (Mr. Major) was running for the leadership of the Tory party his tone was different. He said: I'll tell you about poll tax. We were bounced into it quickly because there was such a fuss about the rates in Scotland and we were bounced without thinking because of all the political fuss. That is what he told the Daily Mail in November last year during the leadership election. He was also candid with the BBC "News at One" that same month. He said: One of the reasons we got into difficulties with the community charge was being bounced into decisions before they were fully thought through and before we knew precisely how it would affect people and what it meant. That was the Prime Minister of our country talking about how, as a Cabinet Minister, he allowed himself to be bounced into decisions. Honest John? That is what he said.

The Government guillotined poll tax in and they guillotined it out. Now they expect us and the country to accept that they intend to guillotine in the next Tory tax as well and to make the same mistakes all over again. In 12 years they have made local government finance a nightmare for taxpayers, for service providers, for voluntary organisations and for councillors—even their own councillors.

The Tories epitomised Santayana's definition of fanatics: Those who redouble their efforts even when they have forgotten their aim. No doubt those hon. Members who rushed into the Lobby to rush in the poll tax, those who proclaimed it around Britain with ringing declarations of undying support—[Interruption.]—and the right hon. Member for Croydon, South (Sir W. Clark), who is protesting from a sedentary position, was one of the leaders—are preparing to rush once more, uninformed, unprepared and underhand into the Lobby for its confused, capricious replacement. Their constituents will not forget their records.

The plain truth is that the windy rhetoric of the Tories on such issues cannot disguise their lack of any coherent philosophy for local government. Their proposals are devoid of sound principles and of any intellectual foundation. The poll tax fiasco expresses the weakness and the incompetence of the Tory Cabinet. They supported it to a man—and they are all men.

The Asylum Bill displays the sinister cynicism of the Government on issues of race and ethnic origin. No one wants the entry of bogus asylum seekers into Britain and the fraudulent applicant must clearly be rejected, but the genuine applicant fleeing persecution has historically been offered protection by our country and the Government's proposals contain the real danger that that will no longer be the case.

It is the height of hypocrisy for the Gracious Speech to state that the aim of legislation is simply to enable applications for asylum in the United Kingdom to be dealt with quickly and effectively. The game is given away by the tabloid newspapers, which are such sycophantic supporters of the Government and deliberately choose to confuse asylum with immigration. If that is the Government's intention, why do they not take up the offer from the General Council of the Bar to enter into discussions on devising a speedy and just system of appeals?

The Government are engaging in scaremongering of the most squalid nature simply because a general election is approaching.

Throughout the past 12 years, Conservative Government have regularly pledged to the House and the country solutions to problems. In six of their 12 Queen's Speeches, they said that they would provide an efficient economy—they have failed. On six occasions they said that they would solve the problem of unemployment—it is worse than ever before. In six of their Queen's Speeches they said that it was their intention to improve the quality of our children's education—it is in decline. They said that they would improve the national health service on six occasions and they have finally admitted that they have been underfunding it. They said that they would tackle crime more effectively in eight of the past 12 years—crime is at all-time record levels after 12 years of the incompetent failure of the Conservative party. In 12 out of 12 years they have given firm commitments to their party for the

Their failures in each of those areas have been abysmal and are far too numerous to elaborate upon in this debate, but I shall examine one or two of them.

This year, for the seventh time, the Government tell us that they want to improve the quality of our children's education—that is our children, because their children do not go into the state system. I choose my words with care. They do not send their children to the schools that they have been meddling with all these years.

Why do the Government persist in the policy of spending millions of pounds of our money—taxpayers' money—on their discredited city technology colleges when our schools suffer from a grave lack of resources? They are spending 50 times more on each child in the CTC than they do on each child in a school in Cumbria in my constituency. How can they defend that? They have allowed Cumbria to spend only £150 per pupil, while CTCs have received £7,450 per pupil from the taxpayer. That is a sign of the Tory party's priorities.

Is it that Cumbria's children lack talent or initiative? Of course not. Pupils at Wyndham school in Egremont in my constituency have won awards for science and technology. One group of young women has been given a national award for the design of an incubator unit for use in the third world. The truth is that state schools throughout the country, not just in Cumbria, are full of talented, able children who are being denied opportunities because of the Government's policies.

One small rural primary school in Lamplugh in my constituency has won several national awards and other school children could win more, given the opportunity. Cumbria is facing millions of pounds worth of cuts in its education spending as a direct result of the Government's policies, as are education authorities the length and breadth of the country. It is a scandalous waste of talent.

Education is not the only example of the Government's neglect. In the 12 months since the last Queen's Speech, unemployment has risen by 780,000-plus—a 50 per cent. rise. The Government, doubtless feeling that the increase, in the words of the Chancellor of the Exchequer, is "a price well worth paying", could not even bring themselves to mention unemployment in the text of one of the longest Queen's Speeches we have seen in recent times. There was not a mention of the plight of the unemployed.

The pattern of the Queen's Speeches over 12 years on unemployment is instructive. In the early 1980s, during the first recession, the Government expressed "concern" at rising unemployment and pledged to tackle it. In the past four years, they have had to fall back on saying that they will increase employment. This year, they obviously feel that there is nothing credible that remains for them to say on their record of rising unemployment. I fear that they are right.

On the eve of 1992, this year of all years, the Queen's Speech should have had at its heart measures to reduce the unemployment which now afflicts every region of the country and every sector of employment.

What is even more worrying is the acute rise in youth unemployment. Almost 300,000 more young people have become unemployed since this recession began. This Queen's Speech offers nothing for the young jobless in my constituency in Cumbria or in the country as a whole. I can assure you, Mr. Speaker, that young people will not forget what the Government have done to them, their job opportunities and their career prospects.

Britain's credibility in Europe is, not surprisingly, again in question. Far from being at the heart of Europe, Britain is once again being left behind—the Bruges group on one side and the Chichester group on the other, pulling the Prime Minister first this way and then that. The Foreign Secretary dances to one tune one day and to another the next, while our country's best interests are pushed aside. As the crucial Maastricht conference approaches, neither at home nor abroad is there a clear, consistent view of where the Tory Government stand. Last year at this time on Europe the Tory party was the prisoner of its Prime Minister. This year its Prime Minister is a prisoner of his own party.

