HC Deb 22 January 1992 vol 202 cc322-417
Mr. Speaker

Before I call the Chancellor of the Exchequer to move the motion, I must announce to the House that I have selected the amendment in the name of the Leader of the Opposition. In view of the late start and the large number of right hon. and hon. Members who wish to participate in the debate, I propose to put a limit of 10 minutes on speeches between 6 o'clock and 8 o'clock. I hope that hon. Members who are called before or after that time will bear that limit in mind, so that every right hon. and hon. Member who wishes to participate may do SO.

4 pm

The Chancellor of the Exchequer (Mr. Norman Lamont)

I beg to move That this House approves the Autumn Statement presented by Mr. Chancellor of the Exchequer on 6th November 1991; notes that the Government has continued to maintain firm control over public expenditure, while honouring its commitments in full and increasing spending in priority areas; and congratulates the Government on its sound and prudent economic policies, which have led to a substantial reduction in inflation and have laid the foundations for sustainable recovery. It is now a little over two months since I delivered my autumn statement to the House, and I welcome today's opportunity to debate the economic policies and prospects that I set out at that time. We also have the Treasury and Civil Service Select Committee's informative report on the autumn statement, and I should start by paying tribute once again to my right hon. Friend the Member for Worthing (Mr. Higgins) for his skilful chairmanship of that Committee.

In the autumn statement, I announced a programme of public spending which channels money to areas of long-term priority within an overall total for public expenditure that the country can afford. The Labour party offers instead an economic strategy that would raise spending indiscriminately and give the British people a bleak combination of higher inflation, higher interest rates and higher taxes.

Mr. Harry Ewing (Falkirk, East)

Will the right hon. Gentleman give way?

Mr. Lamont

I shall give way in a moment. Today's debate is about the choice between the prudent long-term economic policies that we have put in place—policies that will lead to sustained and sustainable recovery—and the tax and spending policies of the Labour party, which would stop that recovery in its tracks.

Mr. Ewing

Will the right hon. Gentleman give way?

Mr. Lamont

I shall give way in a moment. I first want to make a statement to the House.

I set out in the autumn statement the Government's view of the immediate prospects for the economy. As I have already acknowledged on several occasions, output in the second half of 1991 has turned out weaker than I anticipated then. The signs of recovery, apparent in sales and production figures as well as in confidence indicators in the late summer, were not sustained. That, of course, is disappointing but there remain good grounds for believing that the recovery will become firmly established in the course of 1992.

It has been said before, but it is worth emphasising again, that monetary policy operates with a time lag. The full effects of the reduction in interest rates from 15 per cent. to 10.5 per cent. have still to work through to businesses and individuals. The further mortgage rate cuts announced last week will mean that the monthly repayments on a £60,000 mortgage have fallen by nearly £200 a month from their peak. The temporary removal of stamp duty for house purchases under £250,000, and other measures that I announced in December, will provide a further welcome stimulus to the housing market.

Inflation has fallen dramatically over the last year, to a level clearly below the European Community average. Producer price inflation, excluding food, drink and tobacco, which is a good predictor of future retail price inflation, fell in December to 3.8 per cent. In the fourth quarter, the annualised rate was only 2.3 per cent., the lowest rate since 1973. That is excellent news. Low inflation makes British goods more competitive, and provides the stability and certainty that businesses and individuals need to save and invest.

Because inflation has fallen rapidly, the real incomes of those in work in this country are rising, unlike the position in the United States. There is no shortage of potential demand: indeed, there is considerable pent-up demand in the economy. There are always uncertainties about timing, but what is certain is that this rise in incomes will, in time, feed through to a rise in spending.

Fourthly, world stock markets, especially in the United States, are clearly anticipating economic recovery.

Fifthly, even in difficult circumstances, tens of thousands of people are still setting up their own businesses. The fact that so many new businesses are being set up shows that the entrepreneurial spirit that we nurtured in the 1980s still thrives. This reflects continued long-term optimism about the prospects for the British economy.

Finally, and perhaps most important, many manufacturers and retailers are responding in exactly the right way to weak demand by cutting prices and costs. Far from that being bad news, lower prices in the stores mean higher output and lower inflation. That is good news for consumers and for recovery, but recovery comes not, as the Labour party believes, from Governments trying to kick-start the economy but from businesses being more competitive.

Mr. Harry Ewing

I am grateful to the Chancellor for giving way so early in his speech, because my intervention may help to set the context in which his speech is delivered. When he has shown how wrong he was in his forecasts, backed up by all the paraphernalia of the civil service and the forecasting material at his disposal, why should the people of this country believe a word he says about the Labour party's spending proposals? Is the right hon. Gentleman aware that he now sounds very much like the Gerald Ratner of British politics?

Mr. Lamont

I am grateful to the hon. Member for inviting me to comment on and show why I am suspicious of the Labour party's spending proposals. I shall not disappoint him. I shall answer his question when I come to that.

Mr. David Winnick (Walsall, North)

Last year, we were told that recovery would come in the second part of 1991. On the Chancellor's own admission, that has not occurred. Is he telling the House that a recovery will take place in 1992, and why should the country believe him? Is that why the Secretary of State for Education and Science and the Tory party chairman are so hesitant about holding an election on 9 April? Is it true that the Government are so terrified of facing the electorate that some Ministers want to wait as late as July?

Mr. Lamont

I have just spelt out —apparently, the hon. Gentleman was not listening—why I believe we shall see a recovery in 1992. That view accords with that of the Organisation for Economic Co-operation and Development, which predicts that, in 1992, the British economy will grow by 2 per cent.—faster than Germany and as fast as France and Italy. Not only the Government but other organisations take an optimistic view of Britain's prospects in 1992.

I know very well that many businesses are continuing to face difficult conditions, but while the recovery has not yet become firmly established, it is clear that the foundations are in place.

The narrow definition of money—M0—has moved into the top half of its target range. Manufacturing investment—about which the right hon. and learned Member for Monklands, East (Mr. Smith) is always talking—rose in the third quarter. Imports of raw materials are rising. The rate of increase of unemployment has fallen sharply. The increase in the last quarter of 1991 was little more than a third that of the first quarter.

Mr. Bruce Grocott (The Wrekin)

Always look on the bright side.

Mr. Lamont

The hon. Gentleman says, "Always look on the bright side", but unlike the hon. Gentleman, who has made it clear again and again that he has a vested interest in making the gloomiest and most dismal—

Several Hon. Members


Mr. Speaker

Order. I call the Chancellor.

Mr. Lamont

I give way to the hon. Member for The Wrekin.

Mr. Grocott

I am grateful to the temporary Chancellor for giving way. We are interested not in looking on the bright side or on the gloomy side but in looking at the truth.

Mr. Lamont

Sometimes that commodity is used more sparingly than on other occasions.—[Interruption.]

Mr. Speaker

Order. I have already said that there is great pressure to participate in the debate, so let us now get on.

Mr. Lamont

The car industry has faced especially difficult conditions, but has shown remarkable resilience in switching production to export markets. Production for export in 1991 was up nearly a half on the previous year, and car production overall rose 12 per cent. in December. Commercial vehicle production which has faced similar problems has been switching from domestic to export markets, and export production is at its highest level since 1980.

Nothing could say more about the underlying strength of the British economy and the skills of British workers than Nissan's decision last week to invest another £200 million in its plant in Sunderland. That will make the Nissan plant the largest Japanese investment in Europe. It will bring another 600 jobs to the north-east with more to come through orders from suppliers. It is not only Japanese investors: yesterday's survey from the German Chamber of Industry and Commerce in the United Kingdom showed that Britain is the most favoured location for German investment in Europe.

All over the country, British exporters have continued to perform well. Our share of world trade in manufactured goods has risen for three years in a row, for the first time in decades. Our exports are at record levels. This achievement is all the more impressive given the weakness of economic growth throughout the industrialised world. The Opposition, we notice, have a deliberate policy of ignoring the rest of the world. They claim that recession here has nothing to do with what is happening in the United States or elsewhere. Of course that is nonsense. We have seen recession in many countries.

Last year, even Germany saw two quarters of falling gross domestic product—technically a recession. Growth has slowed in Japan and France. In the United States, the effects of the recession have lingered on despite the fall in interest rates to their lowest level in a quarter of a century. In addition to that in the United States, there have been recessions in Canada, New Zealand, Australia, Sweden and Switzerland.

I have always stressed that unemployment is likely to continue to rise for some time. I do not underestimate the hardship that that causes to individuals and families, but the right hon. Gentleman the leader of the Opposition seems to think that unemployment is an affliction peculiar to Britain. Unemployment is rising in most Community countries. Last month, unemployment rose by 30,000 in France and by 290,000 in the United States. In France, it is now over 2 million. In Australia, it is at the highest level since the war. Therefore, hon. Gentlemen cannot ignore the fact that these issues are common to many countries.

Mr. Giles Radice (Durham, North )

At the Select Committee hearing on last year's Budget, the Chancellor told me in answer to a question that the main cause and origin of the recession was the Government's response to a too rapid rate of growth.

Mr. Lamont

The hon. Gentleman is not quoting me precisely. The point that I am making is that the reason that the outlook—[Interruption.] I am about to come to domestic factors. My point is —any person would have to admit this—that the international climate has undoubtedly been deteriorating. For an exporting country such as ours, that has a major impact on the economy.

Mr. Neil Kinnock (Islwyn)

While we are on the subject of admissions, will the right hon. Gentleman acknowledge that, out of every seven jobs lost in the European Community last year, five were lost in Britain, under his Government?

Mr. Lamont

As the right hon. Gentleman knows, the figure that he has given is gross. I have pointed out to him that unemployment has risen in a number of other European countries. The latest three-month on three-month figures on rises in unemployment show that, in the past three months, it has risen more quickly in several other countries than it has here.

Several Hon. Members


Mr. Lamont

No, I should like to press on.

I know very well that times are difficult for business, but industrial production in Britain has fallen by less in the past year than industrial production in Canada, Italy, Belgium, Sweden or Australia.

Although the December fall in retail sales was disappointing, in this country sales were still higher in the last quarter than they were a year ago. Retail sales in Canada are down 10 per cent. on a year ago, and they are down in Italy, too. In the United States, the retail sales figures were the worst for 20 years.

It is pure folly to imagine, if one were ever tempted to do so, that we in Britain can isolate ourselves from the world economy. Economic conditions in other countries affect us directly, through the level of demand for British products abroad, but also indirectly through the effects on confidence. That in turn further affects domestic demand and output.

Of course, as the hon. Member for Durham, North (Mr. Radice) has said, domestic factors have also been at work. The most important of those is the sharp rise in the savings ratio in the course of the recession. Many individuals, having incurred large debts in the late 1980s, have chosen to repay those debts and, indeed, to build up their savings rather than to spend money on consumer goods.

In the short run, manufacturers and retailers have suffered as a result of weaker consumer demand. But it is not the business of Government to tell individuals that they should be spending rather than saving. In this country there has for a long while—quite rightly—been concern that our level of national savings has not been high enough. For too long, we have relied on house price inflation to do our saving for us. In the long run, an increase in real, genuine savings will help to finance investment, to reduce real interest rates and to strengthen the economy. That means that the recovery will be stronger and more soundly based.

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

Clearly, the Chancellor of the Exchequer genuinely believed that, by this time, consumers would be spending more money—that the pent-up demand of which he has spoken would have been released so as to start the economy moving again, and that that would lead the recovery. Why, does he think, have consumers not had the confidence to go into the shops and spend money? What does that reluctance say about Government policies?

Mr. Lamont

I have already said that one would not normally expect monetary policy to have had it full effect—for instance, the considerable loosening of policy that occurred between February and July last year. I am sure that the hon. Member for Berwick-upon-Tweed (Mr. Beith) is not suggesting this, but it would be absurd to suggest that, because output does not follow a predicted path from one quarter to another, the thrust and direction of policy should be changed, or that policy is wrong.

Good management of the economy has nothing to do with changing policy in the futile pursuit of each month's passing statistic. Good management is about getting the policies right and sticking to them. That is what we have done, and that is what we will continue to do.

We must, of course, be realistic and open about this recession. It has caused much hardship. However, it is not realistic to talk, as Opposition Members do, about a never-ending recession. It is positively irresponsible and shows that they will stoop to any depths to gain power and to try to frighten the British people. In the past few months, the Labour party has certainly succeeded in frightening the British people, but it is the Labour party of which the British people are frightened, because they know perfectly well that the one thing that could mean a never-ending free-fall recession is the advent of a Labour Government.

As this autumn statement has demonstrated once again, we are the only party that can keep public spending and taxation under control. Inevitably, the recession has added to the pressures both on public spending and on tax revenues. Weaker than expected activity in the second half of last year will mean that those pressures are even greater than anticipated in the autumn statement.

I shall present my Budget to this House on 10 March. The House would not expect me to anticipate my Budget, but I can tell the House that we will continue our prudent stewardship of public finances, in contrast to the reckless promises of the Labour party.

The right hon. and learned Member for Monklands, East likes to pretend that he has some alternative policy. For months, as we were lowering interest rates cautiously and carefully, he said they should be lower. Whatever the state of the economy, Labour's refrain has been the same—[Interruption.]

Mr. Speaker

Order. I ask the House to settle down. This is a very important debate, and many right hon. and hon. Members wish to participate. Interruptions do not make it easier for them to do so.

Mr Lamont

Whatever the state of the economy, the right hon. and learned Gentleman's policy has always been the same. Whatever the level of interest rates, he has always argued that they should be lower. Even in 1987 and even in 1988, right at the top of the boom, the right hon. and learned Gentleman advocated that interest rates should be lower. We all know where we should be if we had followed his policy. Today, inflation would be higher and the recession would be deeper.

The right hon. and learned Gentleman has been rumbled. Now he is trying to give the impression that he would not devalue the pound. He has been forced to admit that he could not cut interest rates. He has lost his only policy, so what does he call for now? He calls for a change of course—a new direction. He parrots the phrase. But what is this change of course—[Interruption.)

Mr. Speaker

Order. This gives a very bad impression—[HON. MEMBERS: "Oh."] I mean the reaction of the House.

Mr. Lamont

We all know that the last thing the Labour party wants is for any attention to be focused on its policies. That is the one thing that it cannot bear.

The right hon. and learned Member for Monklands, East has repeatedly in debate called for a fresh approach, a new policy and a change of course, yet in speech after speech we have not had the slightest sign or demonstration of what that policy is meant to be.

In the previous debate on the autumn statement, I asked the right hon. and learned Gentleman this question: if he did not disagree with monetary policy, what did he think about fiscal policy, about spending and about borrowing? I asked him then if he thought that public spending was too high, too low or just about right. I asked him whether he thought that borrowing was too high, too low or just about right, and he did not answer. What the right hon. and learned Gentleman lacks in frankness he makes up for in evasion.

Mr. Dennis Skinner (Bolsover)

Will the Chancellor admit that, this time last year, he forecast that there would not be a budget deficit? We are now running into the possibility in 1992 of a deficit of the order of £19 billion. On top of that, when the Government came to power in 1979, personal debt on average was 45 per cent. The latest figure is 102 per cent. That figure will haunt the Government for ever.

Hon. Members

Hear, hear.

Mr. Lamont

The House will have noticed the cheers that the hon. Gentleman was getting from his Back-Bench colleagues. Perhaps that is because he is one of 25 hon. Members who signed an amendment to the motion, rejecting the market economy, calling for a fully socialist policy and disagreeing totally with the policy advocated by the Front Bench of his party.

Mr. Skinner


Mr. Lamont

I will answer. For all his austerity, the hon. Gentleman has quite a few contacts with the City, but he does not seem to be well informed. No such prediction was made in the Budget last year. The hon. Gentleman has got it totally wrong.

To return to the right hon. and learned Member for Monklands, East, he is caught between the massive spending plans of his shadow Ministers and his wish to appear to be in a position to deny that a Labour Government would put up taxes, but he does not seem to be having much success with his colleagues.

Let me turn now in detail to public spending, the subject of the debate. On the programme for each Department, we have set out our spending plans for the next three years. On each of those, Labour promises to spend more. I hope that today the right hon. and learned Gentleman will tell us which of Labour's promises we should believe and which are just empty words.

Let me start with social security. In the autumn statement, I announced that provision for social security in 1992–93 would rise by £4.25 billion, to over £70 billion. That is a massive sum and a massive increase. We have honoured our commitments to the old, the disabled and the jobless. We gave extra help to the poorest disabled pensioners and those over 80. Unlike the Labour party, we did not use an economic downturn as an excuse to break our promises to pensioners.

But all that is not enough for the Labour party. Indeed, on 30 September last year the right hon. and learned Gentleman said: And of course that Labour Government will restore the link between retirement pensions and earnings and prices—whichever is the higher. I noticed the right hon. and learned Gentleman nodding to confirm that. So much for the pledge that Labour has got only two specific pledges in its spending plans. We can see that not just the party but the right hon. and learned Gentleman himself does not believe in his policy.

The autumn statement demonstrated again that the national health service gets a better deal under this Government than it ever did under Labour. I announced an increase of £1.5 billion in United Kingdom spending on the NHS; for the hospital and community health services, the real increase in spending planned between this year and next is 5 per cent.

In 1992–93, we will be spending a greater share of national income on the health service than ever before—more than half as much again in real terms as in 1979. That has given more doctors, more dentists, more nurses, more midwives and more patients being treated. In addition, we are investing for the future of the health service because capital spending is three quarters as high as it was under the Labour Government.

All that is not enough for the Labour party. The hon. Member for Livingston (Mr. Cook) was reported on one occasion as saying that he would pour money into the health service. On 23 September last year, he said: We are going to restore the underfunding of the NHS. On 21 October, he said: in the first year we shall start to tackle underfunding".—[Official Report, 21 October 1991; Vol. 196, c. 673.] How much would he spend—£3 billion, £1 billion, or nothing? Is it a pledge—it sounds like a pledge—or is it just empty words?

Despite the recession, we have maintained British Rail and London Regional Transport's massive investment programmes. I announced an increase of £1.4 billion in Government finance, enabling them to maintain an investment programme of more than £2½ billion in 1992–93—three times as much as in 1979. Over the next three years, they will be investing half as much again in real terms as in the past three years.

But again that is not enough for the hon. Member for Kingston upon Hull, East (Mr. Prescott). On 22 April 1991, he said: the Government have the overriding responsibility to see that there is a high-speed rail link from the tunnel not only to London but to areas beyond—the midlands, the north, Wales and Scotland?"—[Official Report, 22 April 1991; Vol. 189, c. 760.] He said nothing about having only two pledges on child benefit and taxes and about everything being optional. Are we to take those words at face value or not? Are those words a pledge? They sound like a pledge. Are they a pledge, or are they just empty words designed to deceive the electorate?

Opposition Members go on and on about education and training, but when will they look at the facts? Next year, we are providing for a real-terms increase of 15 per cent. in Government support for maintained schools. We have more students in higher education than ever before —one in four, compared with one in eight when the Labour party was in power. Again, it is not enough for the Labour party, and it is not enough for the Leader of the Opposition. In October 1991, he said: If that level of expenditure"— he was talking about the proportion of GDP spent on education in 1979— had been maintained, an extra £2.6 billion every year would be going into education. We will continue with the scale of commitment at least at the levels of 1979. Again there was nothing about having only two pledges. Is that a pledge, is it a firm promise—it sounds like it; it is calculated to be like it—or is it just empty words?

We announced that the overseas aid budget would increase by 2 per cent. in real terms. Again, that is not enough for the right hon. Member for Manchester, Gorton (Mr. Kaufman). He was not worried about things being phased in over the next Parliament or over two Parliaments. On 3 October 1991, he said: During our first Parliament we shall increase Britain's aid budget to the United Nations' target of 0.7 per cent. …That is a firm commitment, costed and clear, that I pledge our Labour Government will carry out. Again, that sounds like a pledge, but the Labour party says that it has only two pledges. Is it a pledge, or is it just empty words? Yesterday, my right hon. and learned Friend the Chief Secretary showed that the bill for Labour's spending plans has now risen to an astonishing £37 billion over and above the public—[Interruption.]

Madam Deputy Speaker (Miss Betty Boothroyd)

Order. Barracking does not improve the quality of our debates.

Mr. Lamont

We all know that the Labour party simply cannot take any examination of its policy—it simply cannot. The Labour party has made—I quoted them today and there has been no intervention by Opposition Front-Bench Members—what sound like specific promises. Those promises add up to £37 billion. We have repeatedly challenged Labour Members either to drop those spending pledges or to tell the country what taxes they would put up to pay for them, but they have not responded.

Mr. Tony Benn (Chesterfield)

Is the Chancellor aware that, because of unemployment, each day 3 million working days are lost from production, and that the cost of benefit and lost production put together is probably about £50 billion a year?

Any proposal to expand production will be self-financing. [Interruption.] Of course it will. That is exactly how the rearmament programme before the war brought full employment back to Britain, after a slump under Neville Chamberlain as serious as the one that the Chancellor has engineered in this country.

Mr. Lamont

The right hon. Member for Chesterfield (Mr. Benn) in recent debates has made some telling contributions, but I am afraid that that is not one of them. It is a sheer fallacy to think that any public expenditure measure can be justified simply because it would create jobs and be self-financing. We have heard that many times before, but I am afraid that it does not work like that.

Hon. Members opposite have refused repeatedly to respond; perhaps we shall hear from the right hon. and learned Member for Monklands, East something about this today.

These plans have huge implications for taxation as well, although the Labour party has been a little more forthcoming than at first about its tax plans. It promised to raise the marginal rate of tax for the better-off to 59 per cent. I am not sure what it thinks that will do to house prices in the south-east, about which we will no doubt hear so much from the right hon. and learned Gentleman in a minute.

Labour Members promised to hit everybody earning more than £390 a week with a full extra 9 per cent. on national insurance contributions. That will hit not just those earning more than £20,000 a year but anybody whose earnings go over £390 in a week, perhaps because of overtime: they will be penalised by the tax proposed by the Labour party.

Despite their professed concern for investment, Labour Members promise to introduce a new 9 per cent. tax on savings income. They still call income from savings "unearned income", and they are determined to tax it as heavily as possible. The whole country knows, and we know, that the Labour party is the party of high taxation.

We saw in The Sunday Times—a quality newspaper that I read very carefully —an Access opinion poll which revealed that 57 per cent. of hon. Members on the Benches opposite want to put the basic rate of tax up by 2p. We also heard the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) admit in a broadcast the other day that he did not think that 83 per cent. was a penal rate of tax. Both those things reveal the attitudes of the party opposite.

We thought that we knew what Labour was promising on taxes, but now all seems to be in confusion after the Leader of the Opposition's famous dinner at Luigi's. I do not know if it was the effect of the frascati, but the right hon. Gentleman seems to have been in expansive mood. The dinner certainly cost a lot. It has cost Labour its last slender vestige of credibility on taxation. The truth is that Labour knows that it will have to increase tax and national insurance to pay for its extra spending. Even if it was able to phase in the increases, the phasing in would make no difference. In the end, the taxes would go up—and everyone knows it.

We were told by the right hon. and learned Member for Monklands, East that all this was going to happen, and happen immediately. Now we are told that the right hon. and learned Gentleman is furious with his leader—again according to that reliable paper, The Sunday Times. I am not surprised about the right hon. and learned Gentleman, because his credibility has rested on creating the impression that they had only two spending plans and that those plans could be financed simply out of the increases in national insurance and the higher rates of tax.

The priority package of the right hon. and learned Member for Monklands, East is in ribbons, and not just because the Leader of the Opposition wants to delay the tax increases to pay for it. The right hon. and learned Gentleman himself has also bungled it, because, on top of the two specific pledges which he keeps saying are their only ones, he has added £1 billion for training as an immediate package for industry. So the right hon. and learned Gentleman simply cannot say that they can finance their child benefit and pension increases and the industry package out the tax measures that they are proposing and at the same time postpone the introduction of those tax increases.

Mr. John Smith (Monklands, East)

Perhaps the Chancellor will refresh my memory. I do not know whether it was in The Sunday Times, but he claims that his credibility is much greater than mine. Why is that not reflected in the opinion polls that appear in newspapers?

Mr. Lamont

Powerful and persuasive though the right hon. and learned Gentleman is, he does not seem to have been very successful, because polls show that eight out 10 people think that a Labour Government would put up taxes.

Mr. Smith

If the Chancellor has such an outstanding economic record, and if I am so incredible, can he explain why he is so badly regarded by the public in every opinion poll?

Mr. Lamont

I am sure that the right hon. and learned Gentleman puts that question to his right hon. Friend the Leader of the Opposition all the time. The right hon. and learned Gentleman used the phrase "credibility gap". The Labour party does not have a credibility gap: it has a credibility chasm.

I hope that the right hon. and learned Member for Monklands, East will answer some questions today. Where is the money coming from? What is the order of priorities? How does Labour plan to build up the supply side? How would Labour cope with a flood of public sector wage claims? How serious is Labour on inflation? Those questions, which some hon. Members may recognise, are very good questions, not because they come from me; they were raised by the hon. Member for Islington, South and Finsbury (Mr. Smith) in a slim volume that was wistfully entitled, "Awkward Questions: Random Thoughts."

The hon. Member wrote that two years ago, but the Labour party has still provided no answers. Labour does not have an alternative policy; it simply has alternative presentation. Behind the lawyer's patter of the right hon. and learned Member for Monklands, East, he knows that he is defending a guilty party that is misleading the country. We know it, Labour knows it and, increasingly, the whole country knows it as well.

In the autumn statement, I announced a programme of public spending which the country can afford, designed to meet the needs of those areas that we see as the highest priority. I set out the economic policies that we have put in place that will provide the ground for a sustained, non-inflationary recovery—a real recovery, not the kind of sham recovery that we saw in the 1960s.

Some people say that there is not much difference between the policies of the two parties. However, some people are wrong. There is a vast divide between us and the Labour party on economic questions, in particular on taxation and public spending. We await the answers from the right hon. and learned Member for Monklands, East today. There is no doubt that he would increase spending rashly, indiscriminately and unaffordably, inevitably leading to the higher taxes that Labour Governments always introduce—higher taxes, higher interest rates and higher borrowing. All that would stop the recovery in its tracks.

We commend our spending proposals to the House with the confidence that they are realistic, affordable and clear. No such description can be applied to the spending explosion foolishly promised by the Labour party. That is why the House should endorse our plans and reject the amendment.

4.44 pm
Mr. John Smith (Monklands, East)

I beg to move, to leave out from "House" to the end of the Question, and to add instead thereof: declines to approve the Autumn Statement; deplores the continued mismanagement of the economy, which has plunged all parts of the nation into a deep and damaging recession, causing unprecedented and avoidable levels of business failures and rapidly rising unemployment; regrets the errors that are already apparent in the Government's forecasts for the economy made in the Autumn Statement; condemns the failure of the Government to invest in the economic infrastructure and vital public services; and calls upon the Government to promote an investment-led recovery including financial incentives for investment in manufacturing, tax credits for the enhancement of technology, assistance for regional economic development and a major programme of education and training to tackle Britain's continuing skills crisis.'. As today's debate proceeds, it might be necessary to remind ourselves continually that it is about the autumn statement which was produced by the Government last November. That statement did two things: it provided the Government's assessment of the economic prospects for 1992, and it outlined the Government's spending plans for the forthcoming year. We have already heard the Chancellor attempt to divert attention from the Government's economic record and their totally inaccurate forecasts. No doubt that tactic will be pursued relentlessly today and in the period ahead.

Conservatives want political debate in this country to feature on almost everything except their economic record. One can of course understand their motivation for that, particularly with regard to the autumn statement.

Let me remind the House of the forecasts that the Chancellor made in his autumn statement in November. He told the House that he expected GDP to rise by 0.75 per cent. in the second half of 1991. He said that growth in 1992 would rise by 2.25 per cent. He said: The increase in output from the second half of this year that is to say, 1991— to the second half of the next is expected to be 2¾ per cent." —[Official Report, 6 November 1991; Vol. 198, c. 453.] He claimed that growth from July 1991 to the end of June 1992 would be approaching 3 per cent. [Horn. MEMBERS: "No."] He did. There can be no question about it. The Chancellor said that very clearly on 6 November and I have quoted his exact words from Hansard. It is absurd to claim that growth would be nearly 3 per cent. between July 1991 and June 1992. It is right that that should be exposed today. We are now in January 1992, more than halfway through that projected year. Where is the 3 per cent. growth? We are still declining and not expanding. It is now abundantly clear that all those forecasts, particularly the last one to which I referred, were rubbish.

In the light of the undisputed facts about the British economy, in particular the absense of growth in an economy which, in 1991 shrank by 2 per cent., it is astonishing that the Chancellor claimed on 6 November, when the forecasts were produced, that he was "realistic and cautious".

We all know what he was doing when he spoke to the House last November. He was doing one simple political task: he was creating a mythical economic scenario for a November election. That is what he was up to when he gave the House those figures.

Unfortunately for the Chancellor's reputation as an economic forecaster, the Prime Minister let him down by not having a November election because he ran away from the prospect of facing the electorate. We are now in January 1992, more than halfway through the economic year in which 3 per cent. growth was predicted. As we know, the economy is stagnant. At the very best, we are bumping along the bottom.

Mr. Tony Marlow (Northampton, North)

I am an admirer of the right hon. and learned Gentleman. We share certain objectives. He would like to see manufacturing industry expand and succeed to promote growth in the economy. How would the right hon. and learned Gentleman achieve that if, at the same time, he seeks to introduce swinging tax increases on managers and entrepreneurs and also introduce a tax on savings? How will he achieve investment in manufacturing industry on that basis?

Mr. Smith

May I ask the hon. Gentleman for a small favour? I should like him to keep his professed admiration for me to himself for some time. In the forthcoming election I could do without it.

The hon. Gentleman said that if I were Chancellor I would introduce swinging tax increases. Let him reflect that under Labour the top rate of tax—even adding tax and national insurance together—would be lower than the rate that was in force until March 1988 under a Conservative Government.

Mr. Marlow


Mr. Smith

I am tempted to give way again, but if I were to do so I might encourage the admiration that I wish to stop.

Mr. Robert Adley (Christchurch)

The right hon. and learned Gentleman has referred to the rate of direct taxes that applied in 1988. Presumably he is familiar with the Laffer curve. Is not it true that since the direct tax reductions of 1988 there has been a substantial increase in the tax take? In contrast, when his party was in government higher direct taxes produced a lower tax take. What on earth can he say to the British people to make them believe that what happened under the last Labour Government and what has happened under the present Government during the last two or three years would miraculously be reversed?

Mr. Smith

Let me make it quite clear that I have never accepted any economic propositions to the effect that if one constantly reduces tax rates one will constantly increase tax revenue. That seems to me to be an inherently absurd proposition. [Interruption.] Hon. Members must allow me to reply to the question. The reason for the higher-tax band figures is that well-paid people have received huge salary increases. We know perfectly well that the Government invited the late Professor Charles Brown to investigate the connection between tax and incentives. Professor Brown, whose investigation was financed by the Treasury, came to the conclusion that there was no reliable connection between the two things. With respect to the hon. Gentleman, I say that the professor probably knew a little more about this than he does.

Mr. Peter Thurnham (Bolton, North-East)

Can the right hon. and learned Gentleman say exactly how he would fund the increases in pensions and child benefit that he has promised— not to mention the rest of the £37 billion—if he were to phase in his tax bombshell?

Mr. Smith

I shall come to that matter. The hon. Gentleman knows perfectly well that we have proposed tax changes that would more than cover our promises in respect of pensions and child benefit.

I must get back to the autumn statement. I am quite happy to answer hon. Members' questions—

Mr. Patrick Nicholls (Teignbridge)


Madam Deputy Speaker


Mr. Smith

I shall give way to the hon. Gentleman as he seems to be hailing me.

Mr. Nicholls

If right hon. and learned Gentleman were to be so generous on future occasions I should hail him more often.

The right hon. and learned Gentleman denied that his party would introduce swingeing tax increases. Is not he aware that Labour's stated intention to tax savings income in excess of £3,000 would hit 750,000 people who are basic-rate taxpayers? In those circumstances, how on earth can the leader of his party say that his tax proposals will not affect people earning less than £20,000 a year?

Mr. Smith

The hon. Gentleman does not seem to realise that the purpose of our changes is to treat unearned income and earned income in exactly the same way. That is a first-class principle that should apply to all tax systems.

I really must get back to the autumn statement. The Chancellor, in introducing that statement, sought to justify his claims, which I believe were ridiculous. He sought to rebut my challenge that his forecasts were incredible by saying: What the right hon. and learned Gentleman ignored was the fact that our forecasts are in line with those of independent organisations".—[Official Report, 6 November 1991; Vol. 198, c. 456.] Let us look at what independent forecasters are saying. In Consensus Forecasts of 1992, which usefully brings together the data from 34 different independent British forecasting organisations, growth for the whole of 1992 is predicted to be 1.4 per cent. So let there be no doubt that the autumn statement's assessment of the British economy is so absurd that it should be withdrawn and fed into the Treasury shredder—an over-worked machine that is well used to pulping reams of bogus forecasts made by the present incompetent Government.

Anticipating the inevitable downgrading of his estimates, which he had to make today and will have to make in his Budget statement on 10 March, the Chancellor took the opportunity of an early-morning slot on TV-am to begin the process of his tortuous recantation. The risk, of course, was that he would appear to be a dismal Johnnie —"dismal Johnnie" being a phrase which appeared in the press release of the Prime Minister's recent speech to Newcastle business men but which, on delivery, was changed to "moaning Jimmy". The Chancellor had little choice but to accept what the nation knew only too well and to admit to David Frost The forecast I made at the time of the autumn statement will prove to have been somewhat over-optimistic. Hard on the heels of the Chancellor, the Prime Minister himself appeared on TV-am last Sunday and conceded that the recovery that he said he had previously imagined had been delayed. Note the revealing choice of words: "imagined" and "delayed". The Prime Minister appeared to forget his own admonition against moaning Jimmys when, as a dismal Johnnie, he sought to downgrade the economic prospects for the world as a whole using the well-tried Conservative technique of blaming others. But we now know that the point at which a moaning Jimmy becomes a dismal Johnnie is when the Prime Minister appears on TV-am and admits that the recession will not be over before the general election.

Despite the necessary backtracking in which both the Chancellor and the Prime Minister have been engaged, they have still not given up the addiction to producing bogus predictions about the British economy. Let us take the Prime Minister's most audacious effort to date. It occurred in that TV-am interview and was repeated yesterday in the House. In the interview he claimed: We are at a different stage in the cycle from many of our competitor countries, and I think we will come out of our difficulties earlier than them. So that there may be no misunderstanding, let me quote the words that he used in the House yesterday at Prime Minister's Question Time: a number of European economies have either been in recession or are moving towards recession at precisely the moment when the United Kingdom economy is poised to come out of recession.—[Official Report, 21 January 1992; Vol. 202, c. 177.] The Prime Minister's latest dodge is clearly to imply that as Britain was first into the recession it will be first out. But let us look at the latest available independent forecasts prepared by Consensus Forecasts, using 180 international forecasting institutions. These show that in 1992 Britain remains at the bottom of the G7 growth league. They even show that in 1993 we shall be at the bottom. The forecasts also confirm that the only other G7 countries to suffer a downturn in 1991 were Canada and the United States of America, which experienced declines of 1 per cent. and 0.5 per cent. respectively. This compares with Britain's decline of over 2 per cent.—more than twice as severe. Both of these countries are forecast to recover faster and earlier than the United Kingdom.

Let us look at the European Community, to which the Prime Minister referred yesterday. No single EC member, other than Britain, suffered a decline in gross domestic product in 1991, and the conclusion of the 180 forecasters is that in both 1992 and 1993 the only EC country with a worse projected growth rate than Britain is Greece. There never was, and there does not exist, any basis whatsoever for the Prime Minister's absurd proposition. The truth, as the objective facts reveal, is that Britain, first into recession under the Conservatives, would, under the Conservatives, be last out.

Mr. Norman Lamont

The right hon. and learned Gentleman is commenting on a forecast. It is astonishing that, even though he has it in front of him, he cannot read it accurately. When he looks at what he said, he may well find that it was a great deal of nonsense.

Mr. Smith

What was?

Mr. Lamont

What the right hon. and learned Gentleman alleged the forecast to be. Leaving that on one side, the figure that he forecast to June was not, in fact, to June but to December. He got it wrong; he never knows the details.

As I said earlier, what the right hon. and learned Gentleman said does not accord with the forecasts of the OECD, and neither does it accord with the views of the European Commission. In its latest European economy report, published in December, it states: The United Kingdom is the only country where signals of sustained economic recovery are discernible. By contrast, the tendency for a gradual slackening of growth continued in six countries—Germany, Spain, France, Italy, the Netherlands and Portugal. That accords fully with what my right hon. Friend the Prime Minister said.

Mr. Smith

I could make the obvious point that, as all of the hon. Gentleman's previous forecasts were wrong, there is no need to believe this one. I assure the right hon. Gentleman that he said that, from the middle of one year to the middle of the next, the figure would be 2¾ per cent. If he did not say that, what was his prediction from the middle of that year to the middle of the next?

Mr. Norman Lamont

The right hon. and learned Gentleman is quoting the figure for the second half of this year on the second half of last year.

Mr. Smith

I shall give way again to the right hon. Gentleman if he will tell me what was his prediction from July 1991 to July 1992.

Mr. Lamont

indicated dissent.

Hon. Members


Mr. Lamont

It is all very well for hon. Members to shout, but they do not have the slightest understanding of these matters. The simple fact is that the forecast was expressed in terms of the second half of this year on the second half of last year. The right hon. and learned Gentleman has misquoted it, which must cast considerable doubt on almost everything else that he says.

Mr. Smith

We will look at the record and establish the facts. However, the right hon. Gentleman still has not told me what his forecast was from July 1991 to July 1992. I will give way again if he will tell me that. In the absence of a frank reply from the right hon. Gentleman, I shall move on —[Interruption.] I was not quoting what the right hon. Gentleman said in his statement, but what he said in the House.

It is not just in economic forecasts that we find the truth that belies Conservative propaganda, it is in the reality of our present economic experience; what is experienced every day by people in business. Unemployment in December rose yet again by 31,000, bringing total unemployment—on the Government's reckoning—to 2.54 million, a rise of more than 800,000 in the last year alone. Output is down once again, and home repossessions are occurring at the rate of 300 for every working day. In the last quarter of 1991, 995 business failures were occurring every week.

In case the Conservative party says that all that will come to an end, Mr. Philip Mellor of Dun and Bradstreet gave us the chilling news, in the Financial Times on 30 December, that The really worrying message … is that…well established companies as well as new ones are going to the wall. He said that the position was getting worse. It is little wonder, therefore, that business confidence has slumped again, as reported by the Institute of Directors, the CBI, Dun and Bradstreet and The Engineer magazine, which reported on the serious problems of Britain's engineering companies.

One of the major reasons why there is so little confidence is that no one can have confidence in a Government who, year in and year out—and even from month to month—get it so badly wrong. The Chancellor has what might be called the opposite of the Midas touch. Every area of the economy in which he predicts a recovery goes in the opposite direction.

In the middle of last year, yet again on his favourite appearance venue of TV-am, he detected the now notorious vague stirrings of recovery in the housing market. As millions of home owners and the construction industry know only too well, that sector of the economy remains severely depressed. Indeed, as the industry's leaders tell us, it is in its worst condition for decades. According to the chairman of the Building Employers Federation— a gentleman who happens to be called Mr. John Smith, who is no relation but is clearly a reliable source—said in the Financial Times on 4 January: Construction output last year fell by between 8 and 10 per cent. and a further fall of at least 4 to 5 per cent. is likely this year. So much for the vague stirrings of recovery in the economy.

Moving on from construction, the Chancellor applied his non-golden touch to the high street when he detected green shoots of recovery in time for the Tory conference. He then told his Guildhall audience that things were on the mend because retail sales were on an upward trend. The right hon. Gentleman will recall that there were exchanges between us in the House about that assertion. He is as aware as I am of the latest information that retail sales volume in December fell by a seasonally adjusted 1 per cent. compared with the previous month, giving a 0.4 per cent. year-on-year decline—

Mr. Tony Favell (Stockport)


Mr. Smith

I want to finish this passage. I am explaining how the Chancellor has a non-Midas touch.

The right hon. Gentleman said on 6 November, during our debate on the autumn statement: The last few months and we must remember that he was speaking in November have seen a surge in business optimism in nearly every sector, nearly every region, in businesses large and small…This gives powerful support to our view of the recovery."— [Official Report, 6 November 1991; Vol. 198, c. 453.] Of course, that was the line to be used in a November general election—an election that did not happen.

As we now know, even the Institute of Directors—not a source known to be unremittingly hostile to the Conservative party—has found a sharp fall in the proportion of directors feeling optimistic about the economy. It reported a downturn in investment and said that the outlook for jobs was bleak. Construction, retail sales and business optimism all turned down as soon as the Chancellor fixed his eye on them. It is no wonder that businesses cringe at the prospect of becoming the Chancellor's latest projected vehicle for recovery. They know that he is, in that respect, the personification of voodoo economics.

Mr. Nicholas Budgen (Wolverhampton, South-West)

Will the right hon. and learned Gentleman explain how it is possible for any future Labour Government to improve the position? Are not all the three factors that he mentioned the result of very high real interest rates within the exchange rage mechanism? As the new respectable Labour party has said that it wishes to remain within the ERM, and as it is likely—at least initially, and perhaps unfairly—to be badly viewed by the market, is it not likely that, far from being able to reduce interest rates, an incoming Labour Government would have to increase them, so making all those factors even worse?

Mr. Smith

I do not doubt that high interest rates have had a very bad effect on the British economy. However, I must warn the hon. Gentleman about one matter—the line is not, "the new respectable Labour party"; the right hon. Member for Bath (Mr. Patten) gives a quite different line. [HON. MEMBERS: "Answer the question."] I shall deal with the hon. Gentleman's points because, on the whole, he asks more intelligent questions than most of his colleagues.

The hon. Gentleman was right to say that high interest rates have had a considerable effect, but that is only half an analysis of the problem. The deplorable weaknesses in investment, training and education on the supply side have also weakened the British economy. That is why the Labour party's plans are so relevant.

Mr. Favell


Mr. Smith

I will not give way—[Interruption.] I have given way as often as the Chancellor gave way.

What the British economy needs and this directly answers the question of the hon. Member for Wolverhampton, South-West (Mr. Budgen)—instead of bogus forecasts and stultifying complacency, is action to move out of recession towards an investment-led recovery.

The Chancellor has received strongly worded representations from British industry. He has them on his desk. They have come from the CBI, the engineering employers and others. They have argued for the introduction of measures to promote investment, including the enhancement of capital allowances for investment in new plant and machinery—[Interruption.] Actually, for the benefit of Conservative Members, that is a tax reduction—although I do not know whether they would know one if they saw one.

Given that manufacturing investment is below the level for 1979, the need to promote manufacturing investment is overwhelming. The Government's usual response is to claim that, under their management, business investment —which is, of course, different from manufacturing investment —has been highly satisfactory. I hear day in and day out that it is highly satisfactory. The Chancellor nods, so at least we agree on that. As hon. Members know, that is a familiar argument.

I ask those who might be in doubt about the truth to consider the CBI's Budget submission. Page 10 shows that in the United Kingdom fixed investment per employee over the last decade was well below the level that was achieved by our main competitors. Manufacturing investment per employee in the United Kingdom was £1,980; in the United States it was £2,850; in Germany it was £2,850; in France it was £3,300; and in Japan it was £5,360. The figures for business investment as a whole are roughly similar—

Mr. Phillip Oppenheim (Amber Valley)


Mr. Smith

Let me make the point.

If we have had such splendid investment under this Chancellor, why are our figures so bad in relation to those of our principal competitors?

Mr. Norman Lamont

Can the right hon. Gentleman name any year in the 1970s in which investment in plant and machinery as a proportion of GDP was as high as it is this year?

Mr. Smith

I shall certainly look into the details of the 1970s and 1980s because I want to be absolutely accurate. I shall tell the right hon. Gentleman what I do know because I do not make chance remarks across the Floor of the House without knowing what I am talking about. The right hon. Gentleman might bear that in mind when he considers forecasting. I can tell him that investment is plummeting this year. It was ridiculous of the right hon. Gentleman to claim earlier that we should be gratified because manufacturing investment has increased in the third quarter. Why on earth should we be gratified when manufacturing investment has fallen by 20 per cent. this year? What does it matter whether we are up or down slightly on the quarter when we are 20 per cent. down for the year as a whole? [Interruption.] That is a fact that the Chancellor cannot deny. If he wants to deny it, he should get to his feet. [Interruption.] He cannot deny that manufacturing investment fell—[Interruption.] Can he tell me a year in the 1970s when manufacturing investment fell by 20 per cent.?

Mr. Skinner

Get up.

Mr. Smith

I do not think that he can.

Mr. Oppenheim

Will the right hon. and learned Gentleman give way?

Mr. Smith

If the Government—

Mr. Oppenheim


Madam Deputy Speaker

Order. The right hon. and learned Gentleman has made it clear to me and the House that at the moment he is not prepared to give way. Hon. Members should not persist in seeking to intervene.

Mr. Smith

I believe that I have given way certainly as much as the Chancellor—

The Chief Secretary to the Treasury (Mr. David Mellor)


Mr. Smith

And I am being asked to give way again by a member of the Government Front Bench.

Mr. Mellor

The right hon. and learned Gentleman has issued an invitation about business investment and I shall now take him up on it. Investment in plant and machinery at constant prices—

Mr. Skinner

Here comes "Swank".

Mr. Mellor

It is no good the hon. Gentleman intervening. This is a serious matter, as his right hon. and learned Friend knows.

At constant prices, in investment in plant and machinery in 1979 was £19.7 billion. If the right hon. and learned Gentleman prefers, the average for the Labour years was £17.5 billion. In 1990, at constant prices [Interruption.] This is investment in plant and machinery —that is what the right hon. and learned Gentleman was concerned about. The figure was £32.6 billion in 1990, with a forecast for 1991—

Mr. Brian Sedgemore (Hackney, South and Shoreditch)

Oh, forecasts.

Mr. Mellor

—of £29.5 billion, which is 50 per cent. up in real terms on the figures for 1979—even in a recession.

Mr. Smith

The right hon. and learned Gentleman has quoted the figures for business investment.

Mr. Mellor


Mr. Smith

No, I am answering his point. I am not giving way—[Interruption.]

Madam Deputy Speaker


Mr. Smith

The right hon. and learned Gentleman should learn more manners. He should not interrupt someone who is speaking and who has already given way —[HON. MEMBERS: "Hear, hear."] He should try, at least. The right hon. and learned Gentleman quoted a spurious statistic. He referred to business investment as a whole, but he knows that there is a distinction between that and manufacturing investment—

Mr. Mellor


Mr. Smith

Yes, I shall give way if the right hon. Gentleman would like me to.

Mr. Mellor

Complaints about manners could become the last refuge of the parliamentary scoundrel. I shall tell the right hon. and learned Gentleman—[Interruption.] If there had not been so much noise earlier from the hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore), who is a bit more Lambeth council than learned counsel—[Interruption.] If there had not been so much shouting from the Opposition, the right hon. and learned Gentleman would have been able to hear. I am talking about the one thing that the right hon. and learned Gentleman is concerned about—investment in plant and machinery. That is the key indicator of what is going on in the British economy, and especially in manufacturing. The figure was £19.7 billion for 1979 and, at constant prices, £32.5 billion for 1990 and £29.5 billion for 1991.

Mr. Smith

The right hon. and learned Gentleman has simply repeated the point that he has already made. He has not added anything new. He is talking about business expenditure as a whole, and there is an important distinction.

Mr. Alan Williams (Swansea, West)

We are seeing another example of sleight of hand from the Government Front Bench. They switched to business investment when the manufacturing investment figures were embarrassing because business investment includes empty office blocks. As the Chancellor told us, they have now switched to "core investment", which is investment in plant and machinery and includes all the investment in plant and machinery that has been made by the service industry as well as by those in the manufacturing sector. It includes the computers that are linked to supermarket checkouts. It is a completely different set of figures.

Mr. Smith

I am grateful for my right hon. Friend's strong support. He had a distinguished career at the Department of Industry when we had a Department that cared about British industry and worked hard to help and support it.

If the position is as good as the Government say, why is the CBI complaining so loudly about investment? I must get on, Madam Deputy Speaker, and deal with the autumn statement—[HoN. MEMBERS: "Yes, do get on with it."] Well, I am doing my best, but I keep being interrupted.

When concern about falling investment is expressed in the House, the Government's response is one of dismissive complacency. In one of their recent denunciatory tracts on Labour policy, they even went as far as to warn against what they call force-feeding the economy with investment". That appears to be the terrible peril lurking behind the next Labour Government. In that same document, the Government discussed the case for enhanced allowances for capital investment and dismissed them as if they did not matter. So, despite the recent arguments put forward by industry and the undeniable collapse in investment—and it cannot be denied—any change is ruled out by a Government who, I fear, are blinded by their own dogma.

When will the Government at last listen to the pleas of the construction industry, the local authorities and even of the Select Committee on the Treasury and Civil Service to relax the restrictive rules on local authorities using their own assets for capital investment? There are measures which the Government could take, but which they refuse to take, to help us to start to move out of recession. Opposition Members will continue to argue for action to encourage investment, to develop skills, to promote technology and to stimulate our vital regions.

In the motion the Government congratulate themselves on what they call "firm control over public expenditure" and on increasing spending in priority areas as if they had made a conscious choice to favour increased expenditure in some areas. If we examine the details, however, we discover that a great deal of the increase is the by-product of the recession which has been caused by the Government's own incompetence. In evidence to the Select Committee, the Chief Secretary to the Treasury said: around £5 billion could be directly attributable to the stage of the cycle. In plain English, that means "as a result of the recession." The right hon. and learned Gentleman also told the Committee that, for example, at least half the increase to London Transport and British Rail related to what he called the shortfall in business due to the recession". He added: And most of the increases in the Department of Employment Budget relate to the increased requirements …as a result of the increase in unemployment. It is all too obvious that the more that unemployment rises, the greater the cost to the public purse.

Mr. Quentin Davies (Stamford and Spalding)


Mr. Smith

No, I must get on.

In his autumn statement, under questioning from my hon. Friend the Member for Durham, North (Mr. Radice), the Chancellor had to concede that the Government's assumption about unemployment in the coming year is 2.4 million. That still appears to be the Government's assumption, but we already know—only a few months after the autumn statement—that unemployment has risen to 2.54 million. The Government's assumption is already adrift by 140,000 unemployed and by the costs that that will involve. As unemployment regrettably continues to rise, the disparity between assumption and reality will become greater and the autumn statement's figures increasingly out of date.

In any case, when we consider Conservative promises about public expenditure immediately prior to an election, the public are entitled to a healthy degree of cynicism. As the CBI noted—

Mr. Favell


Mr. Smith

The hon. Gentleman might at least listen to what the CBI said. The CBI's economic situation report of November 1991 noted that under the Conservatives underlying spending rises in election periods—this pattern is being repeated". How right the CBI is.

Let us look back to the period before the 1987 general election. Then, the Conservatives promised increased expenditure over three years of £11.2 billion above and beyond the amount needed to make up for inflation. In fact, during the three years that followed the election, there was no real increase, but a cumulative cut of £12.7 billion.

When the autumn statement was first presented to the House in November, Opposition Members said that it was a gigantic confidence trick, in terms of both its economic assessment and its public expenditure promises. Nothing that has happened in the ensuing months makes us wish to change that verdict.

Mr. Norman Lamont

As the right hon. and learned Gentleman is talking about confidence tricks, will he tell us when he will answer the question that he said he would answer about how the increases in child benefit are to be financed if the abolition of the upper earnings limit on national insurance is to he phased? It does not add up.

Mr. Smith

I told the right hon. Gentleman that I would give way to him, and I now do so. The revenue increases referred to in Labour's election proposals more than cover those commitments; there is no difficulty whatever. [Interruption.] There is not the slightest problem.

Mr. Lamont

The right hon. and learned Gentleman has not answered the question. As he knows, he has given the impression that the increases would take place immediately, but he says that the national insurance changes would have to be phased in. What he also appears to have left out of his calculations is the fact that the changes that he proposes to make in the higher rate of tax will, in the first year, produce only half the revenue that he estimates that he will receive.

Mr. Smith

The right hon. Gentleman is asking me to give details of a Budget when he will not even tell us what his Budget may bring. [Interruption.]

Madam Deputy Speaker

Order. I can barely hear, but I understand that I have been asked to allow a point of order. I am sure that it is genuine.

Mr. Thurnham

On a point of order, Madam Deputy Speaker. The right hon. and learned Gentleman has implied that he answered my earlier intervention, but he did not.

Madam Deputy Speaker

That is a matter for debate; it is not a matter for the Chair.

Mr. Smith

Every day, there is speculation in the press about whether the Chancellor will cut the standard rate of tax by 1 p, whether he will increase personal allowances, whether he will do this and whether he will do that. He must deal with a huge range of options in a few weeks. Now, Opposition Members are expected to give details when the Chancellor will not.

Let me tell the right hon. Gentleman this. We shall be able to raise—from increases in the top rate of income tax, and by removing the upper limit on national insurance contributions—more than enough to pay for the increases that we propose. Every commentator agrees that that is so.

As the Chancellor knows, the trouble with his promises is that, while giving the impression that he is committed to increases in public expenditure, he also pledges to cut the standard rate of tax from 25p to 20p in the pound. He has constantly reiterated that promise. How is it possible for the right hon. Gentleman to maintain the spending plans that he announced in the autumn statement if he is going to cut the standard rate of tax by that amount? [HON. MEMBERS: "Answer."]

Mr. Norman Lamont

The right hon. and learned Gentleman said that the question that I asked him earlier was like a question asked about a Budget before that Budget had taken place. However, he has repeatedly given the impression, on television and in the House, that his package would finance itself out of the national insurance increases. He has assumed that £2½ billion can be obtained from payments of income tax at the higher rate. What he does not seem to understand is that, in the first year, only £1¼ billion is obtained. The money is not there—even before we take account of the right hon. Gentleman's industry package.