The Gracious Speech is dominated by attempts to clear up the Tory economic incompetence and the manic ideology of the past 12 years. It has been contradicted on public expenditure within a week by yesterday's political opportunism in the autumn statement. On the question of financing public expenditure, why is it that, in the past 24 hours, on three occasions the Chancellor of the Exchequer and on three occasions the Leader of the House have been asked to spell out the Government's plans on VAT and on six occasions they have not had the courage to answer once either my right hon. and learned Friend the shadow Chancellor of the Exchequer or my right hon. Friend the leader of the Labour party?

All that is the work of a Prime Minister who, after a year in office is—to use one of his favourite cricketing metaphors—a nightwatchman. He is a caretaker who will not last. He says that he wants women in his Cabinet—but not yet. He says that he wants Britain at the heart of Europe—but not yet. He says that he wants to abolish poll tax—but not yet. He says that he wants to reform the DTI and put the right hon. Member for Henley (Mr. Heseltine) in charge—but not yet. He says that he wants a mandate of his own—[HON. MEMBERS: "But not yet."] As a cricketing friend said to me: I wouldn't have him in my team—he has a terrible propensity to no balls". Under the right hon. Gentleman, the Tory party's bogus claims are on auto-destruct. House sales have become repossessions and business starts have become insolvencies. The state intervenes in every school, hospital and town hall.

Britain needs a new hope for the 1990s and a new agenda that will give people opportunities. They will never achieve those advances and opportunities with a tired and discredited Tory party in power. We look forward to the next Gracious Speech, because we shall write it.

9.41 pm

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

I join the hon. Member for Copeland (Dr. Cunningham) in paying tribute to my right hon. Friend the Member for Worcester (Mr. Walker) and my hon. Friend the Member for Thanet, South (Mr. Aitken), who proposed and seconded the Loyal Address. I also join him in paying tribute to Alick Buchanan-Smith who was a personal friend of mine, as he was of so many, and who was an outstanding parliamentarian and Minister, and to the courage of George Buckley. We were all sorry to hear of the death of Richard Holt, who made a big mark in this House and put Langbaurgh on the map.

I reject absolutely any charges of racism on the part of anyone in the Tory party in the Langbaurgh campaign. We have been drawing attention to the defects of the Labour party campaign, and I shall give just one example. The Labour candidate, quite fairly and reasonably, bought shares in British Telecom. The Leader of the Opposition defended his freedom to do so. The point that we were making in drawing attention to it was that, if the Labour party had been in power, he would not have had the freedom to buy shares in BT. That is a perfectly fair point to make.

I begin, as I did last time, with brief but important references to one of the matters that comes within my sphere of responsibility—parliamentary reform. The Government are committed to sustaining the momentum of parliamentary reform. We place the emphasis on practical reforms that deliver real improvements in the management of the House, conditions for Members and working practices. This Session will see the new House management committees introduced, and, following the report by Sir Robin Ibbs, in operation for the first time.

We are now at phase one of the new parliamentary buildings—the first stage of a long-overdue improvement in accommodation facilities for Members. Much more needs to be done, but I shall always endeavour to turn a sympathetic ear to changes that will enable us to serve our constituents more effectively.

The pace of reforms to working practices is also hotting up. The Government's emphasis is on practical measures, on changes that will work to improve the hours that we sit and the effectiveness of parliamentary procedure. I expect to be able to report to the House soon the results of the review of the first year of the new European Standing Committees after the Select Committee on Procedure has reported. However, it is already clear that they are a real success, with enhanced scrutiny, better debate and, perhaps most noticeable, a reduction in the number of late-night debates on the Floor of the House. We have had seven in 1991, compared with 27 in 1990 and 37 in 1989.

The Transport and Works Bill will be a major step forward in the reform of antiquated, obscure private Bill procedures and should reduce by about half the number of private Bills that come before the House, while improving procedures in the area that deal with them.

The Select Committee on the Hours of Sitting, chaired by my right hon. Friend the Member for Westmorland and Lonsdale (Mr. Jopling), is carrying forward its work with vigour and enthusiasm. [HON. MEMBERS: "Slow down."] I have a great deal to say. I gave evidence to that Committee this week, and we all await conclusions with interest. I still believe that reforms in working practices and hours of sitting are essential to improve our ability to serve our constituents and our effectiveness as a legislature. I promise the House a full opportunity to debate the report from the Committee. I also promise that the Government will look seriously at all proposals for sensible reform.

Mr. Rhodri Morgan (Cardiff, West)

rose——

Mr. MacGregor

Like the hon. Member for Copeland, I have reduced my time considerably, so I will not give way.

I wish at the outset to concentrate on three astonishing features of the debate, the first being the speech of the right hon. and learned Member for Monklands, East (Mr. Smith). The right hon. Member for Lagan Valley (Mr. Molyneaux) and my right hon. Friend the Member for Guildford (Mr. Howell) got it absolutely right. The right hon. Member for Lagan Valley said that he was not clear whether the right hon. and learned Gentleman had finished or was still giving way, and my right hon. Friend referred to what looked like only the first half of his speech.

It was clear that the right hon. and learned Gentleman had astonishingly little to say, and nothing at all to say about Labour policies. Indeed, he failed totally to answer the two questions that were asked of him, and I know why. He does not want to be probed on questions of public expenditure relating to the Labour party and its tax proposals. That has been a big feature of today's debate, so I want to take the matter a bit further.

Mr. Morgan

rose——

Mr. MacGregor

No, I will not give way. [Interruption.] I will deal with VAT. It was not necessary to spell it out, because the existing public expenditure plans are based on existing tax rates, with the allowances and excise duties indexed in the normal way. That is spelled out clearly.

Mr. Morgan

rose——

Mr. MacGregor

I am not giving way.

I understand why the right hon. and learned Gentleman could not wait to resume his seat—in case he was asked again about expenditure. So let us try again. We know that the Labour party is committed to an increase in child benefit and pensions, covered by its eight new or increased taxes, a point that has featured in the debate.

We have heard throughout the past year from one Labour Member after another about how their areas of spending have a high priority. The Leader of the Opposition said: Top place will go to the health services. The hon. Member for Copeland promises: Education is our first priority. We had none of those commitments from the right hon. and learned Member for Monklands, East, although he said that education and training would be key priorities.