Mr. Smith

The House will have noticed that the Chancellor has not said a single word about the Tory pledge to cut the standard rate of tax from 25p to 20p. If he reads the considerable debate that is now taking place in the public press about the respective tax and spending plans of the Conservatives and Labour, he will find that no objective commentator supports the point that he is making. [Interruption.] I am talking about objective commentators; the Tory tabloids are a different matter.

Mr. Mellor

Will the right hon. and learned Gentleman give way?

Mr. Smith

I must get on with my speech. [Interruption.]

Madam Deputy Speaker

Order. Do I understand that the right hon. and learned Gentleman is giving way?

Mr. Smith


Mr. Mellor

Fair enough. I hope that a further intervention will be unnecessary.

If the right hon. and learned Gentleman believes that all this has been got up by Tory-inclined commentators, let him answer a straight question: did he know what his right hon. Friend the Leader of the Opposition was going to say to the journalists at Luigi's?

Mr. Smith

Did the Chief Secretary know that the Prime Minister and the Chancellor of the Exchequer—[HON. MEMBERS: "Answer."] I think that it is about time that we heard about these pledges to lower the standard rate of tax from 25p to 20p. It is an important point. Whenever the Conservatives are challenged about the matter, they quietly tell the commentators, "You need not worry; we shall not actually implement the tax-cutting pledge", or, "We shall not implement it in the lifetime of a single Parliament", or, "It will be done very gradually, and it will not cause any difficulty."

The Chief Secretary gave the game away when he told the Today programme on 20 June 1991: If people are actually putting forward pledges it is right that those pledges should be seen as being implemented within the lifetime of a Parliament over 5 years. I take it that that applies to the Tory pledge to cut tax from 25p to 20p. If I am wrong, I will give way once more so that the right hon. and learned Gentleman can put things right.

Mr. Mellor

Every time that we have spoken about the matter, it has been made clear that that pledge is not timed, and that, when the time is right, further progress will be made towards our objective. There has never been any doubt about that. If what the right hon. and learned Gentleman has said about his pledges was as clear-cut as what we say has always been, we should be a good deal better off.

Mr. Smith

I am very glad that I gave way to the Chief Secretary, because his intervention allows me to put on record what the Prime Minister said in an interview with the Daily Express on 26 April last year. He said: Our primary objective is to reduce taxation at the lower end. There will be changes at the upper end, but we have an objective of moving to a 20p level of taxation. What the Chief Secretary said—and I do not think that he understands the significance of his own comments—was: If people are …putting forward pledges it is right that those pledges should be seen as being implemented within the lifetime of a Parliament over 5 years. In his Adam Smith Institute lecture on 12 April 1991, the Chancellor said: Our 20p remains a firm objective". A pledge given by the Labour party must be implemented within five years; the Tories can take as long as they like.

I am trying very hard to return to the subject of the autumn statement. We know perfectly well, however, that when the Conservatives talk about taxation, they talk hypocritically. Their's is the party that increased the burden of taxation from over 34 per cent. to over 37 per cent., and pushed up valued added tax from 8 per cent. in 1979 to the current rate of 17.5 per cent. Conservative Members have been unable to tell us how they would maintain their pledges while simultaneously cutting income tax on the scale that they propose. It is probably true that the Conservative party is the party of choice, but what is the choice? The choice is between cutting spending on vital public services and putting up value added tax. That is the choice that the Conservatives would offer if they were re-elected.

The debate will go on about the Government's competence and about the tax and spending pledges of both sides. In case the House thinks that Opposition criticism of the Government's competence is something that we have invented or that it is the product of political malice, exaggeration or even hyperbole—which occasionally can be found in the speeches of right hon. and hon. Members—let me remind it of the measured conclusion of Mr. Samuel Brittan. In the Financial Times of 19 December 1991 he wrote: British Treasury forecasters have performed a hat trick. They failed to foresee the inflationary boom of the late 1980s; they failed to foresee the subsequent recession, and then they forecast a fictitious recovery. I do not blame the Treasury civil servants. I blame the Treasury Ministers who were in charge during that period. With such an abysmal record—unemployment rising, businesses collapsing and homes being repossessed—one might think that an apology from the Government to the House and the people was in order. But not a bit of it. They are still as bold as ever they were. The Prime Minister told us that if it was not hurting it was not working. I hope that everyone who has been hurt remembers exactly why they are being hurt—because it is part of the Government's plan.

The Chancellor told us that the recession, rising unemployment, record bankruptcies and an unprecedented level of repossessions were a price well worth paying —words that will be remembered by every British elector at the next election. To cap it all, this month the Chancellor had the gall to say at the January meeting of the National Economic Development Council that the policy would not have been different had we known the outcome. So the recession was part of the plan, the result of the Government's policies. The British electorate will soon be able to pass their verdict on a Government who treat their interests with such cavalier disregard.

5.31 pm
Mr. Terence L. Higgins (Worthing)

I thank my right hon. Friend the Chancellor of the Exchequer for his kind remarks about the report of the Treasury and Civil Service Select Committee. It provides, I believe, a helpful background to the debate. It was a unanimous report. The evidence that backed up the report is also helpful.

I listened with great interest to the speech of the right hon. and learned Member for Monklands, East (Mr. Smith). The crucial point in economic management is that, if one is to achieve sustainable economic growth, inflation must be brought under control. It is interesting to note that in a speech lasting more than 45 minutes the right hon. and learned Gentleman never addressed the crucial issue of inflation. That is a point of considerable significance, as we know the record of previous Labour Governments on inflation.

It is not easy to get inflation under control. It is vital that the Government maintain their present anti-inflationary posture, based on membership of the exchange rate mechanism and the use of interest rates. The Government are right to resist the cries of those who wish both devaluation and a reduction in interest rates to be used to kick-start the economy. If one kicks with both feet, the economy will probably go up in the air and end up on its back. My right hon. Friend the Chancellor is therefore absolutely right to maintain the exchange rate value of the pound.

In my view, it should also be possible for the present exchange rate to be kept within the ERM limits without an increase in interest rates. That is very much a tribute to the prudent polices of my right hon. Friend the Chancellor, which have led to a gradual reduction in interest rates. There has been a substantial reduction in interest rates. If we had listened to the Opposition's cries for a reduction in interest rates, I do not doubt that now we would find it necessary to raise them again. The trend in interest rates is crucial to business confidence. I believe that the Government have adopted the right approach.

I am bound to say, however, that recently we have had little co-operation from the other members of the European Community. The rise in interest rates in Germany did not help. That may be a warning against the dangers of an independent central bank. It would be very dangerous if we were to listen to those who say that we ought to withdraw from the exchange rate mechanism. If we withdrew, we would cease to have influence in Europe, particularly in resisting protectionist pressures. Even with a cut in interest rates and devaluation, I do not believe that we would achieve stability. There would be the usual J-curve effect. There would be a deterioration in the balance of payments and a succession of devaluations. I strongly support the points that my right hon. Friend the Chancellor put at the centre of his policies, which have led to such a substantial reduction in inflation and in interest rates.

The right hon. and learned Member for Monklands, East referred to public spending. He said that the Government had not placed sufficient emphasis on extra spending in priority areas. I shall take just one example, the national health service, which—outside the broad economic debate—has been the focus of the Opposition's attack. It is important to look at the figures in the autumn statement. They show a massive increase of almost £2.5 billion last year, 1990–91, in expenditure on the national health service, an additional £3.1 billion this year and another £2.4 billion increase next year.

It is difficult for people to comprehend such massive increases in expenditure. It is interesting to note that the announcement that an extra £2 million was to be spent on reducing waiting lists attracted far more publicity than the announcement that an additional £1.5 billion was to be spent on the national health service. The Government are giving priority to the health service. It is absurd rubbish to talk about cuts in the health service. It is important to get that point over to the public at large.

I turn to a more controversial point. Traditionally, we have divided the annual cycle of economic management between public expenditure—the autumn statement—and taxation, which is dealt with in the spring Budget. Some years ago, I chaired the Select Committee on Procedure (Finance) when it looked at the case for bringing the two sides of the equation together.

Treasury forecasts have been singularly fallible recently. The Treasury and Civil Service Select Committee is considering what might be done to improve them. At present, one finds after a short period—perhaps just a few months—that an adjustment needs to be made to the economy because the forecasts were wrong. It is absurd to say that, if it happens in the spring, it must be done by tax changes and, if it happens in the autumn, the adjustment must be made on the expenditure side. One understands the inhibitions against changing that. They are historic. Traditions in this place take a long while to break down.

Because we seemed to have Budgets every other week under the previous Labour Government, we have been reluctant to do anything in the autumn statement that involves tax or something in the Budget that involves expenditure. I do not suggest that adjustments should be made every other week, but a division between expenditure and taxation is not always appropriate. It should be possible to make appropriate adjustments in tax or expenditure at either time of the year. One can always get a stigma to beat a dogma on this sort of historical analogy, but I hope that my right hon. Friend the Chancellor will bear that point in mind.

On a number of occasions the Treasury and Civil Service Committee has pointed out that membership of the exchange rate mechanism of the European monetary system substantially inhibits the use of monetary policy. Therefore, we have argued that there is a strong case for a more active fiscal policy. I am glad that my right hon. Friend the Chancellor accepted our views on the use of automatic stabilisers, but we have suggested for a long time that there is a case for changes in discretionary expenditure.

I congratulate my right hon. Friend the Chancellor on maintaining our right in this country, and in the House of Commons in particular, to have a fiscal policy. If we had gone along with what the Labour party supported, the negotiations at Maastricht would have seriously inhibited the future use of fiscal policy. That would have been damaging. My right hon. Friend was right to fight for that, and I am glad that he succeeded in ensuring that we can continue to use fiscal policy when it is appropriate to do so —I hope that he will not now hesitate to do so if necessary.

We well know all the arguments against fine tuning. I understand the concern of my right hon. Friends the Chancellor and the Prime Minister about the need to avoid the situation in which one stimulates the economy and then has measures coming into operation when a boom is already under way. The Government's experience is reason to believe that that is important. Nevertheless, it is possible to take some public expenditure measures which are time limited and which would stimulate the economy without endangering the crucial medium-term control of public expenditure. We should not say that, because we may sometimes get the timing wrong, we should not take measures where the timing is specifically under control.

It has been said in this debate and previously that the recession has been deeper and longer than any of us hoped or anyone, except the Treasury and Civil Service Select Committee, had forecast. It is true that, regrettably, the recession has been deeper and longer than was expected. It is important to say why that has happened. Clearly—my right hon. Friend recognised this—we have had a substantial cut in interest rates and a corresponding reduction in mortgage rates. I looked at the figures the other day. A person with an average endowment mortgage of £30,000—the position is not much different for a repayment mortgage—is £82 a month better off than when we joined the ERM. A person with a £60,000 mortgage is £192 a month better off and a person with a £120,000 mortgage is £413 a month better off.

It is surprising that those cuts, which are important for householders, have not worked their way through into the economy. People have tended to pay off other debts, particularly credit card bills that they have run up during a time of high mortgage rates, or saved the money. As the Select Committee points out in its report, the role of savings is crucial in this respect. That being so, one must realise that that cushion is having a delaying effect. However, I do not doubt that the cuts in interest rates will gradually work through into the system. I do not go along with the so-called double-dip recession which has been forecast by some people. I believe that we shall see a steady improvement.

A cut in direct taxation now would probably suffer from the effects of a similar cushion. There is some case for avoiding the pushing-on-a-string effect. We should see whether something can be done with time-limited public expenditure.

I want to talk about local authority expenditure and the vast accumulated balances that local authorities now have. In a report which was formally published a few days ago on the Bank of Credit and Commerce International and the role of local authorities and money brokers, we pointed out that the conjuncture of Government policies and market conditions had led to a considerable increase in the level of local authority external investments. The investments have increased from £4.4 billion in 1986 to £11 billion at the end of 1989 and the figure is just short of £8 billion now. Local authorities are not allowed to spend that money. I am not advocating that the brakes should be taken off and that they should be allowed to spend it all but we should seriously consider whether some relaxation on a time-limited basis might be appropriate.

It is clear from our report that the financial decisions of local authorities have been pro-cyclical rather than anti-cyclical. We point out in our report that in 1989–90 local authority capital expenditure was £10.5 billion and that it fell to £7.7 billion in 1991. In short, the decisions of local authorities have made the boom bigger and the recession worse. We need to look carefully at the way in which the huge accumulated balances and the decisions of local authorities have- been distorting the operation of the economy as a whole. They are big enough to have a significant effect on the management of the economy. We cannot hope simply to sterilise those balances indefinitely. A recession is an appropriate time to ameliorate the matter to some extent.

I have restricted my remarks to the Government's policy, except for saying that the Opposition do not give the slightest priority to the control of inflation. The Opposition believe that the cap on national insurance contributions should be removed. I have tried hard to think of any insurance premium where the amount paid for any given level of benefits depends upon one's income. I have not managed to do so. Once one carries out the Labour party's proposal, any idea that it is a national insurance premium would go out the window. It is a straight increase in taxation.

Mr. John Smith

What did the right hon. Gentleman think of the Government when they removed the cap on employers' contributions?

Mr. Higgins

That is another matter. Someone else making a contribution to a given benefit is not the same as a contribution from the individual who is expecting to benefit.

Mrs. Margaret Beckett (Derby, South)

I have listened carefully to the right hon. Gentleman. What did he think when the Government raised the national insurance contribution and steadily cut away at the benefits for which it was paid? I do not recall an insurance company finding it easy to do that.

Mr. Higgins

That has been known to happen, but I agree that it has not happened often.

The way in which the Opposition's policy is being formulated clearly involves a massive increase in taxation. However one disguises it or seeks to dress it up as an insurance premium, that is the reality. Labour's proposals on taxation and public expenditure are likely to prove highly inflationary, which would be disastrous for the future management of the economy. To get the economy back on an even keel, it is crucial to control inflation. The Government have steadily made progress in that respect, which has enabled them to reduce interest rates. The combination of the controlling of inflation and the reduction in interest rates will enable us to return to a sustainable rate of economic growth.

That is the right approach for the Government to adopt, and I congratulate my right hon. Friend the Chancellor on resisting the calls for devaluation and cuts. It is important to ensure that the effects of our membership of the exchange rate mechanism on the control of inflation are brought out strongly.

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

The right hon. Member for Worthing (Mr. Higgins) spent most of his speech—and much the best part of it—dealing with the report of the Treasury and Civil Service Select Committee. The Chancellor should pay more heed to its reports, which are so ably steered through the Committee by the right hon. Member for Worthing. They have consistently been more accurate than Government forecasts, especially on growth.

The advice accompanying them has also been good. If the Government had taken note of the report on, for example, public expenditure, they could have significantly countered the cyclical recessionary effects about which they speak so much. By the Committee's standards, they are at least a year late in some of the discretionary expenditure that they have made. I hope that the Chancellor will pay more heed to the Committee's reports.

That brings me to the fundamental point of what we are debating today. For much of the time, I suspect that we shall debate the general election and the battle that it involves rather than the autumn statement, but there is another reason why much of the debate will not be about the autumn statement—it is out of date. It is like trying to navigate the railway system with a Soviet railway timetable—it bears no resemblance to the trains that run. That is certainly the condition of the autumn statement. I do not know why the Chancellor did not do more to update the forecasts made in it. After all, the Prime Minister updates the forecasts that the Chancellor made in the statement.

Even the comments that the Chancellor made some time after the autumn statement failed to take account of how inaccurate his forecasts were proving. He said: I have no reason to revise my view that GDP will show a modest increase in the second half of this year and that recovery will accelerate this year. That is what I said in the Budget and in the autumn statement. That is what I say now." —[Official Report, 5 December 1991; Vol. 200, c. 425.] Between 5 December and new year's day, the picture had changed. In his new year's day interview, the Prime Minister said that recovery looked "a little less certain", which he found "frustrating". He said: My judgment is, although it is jagged and irregular, in retrospect we will look back and say it has already started as we speak. The opportunity to look back and say that recovery had started on 1 January still has not arisen, and I suspect that it will not do so this side of the general election.

What are the autumn statement's forecasts? Are they genuine statistical forecasts about the economy, or are they hyped up by ministerial desire to look optimistic and sound encouraging? They show many signs of the latter. It is always noticeable that, when they are wrong, they are too optimistic. Almost no Government forecast is excessively pessimistic. Occasionally, forecasts of revenue are too pessimistic, but forecasts of growth, output and inflation are always too optimistic. They give every impression of having been massaged to have an economic effect of their own—to try to instil the confidence that Ministers understandably seek.

They do not have that effect, and the more that they appear to be massaged, the less they inspire confidence, because people have long since given up believing ministerial forecasts. It is time that we made the role of statistics clearer and made it clearer that they will be independently produced and published and will form part of the Government's attempt to inspire and encourage the populace, which is the impression that we have gained from them so far.

Statistics in Government forecasts are too optimistic, so their policy decisions must visibly correspond with them. That results in Ministers making policy decisions that prove as mistaken as the forecasts.

Misleading claims go with mistaken decisions. Departmental press releases at the time of autumn statements are riddled with misstatements or half-truths about the nature of the improved resources said to be available to the Departments and industries concerned.

Many of the Government's claims about spending do not fit with the reality. For example, Ministers never properly explained the difference between the real inflation faced by local authorities and the inflation that they claim to be compensating for in the spending assessments that they set for local authorities. Tomorrow, a delegation of every high school head teacher in Northumberland will come down to London to lobby the House because Northumberland education authority is imposing swingeing cuts on the education service. More than 100 teachers are being made redundant in an area that is large geographically but small numerically.

One can argue that, over the years, Northumberland did not foresee the extent to which its rising budgets would lead to that problem, but a significant part of the problem results from the fact that what the authority is allowed to spend does not correspond with real inflation and the additional burdens placed on it. That is true in many service areas. It is particularly worrying and damaging that it is happening in education.

The timing of Government expenditure has also been wrong. Paragraph 80 of the report of the Treasury and Civil Service Select Committee says: We recommend that the financial regime for local authority capital spending should be adjusted so that it is counter-cyclical, so that it does not compete with the private sector during years of higher growth, but assists its suppliers such as the construction industry when growth is below trend. The obvious time for significant additional expenditure on local authority services and local authority capital investment is a recession, when the construction industry is flat on its back. Additional spending could help to create longer-term assets, create employment at a time of high unemployment and counter-cyclical trends. That would help more than making such expenditure at a time when it becomes inflationary, because it is added to considerable overheating pressures in the economy. The autumn statement was seriously at fault on all those points.

I must comment on some aspects of Labour's approach, because two Labour amendments appear on the Order Paper. The one that has visible support from more Labour Members talks about the evils of capitalism and market forces and calls for full-blooded socialist policies, including: the harnessing of the nation's savings", whatever that may be. It sounds suspiciously like local authority pension funds that invest in politically approved projects, such as failed newspapers, because3 they are thought to be a good thing rather than because they represent a sound deal for the authority's pensioners.

There is another tendency in the Labour party that is by no means dead. It may be temporarily defeated, but it will clearly be a force to be reckoned with in a future Parliament.

Mr. Alex Salmond (Banff and Buchan)

Which of Labour's amendments does the hon. Gentleman prefer—the one that he is talking about, which at least proposes a change from the Government's policy, or the official Opposition amendment, which, in general macroeconomic terms, pursues a policy virtually identical to that of the Government?

Mr. Beith

The official Opposition amendment is markedly different from the one that I have been describing. It is significant more for its omissions than for its content. In its content, it reflects the significant change that has taken place in Labour Front-Bench policy—the gap between the two makes that contrast particularly stark—but it does not say what the Labour party would do about inflation or the fiscal problems that emerged earlier in the debate. That is another area where there is a great puzzle about Labour policy.

Labour advances proposals for the funding of the benefit and pension increases as if they were self-financing. It sincerely and genuinely proposed to finance those increases by uncapping the national insurance contribution and levying two top rates of tax, one of which is very much higher at a combined rate of 59 per cent. There might be a bit to spare—it is difficult to forecast such revenues—but that is what Labour would have done.

There is now talk of phasing in the national insurance change which is a significant part of the whole. If that is done, it casts doubt on the self-financing nature of the pensions and benefits pledge. That is a simple point. If the Labour party still wants to maintain its earlier approach and wants to set out its clear commitments and how it will pay for them, it must update its proposals. It would be reasonable to expect it to come up with a new set.

Mr. Thomas McAvoy (Glasgow, Rutherglen)

Will the hon. Gentleman give way?

Mr. Beith

I shall, but it will be for the last time, because I am about to be hit by the 10-minute rule.

Mr. McAvoy

To my mind, the hon. Gentleman has outlined the fact quite clearly that he would find working with the Labour party in a future Parliament unacceptable. Will he be honest and say that he is making a commitment to work with the Tory party after the next election?

Mr. Beith

The hon. Gentleman has drawn a fascinating conclusion from what I said. I gave the Labour party some honest and sincere advice on what it should do about its tax and benefit proposals during the debate on the autumn statement. I am not a socialist or a Conservative but a Liberal Democrat. If the hon. Gentleman will give me a little time, I shall explain the Liberal Democrats' policies, which will be advocated during the election and which we shall seek to pursue in the next Parliament with whatever power the electors give us.

Recent economic mismanagement has merely added short-term misery to the long-term failures of successive British Governments who have not been willing to face some of the fundamental changes that our economy and society need. Since the early 1950s, the value of the pound has dropped dramatically. From a 1951 value of 100, the mark has gone down to 32 and the dollar to 19, but the pound has gone down to seven.

Unemployment has increased again and again during the same period, reaching new heights under the present Government in the 1980s and it is now returning to those heights. If we were still using the same figures to calculate unemployment as we used earlier in that decade, we would now almost have reached those very high figures—we are certainly heading in that direction even under the Government's much more limited calculation of unemployment. Britain's imports have risen fourfold in value while our exports have barely doubled during the same period.

Those figures represent serious long-term problems, and long-term measures are needed to tackle them. Such measures must include serious investment in our education system so that we get it right. It is not enough merely to improve it as the current debate is designed to do, and the report published today is a contribution to the effort to improve primary education. However, it cannot be done without resources, which is why we shall be prepared, if necessary, to put a penny on income tax to generate those resources. If we can find them without doing that, we shall do so, but additional investment of about £2 billion is certainly required for the education system. Labour cannot deny that, as it must be aware of the problems facing some of the local authorities that it controls.

We need investment in transport, and such investment could also have been made earlier in the recession. It would have been better for getting the channel tunnel links constructed in time and for countering the cyclical effects of the recession. We also need investment in research and development, but changes are also needed in other policies.

We need to promote competition more aggressively and to break down the huge monopolies which have been created as a result of privatisation. We need genuine competition. There is no real competition in, for example, the electricity industry in which two large generating companies control the entire market between them and can therefore have a rigged market in their dealings with British Coal. There is no genuine competition—only a market controlled by two very large concerns.

We need long-term anti-inflation policies. We believe that an independent central bank is the right mechanism for that and that, in the end, we shall have it because of the development of a European central bank and a single currency. The question is, how long will the United Kingdom wait to get fully involved in that process? Time and time again, we have taken decisions but much later than we should have done, with the consequence that our economy is suffering.

Our entire role in Europe remains in question because Governments have not faced the inevitability of full British participation. There is no realistic future for Britain outside a strong single currency bloc such as is being created in Europe.

We also need changes in the way in which the country is governed. We need the stability that would come from a fair electoral system and the initiative that would come from the decentralisation of power as opposed to the current centralisation. Real change is required, not merely new management. Such change would have led to a very different autumn statement and to much better prospects for recovery.

My party believes that, during the election campaign, it will be necessary for parties to show as clearly as they can what their fundamental commitments are to the character of our society, on what changes they intend to spend money in the early days of a new Parliament and how they will finance them. We shall set out our proposals. The Liberal Democrats will offer a menu with prices.

The public would be entitled to view the promises of all parties with some scepticism, in view of the fact that the Government who said that they would be repaying £19 billion of public debt in the current two-year cycle are in fact borrowing a further £19 billion, thereby showing that their spending assessments were no less than £38 billion wide of the mark. Nevertheless, parties must make some pledges about their intentions and must show some honesty about where tax increases might be necessary. They must also offer some clarity in their tax proposals if they are to expect the electorate to believe anything they say.

Several Hon. Members


Madam Deputy Speaker

Order. The Standing Order limiting speeches to 10 minutes is now in operation.

6.5 pm

Mr. John Townend (Bridlington)

There are three matters arising from this year's autumn statement on which I wish to comment. The first is the Treasury forecast about the recovery, the second is how relevant Labour's spending and taxation policies are to the problems facing the United Kingdom and what damage would be done to public finance if they were implemented, and the third is the medium-term financial strategy.

Why has the long-awaited and long-forecast recovery —long forecast by the Government—not materialised? There are a number of reasons, but two principal ones. The first is that real interest rates are far too high. That is a direct result of our membership of the exchange rate mechanism and the abandonment of a floating exchange rate. Interest rates have ceased to be an instrument of monetary policy and have become an instrument of exchange rate policy.

Despite the fact that nominal interest rates have dropped by no less than 4.5 per cent., real interest rates at 6.1 per cent.—are at a historically high level and double what they were during the previous recession in 1981. That can only be perverse when the country is in a deep recession. In real terms, small businesses are paying a minimum of 9 per cent. on their borrowings, and many are paying more.

The reduction in nominal interest rates has not had the effect for which we had hoped. Instead of large reductions of 2 per cent. or 2.5 per cent. which would have kick-started the economy, we have had small reductions of 0.5 per cent., which have had less impact.

I appreciate the fact that the Government have been constrained in the way that they have reduced interest rates by their membership of the exchange rate mechanism, but, by introducing small reductions, they have dissipated the effect. That is similar to what happened when the economy overheated in 1988. Instead of banging up interest rates by 2 per cent. to bring the economy to a halt, to get the overheating over quickly and get us going again, the former Chancellor, the right hon. Member for Blaby (Mr. Lawson), had a salami policy of death by a thousand cuts, and put them up 0.5 per cent. at a time.

This year, all the financial indicators have been screaming for interest rate cuts. Those indicators include the decline in the rate of increase of broad money, consumer credit, declining corporate profits, a flat housing market, rising unemployment, poor retail sales, falling industrial investment and falling inflation. The Government have achieved their major objective of bringing inflation down, and the only reason that interest rates have not come down by 2 per cent. to 2.5 per cent. more is our membership of the exchange rate mechanism.

If interest rates had come down to that extent, the pound would admittedly have been a little lower but that would have boosted export markets. Mortgage payers would have had their burdens eased, and many small businesses would have been saved and consumer spending would be rising.

Mr. Budgen

May I interrupt my hon. Friend for a moment?

Mr. Townend

I have only 10 minutes, so I shall not give way. I hope that my hon. Friend does not mind.

The housing market would also be recovering. If by any mischance we do not win the election, the principal cause will be seen in retrospect to be the fact that we joined the exchange rate mechanism and handed over monetary control to the Bundesbank. Our country and our industry are having to bear the burden of Germany's battle to control the inflation caused by reunification. Surely that is not in the national interest. Indeed, the recent increase in interest rates by the Bundesbank has curtailed the possibility of the Government's making another long-awaited and very necessary reduction in interest rates.

It is ironic that both the Labour party and the Liberal party urged the Government to join the ERM more than a year before we joined. Indeed, the Labour party has made it clear today—its Front-Bench spokesman did not deny the fact—that it would keep us in the ERM and would not realign the parity. So the Opposition have made it clear that the Labour party is also the party of high interest rates.