In one policy document, the Labour party says: A hugely increased programme encouraging energy conservation and efficiency is given priority. In another, Labour says: First priority will be substantial extra investment in London on extra buses, tubes and trains. In yet another, Labour says: Returning water to the public sector is a priority. That would not be cheap. For the hon. Member for Dagenham (Mr. Gould), thousands of millions of extra pounds spent on housing would be an immediate solution to the homeless problem. He has also said that the Labour party was already committed to the rapid development of regional development agencies." The hon. Member for Cynon Valley (Mrs. Clywd) said: Reaching the United Nation's aid target is a top priority. I have left out the biggest spender of the lot, the hon. Member for Oldham, West (Mr. Meacher), who, every time he gets to his feet in the House, commits the Labour party to further increased spending on the social services.

Mr. Jeff Rooker (Birmingham, Perry Barr)

Nothing of the kind.

Mr. MacGregor

It is all very well for the hon. Gentleman to say that. He should read what his hon. Friend has said. The Leader of the Opposition said the other day, talking about education: We will continue with the scale of commitment at least at the level of 1979. That means, year on year, sustaining the commitment instead of letting it be eroded. We know that that would cost an extra £2.6 billion. The right hon. and learned Member for Monklands, East immediately tried to suppress that, and that is indicative of the battle that is going on in the Labour party—[Interruption.] It was said by the Leader of the Opposition himself.

Mr. Morgan

rose——

Mr. MacGregor

I will not give way.

That is why we have costed the Labour party programme in the document which I have with me. It amounts to an extra £35 billion. They are all spending pledges given by Labour Members. They are all listed, and not one of them has been denied.

Nor can the right hon. and learned Member for Monklands, East claim that it would come from growth, because growth is already assumed in our plans. He knows that it would be a real-terms increase on top of inflation. That is why, on the costing basis, we are right to say that it represents another 10p in the pound on basic income tax. [Interruption.] I want to hear from the right hon. and learned Member for Monklands, East, because the Opposition must now come clean.

Which is it—massive increases in normal basic income tax, or does the Labour party intend to reject all the spending plans with which it has conned the electorate by saying that it will engage in them? It is a massive con trick—[Interruption.] Or will Labour go back to very large Government borrowing, on the scale that occurred in one year under the last Labour Government, of 9.5 per cent. of GDP and a PSBR of £55 billion?

Yesterday, we heard another commitment from the Labour party. We heard that it does not intend to cap any local authority. That was a clear commitment. So, in addition to the high increases in taxation that the Labour party would impose if it was ever given a chance, the community charge payer, or the council tax payer, would be ripped apart by high-spending Labour authorities, because there would be no capping. The Labour party has failed to answer those questions. Clearly their measures would be hugely inflationary.

Another astonishing feature of the debate was pointed out by my hon. Friend the Member for Stamford and Spalding (Mr. Davies). None of the speeches of Opposition Front-Bench spokesmen has mentioned the importance of achieving, as we have done, and sustaining, as we are determined to do, a low rate of inflation. I am not surprised. Labour's record in office and its current policies would be hugely inflationary.

On Europe, the Leader of the Opposition gave a long answer during the Queen's Speech debate on 31 October. It was not as long as his previous answer on economic and monetary union, but it was close. In that answer, he said absolutely nothing until my right hon. Friend the Chancellor pinned him down and asked what positive extra policies the Labour party would commit itself to. He said: When I say that the Government are not positive, that is because they have sought no undertakings on regional policy, growth policy or employment policy."—[Official Report, 31 October 1991; Vol. 198, c. 22.] By talking about those three areas, the right hon. Gentleman clearly underlines the fact that the Labour party has nothing to say about economic and monetary union.

Surprisingly, the Labour party document on Europe says: The completion of the single market contains the potential for great opportunities. However, in November 1986, the Leader of the Opposition said that the single market would be a political failure of such magnitude that it may well endanger the future development and cohesion of the Community. That shows his understanding of European matters. He was wrong then, he is wrong now, and he will be wrong in the future.

The only clearly distinctive point that the Opposition have made about convergence is: Labour's supply-side policies are the policies necessary for real convergence. It was the Labour party's supply-side policies, including its industrial relations policies—all of which we had to reverse—which did such damage in the 1970s. Our supply-side policies achieved the growth of the 1980s.

On employment, the Labour party would sign up for a massive extension of Community competence and majority voting in the name of the social charter. Those ill thought out policies would add massively to the burden on employers and reduce profitability and employment.

On growth, the Labour party ignores the evidence of independent forecasters that, on top of the substantial growth rates that we have achieved in the 1980s, our growth rate will be just as good as the G7 average and faster than Germany's in the second half of next year. That is not just our forecast; it is the IMF's forecast.

The third element of European policy that the Leader of the Opposition accused us of ignoring was regional policy. As one of my hon. Friends pointed out today, it is typical that, when finally pushed into a corner and forced to be specific, the Leader of the Opposition picked for unqualified Labour party support the one area of European Community policy that would cost this country. An increase in regional aid would benefit other countries far more than us and would drive up our net contribution to the budget. In other words, we would be paying for it. That is why, although the Labour party is changing its stance on Europe and is still deeply divided, it still has nothing constructive to say about the future of economic and monetary union.

The right hon. and learned Member for Monklands, East talked about our record. He used some statistics about what has been happening to jobs and businesses recently. I remind the House and the country that, over our 12 years of office, every day 800 more households have become home owners, nearly 100 extra new businesses have been established—they are all net increases—and nearly 200 new jobs have been created. Our policies will extend that fine record throughout the 1990s.

The shadow Chancellor criticised the investment performance of British industry. Again, he was wrong. Despite the recession, which my right hon. Friend the Chancellor made clear is coming to an end, our national wealth is 23 per cent. up on 1979, and business investment is up 27 per cent. As my right hon. Friend the Chancellor said, there was a massive increase in business investment in the three years up to 1989. Currently, business investment accounts for a higher proportion of GDP than at any time in the 1970s and early 1980s. Business investment remains high, and the latest CBI survey reported a sharp improvement in manufacturers' investment intentions.