The second cause of the continued recession is outside out control—it is world recession. Output has fallen, or growth has slowed, in most of the G7 countries. France has been badly hit and the United States is suffering quite badly. But because the United States is not hogtied by the ERM or a fixed exchange rate, it has done what we should have done, and its interest rates, from being at a historic high, are at a 25-year low. It is to be hoped that that will stimulate a recovery in the United States, which will help to revive the economies of the western world.

In the autumn statement, the Treasury said that the United Kingdom was emerging from the recession, and that the recovery would be led by consumer spending, stocks and exports. We are now at the end of January, and I have to say that there is little sign of recovery. The housing market is as dead as a dodo, repossessions and mortgage arrears are still rising, and the construction and motor industries are flat on the floor. The retail trade has had a bad Christmas, and January is even worse. In my constituency, there have been three major closures in the past three months.

There is a lack of confidence. What we need now is a kick start to get the economy going. In my view, a monetary stimulus would be best. Once the economy gets going again, if there is a danger of inflation starting to rise, it will be easy to reverse a monetary stimulus. A 2 per cent. drop in interest rates would do the trick; it would get the housing market going immediately and restore the confidence that is so badly lacking.

However, that would require a realignment, and as not only the Government but all the Opposition parties seem to have set their faces against that, we are left with a fiscal stimulus as the only alternative. In my view, that is second best, because it inevitably leads to an increase in the budget deficit, and once the economy is moving, it is more difficult to reverse than a monetary stimulus.

A fiscal stimulus can be obtained by cutting taxes or by increasing Government spending. I favour the former, but the increased expenditure in the autumn statement can be justified by the recession. However, I question the need for some of that increased spending, especially in Scotland, where spending is already so much higher than in England. For example, in Scotland we spend £475 per person on hospital treatment, as against £378 in England, and we give £1,150 per person in support to local authorities, whereas in England we give only £733 per person. In Scotland, we spend £1,900 per pupil on education, as against £1,200 in England. Those are not my figures; they were given by the Minister of State, Scottish Office, and published in The Times this week.

That expenditure no longer represents the relative populations of the two countries.

Mr. Salmond

Will the hon. Gentleman give way?

Mr. Townend

I only have 10 minutes, so I am afraid that the hon. Gentleman will have to make his points in his own speech.

In view of our present balance of payments deficit, I question whether this country can really afford to spend £2 billion on overseas aid. I question, too, whether at this time the country should increase spending on the arts.

Hon. Members should note, as should the public, how the cost of our membership of the European Community rises inexorably year after year, as the Community increases its spending at a significant rate. That cost will soon be almost £3 billion.

Additional spending should be supplemented in the Budget by reductions in taxation to stimulate the recovery. There should be help for small businesses. I suggest that the first £10,000 of retained profit should be tax-free. There should be help for industry, and capital allowances should be written off on a straight-line basis rather than a reducing balance basis. Perhaps, for one year only, small businesses could have 100 per cent. capital allowances on expenditure of not more than £50,000.

In that context, the Labour party's proposals to increase taxes and national insurance contributions would only make the recession worse and reduce confidence. Furthermore, proposed Labour increases in public expenditure would have to be funded by further increases in taxation on the majority of the population, or a Labour Government would run up a budget deficit way above the level of 3 per cent. of gross domestic product stipulated by Brussels.

The Labour party's proposals would cost between £30 billion and £35 billion a year; and—this is what Labour Members never mention—another £8 billion would have to be added to that total to make up for privatisation proceeds which a Labour Government would not receive, as the Labour party does not intend to continue with privatisation. All that would have to be added to the £20 billion public sector borrowing requirement estimated in the autumn statement.

Unless the Labour party makes major changes in policy and admits that all its promises of more expenditure on every policy area were mistaken, a Labour Government would have to increase taxes to the punitive levels of the 1970s.

Finally, the medium-term financial strategy—the MTFS—is dead if not buried. It was supposed to provide a framework in which macro-economic policies would be conducted over a rolling four-year programme, and to impose a discipline. But a continual abandonment of targets on expenditure, on the growth of monetary aggregates, and on inflation has made the MTFS hardly worth the paper it is written on.

As one who supports financial rectitude and believes in a balanced budget, I feel great sadness that, having achieved a balanced budget and then a surplus, the Government have been driven off course by recession into having an increasing budget deficit.

Mr. Deputy Speaker (Sir Paul Dean)

Order. I am sorry, but I must interrupt the hon. Gentleman. He has exceeded his time.

6.15 pm
Mr. Brian Sedgemore (Hackney, South and Shoreditch)

The Daily Telegraph and the Financial Times tell us today that the Prime Minister has decided that the general election will be held on 9 April. I welcome that decision, because it removes doubt and uncertainty which could otherwise damage the country's economic prospects.

In the expectation that a Labour Government will come to power later this year, the big question being asked at the Treasury is not, "Can we work with Labour policies?"—top civil servants have agreed that our policies are better for Britain than Tory policies—but, "Who will be the next permanent secretary?" The current incumbent, Sir Terence Burns, a professional economist, was a political appointment. As the architect of two Tory slumps in one decade, Sir Terence put more people out of work than anyone else in the history of Britain. My advice to him is, "Get on your bike, Terry. Find yourself another job. As an economist and a civil servant, you are finished".

Meanwhile, at the Bank of England people are desperate to know who will replace Mr. Robin Leigh-Pemberton, the dilettante appointed as Governor by the former Prime Minister—he was her husband's golfing partner. I am tempted to suggest a rakishly radical appointment—

Mr. Beith


Mr. Sedgemore

I am tempted to give the answer that the former Prime Minister gave when such suggestions were made—but on second thoughts I believe that the Labour party should plump for a Governor who believes in low inflation as the basis for sound economic growth and high employment. That means that Eddie George, the current Deputy Governor, should get the job. Eddie may not be such a good cricketer as Mr. Leigh-Pemberton, but he knows a hell of a lot more about banking.

I digress. I really wanted to tell the House that, during the past week, I have undertaken one of the most intensive investigations ever made. I have been to every corner of the kingdom, searching and seeking, in pursuit of at least one economic indicator that justified the assertion that the Tories are efficient economic managers. I have combed every library; I have read and reread every statistical statement on the British economy made between 1949 and 1992. I have consulted eminent economists, trawled through the national income accounts, and carried out endless computer runs.

In all honesty, I have to admit that I have failed. It has been a case of "mission unaccomplished". The data are conclusive, and show not only that the Tory party is the party of high taxation and high unemployment, but, contrariwise, that it is also the party of low investment and low output. When it comes to economic incompetence, the ragamuffins sitting on the Government Benches have no rivals. The idea of the Tories as efficient economic managers in the locust years of 1979–82 is an illusion, a mirage and a will-o'-the-wisp which belongs to the media world of make-believe.

When Swift said that all political parties die of swallowing their own lies, he had clearly anticipated the Tory claim in the 1990s that the Tory pary is the party of low taxation. If taxation is theft, the biggest thief Britain has ever known is the man whom the current opinion polls show to be the most unpopular Chancellor of the Exchequer—the right hon. Member for Kingston upon Thames (Mr. Lamont). He is despised even by his next-door neighbour, the Prime Minister. His incompetent best, not to mention the figures, makes him a laughing stock.

According to the Chancellor's own autumn statement, tax as a percentage of gross domestic product in the last year of the Labour Government, 1978–79, was 34.3 per cent. Under the Tories, it rose in 1981–82 to a colossal 39.9 per cent. of GDP. Today, it is, at 37.1 per cent., still way above what it was under Labour. The position is even worse. [Interruption.] According to Goldman Sachs, the Tory stockbrokers—I hope that the Financial Secretary will listen instead of muttering—way ahead, in 1994–95, tax under the Tories will go up even further, to 37.5 per cent. of GDP. Yet the Chancellor stood at the Dispatch Box today and had the temerity to say that the Tories were the party of low taxation.

The Financial Secretary to the Treasury (Mr. Francis Maude)

Will the hon. Gentleman give way?

Mr. Sedgemore

No, because I know what the hon. Gentleman will say. He will make the introduction that his colleague the Economic Secretary to the Treasury made last time I made this comment. He will ask about borrowing in 1979. I will ask him about German borrowing. The Germans borrowed 5 per cent. of their GDP, and they have the strongest economy in Europe.

Mr. Maude

Will the hon. Gentleman give way?

Mr. Sedgemore

No, I will not give way, because I have only 10 minutes.

With sound economic growth under the next Labour Government, taxation will fall as a percentage of GDP and there will be more public expenditure too. That is what the public want, and that is what we will give them. That is what our supply-side economics is all about.

The Tories have an appalling record as the party of production. Not even the editor of The Sun, who daily proves my dictum that in journalism there is no honour, would seek to deny the figures from the Organisation for Economic Co-operation and Development, which show that, although industrial output rose by a piddling, paltry 10.3 per cent. in the United Kingdom from 1979 to 1990 under the Tories, it rose by 27.5 per cent. in the United States and by 55.5 per cent. in Japan in the same period.

Listening to today's debate, it seems that the Tories' appalling record is made worse by the Chief Secretary's appalling ignorance of matters economic. In his intervention during the speech of my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) today, he showed that he does not know the difference between industrial investment, manufacturing investment, and investment in plant and machinery, the latter of which includes new, empty office blocks. The problem is that "Swank", as the Chief Secretary has become known, brings to economics the mind of a second-rate lawyer. The idea of the Tories as good economic managers comes in the main from practised professional lawyers.

I have already mentioned Kelvin MacKenzie, the editor of The Sun. Close behind comes the editor of the Evening Standard. Last week, the Evening Standard wrote that, according to the Institute of Fiscal Studies, one in three people in London and the south-east would pay increased national insurance contributions under Labour. The truth is that the institute said no such thing. It was a whopping lie. On the basis of that complete fabrication, the Evening Standard printed screaming headlines with breathless stories underneath about Labour's tax and benefit polices being in disarray. Only those for whom lies are a way of life would seek to argue that tax and benefit changes which produce five times more winners than losers will be unpopular.

John Wycliffe once said: I believe that in the end the truth will conquer. It will not if the editor of the Evening Standard has his way. When H. Agar wrote: The truth that makes men free is for the most part the truth which men prefer not to hear", he might well have added, "and which the editor of the Evening Standard, backed by Swank and the Chancellor, prefers not to print."

Happily, we can turn to The Times to see just how incompetent the Tories are as economic managers. On 4 January, a letter appeared in its columns which dripped with arrogance and conceit and which exuded the unconscious realisation of the effortless superiority in economic matters of its author. It was the kind of letter that decently modest and reticent men would leave their wives and mistresses or their friends to write. It was written by the right hon. and learned Member for Surrey, East (Sir. G. Howe).

When Professor Sidney Pollard, the distinguished economic historian, saw it over breakfast at his home in Sheffield, he almost choked on his cornflakes. Although not given to writing to newspapers, the professor grabbed for his pen. "This politician," he thought to himself, "is being worse than economical with the truth. He is a"—I cannot say the word, because it is unparliamentary.

Professor Pollard wrote in his reply that Sir Geoffrey had forgotten—how can one forget the very essence of one's being?—to mention that it was his first Budget with its massive Thatcherite transfer of the tax burden from the rich to the poor which raised the rate of inflation to the extent that the dramatic remedies he mentioned became a necessity. Professor Pollard then said that the much-lauded period of growth for seven years merely raised us back to the pit into which Sir Geoffrey's policies had brought the economy.

The growth rate for the whole period of Tory Government was well below that achieved from 1974–79. At the end of it, as Professor Pollard told readers of The Times, our economy was so weakened that it had to be put right by crude and cruel measures.

I will finish with Professor Pollard's epitaph to the right hon. and learned Member for Surrey, East, which is a fitting epitaph to the Tory Government. Professor Pollard says: Being personally responsible for a policy which damaged the economy to an extent that even the sufferings of millions could not fully put right is bad enough: to boast about it thereafter is quite intolerable.

6.26 pm
Mr. John Browne (Winchester)

In a speech limited to 10 minutes, I will concentrate on the exchange rate mechanism, especially in light of paragraph 36 of the report by the Treasury and Civil Service Select Committee on the autumn statement.

I share the Committee's concern about the effects of our membership of the ERM. The ERM is a central and crucial point in the great European debate. In essence, that debate is about power—how much or how little power we should surrender to survive as a developed country. The great European debate is about power—great power. Essentially, it is about German power and how best to cope with it. In coping with German power, there are basically two main approaches—that of Great Britain and that of France.

Great Britain is a net contributor to the European Economic Community. It has a 600-year-old democracy and it has successfully resisted German domination twice in the past century. In Britain, we intend to cope with German power by competition in a free market, but independently as a free nation. We in Britain believe in a Europe of free markets and free nations.

On the other hand, France—which, like most other members of the EEC, is a net recipient of EEC funds—has a relatively short history of democracy and has suffered a mauling and domination by Germany at least twice in the past century. The French approach appears to be to tie Germany down within Europe, like a modern Gulliver, and then to get closely into bed with Germany in the hope that Germany will be kind and will tend to favour France in the future. The French approach is to participate as a subservient friend of Germany in a market dominated by Germany, in the hope of future favours. Of course, people throughout Europe will ask: how much different is that from Vichy France?

In addition to that essential difference in political philosophy and approach, there are fundamental differences in economic structure between the United Kingdom and Germany. Let us make no mistake about it: the exchange rate mechanism is a halfway house to a single European currency. A single European currency, based on paper rather than on gold, will represent a single economy which in turn will be dominated by Germany.

The basic characteristics of the United Kingdom economy are that growth has been generated internally, that real rates of interest have always been low or even negative and that inflation has been tolerated to protect jobs, but the basic characteristics of the German economy are almost exactly 180 deg different. Growth has been externally generated, real rates of interest have been historically high and inflation has been tolerated only at a low rate or at zero.

To illustrate the crucial difference in attitudes towards inflation, let us remember today that our Government rightly claim a great sense of achievement in reducing inflation to its present level. In contrast, the Germans regard the very same rate of inflation as intolerable. Therefore, particularly on inflation, where do we meet?

The exchange rate mechanism is a halfway house to a single currency. It is a currency bloc dominated by the deutschmark. It reflects, in essence, the interests of the German economy. Within the exchange rate mechanism we see different interests. For example, the German transfer economies—countries such as Holland and Belgium—import, add value and export to Germany. Therefore, they feel little of the ill-effect of high German interest rates. Other economies, like those of France and Italy, are steadily being stifled by high interest rates within the ERM.

In our economy we have falling nominal rates of interest, but, as we have been told, inflation has been falling even faster than the nominal rate of interest. Therefore, real rates of interest—nominal, less inflation —are rising in the face of the worst recession in living memory. That has the effect of deepening our recession and causing even normally more prudent businesses to go into liquidation, even higher unemployment and even more mortgage foreclosures. High interest rates are encouraging higher savings and therefore less demand.

Our economy is crying out for lower interest rates, but our interest rates do not respond any more to our economic needs. Oh, no; thanks to our ERM membership, United Kingdom interest rates respond not to the needs of our economy but, through the ERM, to the needs of the German economy, which demands high interest rates in today's world. That surely must be economic nonsense. In the interests of our economy and the economies of other ERM members, interest rates must come down, just as they have done in the United States. The United States was free to bring its interest rates down so that, at the prime end, federal interest rates are negative by 25 basis points.

From within the ERM we must press for a reduction in German interest rates. If we fail in that, we must press the Germans to revalue the deutschmark, thus allowing other ERM domestic interest rates to fall. If we fail to achieve German co-operatoin and that goal, we must withdraw from the ERM without delay before we are forced to do so by trouble on the streets because of economic depression, not merely recession.

My right hon. Friend the Member for Worthing (Mr. Higgins) and others have criticised that advice. They say that the prime aim is to bring inflation under control, but what is "under control"? Is inflation under control if it is plummeting and falls below zero into negative rates? I believe that that is depression. Inflation is yesterday's battle. It may be tomorrow's battle yet again, but today the battle is to stimulate confidence in the economy. The longer we fail to achieve that, the worse will be our competitive position in the prosperity race of the next decade.

My right hon. Friend the Chancellor has a very difficult job. I do not underestimate it or his great efforts to achieve a sound, prudent economy, but I beg him to withdraw promptly from the exchange rate mechanism unless he is successful in negotiating either a reduction in deutschmark interest rates or a revaluation of the deutschmark, which would allow other members within the ERM to lower their domestic rates. In the absence of that assurance, I regret to have to tell my right hon. Friend that I cannot support his autumn statement.

6.35 pm
Mr. Doug Hoyle (Warrington, North)

The Chancellor's opening speech was a joke. Instead of addressing himself to his forecasts in the autumn statement and to why they were so far out, he decided instead to spend his time attacking Labour's proposals. He did that with all the venom of a Pekinese let off the lead. If the Chancellor had been a rain doctor and had forecast to the tribe that rain was coming as often as he forecast the end of the recession, all the tribe would have died of starvation. The Chancellor is the worst in a line of successive Tory Chancellors, all of whom have failed the nation and all of whom have added to the ruin of the economy.

What we have today is a recession. Those are not just my words. Every hon. Member who has spoken from the Government Benches has referred to the fact that the recession is biting, that interest rates are too high and that business and industry are being throttled. We are facing very difficult times. Under the Tory Government since 1979 unemployment has gone up 150 per cent. and is still rising.

There has been much discussion about investment and what is meant by manufacturing investment. Following the recession, or rather the slump, between 1979 and 1981 manufacturing investment took a long time to recover. It was 1988 before it recovered. We had investment in the mid-1980s; however, most of it did not go into manufacturing but into retail, finance and services—all worthy in themselves but not things which added to the competitiveness of manufacturing investment.

Manufacturing investment only regained its 1979 level in 1988. Once more, it is beginning to plummet. Hon. Members do not need to take my word for that or the word of any of my right hon. or hon. Friends. The CBI has forecast that manufacturing investment between 1989 and 1992 will fall by almost 25 per cent. If investment is falling, there is no way that manufacturing industry can be competitive with the rest of the world, particularly in the single European market.

That is the truth, and it is very grave. It is no use the Chancellor pretending that investments are up. He was talking about all investment, of course. Manufacturing investment is going down, and, of course, manufacturing industry produced the wealth of this nation.

Mr. Tim Smith (Beaconsfield)

Will the hon. Gentleman give way?

Mr. Hoyle

I should like to give way to the hon. Gentleman, but I do not have much longer to speak.

Quite apart from investment, of course, we have the problem of what is happening to small employers. Business failures have increased by almost 61 per cent., yet the Conservative party pretends to be the friend of small employers. Nothing that the Chancellor or even Conservative Back-Bench Members have said will add to confidence. We have a lack of confidence at the moment. As many hon. Members have said, all sectors, whether retail, construction or manufacturing, are completely flat.

Another problem is the rate at which we entered the ERM. To hear Conservative Members talk, one would not think that the former Prime Minister and the present Prime Minister took us into the ERM at the wrong time, for all the wrong reasons, and at the wrong rate. One cannot go in at that rate, because British manufacturing industry cannot compete. The rate at which we went in was almost three—

Mr. John Browne

Hon. Members should also look at the Opposition Front Bench.

Mr. Hoyle

I am sorry, it was the ex-Prime Minister and the—[Interruption.] The Government took us in at that level and put us in the dilemma in which we must compete at an artificial rate. I wish that Conservative Members would accept their responsibility and turn their attention to the Prime Minister who said, "In no way will we change the rate that we are in."

Mr. Tim Smith

indicated dissent.

Mr. Hoyle

The hon. Gentleman keeps pointing. Why does he not apply pressure on the Prime Minister who took us into the ERM? I cannot understand the former Prime Minister—

Mr. John Browne

Will the hon. Gentleman give way?

Mr. Hoyle

I am sorry, but I cannot give way, much as I should like to do so. I have only three minutes left.

I cannot understand why the former Prime Minister is now objecting to our being in the ERM. She is the person who took us in. There is no doubt that, whichever party is in power, the Government will have to look at the realignment. It will have to be a fairly large realignment if we are to be competitive—that is, about 15 per cent.—and if we are to give back the competitive edge to industry, to have a recovery and to sustain that recovery.

We have plans in relation to providing incentives to manufacturing industry, and providing the incentives that the CBI has repeatedly asked the Government to give. We will give tax incentives for research and development. If we do not have research and development, our companies will not be in the forefront of those that bring forward new ideas. If we do not have new ideas, we will not be able to compete. Of course, we will opt for more training. Indeed, we will spend more on training. In addition, we will give real help to small businesses. We will get on with the task of revitalising the country. It will be a new start and it will give new hope, and new hope is certainly required.

It is no use the Chancellor or the Financial Secretary spending all their time attempting to attack Labour's plans. The electorate will want to know what successive Conservative Governments have been doing since 1979 to land us in such a mess—and we are in a mess. We are the only member of the European Community in recession. All other members are looking to growth, but we have negative growth of 2 per cent. That does not augur well for the future of this country. It means that, instead of things getting better under the present Government, things will get much worse, and that is even before we are in the single European market. There has certainly been no progress in developing an infrastructure and in encouraging companies to compete in that market. Of course that market will offer opportunities, but it will also lead to failures if one is not prepared for it. The Government have not prepared us for it.

Let us have a general election and let us have what the country needs and is crying for—a change of Government, and a Government who will get on with the task of proudly leading us into the next century. That Government can only be a Labour Government.

6.45 pm
Sir Timothy Raison (Aylesbury)

I think, although I am not absolutely sure, that this is the first time in 21 years in the House that I have spoken in an economic debate. I have in common with the Leader of the Opposition the fact that economics is not my scene.

The debate has three purposes. The first is to enable hon. Members to take part in some electioneering along the lines that we have heard from the hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore). The second is to discuss the overall economic strategy, and that is not what I feel qualified to do. The third purpose springs from the fact that the debate is just about halfway between the autumn statement and the Budget. The autumn statement and the accompanying material cover public expenditure and taxation. The two points that I shall raise are in the territory between the two.

My first point—both points are addressed to my right hon. Friend the Chancellor and my hon. Friend the Financial Secretary—is about one thing that we could do for small businesses in the present tough economic climate. We all know that the economic climate is tough—there is no point saying otherwise. I strongly urge my right hon. and hon Friends in the coming Budget to think hard about the possibility of some short-term relief from the unified business rate.

I am very struck that small business men whom I meet in my constituency and elsewhere say over and again that the UBR is causing them great difficulty. Of course, fundamentally, the lack of orders is the difficulty, but the UBR is a serious difficulty. It is pretty obvious that there is not much point in reducing corporation tax for people who are not actually paying corporation tax, whereas an immediate reduction in the UBR would be of great value.

That is a short-term measure to deal with the current situation. When the economic recovery comes, that measure could be dropped. I do not propose to say how it could be done; there are different ways of doing it. No doubt one way would be by stalling or even temporarily reversing the move to the level determined by revaluation. There is no doubt that the people who are feeling it most viciously in many parts of the country are those who are affected by the higher levels produced by revaluation in areas such as my own. The other way would be through some simple, straightforward cut. I hope that my right hon. and hon. Friends will think very hard about the possibility of doing something.

The second matter also falls in the interstices between taxation and public expenditure. I wish to say a word about the proposals which are currently being floated in relation to the possibility of tax relief on child care for working mothers, or the alternative version, which is to provide a voucher for child care to working mothers.

We have already seen brought in some sort of tax relief for workplace nurseries. It is now being suggested that this should be extended to all day care, presumably where fees are actually being charged. It is designed to help mothers to go out to work—or perhaps, more strictly, to help when both parents are at work. I understand the pressure for it and many of my constituents would be rather pleased by it, but I have a good many doubts as to whether it is the right course to follow.

The idea of a tax allowance of this kind goes against the general philosophy or policy of reducing tax reliefs and allowances rather than multiplying them, a philosophy that I am very much in favour of.

There are obvious problems about the feasibility of schemes of this kind. Definition is bound to be complicated: defining exactly what is meant by day care or child care. The voucher version of this is also open to abuse; it could end up in pockets for which it was not designed. So there are practical problems.

Is there an economic case for such a measure? It depends very much where we are in the economic cycle. It is rather hard at present to argue that there is a strong case for measures to encourage more people, who are not in it at the moment, to enter the labour market. The problem at the moment is unemployment rather than over-full employment, so I cannot see a desperate need to lure back to work people who are uncertain whether they should be there.

If, however, there is an economic need, it has always seemed to me that the proper people to pay for it, to put it crudely, are not the taxpayers as a whole but the employers, the people who would gain the economic advantage. In logic, that is irrefutable.

Above all, it seems to me unfair that those who earn a second income should receive tax relief while those who stay at home to look after their children receive neither income nor tax relief. Not only is that not equitable; it seems questionable on social grounds. How far do we really want to persuade the parents of very young children to go out to work? Of course they should have the right to do so—I am absolutely in favour of that, and often it is the right decision, but in other cases it is the wrong decision. I cannot see that it should be part of public policy to go out of our way to encourage people to leave home as soon as possible, because we know that the needs of children are very great and that, by and large, their mothers are the best people to look after them when they are very young.

What emerges from this is that, fundamentally, the argument in favour of tax relief is not really about supporting or looking after children but about helping their parents, about making life a bit easier for their parents. In all this, we should look primarily at the interests of the children themselves. If we were to give tax relief or introduce a voucher system for child care, that itself would give no guarantee of quality in child care, something in which I am very interested.

When I was Chairman of the Select Committee on Education, Science and Arts, I was active in producing a report which argued the case for the widest possible extension of nursery education, either in the public sector or the private sector. It should be not just glorified child-minding, but appropriate education of its kind. I would much rather see resources, if resources are deemed to be available, devoted to strengthening nursery education than to providing this particular tax relief.

I also believe that, if we feel that we are in a position to inject extra resources into this area, much the best way, on top of nursery education, is through an enhanced child benefit. It will be said that child benefit is not selective, but we all know very well that tax reliefs are not selective—or, if they are, that they are generally selective in favour of the better-off rather than the worse-off. So that is not a strong argument.

We should leave the choice of whether to go back to work to the parents themselves; the state should be neutral. I very much hope, therefore, that my right hon. Friends will not fall for the arguments which are being advanced with such fervour.

6.53 pm
Mr. Ronnie Campbell (Blyth Valley)

The autumn statement is a testimony to the programme of whatever Government are in office. What we have here and what we have seen with the Government over the years is a waste of £100 billion from North sea oil and a waste of £10 billion with the poll tax. That is testimony indeed. When I hear bandied around the Chamber phrases such as those that we heard today, the one that comes most to mind is: "If it's not hurting, it's not working." I assure Conservative Members that in my constituency, where unemployment is very high, it is hurting and it is not working.

If we look at the testimony of the Government's record on investment and manufacturing, we see some interesting figures. I have managed to dig them up today by means of the Library. Investment in manufacturing was £12.4 billion in 1989 and £12.4 billion in 1990, but in 1991 it came down to £9.4 billion, a reduction of 30 per cent. In the 12 years since 1979, manufacturing investment rose by 52 per cent. in France, 48 per cent. in Germany and 54 per cent. in Europe as a whole, yet in Britain it has fallen in real terms.