United Kingdom manufacturing output is 25 per cent. higher than it was 10 years ago. United Kingdom manufactured exports have been increasing faster than world trade. After decades of decline, the United Kingdom's share of manufactured exports of developed nations has increased from 7.5 per cent. to almost 9 per cent. in the past five years. Those are the facts about the state of manufacturing industry, and industrial disputes are at the lowest for half a century. To answer the shadow Chancellor, this summer, the director general of the CBI said: Virtually everything associated with our manufacturing base is better than it was in the era of Government interference, lost orders, strikes and roaring inflation. No prizes for guessing when that was. It was when the industrial policies of the Labour party were being pursued, to our damage, in the 1970s.

Government spending of more than £2.6 billion in 1992–93 on enterprise and vocational education is two and a half times more in real terms than in 1978–79. Companies are spending record sums of some £20 billion on training per year, and the CBI survey shows an increase in the year ahead, with more than 80 per cent. of manufacturers expecting to spend as much or more on training in the next 12 months. That is what the right hon. and learned Member for Monklands, East means by cuts.

Almost 1 million people will be helped back to work in the coming year by employment and training programmes. We need to take no lectures from Labour Members. I remind them that we are spending two and a half times as much on training and enterprise as they did. When they left office, they were training 6,000 young people. This year, we shall train more than 250,000. If the right hon. and learned Member for Monk lands, East were concerned about employment and training, he would be prepared to condemn the TUC boycott of the employment action, youth training and TEC programmes. He has been asked before: will he now do so?

It is no wonder that the right hon. and learned Member for Monklands, East does not want to hear the facts about Government spending on science and technology. The autumn statement shows that spending on science and technology in 1992–93 will be almost £6 billion. That is substantial investment in science and technology.

I shall take no lessons from the right hon. and learned Gentleman on education, because the Government's record has been extremely good. In the past 12 years, there has been a record increase in spending per pupil—up 42 per cent. in schools. His comparisons with the city technology colleges did not bear water. More young people are staying on after 16 than ever before. More and more are getting good grades in GCSE and A-levels. Above all, our record on the numbers entering higher education, universities and polytechnics is outstandingly good—one out of eight of the relevant age group in 1979, one out of four now. Not only are numbers increasing every year but most students qualify in universities and polytechnics, whereas in other countries that have similar numbers entering higher education there is a much higher wastage rate.

The results of our education reforms and improvements in the 1980s are being shown by the way in which our young people are leaving higher education with qualifications. One in four is very much better than before.

The Opposition cannot add up. They make promises that they have no way of sustaining. They have no commitment to the control of inflation. Their approach to European matters involves policies that are not at all in the interests of British industry. The Government's record is outstandingly good. The Queen's Speech will carry it forward and, when the time comes, I am certain that the electorate will choose our policies.

Question put, That the amendment be made:

The House divided: Ayes 193, Noes 323.

Division No. 2]	[10 pm
AYES
Abbott, Ms Diane	Foulkes, George
Adams, Mrs Irene (Paisley, N.)	Fraser, John
Allen, Graham	Galloway, George
Alton, David	Garrett, John (Norwich South)
Archer, Rt Hon Peter	Garrett, Ted (Wallsend)
Ashdown, Rt Hon Paddy	Gilbert, Rt Hon Dr John
Ashley, Rt Hon Jack	Godman, Dr Norman A.
Ashton, Joe	Golding, Mrs Llin
Banks, Tony (Newham NW)	Gordon, Mildred
Barnes, Harry (Derbyshire NE)	Gould, Bryan
Barnes, Mrs Rosie (Greenwich)	Graham, Thomas
Beckett, Margaret	Grant, Bernie (Tottenham)
Beith, A. J.	Griffiths, Nigel (Edinburgh S)
Bellotti, David	Griffiths, Win (Bridgend)
Benn, Rt Hon Tony	Grocott, Bruce
Bennett, A. F. (D'nt'n & R'dish)	Hain, Peter
Bermingham, Gerald	Harman, Ms Harriet
Bidwell, Sydney	Haynes, Frank
Blair, Tony	Heal, Mrs Sylvia
Boateng, Paul	Healey, Rt Hon Denis
Bradley, Keith	Henderson, Doug
Brown, Gordon (D'mline E)	Hinchliffe, David
Brown, Ron (Edinburgh Leith)	Hoey, Kate (Vauxhall)
Caborn, Richard	Hogg, N. (C'nauld & Kilsyth)
Callaghan, Jim	Home Robertson, John
Campbell, Menzies (Fife NE)	Howell, Rt Hon D. (S'heath)
Campbell-Savours, D. N.	Howells, Geraint
Canavan, Dennis	Howells, Dr. Kim (Pontypridd)
Carr, Michael	Hoyle, Doug
Cartwright, John	Hughes, John (Coventry NE)
Clarke, Tom (Monklands W)	Hughes, Roy (Newport E)
Cohen, Harry	Hughes, Simon (Southwark)
Corbett, Robin	Hume, John
Corbyn, Jeremy	Ingram, Adam
Cox, Tom	Johnston, Sir Russell
Crowther, Stan	Jones, Barry (Alyn & Deeside)
Cryer, Bob	Jones, Martyn (Clwyd S W)
Cunningham, Dr John	Kaufman, Rt Hon Gerald
Darling, Alistair	Kennedy, Charles
Davies, Rt Hon Denzil (Lianelli)	Kilfoyle, Peter
Davies, Ron (Caerphilly)	Kinnock, Rt Hon Neil
Davis, Terry (B'ham Hodge H'I)	Kirkwood, Archy
Dixon, Don	Lamond, James
Dobson, Frank	Leadbitter, Ted
Duffy, Sir A. E. P.	Leighton, Ron
Dunnachie, Jimmy	Lestor, Joan (Eccles)
Dunwoody, Hon Mrs Gwyneth	Lewis, Terry
Eadie, Alexander	Litherland, Robert
Edwards, Huw	Livingstone, Ken
Evans, John (St Helens N)	Livsey, Richard
Ewing, Mrs Margaret (Moray)	Lloyd, Tony (Stretford)
Faulds, Andrew	Loyden, Eddie
Fearn, Ronald	McAllion, John
Field, Frank (Birkenhead)	McAvoy, Thomas
Fields, Terry (L'pool B G'n)	McGrady, Eddie
Fisher, Mark	McKay, Allen (Barnsley West)
Flannery, Martin	McKelvey, William
Flynn, Paul	McLeish, Henry
Foot, Rt Hon Michael	Maclennan, Robert
Foster, Derek	McMaster, Gordon

McWilliam, John	Ross, Ernie (Dundee W)
Madden, Max	Rowlands, Ted
Mahon, Mrs Alice	Ruddock, Joan
Marek, Dr John	Salmond, Alex
Marshall, David (Shettleston)	Sedgemore, Brian
Marshall, Jim (Leicester S)	Sheerman, Barry
Martin, Michael J. (Springburn)	Sheldon, Rt Hon Robert
Martlew, Eric	Shore, Rt Hon Peter
Meacher, Michael	Skinner, Dennis
Meale, Alan	Smith, Andrew (Oxford E)
Michael, Alun	Smith, C. (Isl'ton & F'bury)
Michie, Bill (Sheffield Heeley)	Smith, Rt Hon J. (Monk'ds E)
Michie, Mrs Ray (Arg'l & Bute)	Snape, Peter
Mitchell, Austin (G't Grimsby)	Soley, Clive
Morgan, Rhodri	Spearing, Nigel
Morley, Elliot	Steel, Rt Hon Sir David
Morris, Rt Hon A. (W'shawe)	Steinberg, Gerry
Morris, Rt Hon J. (Aberavon)	Stott, Roger
Murphy, Paul	Straw, Jack
Nellist, Dave	Taylor, Mrs Ann (Dewsbury)
Oakes, Rt Hon Gordon	Vaz, Keith
O'Hara, Edward	Wallace, James
O'Neill, Martin	Walley, Joan
Orme, Rt Hon Stanley	Wardell, Gareth (Gower)
Patchett, Terry	Wareing, Robert N.
Pike, Peter L.	Watson, Mike (Glasgow, C)
Powell, Ray (Ogmore)	Williams, Rt Hon Alan
Prescott, John	Williams, Alan W. (Carm'then)
Primarolo, Dawn	Wilson, Brian
Quin, Ms Joyce	Winnick, David
Randall, Stuart	Wise, Mrs Audrey
Redmond, Martin	Worthington, Tony
Rees, Rt Hon Merlyn	Wray, Jimmy
Richardson, Jo	Young, David (Bolton SE)
Robertson, George
Robinson, Geoffrey	Tellers for the Ayes:
Robinson, Peter (Belfast E)	Mr. Ken Eastham and Mr. Jack Thompson.
Rogers, Allan
Rooker, Jeff

NOES
Adley, Robert	Browne, John (Winchester)
Aitken, Jonathan	Bruce, Ian (Dorset South)
Alexander, Richard	Buck, Sir Antony
Alison, Rt Hon Michael	Burns, Simon
Amery, Rt Hon Julian	Burt, Alistair
Amess, David	Butcher, John
Amos, Alan	Butler, Chris
Arbuthnot, James	Butterfill, John
Arnold, Jacques (Gravesham)	Carlisle, Kenneth (Lincoln)
Arnold, Sir Thomas	Carrington, Matthew
Ashby, David	Carttiss, Michael
Aspinwall, Jack	Cash, William
Baker, Nicholas (Dorset N)	Chalker, Rt Hon Mrs Lynda
Baldry, Tony	Channon, Rt Hon Paul
Banks, Robert (Harrogate)	Chapman, Sydney
Batiste, Spencer	Chope, Christopher
Beggs, Roy	Churchill, Mr
Bellingham, Henry	Clark, Dr Michael (Rochford)
Bendall, Vivian	Clark, Rt Hon Sir William
Bennett, Nicholas (Pembroke)	Conway, Derek
Benyon, W.	Coombs, Anthony (Wyre F'rest)
Biffen, Rt Hon John	Coombs, Simon (Swindon)
Blackburn, Dr John G.	Cope, Rt Hon Sir John
Blaker, Rt Hon Sir Peter	Cormack, Patrick
Body, Sir Richard	Couchman, James
Bonsor, Sir Nicholas	Cran, James
Boscawen, Hon Robert	Currie, Mrs Edwina
Boswell, Tim	Curry, David
Bottomley, Peter	Davies, Q. (Stamf'd & Spald'g)
Bottomley, Mrs Virginia	Davis, David (Boothferry)
Bowden, A. (Brighton K'pto'n)	Day, Stephen
Bowden, Gerald (Dulwich)	Dickens, Geoffrey
Bowis, John	Dicks, Terry
Boyson, Rt Hon Dr Sir Rhodes	Dorrell, Stephen
Braine, Rt Hon Sir Bernard	Douglas-Hamilton, Lord James
Brandon-Bravo, Martin	Dover, Den
Brazier, Julian	Dunn, Bob
Bright, Graham	Durant, Sir Anthony
Brown, Michael (Brigg & Cl't's)	Dykes, Hugh