Our manufacturing industry has been slashed to a minimum. At one time there were many millions of people working in manufacturing industry; today there are only 5 million. It is an absolute disgrace. It is again testimony to the Government and their so-called economic miracle. When people heard about it a few years ago, they were on the crest of a wave and thought that we had one of the best Governments in living memory, but we are now paying the price.

Business investment in Germany is rising by 7 per cent., in Spain by 5 per cent. and in Japan by 7 per cent. According to the Confederation of British Industry—not any Opposition Member—investment in Britain is falling by 11 per cent., so the CBI is telling the Government that their investment has been nothing to shout about.

Business failures are even worse. Let us look at the record. In 1980 when the Conservative party had just come to power, there were 10,651 business failures; in 1991 the figure was 47,777—another testimony to the hopelessness of the Government. The growth rate under this Government has been 1.75 per cent.—lower than under any other post-war Government. The Government have the worst record since the war. Gross domestic product fell by 2.3 per cent. in 1990, while that of Germany grew by 1.9 per cent., of France by 1.2 per cent. and of Italy by 1.4 per cent. Britain is indeed the poor man of Europe.

Manufacturing output growth in the United Kingdom between 1979 and 1991 was the lowest of all the countries in the European Economic Community, except for Greece where it was just 1 per cent. lower than in the United Kingdom.

Last year, in the north, there were 3,730 business failures—an increase of 57 per cent. on 1990. When I looked at the position in the south-east, I felt that the north's figure was not too bad because the figure for the south-east was 9,722. Then I looked at the position in the south-west, because that is where all the Tory Members are. No wonder they are not here tonight. No wonder the Government cannot find speakers for the debate. According to last year's figures, there were 5,401 business failures in the south-west.

The figure for London is even worse, but that is where the Tories hope to gain some seats to win overall control. According to last year's figures, there were 7,731 business failures in London. That is an absolute disgrace. The Government are hoodwinking people in those areas. I hope that one day those people will realise what the Government are all about. The Government are for themselves; for the rich and for anyone who wants to put something in the coffers of Conservative central office. According to last year's figures, 200 firms a day went under.

Since 1979, unemployment in the north has increased by 39 per cent. in real terms. It has increased from 93,000 in 1979, when the Conservatives came to power, to 129,000. More than 31 per cent. of unemployed people in the north-east are under 25. Fortunately for us, there are Labour Members in the north-east. There are also one or two Conservative Members, but the figures which I recounted will ensure that they are defeated at the next election. Given the figures which I just described, I hope that Conservative Members will also be defeated in the south-east.

Thirty-three per cent. of people in the north-east have been out of work for more than a year. That is intolerable. It is no good the Government telling us, as they tried to tell us today, that everything is hunky-dory and that the recession has bottomed out. According to the 1991 figures, there were 80,000 house repossessions in England, Wales and Scotland. That was a 90 per cent. increase over the 1990 figure. That is the Government's testimony. Mortgage arrears are now at record levels and one in 12 people are two months behind with their mortgage repayments.

In respect of taxation, the Tories believe that their party gives everything away and takes nothing back. Unfortunately, that is wrong. When Labour came to power, VAT was 8 per cent. As we all know, under the Tories today, VAT is 17.5 per cent. That has caused problems for working people, because VAT applies to everyone and not simply to the rich. It applies to the low-paid man who has to buy clothes for his children.

Mr. Tim Smith

Value added tax does not apply to children's clothes.

Mr. Campbell

The hon. Gentleman is right; I apologise.

In the last Budget, VAT meant an extra £2 for the average working family. The increase in alcohol duty meant an extra £1 on that family's budget. The tax increase on tobacco in the last Budget meant £1 a week for the average working man. Changes to petrol duty meant an extra 30p a week for the average working man—not many average working men have motor cars, not like some of us in this place who are very rich. In all, last year's Budget meant an increase of £4.30 in taxation for the average working man. It is a fallacy that the Government are not a Government of taxation. They should get out and let another Government come in and do the right thing for the working class of this country.

7.4 pm

Mr. Nigel Forman (Carshalton and Wallington)

It is already crystal clear from this debate and from the official Opposition amendment that, if the Labour party was ever to form the Government, this country would have to spend more, tax more and borrow more. That would be quantitatively and qualitatively far more than if this Conservative Government were to remain in power.

It is also misleading for the right hon. and learned Member for Monklands, East (Mr. Smith) and his colleagues to present Labour's programme as cautious and carefully costed. They must know, just as we know, that it is the cost of a Labour Government over a full five-year term which would concern the British people. That cost would be well in excess—perhaps more than £30 billion in excess—of the Government's current spending plans, which are already based on some pretty optimistic assumptions about future growth in the economy over the relevant period.

The Labour party has sought to lull the British people into a false sense of security by referring only to the first year's cost of its promised increases in state pensions and child benefits. However, any fair-minded observer is bound to conclude, on the basis of previous evidence of the Labour party in office, that there are usually three stages in a typical Labour path to perdition: first, Labour spends more in an effort to redeem its pledges to special interest groups—and it is very close to many producer groups; then it taxes more, whether via income tax or national insurance, in an attempt to cover at least some of that cost; then it borrows more and has to raise interest rates higher than they would otherwise have been until the markets or the International Monetary Fund—possibly both—intervene to stop Labour. That all ends in tears.

We saw all that before, between October 1974 and October 1976. If the British people were foolish enough to return a Labour Government once more, we would see it again. The bills to the taxpayer may be delayed somewhat under the formulae espoused by the right hon. and learned Member for Monklands, East, but they would all be in the post—as the saying goes—even if, under Labour, that would be a pretty inferior second-class post.

Furthermore, in a modern society such as ours, Labour would soon encounter a taxpayers' revolt if it pursued its irresponsible public spending plans. Notwithstanding all the adult education that Labour Members have received during their long years in opposition, they do not seem to have learnt that large and rapid increases in public spending are not the most efficient way to meet genuine social needs or to get maximum value for money in the public sector. Too much of an extra spend of that kind tends to be absorbed in a rapid pay increase.

Labour's redistributive politics—the politics of envy as it was once called—would involve robbing middle-class Peter to provide services for middle-class Paul. Indeed, because of the pattern of use in many public services, it would often be a case of increasing tax on the relatively lower-paid in work, or national insurance contributions, to increase pay in the public sector and provide services which the hon. Member for Birkenhead (Mr. Field)—who, alas, is not in the Chamber today—and others have shown are secured disproportionately by what the hon. Member has described as the "sharp elbows" of the middle class.

The wrong way in which to promote an investment-led recovery, which is precisely the objective in the Opposition's amendment, is to pursue policies that would raise interest rates, increase taxation and national insurance and weaken market confidence in the currency. However, those would be the consequences of Labour's high-spending and high taxation policies.

The Opposition's amendment refers to other desirable measures, such as those designed to promote education and training, but they are medium to long-term measures. They would have no positive impact during the current phase of economic recession. In any case, the private sector has commendably continued with its expenditure on human capital throughout the recession in a way that it did not do in the last recession. However, private firms do not want the prospect of a statutory training levy, something that they would get from a Labour Government, which would be rigid and unfair and would add to their costs.

Against that background, the autumn statement is a worthy document which catalogues the Government's commitment to increase public spending in our priority areas—for example, the national health service. However, the obligatory forecasting duty that the Industry Act 1975 imposes leads to some forecasts that are more than usually inaccurate—for example, forecasts about the pace and scale of economic recovery, and especially about the turnaround in consumer expenditure and fixed investment. I regard this as a pity, because it may have served to raise among the public some hopes whose fulfilment now seems destined to be deferred.

However, there is good news in the autumn statement. Much of this should breed confidence that the recovery, when it does come, will be soundly based and sustainable. For example, consumer price increases have halved since their peak last year, unit labour cost increases have halved since their peak last year, and sterling remains securely within its agreed ERM bands. I believe that, on this basis, we can he confident that the coming year will see the beginnings of recovery after what may turn out to have been the longest and deepest recession of the post-war period.

Incidentally, we should not really have been surprised at the extent of the recession, as the downturn is not confined to this country. But, primarily, the boom that preceded the downturn was also the longest and strongest period of continuous economic growth in this country since the 1930s. These experiences have obviously had their behavioural and psychological effects in both phases of the economic cycle.

Against that background, my right hon. Friend the Chancellor was right when he said in the House last week that reduced inflation is absolutely the first condition for medium-term prosperity. Having heard his speech today, I am confident that he will stick to his view into and beyond the next election. He was also right, in a recent Financial Times interview, to reject the temptation to buy votes in the election period. Only an irresponsible Government would seek to do that. It would be completely wrong for my right hon. Friends even to contemplate such action—not least because Conservatives intend in the next Parliament to inherit the consequences of current policy decisions.

7.12 pm
Mr. William Ross (Londonderry, East)

At the time of the autumn statement, I asked the Chancellor whether it did not represent a decisive shift from the concept of balanced budgets. He replied that he intended to balance the budget over the cycle. Since he uttered those words, I have given some thought to them, but have not yet been able to figure out what period of years, from inflation to deflation to inflation, he was talking about.

I have not been able to figure out whether the right hon. Gentleman intended to retain the same burden of debt over a very long period—perhaps permanently—and whether that burden would be in cash terms or real terms or would be expressed as a percentage of gross national product, or whatever. I hope that the Front-Bench spokesman, if he is unable to give me the information tonight, will have the courtesy to write and let me know what maintaining a balance over the cycle means. Quite a number of people will be interested to hear.

I should like to know whether the current Administration or their predecessors ever intended to diminish central Government debt, or even the entire public-sector debt, as a matter of policy, or whether the diminution was simply the result of a happy accident that occurred because they got their sums wrong. Governments seem to be very good at getting their sums wrong. In the very rumbustious electioneering speeches that we have heard from the two Front Benches and from some other Members today, there was some evidence of that. As neither of the major parties will make any impact in the election in Northern Ireland, I can take a more casual, and perhaps a more objective, view and can state what very many people in the country are thinking.

The Government did not only get their sums wrong in relation to the whole United Kingdom; they got their sums wrong over Government expenditure in Northern Ireland in the current year. But there is something that annoyed some of us even more. When, some weeks ago, the Secretary of State for Northern Ireland announced the moratorium on certain aspects of public expenditure in Northern Ireland, he did not have the guts to do so in the House. I do not wish to be impolite, but I must point out that it was in reply to a planted question that he told us that the Government were at least considering the matter.

That was followed up with a statement that the overspend of about £30 million had been identified by early December, that it represented 0.5 per cent. of the Northern Ireland block grant, and that the right hon. Gentleman intended to correct what was amiss. The 0.5 per cent. does not seem very much. Given the magnitude of the mistakes that have been described in almost all speeches today, there could very easily be an underspend of 0.5 per cent., or even 2 or 3 per cent. That being the case, I wonder whether the corrective measure is somewhat premature.

Even worse is the fact that the Government's first excuse for this moratorium in Northern Ireland expenditure was the high cost of compensation for damage and injury caused by terrorist activity. That was the most foolish of remarks. Everyone in Northern Ireland knows that bills arising from terrorist damage do not come in during the financial year in which the damage occurs. The great bulk are received the following year, and sometimes even later. The sums that have been set out for future years seem to suggest that the Government do not expect to conquer the terrorists in the near future.

When, in this case, the Government were blown off course, they had to come up with some other excuses. The real problem is simply that they got their sums wrong, and they do not yet know where the moratorium and the cut will fall. When I put a question about this matter, the Secretary of State had to say that he did not know. He did not say it quite so baldly, but that is what he meant. He said that the changes would be laid before the House in February.

Well, we look forward to February, but when we receive the figures, we shall have to search through the whole mass of detail and make comparisons with the previously published figures to work out exactly where things went wrong. The Government would have been rather more honest if, at the beginning, they had regarded this as a contingency matter—it arose out of terrorist activity—and had decided that the sums required should be provided out of the United Kingdom contingency fund. That is what would happen in respect of any other part of the United Kingdom.

On the national scene, the Government are confronted with a rising budget deficit. The Chancellor now finds himself with a fixed exchange rate. I remember the joy that was demonstrated in this place when we were told that we were to go over to a floating exchange rate. Sometimes I wonder how long the Government stayed with the floating exchange rate. However, they have decided to move to the fixed exchange rate, and the whole economy of the nation is at the mercy of an arbitrary standard that the Chancellor of the Exchequer cannot control.

I feel sure that the Chancellor—whoever he may be —will find the role of a supplicant at European summits very humiliating. Perhaps it will be good for the soul—which, in this case, certainly requires some purification. The Chancellor has no control whatever over interest rates. Would any hon. Member deny that the Chancellor would be overjoyed if he once more had the capacity to reduce interest rates and manage the economy of the nation? After all, that is what he was elected to do. I feel very sad that he has thrown that power away, and I hope to live to see the day when it is restored.

The right hon. Gentleman's alternatives are few. I believe that, very soon, he will find himself in the position of his predecessors, who had to wrestle with fixed exchange rates. I believe that he will be forced, through this wonderful economic cycle, to create inflation or to deflate according to whether the value of the currency is rising or falling. It is not a prospect that any Chancellor would welcome, but it is one with which the present Government have chosen to live.

The problem is that that will continue until we either leave the ERM or become part of a federal Europe with one currency and, inevitably, one budget. When Europe reaches that stage —and I hope that we are not still part of it—that currency will float. It will be bought and sold on the world currency markets because that is the only way in which its true value can be found. If the Chancellor is prepared to deny that that currency will float, I should like to hear him say so. I do not think that I will hear it this evening.

Two minor matters also concern me. Perhaps they are not that minor because they have been the making and the breaking of many a person's fortune. They have cost people their businesses, their dwellings and their incomes. The first is the problems that small businesses face because of the high level of bank rates and the horrendous activities of the banks.

When a business is in trouble and its owner goes to the bank and explains the problem, instead of being sympathetic, the bank says, "You are a risk," and bangs another 3 or 4 per cent. on to the interest rate. We have heard a great deal about caring banks—but from the banks themselves, not from business men or people who owe them money. By putting up the interest rate, the bank ensures that the business goes under and the jobs of its employees are lost.

The second point is the high level of rates being charged on retail premises. It appears to many of us, and especially the retailers, that, every time another few quid has to be found for the local economy, the attitude is, "Get it from retail business." It does not matter whether it be central Government or a local authority, that is the attitude, and it has led to the destruction of many small businesses—the very group the Government say they rely on and want to encourage.

7.21 pm
Mr. Nicholas Budgen (Wolverhampton, South-West)

It is a privilege to follow the hon. Member for Londonderry, East (Mr. Ross). In so much of what he says he shows the fundamental agreement that there has always been between the Tory party and the Ulster Unionists. He makes us realise how many mistakes have been made by successive Tory Governments and how easy it is to understand the despair and resentment felt towards us by many Ulster Unionists. I hope that he and they understand that there are many on the Conservative Benches who have noted those mistakes and who, across the barrier of resentment and misunderstanding, feel strong affection and admiration for our cousins in the Province.

I listened with care to the two opening speeches. I was reminded of the agreeable battles—and "agreeable" is the right adjective—that used to take place in the 1970s between Lord Whitelaw and Lord Jenkins, as they have now become, when they discussed home affairs. Lord Jenkins treated Lord Whitelaw with that urbane condescension for which he was rightly known, and Lord Whitelaw—with genial good will—accepted the role made for him by Lord Jenkins. Both of them were united in the view that it was crude, vulgar and against the public interest to say anything about immigration, which at that time was a subject of some interest to the public. Such vulgarity was avoided in all discussions of home affairs.

The position is similar today. The two Front-Bench spokesmen, who are now carrying out the economic policy of the Bundesbank, did not for a moment allow the words "exchange rate mechanism" to pass their lips. It was left to later and more vulgar speakers to mention those words. My hon. Friends the Members for Bridlington (Mr. Townend) and for Winchester (Mr. Browne) put the fundamental and first arguments against ERM with great force and clarity.

It is interesting that we are now debating these matters in the shadow of the great intellect of my right hon. Friend the Member for Blaby (Mr. Lawson). After all, he was the single most important politician of the period between 1974 and his resignation, because economic policy decides so much in our political affairs. Between 1974 and 1979, he helped us to understand the three most important factors that would guide Tory economic policy between 1979 and 1985. They were, first, that there would be a decline in the increase in money supply; secondly, that there would be floating exchange rates; and thirdly, that, as far as possible, we should aim for fiscal neutrality. It is one of the great tragedies of the Tory party that he who understood everything was, perhaps, less strong in belief.

In 1985, my right hon. Friend went to a great conference—the new field of the cloth of gold—which was a meeting of the G5 at Plaza. He went along with what was then the new American fashion of interfering with exchange rates. No doubt, having been persuaded that it would be of temporary advantage, he persuaded my right hon. Friend the then Prime Minister—who was not immune to the charms of American persuasion—that if the Americans wanted it, it must be good for Britain. The then Prime Minister went against what had been the firm convictions of the Tory party for the whole of the period since the agony of it, having so unnecessarily lost power in 1974.

From starting to rig exchange rates, my right hon. Friend the Member for Blaby then laid the ground for those who wanted to go into the ERM and to move from fixed and variable rates to fixed rates. The consequence of that was that in 1985 he did not merely undermine the argument for a floating exchange rate; he undermined the argument for the medium-term financial strategy and also, in the end, the argument for fiscal neutrality.

It is important that my right hon. and hon. Friends who may be saying to themselves, "There is a risk that we might lose the election", know that if we do lose it, in the end it will be because of what happened at Plaza in 1985, which ended up with Britain joining the ERM. We abandoned the three tenets of a highly successful Tory policy as it was applied between 1979 and 1985.

I hope that my right hon. and hon. Friends will note some of the consequences of the abandonment of those policies. Let us consider the consequences of having what, in practical terms, is a fixed exchange rate. The first is the political consequence. Anybody who has read, thought about or experienced in close circumstances the period of the Callaghan-Wilson devaluation knows what happened. It is a constitutional necessity for the Chancellor of the Exchequer of the day to keep saying, "There will be no change in the value of the currency." He goes on saying, "We shall defend the currency to the last man and to the last drop of blood", but suddenly it changes and not only does the Chancellor have to resign but the Government of the day suffer a considerable political setback as a consequence of having said so much that requires the eating of words.

It also becomes clear that intervention—no matter by how many Governments—is not enough to stand against market forces. Governments then come to the conclusion that they very much dislike using the interest rate weapon when it is so obviously at variance with domestic needs. So what happens? They do things such as reimposing exchange controls. Let us remember that when the Tory Administration abolished exchange controls in 1979, they did so in the belief that they would always be supporting floating exchange rates. Exchange controls are extremely useful with either a variable or a fixed exchange rate.

It will not be long before people start advocating exchange controls, which will considerably affect the viability of the City of London. And it will not stop there —if one has to have a fixed exchange rate, one can no longer remain neutral between exports and imports. We shall be back to import surcharges and to saying that imports are wicked and that exports are morally good. It is highly likely that we shall find that the new privatised arrangements for export credit guarantees are deficient. We shall have to have some system of state subsidy for exports.

All those distortions will inevitably flow from having abandoned those three important tenets that we worked so strongly and so well towards in our difficult period in opposition between 1974 and 1979. But it will not end there. Indeed, it is obvious that it has not ended yet. In my opinion, the system of fiscal neutrality was a good one. Most of all, it said that politicians should not decide who has the tax breaks and that, on the whole, that should be left to the market and we should have low taxes and few tax breaks. If we abandon the principle of fiscal neutrality, we lay ourselves open to every interest group and to every section of the community that can get support from a grouping of Members of Parliament or others who want some special deal.

I regret the way in which in 1985 we abandoned so much that was so successful. I hope that the Tory party will soon reconsider the advantages of so much that was so good between 1979 and 1985.

7.32 pm
Mr. John Battle (Leeds, West)

It is only two months since the Chancellor presented his autumn statement with all its false economic optimism. The period since then has been characterised by short-term electioneering tactics. It seems that the Government's whole approach is now to appeal to the presumed amnesia of the British people about what has actually happened during the past 13 years and then to deny any responsibility for it.

Week by week, another proposed quick fix leaks out from the Government—another spurt of spending for power with a short-term election-winning adjustment. Was not an example today's rumour that the 20 per cent.

mandatory poll tax may go, although only two months ago all Conservative Members voted to retain it? That strategy is based on a short memory and on the hope that everyone will forget that this is the Government who were elected in 1987 on a manifesto that never even mentioned the poll tax—an experiment that has cost thousands of millions of pounds of public money. The Conservative manifesto never even mentioned that VAT would be pushed up from 8 per cent. right through to 15 per cent. and this year to even 17.5 per cent. That manifesto never even mentioned that child benefit would be frozen solid for three years or that pensioners' incomes would be undermined by reductions in housing benefit. The Conservative manifesto never even mentioned that cuts in income support would lead to homelessness among youngsters.

It is worth recalling that in 1979 child benefit was 7 per cent. of average earnings. It is now worth only 4.8 per cent. In 1979 social security benefits, such as sickness benefit, were worth 29.2 per cent. of average earnings, but are now worth only 20 per cent. The Government were elected in 1979 on the basis of getting unemployment below its previous level, but they have had to make 30 alterations to the way in which the official figures are calculated. Yet under the Tories, since 1979, unemployment has never been lower than the figure that they inherited then, which was 1.08 million people, or 4 per cent. of the work force. It is worth recalling that in 1979 unemployment benefit was 29.2 per cent. of average earnings, but is now only 20.9 per cent. That is the real price that people in our society are having to pay for the Tory Government's economic con tricks over the past 13 years.

The Prime Minister told us to pretend that what is happening is a form of sadistic tonic, saying, "If it isn't hurting, it isn't working", but the many who are not working have had their lives effectively broken by the Government. For millions of people in our society these have been 13 years of economic pain, and that economic pain has been because of a deliberate Government policy. They have been quite conscious and deliberate in their experimental attempts to solve the economic crisis that they created by shifting Britain in the last decade to being a vulnerable, low-wage economy.

When Conservative Members talk about such things now, they say that they cannot improve things overnight. They pretend that they have just taken over and that the Prime Minister inherited a mess for which he is not responsible, yet that same man has been both Chief Secretary to the Treasury and Chancellor of the Exchequer. The economic mess and the illusion that one can both cut taxes and increase public spending is of the Government's conscious making. Conservative Members voted night after night in the House to set that policy in place.

The Government are trying to create the illusion of increasing public spending while cutting taxes, but not only has the overall burden of taxation been increased from 34.7 per cent. in 1979 to 37 per cent. now, so that the tax burden for a typical family with two children has increased by 13 per cent. since the years 1978–79, but the Government have effectively cut public spending on the national health service, education and training, and on housing in particular. In 1987, the pre-election bribe in the autumn statement that preceded the election was the promise of an increase in public spending over the next three years of £11.2 billion above and beyond the amount that was needed to make up for expected inflation. However, there was no increase whatsoever. There was a cut of £12.7 billion. That was the way in which that promise was fulfilled.

When the Prime Minister was asked on "The Frost Programme" on Sunday whether VAT would increase under the Conservatives if they were re-elected, the right hon. Gentleman said: We have no plans for an increase in VAT. I seem to remember that that is exactly what the former Prime Minister said in 1979, in 1983 and in 1987, and she subsequently increased VAT. It seems that the promise further to cut income tax has been suspended from today's speeches but it might be a better idea for the Chancellor to come to the House to say that he will cut the 20 per cent. mandatory poll tax payment because that is one of the measures that has hit hardest the poorest in our society.

We need to bear in mind exactly who is paying the price for the Government's decisions. Primarily, it has been the unemployed. In the past year, unemployment has soared to 2.5 million—mainly young people—with the biggest annual rise since 1980. A total of 703,000 people joined the dole queue in 1991. Last month saw a 31,100 rise, bringing the total to 2.5 million people, or 9 per cent. of the working population. That was the worst rise since the first year of the Thatcher Government when in 1979–80 the total number of unemployed rocketed by 738,000 to 1.8 million people. That was what happened under a Government who were elected on a pledge to reduce unemployment, and in the 13 years since then unemployment has never been at a level lower than it was in 1979. Each registered job vacancy is now being chased by 23 unemployed people. That is the real, personal tragedy —a tragedy of lives blighted by the lack of work and purpose. Those people are certainly paying the price for the Government's misguided, short-term economic experiment.

As the trends continue, millions of people begin to feel that they are only a pay cheque away from the dole queue. For every extra 1,000 unemployed, social security spending is increased by £300 million. That is the real waste. Worse, 11 separate cuts in unemployment benefit have saved the Government between £5 billion and £6 billion.

In my constituency, while the unemployed poor pay the price, those in work face a future of low investment and low output under the Government's current economic strategy. Since 1979, the Government have almost seen off manufacturing industry: Britain is now the only EC country in which manufacturing investment is lower than it was in 1979. According to a detailed survey carried out by the Amalgamated Engineering Union, 170,000 jobs were lost in manufacturing industry last year, and 22,000 were lost between October and December. Since the completion of that survey, a further 3,500 jobs have gone. My region, Yorkshire, is highlighted as one of the worst hit.

Paradoxically, the United Kingdom is the second largest world owner of multinational assets. Its economy has been starved of capital investment, as—paradoxically again—the increase in part-time work demonstrates. The country is crying out for Labour's manufacturing investment initiative, which would bring enhanced first-year capital allowances for investment in plant and machinery, innovation and design. That is why we need a strong regional policy, to tackle the divide that is the legacy of the Government's strategy.

It is not only the unemployed who have been forced to pay the price. An estimated 10 million people on the poverty level have suffered real cuts in income since 1979, while 1 per cent. of the population—more than half a million adults with the lowest incomes of all—have experienced a cut of no less than 22.6 per cent. in living standards, in real terms. As Ministers go around the world advertising Britain's special economic advantage of low labour costs, it should be remembered that a further 10 million people—those earning less than the Council of Europe's decency threshold of £5.15 an hour—are also paying the price of the Government's policies, and paying it every week.

There has been a massive income shift from the poorest third of the population to the better-off two thirds—and, above all, to those who are genuinely rich by any standards. The homeless, too, are helping to pay the price of that shift. Every "light at the end of the tunnel" forecast by the Government seems to be yet another oncoming train. The only chance now seems to be a general election, which would offer the people some hope for the future—the hope that a Labour Government is elected.

7.42 pm
Mr. Tim Smith (Beaconsfield)

As is so often the case, the real debate about economic policy has taken place almost exclusively on the Conservative Benches. Labour Members have produced a torrent of statistics, but they have given us little in the way of constructive alternative policy. The speech of the right hon. and learned Member for Monklands, East (Mr. Smith) was even more notable than his previous speeches for the paucity of policy proposals that it contained.

The hon. Member for Leeds, West (Mr. Battle) has just told us of his wish for enhanced capital allowances, which he believes would lead to increased investment. Although, in the late 1970s, such allowances may have led to an increase in the quantity of investment, they distorted economic decisions: investment decisions are made for tax reasons rather than on their merits, and the quality of investment was affected.

Even if such a policy proved successful, it would be counterbalanced by another policy—the policy of increasing tax on savings. How can a party that proposes policies to encourage investment also propose policies to increase savings taxes? How can that encourage people to save, and therefore to invest?