Emery, Sir Peter	Kirkhope, Timothy
Evans, David (Welwyn Hatf'd)	Knapman, Roger
Evennett, David	Knight, Greg (Derby North)
Fairbairn, Sir Nicholas	Knight, Dame Jill (Edgbaston)
Farr, Sir John	Knowles, Michael
Favell, Tony	Knox, David
Fenner, Dame Peggy	Lamont, Rt Hon Norman
Finsberg, Sir Geoffrey	Latham, Michael
Fishburn, John Dudley	Lawrence, Ivan
Fookes, Dame Janet	Lawson, Rt Hon Nigel
Forsyth, Michael (Stirling)	Lee, John (Pendle)
Forsythe, Clifford (Antrim S)	Leigh, Edward (Gainsbor'gh)
Forth, Eric	Lennox-Boyd, Hon Mark
Fowler, Rt Hon Sir Norman	Lester, Jim (Broxtowe)
Fox, Sir Marcus	Lloyd, Peter (Fareham)
Franks, Cecil	Lord, Michael
Freeman, Roger	Luce, Rt Hon Sir Richard
French, Douglas	Lyell, Rt Hon Sir Nicholas
Fry, Peter	McCrindle, Sir Robert
Gale, Roger	Macfarlane, Sir Neil
Gardiner, Sir George	MacGregor, Rt Hon John
Gill, Christopher	MacKay, Andrew (E Berkshire)
Gilmour, Rt Hon Sir Ian	Maclean, David
Glyn, Dr Sir Alan	McLoughlin, Patrick
Goodhart, Sir Philip	McNair-Wilson, Sir Michael
Goodlad, Alastair	McNair-Wilson, Sir Patrick
Goodson-Wickes, Dr Charles	Madel, David
Gorman, Mrs Teresa	Malins, Humfrey
Gorst, John	Mans, Keith
Grant, Sir Anthony (CambsSW)	Maples, John
Greenway, Harry (Ealing N)	Marland, Paul
Greenway, John (Ryedale)	Marlow, Tony
Gregory, Conal	Marshall, John (Hendon S)
Griffiths, Sir Eldon (Bury St E')	Marshall, Sir Michael (Arundel)
Griffiths, Peter (Portsmouth N)	Martin, David (Portsmouth S)
Grist, Ian	Mates, Michael
Ground, Patrick	Maude, Hon Francis
Hamilton, Rt Hon Archie	Mawhinney, Dr Brian
Hamilton, Neil (Tatton)	Maxwell-Hyslop, Robin
Hampson, Dr Keith	Mayhew, Rt Hon Sir Patrick
Hannam, John	Mellor, Rt Hon David
Hargreaves, A. (B'ham H'll Gr')	Meyer, Sir Anthony
Hargreaves, Ken (Hyndburn)	Miller, Sir Hal
Harris, David	Mills, Iain
Haselhurst, Alan	Miscampbell, Norman
Hawkins, Christopher	Mitchell, Andrew (Gedling)
Hayes, Jerry	Mitchell, Sir David
Hayhoe, Rt Hon Sir Barney	Moate, Roger
Hayward, Robert	Molyneaux, Rt Hon James
Heath, Rt Hon Edward	Monro, Sir Hector
Heathcoat-Amory, David	Montgomery, Sir Fergus
Heseltine, Rt Hon Michael	Moore, Rt Hon John
Hicks, Mrs Maureen (Wolv' NE)	Morris, M (N'hampton S)
Hicks, Robert (Cornwall SE)	Morrison, Sir Charles
Higgins, Rt Hon Terence L.	Moss, Malcolm
Hill, James	Moynihan, Hon Colin
Hind, Kenneth	Mudd, David
Hogg, Hon Douglas (Gr'th'm)	Neale, Sir Gerrard
Hordern, Sir Peter	Nelson, Anthony
Howarth, G. (Cannock & B'wd)	Neubert, Sir Michael
Howe, Rt Hon Sir Geoffrey	Newton, Rt Hon Tony
Howell, Rt Hon David (G'dford)	Nicholls, Patrick
Howell, Ralph (North Norfolk)	Nicholson, David (Taunton)
Hughes, Robert G. (Harrow W)	Norris, Steve
Hunt, Rt Hon David	Onslow, Rt Hon Cranley
Hunt, Sir John (Ravensbourne)	Oppenheim, Phillip
Hunter, Andrew	Page, Richard
Irvine, Michael	Paice, James
Jack, Michael	Parkinson, Rt Hon Cecil
Janman, Tim	Patnick, Irvine
Jessel, Toby	Patten, Rt Hon Chris (Bath)
Johnson Smith, Sir Geoffrey	Patten, Rt Hon John
Jones, Gwilym (Cardiff N)	Pattie, Rt Hon Sir Geoffrey
Jones, Robert B (Herts W)	Pawsey, James
Jopling, Rt Hon Michael	Peacock, Mrs Elizabeth
Kellett-Bowman, Dame Elaine	Porter, Barry (Wirral S)
Key, Robert	Porter, David (Waveney)
Kilfedder, James	Portillo, Michael
King, Roger (B'ham N'thfield)	Powell, William (Corby)
King, Rt Hon Tom (Bridgwater)	Price, Sir David

Raffan, Keith	Taylor, Ian (Esher)
Raison, Rt Hon Sir Timothy	Taylor, Sir Teddy
Rathbone, Tim	Tebbit, Rt Hon Norman
Redwood, John	Temple-Morris, Peter
Renton, Rt Hon Tim	Thatcher, Rt Hon Margaret
Rhodes James, Sir Robert	Thompson, Patrick (Norwich N)
Riddick, Graham	Thorne, Neil
Ridley, Rt Hon Nicholas	Thornton, Malcolm
Ridsdale, Sir Julian	Thurnham, Peter
Roe, Mrs Marion	Townend, John (Bridlington)
Ross, William (Londonderry E)	Townsend, Cyril D. (B'heath)
Rost, Peter	Tracey, Richard
Rowe, Andrew	Tredinnick, David
Rumbold, Rt Hon Mrs Angela	Trippier, David
Ryder, Rt Hon Richard	Twinn, Dr Ian
Sackville, Hon Tom	Vaughan, Sir Gerard
Sainsbury, Hon Tim	Viggers, Peter
Sayeed, Jonathan	Waldegrave, Rt Hon William
Shaw, David (Dover)	Walden, George
Shaw, Sir Giles (Pudsey)	Walker, Bill (T'side North)
Shaw, Sir Michael (Scarb')	Walters, Sir Dennis
Shelton, Sir William	Ward, John
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
Smith, Tim (Beaconsfield)	Widdecombe, Ann
Soames, Hon Nicholas	Wiggin, Jerry
Speed, Keith	Wilkinson, John
Speller, Tony	Wilshire, David
Spicer, Sir Jim (Dorset W)	Winterton, Mrs Ann
Spicer, Michael (S Worcs)	Winterton, Nicholas
Stanbrook, Ivor	Wolfson, Mark
Stanley, Rt Hon Sir John	Wood, Timothy
Steen, Anthony	Woodcock, Dr. Mike
Stern, Michael	Yeo, Tim
Stevens, Lewis	Young, Sir George (Acton)
Stewart, Allan (Eastwood)	Younger, Rt Hon George
Stewart, Rt Hon Sir Ian
Stokes, Sir John	Tellers for the Noes:
Summerson, Hugo	Mr. David Lightbown and Mr. John M. Taylor.
Tapsell, Sir Peter

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 that the Gracious Speech failed to present any coherent policy to secure for the people of the United Kingdom the full benefits of the economic, monetary and political union of the European Community and furthermore fails to contain any constructive proposal to combat environmental pollution; regret the inadequacy of the educational reforms proposed in the Gracious Speech to provide for higher standards and wider opportunity in the educational system; further regret the inclusion in the Speech of a measure to replace the unjust poll tax with a regressive and administratively cumbersome council tax rather than a more equitable local income tax; and finally regret the absence of any commitment to comprehensive reform of the institutions of government including Parliaments for Scotland and Wales, a Bill of rights and, in particular, in the last Gracious Speech before the general election any proposal to reform the electoral system for local, Westminster and European elections despite the deficiencies in the current system, which distorts the wishes of the people and produces divisive governments supported by only a minority of the electorate.'—[Mr. Beith]

Question put, That the amendment be made:—

The House divided: Ayes 19, Noes 320.

Division No. 3]	[10.14 pm
AYES
Alton, David	Bellotti, David
Ashdown, Rt Hon Paddy	Campbell, Menzies (Fife NE)
Barnes, Mrs Rosie (Greenwich)	Carr, Michael
Beith, A. J.	Cartwright, John

Ewing, Mrs Margaret (Moray)	Michie, Mrs Ray (Arg'I & Bute)
Fearn, Ronald	Salmond, Alex
Howells, Geraint	Steel, Rt Hon Sir David
Hughes, Simon (Southwark)
Johnston, Sir Russell	Tellers for the Ayes:
Kennedy, Charles	Mr. James Wallace and Mr. Archy Kirkwood.
Livsey, Richard
Maclennan, Robert

NOES
Adley, Robert	Dicks, Terry
Aitken, Jonathan	Dorrell, Stephen
Alexander, Richard	Douglas-Hamilton, Lord James
Alison, Rt Hon Michael	Dover, Den
Amery, Rt Hon Julian	Dunn, Bob
Amess, David	Durant, Sir Anthony
Amos, Alan	Dykes, Hugh
Arbuthnot, James	Emery, Sir Peter
Arnold, Jacques (Gravesham)	Evans, David (Welwyn Hatf'd)
Arnold, Sir Thomas	Evennett, David
Ashby, David	Fairbairn, Sir Nicholas
Aspinwall, Jack	Farr, Sir John
Baker, Nicholas (Dorset N)	Favell, Tony
Baldry, Tony	Fenner, Dame Peggy
Banks, Robert (Harrogate)	Finsberg, Sir Geoffrey
Batiste, Spencer	Fishburn, John Dudley
Beggs, Roy	Fookes, Dame Janet
Bellingham, Henry	Forsyth, Michael (Stirling)
Bendall, Vivian	Forsythe, Clifford (Antrim S)
Bennett, Nicholas (Pembroke)	Forth, Eric
Benyon, W.	Fowler, Rt Hon Sir Norman
Biffen, Rt Hon John	Fox, Sir Marcus
Blackburn, Dr John G.	Franks, Cecil
Blaker, Rt Hon Sir Peter	Freeman, Roger
Body, Sir Richard	French, Douglas
Bonsor, Sir Nicholas	Fry, Peter
Boscawen, Hon Robert	Gale, Roger
Boswell, Tim	Gardiner, Sir George
Bottomley, Peter	Gill, Christopher
Bottomley, Mrs Virginia	Gilmour, Rt Hon Sir Ian
Bowden, A. (Brighton K'pto'n)	Glyn, Dr Sir Alan
Bowden, Gerald (Dulwich)	Goodhart, Sir Philip
Bowis, John	Goodlad, Alastair
Boyson, Rt Hon Dr Sir Rhodes	Goodson-Wickes, Dr Charles
Braine, Rt Hon Sir Bernard	Gorman, Mrs Teresa
Brandon-Bravo, Martin	Gorst, John
Brazier, Julian	Grant, Sir Anthony (CambsSW)
Bright, Graham	Greenway, Harry (Ealing N)
Brown, Michael (Brigg & Cl't's)	Greenway, John (Ryedale)
Browne, John (Winchester)	Gregory, Conal
Bruce, Ian (Dorset South)	Griffiths, Sir Eldon (Bury St E')
Buck, Sir Antony	Griffiths, Peter (Portsmouth N)
Burns, Simon	Grist, Ian
Burt, Alistair	Ground, Patrick
Butler, Chris	Hamilton, Rt Hon Archie
Butterfill, John	Hamilton, Neil (Tatton)
Carlisle, Kenneth (Lincoln)	Hampson, Dr Keith
Carrington, Matthew	Hannam, John
Carttiss, Michael	Hargreaves, A. (B'ham H'll Gr')
Cash, William	Hargreaves, Ken (Hyndburn)
Chalker, Rt Hon Mrs Lynda	Harris, David
Channon, Rt Hon Paul	Haselhurst, Alan
Chapman, Sydney	Hawkins, Christopher
Chope, Christopher	Hayes, Jerry
Clark, Dr Michael (Rochford)	Hayhoe, Rt Hon Sir Barney
Clark, Rt Hon Sir William	Hayward, Robert
Conway, Derek	Heath, Rt Hon Edward
Coombs, Anthony (Wyre F'rest)	Heathcoat-Amory, David
Coombs, Simon (Swindon)	Heseltine, Rt Hon Michael
Cope, Rt Hon Sir John	Hicks, Mrs Maureen (Wolv' NE)
Cormack, Patrick	Hicks, Robert (Cornwall SE)
Couchman, James	Higgins, Rt Hon Terence L.
Cran, James	Hill, James
Cryer, Bob	Hind, Kenneth
Currie, Mrs Edwina	Hogg, Hon Douglas (Gr'th'm)
Curry, David	Hordern, Sir Peter
Davies, Q. (Stamf'd & Spald'g)	Howarth, G. (Cannock & B'wd)
Davis, David (Boothferry)	Howe, Rt Hon Sir Geoffrey
Day, Stephen	Howell, Rt Hon David (G'dford)
Dickens, Geoffrey	Howell, Ralph (North Norfolk)