I have listened carefully to my hon. Friends—especially my hon. Friends the Members for Wolverhampton, South-West (Mr. Budgen), for Winchester (Mr. Browne) and for Bridlington (Mr. Townend). My hon. Friend the Member for Winchester, in particular, seemed very complacent about the prospects for inflation. The great advantage of our membership of the exchange rate mechanism is not that it will lead to a reduction in inflation —although that has already happened—but that it will ensure that inflation is kept down. On too many occasions in the past, we have succeeded in getting inflation down, only to let it rise again, thus throwing away the benefits of a successful policy.

It is only 15 months since we decided to join the ERM, and that policy is widely supported in the House. My hon. Friend the Member for Wolverhampton, South-West is one of the few Members who criticised the Government's monetary policy at the appropriate time, in 1987 and 1988. The right hon. and learned Member for Monklands, East called for further interest rate reductions when interest rates were running at 7.5 per cent.

Mr. Favell

Here speaks an hon. Member who was not at all happy about ERM entry. My hon. Friend says that he believes that the ERM will keep inflation down; but, when my right hon. Friend the Member for Blaby (Mr. Lawson) was Chancellor and our currency was shadowing the deutschmark, we had to reduce interest rates to such a level that inflation took off. How would my hon. Friend ensure that we do not have to reduce them to the same level while we are in the ERM straitjacket?

Mr. Smith

With economic policy, it is necessary to go either forward or back, and my hon. Friend wants to go back—he wants to withdraw from the exchange rate mechanism. I think that we must soon move on—that is, move into the narrow ERM bands and thence, soon, to a single currency. It is vital for us to "progress" the policy.

Mr. Budgen

Surely the problem is the fact that we are now in an unstable, intermediate period. There is a case for the policies that I suggested, and there may be a case for a single currency according to those who believe that there is such a thing as a European nation.

Mr. Smith

There is something in what my hon. Friend says, but I feel that he sometimes underestimates the value of exchange rate stability to those in business. That is why the CBI is so enthusiastic about Britain's ERM membership: a business man who is trying to plan ahead will need some indication of the future level of inflation, interest rates and exchange rates. It is very difficult to carry out either import or export business if exchange rates are fluctuating like a yo-yo. That is why I think that the policy will bring about long-term benefits—although I understand how frustrating it is for some people that we cannot lower interest rates in the way that they would like.

The United States, after all, has reduced interest rates substantially, but as yet it has experienced no economic recovery. I think that people's main concern is less about the level of interest rates than about the level of debt, which is unaffected by the level of interest rates. Like people in the United Kingdom, they are concerned about the debt that built up in the late 1980s, and they want to repay some of it.

In the long term, that is good news: the savings ratio is holding up well, which means more money for investment. It is good that people are repaying their debt, although in the short term an increase in consumer spending would be desirable. It is extraordinary that, in the present circumstances, Labour should propose an increase in taxes on savings. We want to encourage people to save, so that there is more money for investment.

I think that the autumn statement had it about right. A substantial increase in public spending—an increase of some £11 billion—is proposed for next year. Labour would like to increase spending further—much further, no doubt. My right hon. and learned Friend the Chief Secretary has costed all Labour's proposals, and they total £37 billion. [Interruption.] Very well. Let us look at the interesting table on page 27 of the autumn statement which shows the record of public spending from 1963–64 onwards. In the first and second years of the last Labour Government, public spending increased hugely. As a proportion of gross domestic product it rose from 41 to 49 per cent. in just two or three years. That is what would happen if another Labour Government were elected.

There is another side to this question. It illustrates why people do not believe what the Labour party says about taxation. On 26 March 1974, the right hon. Member for Leeds, East (Mr. Healey) introduced his first Budget as Chancellor of the Exchequer. He said: Finally, I turn to the rates of income tax…I require to raise from the taxpayer a substantial amount of additional revenue for the coming year…I propose to increase the basic rate of income tax by 3p in the pound."—[Official Report, 26 March 1974; Vol. 871, c. 325.] The rate was 30p; it was increased to 33p. There was no mention of that in the Labour manifesto of February 1974. There will be no mention in Labour's 1992 manifesto of an increase in income tax. However, the poll published in The Sunday Times shows that most Labour Members of Parliament want income tax rates to be increased.

It happened again. On 15 April 1975, the right hon. Member for Leeds, East introduced his third Budget and said: I therefore have no alternative but to raise the income tax…My proposal is to raise the basic and higher rates of income tax by 2 percentage points".—[Official Report, 15 April 1975; Vol. 890, c. 317.] On that occasion, the standard rate of income tax was raised to 35 per cent. Again, there was no mention of that proposal in the Labour manifesto of October 1974. Labour did it before. It will do it again.

7.51 pm
Mr. Thomas McAvoy (Glasgow, Rutherglen)

According to the Prime Minister, there are an awful lot of dismal Jimmies, as he called them, about. With the exception of just two Conservative Back Benchers, every Conservative Back Bencher agrees that there has been a recession, a depression or a slump. The last one to disagree with that proposition, the hon. Member for Beaconsfield (Mr. Smith), was, I think, given a job to do. That may have satisfied him, because he is patently trying to get a job in Government.

I take no pleasure in agreeing with most Conservative Back Benchers that the British economy is in a deep and damaging recession. Far from there being a recovery, which Ministers have told us over and over again is about to happen, the British economy is still in the middle of a severe recession. There is talk of a plunge down again— the so-called double-dip recession.

Unemployment increased by 31,000 in December, bringing total unemployment up to 2.54 million, a rise of over 800,000 in the last year alone. Output, if North sea oil is excluded, was clown again in the third quarter of 1991 —the fourth consecutive quarter that output was down. Repossessions are running at 300 each working day. Business failures were running at 200 each working day in the last quarter. Consumer confidence is down. Business confidence is also plunging. The latest Confederation of British Industry survey shows that there is no expectation of a pick-up in the distributive trades.

Faced with all those signs, what did the Chancellor of the Exchequer, the Prime Minister's right-hand man, do? He has done absolutely nothing to help the economy. Throughout the time that he has been Chancellor he has been complacent. His predecessor as Chancellor, the present Prime Minister, said: I do not myself believe that a recession is likely or necessary. When the present Chancellor realised that that statement was untenable, he switched to saying that the recession would be painless. On 5 December 1990, he told the Treasury and Civil Service Select Committee: I think there are reasons why one could believe that it will be relatively short-lived and relatively shallow. When that no longer held water, the rhetoric switched swiftly to talk of an imminent recovery. In his 1991 Budget speech he said that there were good reasons to expect that the recovery would begin in the second half of the year. In the following month he told everybody, amazingly, that economic recovery was around the corner.

The hon. Member for Beaconsfield had the cheek to tell us that no one believes us. The Prime Minister added to the nonsense by saying in April 1991 that Britain's position was strengthening month by month. I could refer to many other remarks which have been made which show the complacency of the Prime Minister or, if I were to be more frank, his incompetence and that of the Chancellor in failing to realise the serious state that this country is in and to do something about it.

We have referred frequently in this debate to the Prime Minister's heartless statement that, if it is not hurting, it is not working. [Interruption.] Conservative Members do not like the truth. The Prime Minister's statement showed that he personally was all right. Despite all his whining and moaning about the hardship of his early life, he cares nothing for the people who face the consequences of his economic policies.

The Prime Minister tries to blame Britain's economic woes on a massive worldwide recession. He would have us believe that the recession has nothing to do with him or the Chancellor. The Prime Minister was, however, Chancellor of the Exchequer. He has therefore tried to distance himself from the economic mess in which we find ourselves. The present Chancellor of the Exchequer has been a Treasury Minister since 1986 and a member of the Cabinet since 1989. Between 1987 and 1989 the Prime Minister was second in command to the right hon. Member for Blaby (Mr. Lawson) when he was Chancellor and he was also a member of the Cabinet. Then he became Chancellor of the Exchequer before he was appointed Prime Minister. Therefore, the present Chancellor and Prime Minister helped to plan the top rate tax cuts of 1988 that fuelled the credit boom.

The Chancellor and the Prime Minister told us of the economic miracle that meant that we would have boom times for ever and that people should not hesitate to take on more debt. All of us could give instances of credit being made readily available; people could take on any amount of debt. That was disgraceful, given the misery that it caused. No other country is in such dire straits. The current recession was brought about by the present incumbents of Nos. 10 and 11 Downing street.

Britain was the first major country to go into recession. It has had the deepest recession and, if one considers current form, it may be the last country to come out of the recession. The only other countries within the European Community or the Group of Seven that have experienced serious declines in output in recent times are the United States and Canada. In each case, the fall was smaller than in the United Kingdom.

It is totally misleading to suggest that all countries are facing surging unemployment. The damage done by the Government to my part of Scotland was illustrated again when British Steel decided to close Ravenscraig. My constituency borders on Ravenscraig. Many of my constituents work there. The closure of Ravenscraig will affect them but, to quote the Prime Minister again, if it is not hurting it is not working. Again, though, he is not the one who is getting hurt.

The hon. Member for Beaconsfield referred to Labour's programme and said that it would cost £35 billion. In The Daily Telegraph today—a newspaper that does not usually support the Labour party—its city editor says: Conservatives, you remember, are the people who are pledged to cut taxes; so they have, if the only tax that matters is income tax. But other tax rates, notably Value Added Tax, have doubled since and the proportion that a manual worker earning the average income pays in taxes, both direct and indirect, is higher now than it was then. There is another article in The Guardian today which also questions the Government's credibility. It talks about the Government's campaign about the Opposition's so-called £35 billion spending plans. It says: the campaign was slightly dented by remarks last night by Brendan Bruce, former Conservative communication director, who said: 'No-one sensible in the Tory Party actually believes the Labour Party will put up public spending by £037 billion. The Conservatives are criticised by their own. The Government know that what they are saying is false.

The Chancellor suggested that the Labour party would raise the basic rate of income tax to 35 per cent., but that was dismissed as absurd by Andrew Dilnot, the director of the Institute of Fiscal Studies. That suggestion shows, yet again, nothing but scaremongering by the Conservatives to undermine the Labour party.

Mr. Favell

Will the hon. Gentleman give way?

Mr. McAvoy

I have only 10 minutes, so I must press on.

We will support a manufacturing investment initiative and a package to help small businesses and we will provide a boost for housing. Getting house building going again would provide the kick-start which has been mentioned by Conservative Members. We would support a programme for skills, work for the unemployed and to get the railways moving.

The recession is continuing. It is making life miserable for millions of our people and is severely challenging the country's economic prospects. The recession shows few signs of lifting, but the Prime Minister and the Chancellor do nothing except make bogus attacks on Labour party policy. What are they doing about the country?

The forecasts in the autumn statement are another part of the charade. The gloss of extra spending presented in the autumn statement is simply money to make up for the costs of the recession. Labour's policies to revive the economy are clear and will work. It is time to sweep aside the Government who believe that economic policy consists of doing nothing but trying to talk up recovery.

8.1 pm

Mr. Tony Favell (Stockport)

My hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) made a wonderful contribution to the debate, as he always does. Like my hon. Friend, I listened to the right hon. and learned Member for Monklands, East (Mr. Smith) with some amusement as he threw punches at my right hon. Friend the Chancellor and called upon him to stimulate industrial activity, to deal with the problems of the housing market and to reduce insolvencies and bankruptcies. He knew all the time that he would be unable to take the action necessary to deal with all those problems—reduce interest rates. The right hon. and learned Gentleman could not reduce interest rates because, like his party, he worships at the feet of the European sacred cow—the exchange rate mechanism. He knows that if he were to take office as Chancellor, he would not abandon the exchange rate mechanism because it is the first stage in the three-stage plan to take us to a single currency. He is committed to it. Anybody who votes for the Labour party thinking that it will reduce interest rates and deal with all the problems will soon be disillusioned.

My right hon. Friend the Chancellor is, alas, within the straitjacket of the exchange rate mechanism. I think that he has done remarkably well since becoming Chancellor. Given the confines within which he has operated, he has behaved in a masterly fashion. He has reduced interest rates by 4.5 per cent.—although I believe that the first 1 per cent. reduction occurred when my right hon. Friend the Prime Minister was Chancellor. The way in which my right hon. Friend the Chancellor marshalled his troops, including my hon. Friend the Economic Secretary, when the Germans increased their interest rates so that we did not have to follow them was extraordinary. I agree with my hon. Friend the Member for Wolverhampton, South-West that there is no way in which the Labour party could have reduced interest rates by 4.5 per cent. within the exchange rate mechanism or have defended our interest rate when the Germans increased theirs.

Having said that, in the words of the song, the time has come to review the situation. We must look again at the exchange rate mechanism. It is only 14 months since we joined the ERM and it is no secret that I would not have joined because I see it as a political move to take us towards a single currency and because it is the first stage of the three-stage Delors plan to take us ultimately to a European state. Even from an economic point of view—

Mr. Salmond

To my recollection, this is the fourth or fifth speech against the ERM from Conservative Members. Can the hon. Gentleman estimate for the benefit of the House how many of his colleagues share his view that withdrawal from the ERM should be an immediate priority for the Government?

Mr. Favell

1 cannot possibly estimate how many there are, but there are probably almost as many on the Conservative Benches as on the Opposition Benches. Alas, the Opposition are so thirsty for office that no speaker dares mention the subject.

Like my hon. Friends the Members for Wolverhampton, South-West and for Stafford (Mr. Cash), I think that the time has come to review the situation because of the water that has passed under the bridge since we joined the ERM. We joined the exchange rate mechanism before German reunification took place. The Germans have taken on 16 million people who were formerly in East Germany. That state was bankrupt, out-of-date and thoroughly socialist. They have exchanged one eastern mark for one deutschmark and they now have a monumental public sector deficit. As a result, unexpectedly, they had to put up their interest rates. We have been unable to reduce our interest rates because we are locked in to them.

We read in the newspapers today that the German state is threatened with inflation and with strikes from the steel workers, bank clerks and car workers. Our economy depends on the way the German economy performs. It is far better to put our trust in my right hon. Friends the Prime Minister and the Chancellor and my hon. Friend the Economic Secretary than leaving it to the German Bundesbank in which even the chairman, Karl Otto P¨hl, has lost confidence.

Since joining the ERM we have entered the most serious recession since the war. We have had growing unemployment, bankruptcies and mortgage repossessions. Those problems may not have been caused directly by joining the ERM, but it means that we are unable to deal with them. It is a total and unnecessary abdication of power and the decision to join was taken without the consent of the voters. I doubt whether it will even be an issue at the next general election—I am glad to see that the right hon. Member for Chesterfield (Mr. Benn) is nodding. If the Opposition take office, they will have done so without telling the people that they, too, will be unable to deal with the recession or with the things about which the right hon. and learned Member for Monklands, East was complaining.

Some say that the ERM has been essential in the battle against inflation. Was it? In the early 1980s we inherited an inflation rate which reached 27 per cent. at its height in May 1980. In three years it came down to 3.7 per cent. and that was without the benefit of the exchange rate mechanism. Oddly enough, during the same period, the rate against the deutschmark varied by less than 5 per cent. and between October 1979 and October 1983 our rate against the deutschmark went up. Yet we were not in the exchange rate mechanism.

I firmly believe that the time has come to reconsider our decision. As many of us thought when we joined, the ERM has not proved to be in the interests of the British people. By remaining in the mechanism, we shall take a gigantic gamble with British industry, the property market and jobs. Recently, the Bundesbank said that it will act in the interests of the German domestic economy, and it has done so. It believed that it was in the interests of the German domestic economy to increase interest rates shortly before Christmas. That is exactly what we should be doing. Hon. Members should be controlling the British economy in the interests of the British people, and we should take ourselves out of the ERM.

8.10 pm
Mr. Alex Salmond (Banff and Buchan)

Like the hon. Member for Stockport (Mr. Favell), I enjoyed the speech of the hon. Member for Wolverhampton, South-West (Mr. Budgen), not so much because I agreed with it but because it provided an antidote to the sterility of the economic exchanges of the past two weeks, which continued earlier this afternoon.

In some ways, it can reasonably be said that the hon. Member for Wolverhampton, South-West has dominated this economic debate. He asked the shadow Chancellor the question that has no answer: if the shadow Chancellor and the Labour party are committed to the same monetary policy as the Government—defending the position of sterling within the exchange rate mechanism—it can hardly be argued that interest rates would be different under Labour.

Interestingly, the Chancellor did not pursue the shadow Chancellor on that policy, no more than the shadow Chancellor seemed to want to pursue the Chancellor on the story in The Guardian today suggesting that the Government's aspirations and programme would cost about the same as the Labour party's— £35 billion. The reason why the shadow Chancellor and the Chancellor do not pursue each other on such points is clear: it is not in their interests to stress the similarity of the economic policies of Ministers and Labour Front-Bench spokesmen. It is far better to continue with the phoney war of exchanges that we have seen in the past two weeks. As the policy similarities increase, so the acrimony of the exchanges grows to attempt to find some semblance of a difference between two economic policies that are basically the same.

It is remarkable that the Government are attacking the Labour party for the over-ambition of its policy programme. To be committed to increasing pensions and child benefit and no other spending initiative can hardly be termed an over-extended programme. The weakness of Labour's policy programme is its lack of ambition. Its Achilles heel is its lack of firm commitments.

The Government should have a care about ascribing figures of £35 billion or £37 billion to any aspiration or policy objective of a party, because as in The Guardian story, exactly the same can be done to the Government. In addition, if one considers the detail of the Government's programme and assumes, as one reasonably can from statements that have been made, that a balanced budget is an objective of the policy, with the public sector borrowing requirement heading towards a £20 billion deficit next year, the same type of argument would have it that the Chancellor must be plotting to increase income tax by 10p in the pound in the Budget to square that circle and eliminate the PSBR deficit or perhaps even a larger increase in the percentage of VAT.

Similarly, as the right hon. and learned Member for Monklands, East (Mr. Smith) said, if it is an objective—albeit a long-term one when circumstances allow—to reduce the direct rate of tax to 20p in the pound, it is reasonable for people to ask how it will be paid for within a Parliament. The Government and the Opposition should address the low standard of debate that, sadly, we have witnessed in the past fortnight.

I was disappointed that the chairman of the Treasury and Civil Service Select Committee chose to attack the proposal to lift the ceiling on the national insurance contributions. As far as I know, that is the only tax proposal that the three Opposition parties in Scotland have in common. If one narrowly defines national insurance as an insurance scheme in itself, one can make an argument against it, but if one accepts, as most people surely do, that national insurance has become part of the income tax system, it is impossible to defend a position whereby people who earn more than £21,060 a year pay lower rates of marginal taxation than those who earn less. That is what would happen next year if nothing is done to correct that anomaly.

If Conservative Members are truly concerned about high marginal rates of taxation, they should consider not people earning more than £21,000 but those at the bottom of the earnings scale, who face by far the highest marginal rates of taxation. The Library made a quick calculation for me. I accept that it is a theoretical example, but none the less it shows that it is possible for someone who is on very modest earnings—through a combination of income tax, national insurance, family credit, rent rebates and poll tax rebate—to pay a marginal rate of tax on earnings of 96.04 per cent. Unless the proposal to lift the national insurance upper limit is carried, a family man on perhaps £7,000 a year will pay double the marginal rate of taxation of somebody earning more than £21,000 a year.

Half a dozen Conservative Members are present. I shall gladly give way if one of them can explain why a marginal rate of taxation of 49 per cent. for people earning more than £21,000 a year will have a disincentive effect, but apparently nothing is to be done about the marginal rate of taxation of 96 per cent. for those who earn about £7,000 a year. Is there any semblance of logic in that? Should it not be a priority to shift the burden of taxation from the lower paid to those on higher incomes?

I propose that the upper limit for national insurance be lifted and that the money be used to introduce perhaps a lower first rate of taxation, perhaps to raise tax allowances by 15 per cent., or to incorporate an allowance system into the national insurance system to try to attack the exceptionally high marginal rates of taxation for those on lower earnings. An Administration that had an ounce of compassion and economic rationale would be arguing for that policy.

The debate has done little to focus attention on the real constraints on the United Kingdom economy. I was a relatively young economist before I became an hon. Member, but even I remember the nostrum that the underlying weakness of the United Kingdom economy was that a balance of payments constraint emerged as soon as the economy moved towards recovery, and that recoveries would always be aborted by the balance of payments coming into play and acting as a constraint. According to the independent forecasts that are released by the Treasury, the balance of payments constraint on the current account is emerging before the economy has moved into recovery. The consensus of the forecasts of the organisations is that the current account deficit will increase from £6.6 billion this year to £8.6 billion next year. That is before any firm recovery in the United Kingdom economy.

The underlying weakness of the United Kingdom economy is becoming ever more evident. I think that the hon. Member for Stockport referred to the fact that no one had argued about some of the dangers of the ERM when we joined. I made a speech on 22 October 1990 in which I made some of the points that I am about to repeat. The rate at which we joined the ERM underscored some of the constraints on the United Kingdom economy and put it back into the fairly familiar position of trying to defend an exchange rate that is unsustainable.

In line with the United Kingdom's economic history, it is only a matter of time before someone writes a tract called "The Economic Consequences of Mr. Major". In The Times just before Christmas Anatole Kaletsky had a stab at what might be a precis for such a tract. He wrote that all players in the game of trying to find someone to blame for the problems in the United Kingdom's economy are supposed to forget that John Major had anything to do with economic management in the past five years. They are not allowed to recall that Mr. Major was the Chancellor who panicked into raising interest rates to 15 per cent. in October 1989; or that it was Mr. Major who blundered into the ERM at the worst possible time with the wrong exchange rate. Above all, players must forget that Mr. Major was the man who, during his brief tenure as an ERM Chancellor, elevated the ERM into a sacrificial totem of a kind unknown in this country since the days of Stonehenge and John Barleycorn. That is an apt summary of the case that could be made against the present Prime Minister.

Mr. Favell

Is the hon. Gentleman in favour of our remaining in the exchange rate mechanism?

Mr. Salmond

I am coming to that. I was going to refer to the speech I made on 22 October 1990 which I am sure the hon. Gentleman remembers. I said that, although I was in favour of the ERM, there was a key difficulty for sterling's position in it. That difficulty can be described simply. The ERM has worked because it had a single dominant currency within its structure and the other currencies—they could be called subsidiary currencies—revolved around it as planets revolve around a star. The difficulty with sterling introduced into the exchange rate mechanism is a second centre of polarity because it is a major international tradeable currency. It is an investment currency with 90 per cent. of its value determined by capital flows as opposed to trade flows. Therefore, there are particular difficulties in trying to hold it within what was, in effect, a deutschmark block. In summary, I am in favour of the ERM but I have grave doubts about whether sterling is in the appropriate position, and I certainly have doubts about it being in at the level which there is now an attempt to defend.

The hon. Member for Wolverhampton, South-West asked about the economic impact of the parties' various policies. He rightly argued that if the Labour party was suggesting exactly the same policies as the Conservative party on the question of the ERM, the effect of the monetary policies of the two parties would be neutral. If we take the Labour party at its word and accept that its only definite spending commitments are to pensions and child benefit which will be financed within the tax system from the various tax increases outlined, Labour's fiscal position is also neutral. The tax increases will exactly match the planned expenditure increases. Therefore, the Labour party's fiscal and monetary position—

Mr. George Robertson (Hamilton)


Mr. Salmond

I shall give way to the hon. Member for Hamilton (Mr. Robertson) in a second. The Labour party's fiscal and monetary positions are neutral, so the economic effect of its fiscal and monetary policies will make little or no difference to the current recession. I am sorry that the hon. Gentleman is about to leave because I am coming to an interesting point.

The Labour amendment refers to measures which might help to stimulate the recovery but, as I understand it, none of them are spending commitments. The only spending commitments are to child benefit and to pensions. None of the measures for recovery are definite spending commitments.

Mrs. Beckett


Mr. Salmond

I remember an interview that the hon. Lady gave on, I think, "On the Record" in which she made it absolutely clear that health spending was to be judged only as growth allowed in the economy and that there was no distinct spending commitment. If that is the case for health spending which is currently of such supreme importance, surely it must also be the case for investment grants which are set out in the Labour party's amendment. The Labour party cannot have it both ways. If there are distinct spending commitments matched by taxation, there cannot be other spending commitments as detailed in the amendment.

Mrs. Beckett

The hon. Gentleman is making an interesting but entirely incorrect point. There are definite commitments in the anti-recessionary programme and they are covered by the taxation changes that we have announced. We have always made that clear. I am sorry if it is not clear to the hon. Gentleman—no doubt it is our fault or perhaps the facts were drowned in the barrage of noise from Conservative Members.

Mr. Salmond

I am glad to hear that, but perhaps we could have some quantification of the policies. Let us be clear that they are in addition to the spending commitments on pensions and child benefit which have been widely announced in the past few weeks as being the only key priorities of the Labour party.

Mrs. Beckett

indicated dissent.

Mr. Salmond

I must tell the hon. Lady that the shadow Chancellor has tended to stress fiscal rectitude in the past few weeks and months. Indeed, it seems that he is attempting to outflank the present Chancellor on the right of the political spectrum.

Mrs. Beckett

I must once again correct the hon. Gentleman. He should pay more attention to the debate if he wants to use quotations. It is the Conservative party that pretends that we have referred only to pensions and child benefit. We have always made it clear that they were our initial, specific and costed commitments but for a considerable time—I think probably most of last year since the recession became evident—we have also advocated early moves on such issues as investment allowances and training. They were contained in our shadow Budget almost a year ago—they were identified and costed. I am sorry if the hon. Gentleman did not know that, but it is not our fault.

Dame Elaine Kellett-Bowman (Lancaster)

Where is the cash coming from?

Mr. Salmond

That is exactly the point. It is sensible for the Labour party under current conditions to argue for an increase in the public sector borrowing requirement to pay for the additional fiscal measures.

I noticed that when the right hon. Member for Chesterfield (Mr. Benn) argued that expenditure during a recession could well be self-financing because of the stimulus that it gives the economy, he did not receive much support from Labour's Front Bench. The Labour Front Bench—albeit on a more modest scale— now seems to be arguing that its investment to take the country out of recession will be self-financing.

Mr. Mellor

I am sorry that I missed the beginning of the hon. Gentleman's speech and I shall not speak for long.

It is a funny old world. I have spent much of the past week— indeed, much of the past year—closeted in radio and television studios with the hon. Member for Derby, South (Mrs. Beckett). During that time she has said that it was a dreadful slur to suggest that the Labour party has anything other than the two commitments. Now, she is attacking the hon. Gentleman who dares to say that that is the case.

Mr. Salmond

I am coming to the point

Mrs. Beckett


Mr. Salmond

No, I shall not give way. I have been exceptionally generous to the hon. Lady, far more generous than the Labour Front Bench is to me when I try to intervene.

I have come to a conclusion about the two warring parties. It is excellent news if as a by-product of my speech the Labour party's fiscal policy has shifted to a more ambitious level. I think that the key weakness of its policy is that, without a substantial difference in either monetary or fiscal policies from those of the Government, nothing can be offered to shift the economy out of recession. I believe that such a substantial difference would be justified by the depth and level of the recessionary experience.

I wish to comment on Scotland's experience as it has undergone the recession in the past few years. It is generally agreed—especially by Conservative hon. Members who are anxious to blame the right hon. Member for Blaby (Mr. Lawson) for all that has gone wrong—that the initial rationale behind a high interest rate policy was to cool down the overheated economy of the south-east of England which the right hon. Gentleman did so much to reinforce in the 1988 Budget. I have not heard anyone seriously argue that the Scottish economy was ever overheated.

In the early years of the penal interest rate policies, the wrong economic medicine was applied to Scotland. It is bad enough to suffer high interest rates if one suffers from the economic disease, but it adds insult to injury if one has to take the medicine without having had the disease in the first place. As I have gone on to argue, the high interest rate policy is now sustained by the requirement to defend the weak investment currency of sterling within the ERM.

We have substantial evidence that Scotland is not suffering from a balance of payments problem. There is no indication that a Scottish currency within the ERM would suffer from the same problems as sterling. On the contrary, a country such as Scotland, which exports more manufactured products per head than does Japan, would almost certainly have a comfortable balance of payments position.

From a Scottish perspective, this has been an unnecessary recession, provoked and sustained by policies totally inappropriate to Scottish economic conditions. Only when the constitutional framework has been fundamentally transformed can the Scottish economy be put back on the road to recovery and full employment.

8.30 pm
Mr. Quentin Davies (Stamford and Spalding)

The hon. Member for Banff and Buchan (Mr. Salmond) has done the House a great service with his speech, because he has thrown even more light than has already been thrown during the debate on the extraordinary confusion evident in the Labour party's spending and taxation plans.

Mrs. Beckett

This is becoming extremely boring. I do not know whether the hon. Gentleman was not here for the Budget debate last year, whether he does not listen or whether he is simply incompetent, but I have said over and over in the House what I have just said to the hon. Member for Banff and Buchan (Mr. Salmond). I have said it to the Chief Secretary to the Treasury in the debates and exchanges to which the right hon. and learned Gentleman just referred. If his case is so strong, why does he need to misrepresent what others say?

Mr. Davies

I hear the hon. Lady's intervention with interest, and make a practical suggestion to her, which she may consider helpful. If she accepts my suggestion, it will greatly contribute to the clarity and integrity of political debate during the coming general election campaign. I have here a document that the hon. Lady knows very well—a document on Labour's public expenditure plans. She knows that those plans all add up to the famous figure of £37 billion. She should go through each individual item in the document, and say, "This is a genuine pledge, but that pledge is not genuine." If she does not like the figure of £37 billion, she should boil it down to the hard core of Labour's real spending plans—those that the party really intends to propose to the electorate. If the hon. Lady is willing even to make a start on that now, I shall, of course, give way to her again.

Mrs. Beckett

I shall make my speech later.

Mr. Davies

I look forward to the hon. Lady's speech, and I hope that she does as I suggested. My right hon. Friend the Chancellor of the Exchequer, in an extremely good speech, repeatedly invited her and all her Front-Bench colleagues to do just that.

My right hon. Friend the Chancellor described a number of the Labour party's spending proposals.

Mr. Deputy Speaker (Mr. Harold Walker)

Order. I did not have the opportunity to listen to the earlier part of the debate, but as I understand it the debate is about the Chancellor's autumn statement.

Mr. Davies

As I have understood the debate so far, Mr. Deputy Speaker, it has been about public expenditure, including prospective public expenditure. Logically—I hope that you, Mr. Deputy Speaker, will agree with me about this—the public expenditure that we shall face, if the terrible mishap of the Labour party's winning the election should arise, is very much a part of that subject. In that case, of course, for a large part—perhaps the greater part—of the coming financial year, the Chancellor's autumn statement will not govern the level of public expenditure; some other programme will govern it. We are attempting to find out what that other programme is. This is a matter of the keenest importance to every man and woman in the land.

Are the public expenditure plans in the Labour party's document to be believed? If not, what public expenditure plans is the Labour party offering the country? I warn the hon. Member for Derby, South (Mrs, Beckett) that a second question naturally and logically follows. When she has told us what her genuine public expenditure plans and pledges are—as opposed to the bogus ones that her colleagues have been putting about over the past months and years—a second question will arise, to which, equally, the electorate has a right to an answer. That question is: what proportion of those real additional incremental spending plans will be financed from taxation, and what proportion will represent incremental public borrowing? That is also a vital question, to which I shall look forward to receiving a concrete, specific, unambiguous answer in the hon. Lady's speech.

It is clear that the great result of the debate has been to put the focus clearly, effectively, and so far devastatingly, on the Labour party's expenditure plans. But I am sorry to say that not everything that might be said, and ought to be said, has been said on that subject, by any means. I shall touch on three other aspects of those plans, which are crucial to the future of public spending in this country.

Mr. Deputy Speaker

Order. I hope that the hon. Gentleman will speak to the amendment to the motion. He has not done so so far.

Mr. Davies

The amendment on the Order Paper, Mr. Deputy Speaker, effectively offers the House, and therefore the country, a range of options for public expenditure policy over the coming year. If this is not an opportunity to debate the various possible scenarios for public spending over the next 12 months, I hope that you, Mr. Deputy Speaker, will help me by giving me some advice about when the opportunity will arise for the House to discuss such a vital matter for everybody.

My hon. Friend the Member for Canterbury (Mr. Brazier) has handed me a copy of the Opposition amendment, so I shall read part of it. The amendment condemns the failure of the Government to invest in the economic infrastructure and vital public services; and calls upon the Government to promote an investment-led recovery including financial incentives for investment in manufacturing, tax credits for the enhancement of technology, assistance for regional economic development and a major programme of education and training to tackle Britain's continuing skills crisis. If that is not a range of public expenditure commitments, I do not know what it is. I hope that when I deal with those commitments you, Mr. Deputy Speaker, will feel that I am acting within the rules of order.

So far, the Labour party's response to the autumn statement has been essentially a prospectus without a price—that is, a spivvy and rather worthless response.

As I said, I shall raise a number of pertinent questions that not only might be asked but need to be asked about that response.

Mr. Derek Enright (Hemsworth)

I wonder whether for one moment the hon. Gentleman will deal with the words in the motion which have led to a substantial reduction in inflation and have laid the foundations for sustainable recovery". Will he describe where those foundations are, and where are the signs of a recovery? I am a newcomer here, and I do not understand the rules of the House, but I thought that one of the elementary rules of debate was that one spoke to the motion tabled by one's right hon. Friends.

Mr. Davies

I am indeed speaking to the motion, but I shall now answer the hon. Gentleman's question about the foundations for recovery. The key foundation is the reduction of inflation. The hon. Gentleman will recall, as we all do, with no satisfaction, that this time last year inflation was about 10 per cent. The producer price index is now below 4 per cent. That is a remarkable turnround by any historic standards in any country in the course of 12 months. If that is not the basis for renewed growth in the economy, I do not know what is.

Clarity would be added to our economic debates if Opposition Members made it clear that they do not suggest to the British public that if people were misguided enough to vote in a Labour Government there would never be a recession again—that the Labour party has it in its power to abolish the trade cycle and enter a qualitatively new phase of human economic history, in which there will no longer be a business cycle to contend with, and recessions will all be in the past. I am afraid that we shall always have the trade cycle and that there will always be recessions, whoever is in power. That is as certain as the weather. However, what matters is the response that one decides to make to such recessions.

It will not have escaped any hon. Member's attention that a number of Labour Members were rather concerned that I should not continue to add to their embarrassment and, no doubt, gloom by living up to my promise of making other pertinent points about Labour's economic policies which have been described this afternoon.

The first point has not been raised before, but it is extremely relevant. If Labour comes to power, it is committed to abolishing the capping of local authority expenditure. Unless that means that if local authorities spend more, a Labour Government would reduce central Government expenditure pound for pound to compensate, that one pledge effectively means that a future Labour Government would abdicate all control of local government expenditure. The whole country needs to take that on board. The hon. Member for Derby, South may give us tonight the only alternative to that prospect, which is that she commits a Labour Government, when they abolish the capping and control of local government expenditure, to reducing central Government expenditure pound for pound as local authorities increase their expenditure. Unless we have that pledge, the consequences and conclusions are unassailably and unambiguously clear.

My second point on Labour's attitude to increased spending is that Labour has failed to make clear, because Labour Members themselves are unclear about it, the extent to which when they increase public expenditure—whether it goes up to £37 billion or goes to a lower figure about which the hon. Member for Derby, South will tell us —that spending will buy increased value and services for the British public or for the sections of the British public who are intended to benefit. Or will that expenditure in fact be used simply to defray increased costs? If so, we shall simply end up spending more for the same. In that case, the public will be doubly defrauded because they will have paid the tax burden, the inflation burden or the burden on interest rates caused by higher public sector borrowing to pay for that increased expenditure, and the public will not get value as a result.

I give two concrete examples to the House. I heard only this morning from the most authoritative source possible in British Rail—I shall be no more specific than that—that the cost to British Rail alone of implementing the social chapter, which we know that Labour intends to implement, would be £500 million a year. The cost would be especially great for British Rail because railways have to operate at night and at weekends, so there is a lot of overtime. That is just one enterprise— in this case a nationalised enterprise—which would incur such costs.

We are told—I do not believe that the Labour party will be able to dispute this figure either—that the cost to the national health service of the minimum wage proposals, which Labour intends to introduce, would be about £500 million—

Mr. Deputy Speaker

Order. All this is part of a far wider debate than a debate on the motion or on the amendments. I very much hope that the hon. Gentleman will bring his remarks much closer to the subject of the debate.

Mr. Davies

I shall follow your advice, Mr. Deputy Speaker. May I just point out that the figures in the autumn statement will need to be revised to take account of the factors which I have mentioned if a Labour Government come to power, especially if they are in power for a significant part of the coming financial year? It is, therefore, necessary for the House and for the general public to be able to understand the full purport of the autumn statement so that they can take account of the amendments which would be required if the general election went the wrong way.

Dame Elaine Kellett-Bowman

Does my hon. Friend agree that everyone's private budget would have to be amended? Anyone who works over eight hours would have to start to pay national insurance contributions. At present, those earning under £52 a week do not have to pay. There will be enormous hardship for many part-time workers in the health service, for cleaners and for part-time postmen who will pay national insurance contributions which they have never had to pay before. Their employers will have to pay as well.

Mr. Davies

I absolutely agree with my hon. Friend and I most grateful for her intervention. I did not make those points myself because I am trying to focus on another aspect of the debate. My hon. Friend's point may be even more important and was extremely well made.

It is an illusion to suppose that the extra £35 billion or whatever would purchase additional services—

Mr. Ronnie Campbell

On a point of order, Mr. Deputy Speaker. Is it right that the hon. Gentleman should refer to Labour party policy when the subject of debate is the autumn statement, which is the direct responsibility of the Government?

Mr. Deputy Speaker

I well understand the hon. Gentleman's point of view. I very much hope that the hon. Member for Stamford and Spalding (Mr. Davies) will now direct his remarks more closely to the matter before the House, as I have asked him to do on at least two occasions. Will he please do so or resume his seat?

Mr. Davies

I shall move on from the two earlier points to my third point. I think that you will agree, Mr. Deputy Speaker, that it goes to the heart of our public expenditure debate this afternoon. My third point is reflected in the words that I read earlier from the Labour amendment which we are discussing.

The Labour party has a remarkable tendency, which is frightening, to put objectives and targets in terms of inputs rather than of outputs. It focuses, bizarrely, on a certain sum which is often expressed as a certain proportion of gross national product or of gross domestic product which should be spent on something. Labour talks of spending 5.5 per cent. of GDP on education—a magic figure. It talks of spending 0.7 per cent. of GDP on overseas aid. It seems that one starts from a figure, which is taken out of the blue and which is always a nice round figure and presented as a proportion of GDP, which is a moving target, and then as a secondary and retrospective matter—if at all—one begins to explain why it is necessary to spend money in particular areas and in what specific areas the money will be spent.

I could understand an approach to the autumn statement which began by saying, "The following are our objectives in overseas aid. We need to provide for this in disaster relief. We need to get ourselves involved in these projects or to give this money to these agencies for this precise purpose. We are looking at the most efficient way in which to deliver these programmes and we have come down to the fact that the budget we shall need is x, y and z which add up to n." That would be the sensible and responsible way to conduct affairs and is the way that any institution in the hands of responsible and competent men and women would adopt. That description and those epithets clearly do not apply to Labour Front-Bench Members because they are presenting the very reverse of that approach as a substitute for financial management.

What is the policy? It is basically a policy of spend first and think later. One point about which I am confident is that one may occasionally be able to deceive portions of the British public on certain issues, but that one cannot sell the British public a policy based on that principle.

8.49 pm
Mr. Tony Benn (Chesterfield)

In a few weeks' time we shall be addressing the electorate. Therefore, I should like to say to the House what I propose to tell the electorate about the economic position and the relevance of the autumn statement. The truth, which no one has mentioned in the debate so far, is that there are grounds for believing that, far from our pulling out of the recession, Britain and the western world may be falling into a major slump comparable to that which occurred in the 1930s. That is a possibility which has not been touched on.

Of course, that itself could deepen the misery which is now occurring in the old Soviet Union, as, in panic, they try to copy the failed policies of the west. When I heard that the British Government were sending emergency aid to be auctioned in the Soviet Union, I thought that that must be the first time that an aid programme had been so arranged that only the rich could get hold of the aid, although it was said that the money raised would be spent on relief.

The crisis has caused enormous hardship to very large numbers of people. It is as much political as economic in its origins, and it requires a political response. I do not know how many homeless people, how many unemployed or how many people denied the services they need will have been much impressed by the statistics about what M0 had done in the third quarter compared to the first quarter of the last Labour Government. What impression will that have on the people that we, as Members of Parliament, know are suffering seriously?

What nobody ever says about interest rates is that, if a person is rich and lends money, high interest rates enrich him, but if he is poor and borrows money, high interest rates impoverish him. That aspect of interest rates has never been touched on.

Dame Elaine Kellett-Bowman


Mr. Benn

I am not giving way, because I have only a few minutes, owing to a long speech having been made before mine.

Dame Elaine Kellett-Bowman


Mr. Benn

I am not giving way to the hon. Lady in any circumstances.

There is no one left in the House who served here in the 1930s, yet we have to look back on that period in order to avoid the mistakes and learn the lessons. Not only was the suffering in Europe caused by the depression very serious, but it had serious political consequences as well. In Germany, unemployment rose from over 1 million in 1929 to 6 million in the two and a half years that followed. That brought Hitler to power.

In Britain, Oswald Mosley was quick to point out in the Fascist Quarterly: It is particularly interesting to note that that Fascist success in Italy and Germany followed upon capitalist trade depression. If we are considering the possibility—we cannot put it —higher than that—that the recession may be on its way down, and not on its way up, different policies will be necessary.

In America, Roosevelt, a progressive President, introduced the new deal. In Britain, we had some leaders who advocated different policies. I cite one because he came from the Conservative party—Harold Macmillan, then the Member of Parliament for Stockton on Tees. In his book "The Middle Way" in 1938, he said: We have lived so long at the mercy of uncontrolled economic forces that we have become sceptical regarding any plan for human emancipation. Such a rational and deliberate re-organization of our economic life would enable us, out of the increased wealth production, to establish an irreducible minimum standard which might progressively be raised to one of comfort and security. In 1945, when we won the election—I participated in it as a young RAF pilot on leave—we published a manifesto commenting upon the hard-faced men who had controlled the economy between the wars. Mr. Attlee's manifesto said: They controlled the banks, the mines, the big industries, largely the press, and the cinema. They controlled the means by which the people got their living. They controlled the ways by which most people learned about the world outside. This happened in all the big industrialized countries. Great economic blizzards swept the world in those years. The great inter-war slumps were not acts of God or of blind forces. They were the sure and certain results of the concentration of too much power in the hands of too few men." That was the policy which carried us to power. Indeed, I was elected to the Parliament over which Mr. Attlee still presided as Prime Minister.

It was not just the left of the Labour party which took that view. In the debate on the first motion of censure which Winston Churchill moved against the Government on 5 December 1945, a young Member, Hugh Gaitskell, referring to his colleagues on the Labour Benches, said: We have a philosophy of our own which binds us together…We believe, for example, that the present capitalist system is inefficient, that it produces insecurity and that it is unjust. Can anyone deny those things?"—[Official Report, 5 December 1945; Vol. 416, c. 2364.] It is worth looking back at that ideological conglomeration of opinions of Macmillan, Mosley, Roosevelt, Attlee and Gaitskell if we are to avoid what is already happening in France—a major growth of the National Front under Le Pen. That is a product of unemployment. In Germany, fascism is growing again. In Britain, the British National party is growing again. Perhaps in Britain the fascists were held back because they had for a period a Prime Minister who was doing their work for them; but they are reappearing.

I say to the House, as I shall say to my constituents when the election comes, that the problems we face have been caused largely by the uncontrolled international operation of market forces which place profit before people and widen the gap between the rich and the poor, here and worldwide. Every time a factory lays off people, they cannot buy the products of another factory, so another group of workers is laid off. That is the consequence of the system. Meanwhile, people who need homes and services cannot afford to purchase them, and they cannot get them provided through public expenditure.

What I put in the amendment which I tabled with 25 of my colleagues—quite a substantial body of opinion in the party—is that we need a national recovery plan which will restore full employment by stimulating industry, renewing the infrastructure, improving the environment, and expanding all essential services through a planned increase in public expenditure which alone can act as the engine of economic development here and worldwide.

Before the war, it was rearmament which brought us back to full employment. Everyone knows that. There were 3 million unemployed. They were hired and put into factories. Instead of being on the dole, they got a wage and paid their taxes, and the war was financed. All rearmament was public expenditure. My granny never bought a sten gun; my dad never had a Spitfire in the garage. Those were paid for by public expenditure. Now there must be public expenditure to reconstruct our industry. Of course it would have to be financed by cuts in the arms budget, by harnessing the nation's savings, by fair and progressive taxation, and by borrowing.

If that is to work, it must involve the nation as a whole. We cannot plan it just at the top. Neither the Bank of England nor the Bundesbank nor the Cabinet can do it. That must mean a restoration of democracy in local government. When a local authority is elected, if it says that it will do something, it must be free to do it. Why was the GLC abolished? It was because the Government were not prepared to accept decentralised power, full trade union rights and other civil liberties.

It amuses me to see Tory party statements and horror stories about Labour and the trade unions. Conservative Members always boast about fewer days being lost and about there being fewer industrial disputes under this Government. Let us consider days off—we must not just consider industrial disputes—and unemployment. As I put to the Chancellor in an intervention, 3 million working days are lost every day because of unemployment, which is the direct product of the Government's policy. Conservative Members never mention that. The cost of that is £50 billion a year, bearing in mind the dole, benefits such as housing benefit and the loss of production. When they frighten us with the £37 billion, or whatever they cook up at Tory central office, they omit to mention the £50 billion that they themselves consciously waste.

What is the point of attacking those who think that we do not need Trident when Cabinet has agreed to unilateral economic disarmament by handing over the key powers over our own economy to those who are responsible for the ERM and EMU and, ultimately, the single currency and the Bundesbank? People are slowly coming to realise that that is the way ahead.

When the whistle blows and Parliament is dissolved, I shall fight my 16th election as a candidate. I detect already a substantial body of opinion that shares the views that I have tried briefly to summarise. These views may threaten the power and the privileges of the bankers and the multinationals. They may offend the sensibilities of the clever economists and smug media commentators who presume to tell us what we can and cannot do. However, unless we take action, we could slip into a slump, the political and economic consequences of which could cost this country very dear indeed, as happened from 1939 to 1945.

I shall say all that in Chesterfield when the election comes. If the policies that I have mentioned, which are socialist policies, were to be carefully prepared and advocated with conviction and introduced by consent through the democratic process, they would win the active support of the majority of people in Britain. That is plain common sense, but, more than that, it offers hope to people who are now in despair. No country can solve its economic problems if the people can see no light at the end of the tunnel. After 13 years of this Government, that is the reality for many who thought that it would be good but who now find that they are scraping along at the bottom.

9 pm

Mrs. Margaret Beckett (Derby, South)

All over this country, people look around them at the schools, the hospitals, the roads and the railways. They worry about their jobs, their mortgages and their poll tax, and they say to themselves, "Surely there must be a better way. Isn't there a better way than this?"

The answer is a resounding yes. There are alternative policies and different choices, and it is not only the Labour party who says so. There are better ways of identifying those choices, and it is not only the Labour party who says so. The fact that there are alternatives is the fact that the Government are most desperate to conceal—so desperate that they do not seem to care what they say. No one is saying that our problems can easily or speedily be resolved; they are too deep for that. However, the fact that we cannot do everything at once does not mean that there is nothing at all that we can do.

We are debating—or some of us are—the Government's autumn statement. Its weaknesses have already been identified. Those weaknesses are most obvious where the statement talks of the condition of the economy. But when the assessment of the condition of the economy is deeply flawed, so too must be the assessment, the shape and the scale of the public spending programme. Even before the recent Government admissions of continuing economic weakness—admissions which undermined the whole picture in the autumn statement—its flaws were evident. The unemployment assumption, which is used as the basis for the autumn statement figures on forecast spending, was already out of date when the forecast was published. It does not say so in the published document; the admission was dragged out of the Chancellor on the Floor of the House by my hon. Friend the Member for Durham, North (Mr. Radice).

There were early questions about the scale of privatisation receipts and the anxieties raised—first, about how sound the figures are, and, secondly and much more seriously, about how sound is the public expenditure planning process which depends so heavily upon such rather dubious assumptions—questions again raised by the Select Committee and, I suspect, not answered altogether to its satisfaction. Always, because of what the Prime Minister calls the primary objective of the Government, there is the underlying query about whether, hidden in the opacity of the autumn statement, there is enough room for manoeuvre to allow for further cuts in income tax instead of further public investment.

This year, it appeared that the answer was no; then, lo and behold, just before Christmas, desperate to say something about the problems of house repossessions—problems that they dismissed as insignificant throughout 1989, 1990 and 1991, while thousands of families lost their homes— the Government found £1 billion that they did not yet need to spend on stamp duty relief.

It suggests an interestingly cavalier attitude to the public purse— £1 billion overlooked, judging from the Chancellor's tone when he announced it. But then, perhaps more worryingly, the Chief Secretary also thinks that £1 billion or £2 billion is neither here nor there, to judge from the way, on "Newsnight" last night, he dismissed the revelation of the Conservative party's party political broadcast alleging a Labour programme of £35 billion, when he had announced on the same day that it cost £37 billion, as a mere bagatelle. We do not regard £2 billion as a bagatelle, but it is yet further evidence of the incompetence of the Conservative party.

It is the combination of incompetence, of errors and of obscurity in the autumn statement that make it so dangerous to place any real reliance on it as a guide to the Government's public spending plans.

The Government's record also calls the autumn statement into question. In the run-up to the 1983 election, they had inflation at less than 4 per cent. and interest rates at less than 10 per cent., and they promised funding for improved public services and an income tax cut. A month after the election, they cut public spending because of "unforeseen factors" and, incidentally, within two years inflation had doubled and interest rates had reached 14 per cent.

In the run-up to the 1987 election, they had inflation at just above 4 per cent. and interest rates at 9 per cent., and they promised funding for improved public services. With the election safely over, funding for public services stood still and billions of pounds were lavished on the income tax cuts of 1988. Incidentally, within two years of that election, inflation had doubled on its way to 10.6 per cent., interest rates were heading for the 15 per cent. at which they stuck for long enough to make this, as was said recently, the worst recession of modern times, and the same scenario was repeated.

Today, in the run-up to the 1992 election, the Chancellor of the Exchequer offers us inflation at just above 4 per cent. and interest rates at 10.5 per cent., and he promises increased funding for the public services and further income tax cuts. Even if the figures in this autumn statement stood up—and they do not—the Government's record demonstrates that they cannot be trusted as guardians of the public service.

Whatever revenues are earned, there is a clear choice between their use for public investment and services and for tax cuts, as the Chancellor and the Prime Minister have emphasised again and again. The autumn statement reiterates that the Government will continue to reduce the share of the nation's wealth that goes into public spending. The Prime Minister recently emphasised the case for continuing tax cuts by saying that it was their primary objective to reduce taxation at the lower end, the objective of moving to a 20p level of taxation, because it was right that people should own more of their income to spend in their own interests and in the interests of their family.

Let us examine the nature of that choice and of that freedom. If leaks of recent days are to be believed, implicit, although not evident, in the autumn statement are further income tax cuts of perhaps 1p in the pound. What is that choice worth? Half of all men in work earn at or below £14,430 a year, median earnings. From a 1p cut in income tax at the standard rate, a single man with no mortgage would gain £2.14 a week; with a mortgage, it would be less than £1.50—better than a kick in the teeth, although not enough, under this Government, for a prescription. Private health insurance would cost that individual more than twice as much.

From a 1p income tax cut, a man on average earnings of over £16,600 with no mortgage would gain just over £2.50 a week, less if he had a mortgage, and still half of what private health insurance would cost.

Let us take a family with its varying needs. A one-earner, two-child family on the median wage of around £14,000, with an average mortgage of £37,000, would gain from a 1p cut in income tax £59.65 a year— £1.15 a week.

Health insurance with reasonable cover for that family would be more than £800, or more than £15 a week, which is—

The Economic Secretary to the Treasury (Mr. John Maples)

So what?

Mrs. Beckett

The Economic Secretary to the Treasury asks, so what? I am describing the false nature of the choice that the Prime Minister claims to postulate to the British electorate. He says that he will give the electorate the freedom to have an extra £1 or perhaps £1.50 a week, when the services that are being undermined by the billions of pounds forgone will cost an elector tens or hundreds of pounds.

Middle-range private school fees, as our state-funded system is undermined, are £1,500 a year, or almost £29 a week. That is 25 times as much as such a family would gain from a 1p cut in income tax. Middle-range private secondary school fees are £3,500 a year, or £67 a week. That is 58 times as much as such a family would gain from a 1p cut in income tax.

I do not want to be too unkind to the Government. Let us consider a two-earner family for whom the second income of more than £7,600 represents the earnings of half of all women in manual work. In addition to what the man might gain from his tax cut, that family would gain an extra 84p a week. The figures are of the same order for those on average earnings of more than £16,000. It is a matter of extra pence or perhaps £1 a week.

Let us consider a married couple whose circumstances are more familiar to the Economic Secretary to the Treasury£who is, if I recall rightly, a member of Lloyds and probably does not mix in these circles—both earning at the top of the income scale where they are still only paying the standard rate of tax. This is a much more difficult couple about whom the Government are concerned, and this is the best case for the Government, as we are considering the top 94 per cent. of taxpayers.

Taking account of all the potential allowances, if the man has a gross income of £32,000 and maximum mortgage interest relief, and she earns £26,800—this may come as a shock to Conservative Members, but that is not a totally typical couple although it is the best case that we can make— 1p off their tax is worth £235.20 each. That is a grand total of £470.40 a year. That is still nowhere near the cost of private health insurance or school fees.

What would happen if any of those families had elderly relatives on their way to private nursing homes? The standard cost for residential care is £9,000 a year, or £180 a week. If the care is indeed care in a nursing home, the standard cost is closer to £255 or £275 a week, or £14,300 a year. That is the real nature of the costs to individuals on those earnings and on the services that no doubt the Government hope they will believe they can replace as the state services are undermined by the Government's determination to forgo revenue for income tax cuts. As their determination to cut public spending to allow income tax cuts undermines state provision, more and more families with no choice must use those facilities, because nothing else is on offer.