Hughes, Robert G. (Harrow W)	Page, Richard
Hunt, Rt Hon David	Paice, James
Hunt, Sir John (Ravensbourne)	Parkinson, Rt Hon Cecil
Hunter, Andrew	Patnick, Irvine
Irvine, Michael	Patten, Rt Hon Chris (Bath)
Jack, Michael	Patten, Rt Hon John
Janman, Tim	Pattie, Rt Hon Sir Geoffrey
Jessel, Toby	Pawsey, James
Jones, Gwilym (Cardiff N)	Peacock, Mrs Elizabeth
Jones, Robert B (Herts W)	Porter, Barry (Wirral S)
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
King, Rt Hon Tom (Bridgwater)	Raison, Rt Hon Sir Timothy
Kirkhope, Timothy	Rathbone, Tim
Knapman, Roger	Redwood, John
Knight, Greg (Derby North)	Renton, Rt Hon Tim
Knight, Dame Jill (Edgbaston)	Rhodes James, Sir Robert
Knowles, Michael	Riddick, Graham
Knox, David	Ridley, Rt Hon Nicholas
Lamont, Rt Hon Norman	Ridsdale, Sir Julian
Latham, Michael	Robinson, Peter (Belfast E)
Lawrence, Ivan	Roe, Mrs Marion
Lawson, Rt Hon Nigel	Ross, William (Londonderry E)
Lee, John (Pendle)	Rost, Peter
Leigh, Edward (Gainsbor'gh)	Rowe, Andrew
Lennox-Boyd, Hon Mark	Rumbold, Rt Hon Mrs Angela
Lester, Jim (Broxtowe)	Ryder, Rt Hon Richard
Lloyd, Peter (Fareham)	Sackville, Hon Tom
Lord, Michael	Sainsbury, Hon Tim
Luce, Rt Hon Sir Richard	Sayeed, Jonathan
Lyell, Rt Hon Sir Nicholas	Shaw, David (Dover)
Macfarlane, Sir Neil	Shaw, Sir Giles (Pudsey)
MacGregor, Rt Hon John	Shaw, Sir Michael (Scarb')
MacKay, Andrew (E Berkshire)	Shelton, Sir William
Maclean, David	Shephard, Mrs G. (Norfolk SW)
McLoughlin, Patrick	Shepherd, Colin (Hereford)
McNair-Wilson, Sir Michael	Shepherd, Richard (Aldridge)
McNair-Wilson, Sir Patrick	Shersby, Michael
Madel, David	Sims, Roger
Malins, Humfrey	Skeet, Sir Trevor
Mans, Keith	Skinner, Dennis
Maples, John	Smith, Tim (Beaconsfield)
Marland, Paul	Soames, Hon Nicholas
Marlow, Tony	Speed, Keith
Marshall, John (Hendon S)	Speller, Tony
Marshall, Sir Michael (Arundel)	Spicer, Sir Jim (Dorset W)
Martin, David (Portsmouth S)	Spicer, Michael (S Worcs)
Maude, Hon Francis	Stanbrook, Ivor
Mawhinney, Dr Brian	Stanley, Rt Hon Sir John
Maxwell-Hyslop, Robin	Steen, Anthony
Mayhew, Rt Hon Sir Patrick	Stern, Michael
Mellor, Rt Hon David	Stevens, Lewis
Meyer, Sir Anthony	Stewart, Allan (Eastwood)
Miller, Sir Hal	Stewart, Andy (Sherwood)
Mills, Iain	Stewart, Rt Hon Sir Ian
Miscampbell, Norman	Stokes, Sir John
Mitchell, Andrew (Gedling)	Summerson, Hugo
Mitchell, Sir David	Tapsell, Sir Peter
Moate, Roger	Taylor, Ian (Esher)
Molyneaux, Rt Hon James	Taylor, Sir Teddy
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, Patrick (Norwich N)
Moss, Malcolm	Thorne, Neil
Moynihan, Hon Colin	Thornton, Malcolm
Mudd, David	Thurnham, Peter
Neale, Sir Gerrard	Townend, John (Bridlington)
Nelson, Anthony	Townsend, Cyril D. (B'heath)
Neubert, Sir Michael	Tracey, Richard
Newton, Rt Hon Tony	Tredinnick, David
Nicholls, Patrick	Trippier, David
Nicholson, David (Taunton)	Twinn, Dr Ian
Norris, Steve	Vaughan, Sir Gerard
Onslow, Rt Hon Cranley	Viggers, Peter
Oppenheim, Phillip	Waldegrave, Rt Hon William

Walden, George	Wilshire, David
Walker, Bill (T'side North)	Winterton, Mrs Ann
Walters, Sir Dennis	Winterton, Nicholas
Ward, John	Wolfson, Mark
Wardle, Charles (Bexhill)	Wood, Timothy
Warren, Kenneth	Woodcock, Dr. Mike
Watts, John	Yeo, Tim
Wells, Bowen	Younger, Rt Hon George
Wheeler, Sir John
Whitney, Ray	Tellers for the Noes:
Widdecombe, Ann	Mr. David Lightbown and Mr. John M. Taylor.
Wiggin, Jerry
Wilkinson, John

Question accordingly negatived.

Main Question put and agreed to.

Resolved,

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 Britain 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.

Mrs. Wise

On a point of order, Mr. Speaker. You will be aware of the special report from the Select Committee on Health which I believe will be automatically referred to the Privileges Committee but which, at the moment, is the property of this House. I am sure that the House, with its customary generosity, would be prepared to listen to a personal statement from the hon. Member for Esher (Mr. Taylor) if he cares to explain how he came to keep quiet about his possession at a crucial time of a confidential Committee paper. I would like——

Mr. Speaker

Order. Let me make the position absolutely clear to the House. Following a decision of the House in 1986, whenever a Select Committee makes a special report to the effect that its work has been substantially interfered with as a result of premature disclosure of its proceedings, that report automatically stands referred, as the hon. Member for Preston (Mrs. Wise) has said, to the Privileges Committee. The special report from the Select Committee on Health is now therefore in the hands of the Privileges Committee, and it cannot be discussed.

Mrs. Wise

Further to the point of order, Mr. Speaker.

Mr. Speaker

Order. No points of order arise from that. That is a ruling.

Mrs. Wise

With respect, Mr. Speaker, and on a point of order. I was not asking for a debate and I want to make that quite clear. I am asking——

Mr. Speaker

Order. We cannot discuss it, because the matter is in the hands of the Privileges Committee. We must not prejudice in any way what that Committee is going to do about this matter. Depending on the Privileges Committee's decision, there may well be a debate, and that will be the moment to discuss it.