When the Government claim that they are offering people better choice by prioritising income tax cuts over public investment, that is not a choice for most families —it is sheer insanity.

Mr. Ray Whitney (Wycombe)

It seems that the hon. Lady is basing her entire argument on the fact that she would require the whole nation to take out private health insurance. Her concern about expenditure on the national health service should take account of the fact that, while the present Government have reduced income tax, they have also created an economy in which expenditure on the national health service has been increased in real terms by 50 per cent. The Labour party, when it was in power, was the best recruiting sergeant for private health insurance in this country.

Mrs. Beckett

If that is true, why did the Government bother to provide tax relief to encourage people to take out private health insurance? [Interruption.] If he had been here he might have followed it.

The Government continually use a phoney analogy. They think that by cutting income tax they are in some way offering people greater freedom and that it does not matter if public services are undermined, as there is an option, a choice, a substitute. That is total nonsense.

Labour gives priority to public investment, and we are proud of it. Pensioners should be the first priority. Younger pensioners may have good extra occupational or state pensions. If so, good luck to them. At least 1 million pensioners—some of them the oldest and most frail—who never earned enough to save and never even had a chance to belong to good occupational schemes, are living at less than income support level. They are the generation who regard income support as charity. They will not claim it, and they are not going to change now. The only way to help these people is Labour's way —by increasing the basic state pension for all.

Mr. Norman Lamont

The hon. Lady is making a very clear and very logical statement, but is not the logic of her position that she ought to want to increase the basic rate of tax?

Mrs. Beckett

We do not believe that most ordinary families in this country could afford to pay any more tax. They have been hit by the present Government, under whom the tax burden has increased. Taxes are higher than they have ever been in this country's history, and the burden falls disproportionately heavily on lower-income families. That was so even before the introduction of poll tax. Everyone has had to pay VAT increases and increased national insurance contributions. People cannot afford to bear a heavier burden, and we shall not put a heavier burden on them. As I have said, the only way to help pensioners is Labour's way—by giving them an increase in the state pension.

Millions of children belong to families whose income is at or below income support level. Half of these children belong to the families of the unemployed, and many belong to families who have work but at a desperately low rate of pay. The best way to help them all is Labour's way —by increasing child benefit to £9.95 for every child, to reflect 1987 value. We shall fulfil the pledge given by the Prime Minister in 1987 and abrogated every year since then. Under Labour, child benefit will be paid "as now".

The package of tax and national insurance changes that we actually propose will include lifting the ceiling on national insurance contributions, which will affect only those on individual earnings of £405 a week, or £21,000 a year, from April; introducing a new top rate tax of 50p in the pound, which will affect only those on individual earnings well above £30,000 a year. This package, set against our pension and child benefit changes, will leave 96 per cent. of families better off. That figure was produced by the independent Institute for Fiscal Studies.

From our package, we could readily cover not only the proposals I have just described but also our anti-recession measures to kick-start the recovery. It is a package with measures to promote investment and provide capital allowances similar to those that industry and commerce are begging for—pleas that are falling on the deaf ears of the Chancellor. We would also introduce measures to support training, provision for which is still being cut, as both the autumn statement and the Chief Secretary's evidence to the Select Committee have revealed, while unemployment soars.

We shall begin to release some of the money that local authorities already have to stimulate construction and help the homeless. There will be a pilot scheme, in partnership with the private sector, to put new rolling stock on Network SouthEast—rather more useful than name badges for the guards. We know we can fund all that, because we know that we can raise the additional revenues we need, and we have told the British people where they will come from.

That package is what the Chief Secretary the other day called "socialist spite", a typically graceful phrase from the right hon. and learned Gentleman. In April 1988, in this Parliament, the Government implemented the changes pushed through when the Prime Minister was a Minister at the Department of Social Security. They cut benefits to pensioners, the severely disabled, widows, the unemployed, those with industrial injuries and families with children, in or out of work. There are still a few thousand of the biggest losers who have not had a single penny increase in income from that day to this. What sort of spite was that—or was it just Conservative callousness?

Mr. Quentin Davies


Mrs. Beckett

I am confident that these issues are something about which the hon. Gentleman knows absolutely nothing.

What we have promised in our "most urgent" package we know we can deliver. We are constantly asked by Conservative Members to state our highest priorities. We have. We are constantly asked to say how we will pay for them. We have. We can identify areas of spending where different choices and priorities can be exercised—for example, using city technology colleges funding to provide nursery places. We can identify areas where money is wasted, such as the poll tax.

Any attempt to draw up a wider programme would have to rely overwhelmingly on the only information available to the Opposition—the autumn statement in its present form. As the Select Committee pointed out, last year's autumn statement was out of date by March. This autumn statement was in doubt when it was published. We can rely neither on what it says about the state of the economy nor on the little that it reveals about the state of the public finances.

The Chief Secretary said yesterday that he wanted a serious debate about the economy, yet the ridiculous, but no doubt expensive, campaign that the Government are running is designed to do the very opposite. The Government wish to discuss neither where we are on the economy nor what we can do about it. All the sound and fury of the past few days has been a desperate diversion designed first to draw attention away from the unemployment figures, the inflation figures, and the figures for businesses closed and homes repossessed; and, secondly, to draw attention away from what the Labour party is actually saying, and for the simplest of all reasons —they know it makes sense.

Let us indeed debate the choices before the country; this is the forum for that. However, let us not pretend that there cannot be a choice. The form of the autumn statement makes that debate more difficult, and in 13 years the Government have done little or nothing to improve it. It must be redesigned so that it illuminates the choices facing the country—not, as now, obscures them.

We believe that the final public spending decisions and the Budget should be brought together, so that people can see clearly where the money that is raised will actually be spent. We want the capital and revenue spending of Government more clearly identified, so that we can judge the balance of investment for the future and what we spend today. We want far greater clarity in what we get for our money, measuring output and value for money, not just input.

Most essential of all for the future assessment of public finance, we must establish a truly independent source of economic statistics to ensure that judgments are not distorted—as they have been under this Government, by political interference in their collection or presentation.

Although information can do much to foster debate, it cannot replace judgment. Perhaps the most extraordinary of all the peculiar things that the Chancellor has said during his period in office was his comment on, I believe, 8 January: the policy would not have been different had we known the outcome". The right hon. Gentleman and all his colleagues have constantly reiterated the view that there is no need for a change of policy, that there is no alternative to present policies and that, if re-elected, the Government would pursue the same course. Now we have their final assurance that things would not have been different had we known the outcome. I wonder what the thousands of people who have lost their jobs, homes, businesses or all three thought when they read that.

I believe the Chancellor when he says that, and that is why the Government have to go. A fourth Tory term would mean a fourth Tory recession as surely as night follows day. It is not true that there are no alternatives to their policies. It is not true that there are no choices to be exercised differently; and because there are choices, there is hope. It will not be easy to turn this country's economy round, but it can be done.

The Conservative party ignores the economic policies that we propose, although many independent commentators identify that they would be not only successful, but more successful than the Government policies—

Mr. Greg Knight (Lords Commissioner to the Treasury)

Name one.

Mrs. Beckett

I can, indeed, name one as it happens —[Interruption.] Oxford Economic Forecasting refers to The …better long-run growth picture in the Labour case …arises from better productivity gains". In other words, there would be better growth under Labour.

The National Institute of Economic and Social Research has stated that, in the longer term—[Interruption.] I am giving the hon. Member for Derby, North (Mr. Knight) his answer. He and his hon. Friends should listen. The national institute stated that our policies could raise the sustainable level of output in the United Kingdom and might also bring about a lasting reduction in unemployment". Goldman Sachs has referred to our "extra training provisions" while James Capel has stated that there can be little doubt that our supply-side measures…would improve the United Kingdom's long-term sustainable growth rate and expand the supply-side of the economy". [HON. MEMBERS: "More, more."] I am so glad that the hon. Member for Derby, North asked me that question—

Mr. John Townend

Ask her another one—ask about policy.

Mrs. Beckett

Now to our policies for benefits and taxation. I have referred to our policies on the economy and to many independent views of them. We often hear one phrase in particular from Conservative Members about our policies on benefits and taxation. They talk about the "politics of envy"—a revealingly ugly, negative phrase that sets one person against another. We have described the policies that we advocate as the "ethics of community"—as something that calls on what is best and most generous in the human spirit. That is the essence of the choice that the people will face in the election. It will be a choice between the politics of envy, as advocated so often by the Conservative party, and the ethics of community. When the Prime Minister has the guts to call the election, we shall be ready.

9.28 pm
The Chief Secretary to the Treasury (Mr. David Mellor)

This has been a debate about two documents, only one of which has been tabled. I refer to our document, the "Autumn Statement", which sets out clearly the Government's spending priorities for the next three years. To pick up the point that the hon. Member for Derby, South (Mrs. Beckett) made at the end of her speech, that document makes substantial additional provision for a range of public services, such as the national health service, social security and pensions.

This is an autumn statement of which my right hon. and hon. Friends and I are proud. It is the autumn statement of a Government who have been able to increase public expenditure, in a well-targeted and specific way, by 20 per cent. in real terms during their lifetime; under Labour, it fell by 2½per cent. in real terms. However much Labour may talk about public expenditure, it normally makes such a mess of the economy that there is little benefit to be found in the longer run.

The House ought to be given the opportunity to see another document: the document that sets out Labour's programme, and presents the alternative that Labour Members are well able to encapsulate in amendments to motions but always fight shy of actually producing. That document will tell us Labour's spending priorities, and how it will balance those priorities. Up and down the country, Opposition Front-Benchers have come out with protestations about what they will give this, that and the other interest group; the document will make clear the order of priorities, and will begin to explain how the expenditure will be paid for.

It is not only the Conservative party that has asked for such an explanation; Labour supporters and sympathisers have done so as well. What about Mr. Hugo Young, who wrote in The Guardian yesterday? [Interruption.] Ah, Mr. Young has been disavowed, has he? Whenever we quote anyone, Labour Members seem anxious to become an even smaller group: they want to disavow even those who write for The Guardian, if what they say does not suit Labour. Mr. Young wrote: But we need to know more about priorities. An outline Labour public spending white paper would not be impossible to produce. Is it schools before hospitals, or houses before anything, after pensions and child benefit? We have heard two extensive speeches from the Opposition Front Bench, but they did not devote a single minute to answering that basic, common-sense question.

Because nature abhors a vacuum, we have had to produce the second document for today's debate—"Labour's Public Expenditure Plans". That document sets out Labour's views. It reveals all that has been said in the many policy launches and the speeches that have been made all over the country. Let me say this to Labour Members: if for one moment they feel uneasy about the document, let us have the alternative that they have tabled; let us know where we stand.

Mr. Barry Sheerman (Huddersfield)


Mr. Mellor

What is the matter with the hon. Gentleman? He has not been seen in the Chamber throughout the debate, and now he comes in shouting "Awful!" It would be encouraging to believe that he was capable of listening as well as jeering. Perhaps if he listened for a bit and then jeered, he would at least be able to jeer from a better-informed position.

We have not just heard what the official Opposition have to say, or what the Government have said in the autumn statement; we have heard what the Opposition's opposition suggest, in the form of the amendment tabled by the right hon. Member for Chesterfield (Mr. Benn). I did not agree one bit with his speech, but I will say this for him: at least he has political integrity. At least he states his beliefs as they really are, and does not mould them to electoral advantage. The right hon. Gentleman pointed out exactly what has happened: a substantial body of opinion in the Labour party supports his amendment. Twenty-five Members—more than 10 per cent. of the parliamentary Labour party—support the amendment. I wonder how many others would have liked to sign it but did not feel that they should.

Mr. Peter Snape (West Bromwich, East)


Mr. Mellor

Perhaps the hon. Gentleman is one of those who would have liked to sign the amendment. I give way to him so that he can enlighten us.

Mr. Snape

Does the Chief Secretary remember the October 1974 general election when he was my opponent in West Bromwich and then described me as a militant? Is he sure, all these years later, when he makes remarks about my right hon. Friend the Member for Chesterfield (Mr. Benn) that he could recognise one now?

Mr. Mellor

I am not sure that militant was a word in common parlance at that time. I think that I accused the hon. Gentleman of being a member of the Tribune group, which was then a significant force in the Labour party. Then it moved a great deal leftwards and left the hon. Gentleman looking quite bourgeois compared with some of the later entrants to the Labour party. I do not begrudge the hon. Gentleman his moment of happy, nostalgic reflection. As he knows, he got the biggest majority he has ever had in his constituency against me. Things have become much more difficult since then.

Mr. Speaker

Order. I think that there should now be a little less militancy. Come on, please.

Mr. Mellor

The right hon. Member for Chesterfield and 24 other Members of Parliament have put their names to a return to the alternative economic strategy—a return, once again, to the longest suicide note in history. [HON. MEMBERS: "Oh!"] It is all very well for Opposition Members to say "Oh!" but all of them were happy to fight the 1983 election on exactly that manifesto. Those who think that the Labour party has become a safe party—a party that it would be safe to elect because it has learnt all its lessons— should not forget that it is a pretty wild dream to imagine that the Labour party would get a majority in the House. It is an even wilder dream to imagine that it would get such a majority that it could escape from being held to ransom by the 25 Members who signed the amendment. That is another blow to the credibility of the Opposition Front-Bench spokesmen who speak on Treasury matters. Why otherwise would the right hon. Member for Chesterfield feel the need to table such a motion and why would 24 other Members sign it, if they had real confidence in what they were being told by the Opposition Front-Bench spokesmen and agreed with them?

Mr. Radice

Will the right hon. and learned Gentleman give way?

Mr. Mellor

I do not seem to be able to make a speech without an intervention from the hon. Gentleman. Has he been taking lessons from the right hon. Member for Yeovil (Mr. Ashdown) in arm movements, or perhaps he is auditioning for a part in "Thunderbirds"?

Mr. Radice

I was just wondering when the right hon. and learned Gentleman was going to tell the House how his Government intend to get out of the recession that they have created.

Mr. Mellor

As it happens, my right hon. Friend the Chancellor devoted most of his speech to doing precisely that, but I did not detect a great deal of interest on the Opposition Benches in what he had to say.

I am dealing with rather more interesting matters. My right hon. Friend the Chancellor has made it clear where we stand and we now want to know where the Labour party stands. It is clear that, if the Labour party were elected, the position in which we find ourselves today would become dramatically worse. The right hon. and learned Member for Monklands, East (Mr. Smith) knows that, even if some Opposition Back Benchers do not. That is why the right hon. and learned Gentleman keeps quiet about interest rates. He no longer talks about 1 per cent. off. He knows that the organisations that the hon. Member for Derby, South said commend Labour party policy and many others are arguing amongst themselves about only one thing—how much the Labour party would have to put up interest rates in order to establish its credibility if it were elected.

What is the Opposition's alternative to the autumn statement? [Interruption.] Even if Opposition Members are not interested, plenty of people in the wider community are interested. About 60 per cent. of people in that wider community told a Harris poll that they believed that Labour would raise the basic rate of tax, 57 per cent. told a Gallup poll that they believed that they would pay more tax under a Labour Government and 59 per cent. told an NOP survey that they thought that their take-home pay would be hit. Even more interestingly—this may interest the hon. Member for Huddersfield (Mr. Sheerman), who has resumed shouting—a survey of Labour Members of Parliament done by Access Opinions Ltd.—

Mr. Sheerman


Mr. Mellor

That is hardly relevant, but the survey took place last week. Access Opinions Ltd. asked a number of Labour Members for their views on taxation and what the Chancellor should do in the Budget. A total of 5 per cent. said that they would want the basic rate increased by more than 2p, 40 per cent. said that they would want it increased by 2p and 11 per cent. want it increased by 1p. That is Labour's hidden agenda.

Mrs. Llin Golding (Newcastle-under-Lyme)

How many Labour Members were polled?

Mr. Mellor

Such questions should be directed to Access Opinions Ltd. [Interruption.] I dare say that if the hon. Member for Newcastle-under-Lyme (Mrs. Golding) wishes to challenge the integrity of Access Opinions Ltd. it would be delighted to consult its lawyers. I understand that it was a sample of 100 Members of Parliament.

Mrs. Beckett

Has anybody told the Chief Secretary that that survey also questioned Conservative Members and revealed that more than half of those surveyed did not think that there should be a cut in income tax in the Budget?

Mr. Mellor

What is the Labour party's view on that poll? Does the fact that half of the sample of Conservative Members said that there should be no change in income tax in this Budget invalidate a survey in which well over half the hon. Lady's colleagues who were consulted said that the basic rate of income tax should go up? It is not our credibility on tax matters that needs to be proved, but the Labour party's. The Labour party is not trusted on tax matters, and that is small wonder when its Members of Parliament say things like that.

Mr. Battle

Will the right hon. and learned Gentleman give way?

Mr. Mellor

No, I want to push on. I wonder whether—[interruption.]

Mr. Speaker

Order. I ask the House to calm down. We have only 15 minutes left.

Mr. Mellor

Commenting on Labour's public expenditure plans, The Economist said: It has tried to respond to its familiar dilemma—of wanting to be a high-spending party without being a high-taxing one—by splitting itself in two. Mr. Smith reassures the City and voters generally about his tax plans. But shadow spending ministers pander to health workers, teachers and the low-paid with a different tune. By harping on 'Tory underfunding', they deliberately create the impression that a Labour Government would spend far more. Yet unless taxes were raised substantially, it could not. It is absolutely clear that many Labour Members want taxes to be raised but are not prepared to say so. They want taxes raised that have an impact on ordinary people.

Labour Members say that they want to have a debate, yet because they have been discomfited in other debates they have come in to the Chamber to start shouting and jeering. If they think that the public will be impressed by that, all well and good.

We listened to the hon. Member for Derby, South when she gave us the present status of Beckett's laws—a pledge to increase pensions and child benefit, to which the new manufacturing package has been added. In addition, there are all the other measures included in this document. Labour Members may jeer in a debate in the House, but do they believe that they will get through an election campaign with the inconsistencies that are revealed in this document?

Mr. Peter Hain (Neath)

Will the Chief Secretary give way?

Mr. Mellor

No. I had enough of the hon. Gentleman when I increased my majority against him in the past two elections.

Let us see if Labour Members have an answer to one of these pledges. In 1990, the hon. Member for Cynon Valley (Mrs. Clwyd), who leads for Labour on overseas development, said: I want to see Britain reach the UN aid target of 0.7 per cent. of GDP as top priority. [HON. MEMBERS: "Hear, hear."] The support that that quotation received proves the point. The hon. Member for Derby, South appeared on "On The Record" on 19 May last year. She said: No, that is a goal and it's explicity set out as a goal. That's what we're aiming for. Nobody is absolutely able to put their hand on their heart and say we know we can get there. The right hon. Member for Manchester, Gorton (Mr. Kaufman) told the Labour party conference—

Mr. Robert Sheldon (Ashton-under-Lyne)

Will the Chief Secretary give way?

Mr. Mellor

No, I shall complete the point.

The right hon. Member for Gorton told the Labour party conference: Over our first Parliament we shall increase Britain's aid budget to the United Nations target of 0.7 per cent. of GNP. Those words are significant, even to Labour Members who want to open their mouths and close their ears. The right hon. Gentleman said: That is a firm commitment, costed and clear that I pledge our Labour Governincnt will carry out.

Mr. Sheldon


Mr. Mellor

I shall give way in a moment.

We have an atmosphere reeking of deceit—the unmistakable whiff of under-arm aspirations. When the hon. Member for Derby, South is pressed, she makes a clear statement that it is nothing but an aspiration. But no less weighty a person than the shadow Foreign Secretary gives the clear statement that it is a firm commitment, costed and clear". If it is, the hon. Lady should tell us how Labour will pay for it.

Mr. Sheldon

I may have minority tastes, but I came here to find out what the right hon. and learned Gentleman would say about the autumn statement. I am interested in the method of recovery because we have the highest levels of unemployment, the highest real rates of interest and a deplorable balance of payments. When the recovery comes—I suppose that whatever Government are in power, even one as incompetent as this, some sort of recovery will come eventually—what will happen to the balance of payments? I want to hear the right hon. and learned Gentleman's answer.

Mr. Mellor

I am dealing with how we can save the country from the kind of economic muddle that existed when the right hon. Gentleman was a Treasury Minister. He was the Financial Secretary to the Treasury when Lord Barnett was Chief Secretary, and we know what he had to say. This will be a trip down memory lane for the right hon. Gentleman. Lord Barnett said: The 1974–79 Labour Government had a difficult economic and financial task rendered impossible by pledges foolishly made without any serious thought as to where the money would come from. You name it, we were pledged to increase it. The crucial lesson for all political parties must be that we cannot take growth for granted, and above all, we should not plan in advance how to spend it. Even if we manage growth of 1 or 2 per cent. a year it will largely be needed to meet demographic changes. The Labour party's document makes it clear that Labour has forgotten every word, and that is why the country needs to be saved from a Labour Government.

Another reason why the country needs to be saved from a Labour Government is that it is bad enough to have the type of nonsense that went on in Luigi's restaurant happening when the Labour party is in opposition, but it would be especially ridiculous if it happened with the Labour party in government.

I want to ask the right hon. and learned Member for Monklands, East a thing or two. If a week is a long time in politics, two days were a long time in the right hon. and learned Gentleman's life last week. It all seemed so clear when he appeared on the Frost programme two days before the Leader of the Opposition's visit to Luigi's restaurant. The right hon. and learned Gentleman was asked extensively by Mr. Frost—I have the transcript here and it goes on a fair bit—about Labour's policy. He set out clearly—

Mr. Battle


Mr. Mellor

I shall not give way. I am dealing with the right hon. and learned Member for Monklands, East. He told Mr. Frost about Beckett's law and Mr. Frost asked him several times whether the level of taxation that would then result—

Mr. Battle


Mr. Mellor

The hon. Gentleman is trying to disrupt my speech because he does not want to hear what the country wants to know. For the avoidance of doubt, Mr. Speaker, I do not intend to give way to the hon. Gentleman and, if he persists in intervening, it is merely because the Labour party's grasp of democracy cannot survive a week such as the previous one. It does not want to know.

Mr. George Foulkes (Carrick, Cumnock and Doon Valley)


Mr. Mellor

Things are really bad when the buffoonish tendency has to come out.

Mr. Foulkes


Mr. Speaker

Order. What is it?

Mr. Foulkes

The debate is entitled "Autumn Statement". The Chief Secretary has spoken for 22 minutes but has not mentioned the autumn statement. We have heard only advertisements for Luigi's restaurant.

Mr. Speaker

Order. Since I have been in the Chair, the Chief Secretary has been interrupted so often that there has not been much opportunity for him to do that.

Mr. Mellor

Has the hon. Gentleman, who reads with his lips so much that he could almost give lessons to the Leader of the Opposition, read the amendment which deals with precisely this issue? [Interruption.] It is pretty disgraceful if I cannot put to the right hon. and learned Member for Monklands, East the points which have been the centre of debate in this country for the past 10 days, but I shall do so.

David Frost put it to the right hon. and learned Gentleman no less than three times that it would be an unfair burden on many people who are not rich if he were to carry out immediately his proposed taxation arrangements to pay for Beckett's law—the abolition of the upper earnings limit for national insurance contributions and the 50 per cent. increase in the top rate of tax. He had endless opportunities. The transcript goes on for pages and pages, and not a single word was said about any of those increases being phased in. Indeed, finally, David Frost asked: I mean in the situation that if you find that those two moves, the tax at 50p and the National Insurance contribution raised £4.5 billion or £4.8 billion which David Frost said was more than the right hon. and learned Gentleman needed— you wouldn't adjust what you're going to do, downwards? That gave the right hon. and learned Gentleman every opportunity to say that the increases would be phased, but what did he say? He said: I reserve my position on that because I have not only got to find money for the welfare changes. I want to see the National Health Service properly financed". [Interruption.] This noise is worse than the Shed at Chelsea football club. Is this really what Parliament is all about? Is this what Parliament is coming to?

Several Hon. Members


Mr. Mellor

We can take it—[Interruption.]

Mr. Rhodri Morgan (Cardiff, West)


Mr. Mellor

And we can take all that, as well. We can certainly take this point: on David Frost's programme the right hon. and learned Member for Monklands, East did not have a thought in his head about the phasing in of any of those changes. I asked the right hon. and learned Gentleman whether he knew that his right hon. Friend the Leader of the Opposition would go to Luigi's restaurant and say what he said about phasing. The right hon. and learned Gentleman, who smiles at the idea, did not answer the question. We know why he did not answer. It was because he did not know. If he did know, he would say so. Will he say so now? Will he say that he knew what was going on at Luigi's?

Mr. John Smith

The right hon. and learned Gentleman has spent a great deal of his speech talking about the Labour party's spending plans. Last night, on "Newsnight", Mr. Brendan Bruce, the former director of communications for the Tories, said: No-one sensible in the Tory Party actually believes the Labour Party would put up public spending by £37 billion". If no one in the Tory party believes that, why should the public?

Mr. Mellor

The right hon. and learned Gentleman could have made the shortest speech that he has ever made in the House. He could have said, "Yes, I knew what was going on at Luigi's restaurant." We know that he did not know, and we know that the Leader of the Opposition went to Luigi's restaurant and achieved what, even for him, was a famous first. He became the first man in history to walk into a restaurant and trip over a ceiling.

When the right hon. and learned Member for Monklands, East went on television that night to clean up the mess that his right hon. Friend the Leader of the Opposition had put him into again, he did not look pleased about it. He looked like a man who had just found that his tax returns had been filled in by Ken Dodd's accountant, or that Kitty Kelley was going to write his biography. He had his revenge today, though. He started talking about individuals' opinion poll ratings. I wonder why he made such a thing of that. Was it to say that his right hon. Friend's opinion poll rating was 20 per cent. below that of my right hon. Friend the Prime Minister? [Interruption.] Was that a way of getting his own back? [Interruption.] We heard what the Leader of the Opposition had to say about that. [Interruption.]

Mr. Speaker

Order. I ask the House to listen in reasonable silence for the next two minutes.

Mr. Mellor

The Labour party does not like to know that it has been rumbled. Labour Members know that, whatever they may bray and shout in here, the public outside distrust them. The public know full well that the Labour party taxes and spends, taxes and spends. We will not give Labour the opportunity to do so.

Question put, That the amendment be made:— The House proceeded to a Division

Mr. Phillip Oppenheim (Amber Valley)

(seated and covered): On a point of order, Mr. Speaker. May I on behalf of my right hon. and hon. Friends point out that the disgraceful barracking and shouting which came from the mob opposite during the reply was clearly an exercise orchestrated by the Labour Whips? It was because they are afraid of the public learning the truth about Labour's taxation policies.

Mr. Speaker

The noise in the Chamber tonight did not do the House great credit, but I do not think that it came from one side alone.

The House having divided: Ayes 233, Noes 320.

Division No. 49] [10 pm
Adams, Mrs Irene (Paisley, N.) Carr, Michael
Allen, Graham Cartwright, John
Alton, David Clark, Dr David (S Shields)
Anderson, Donald Clarke, Tom (Monklands W)
Archer, Rt Hon Peter Clelland, David
Armstrong, Hilary Clwyd, Mrs Ann
Ashdown, Rt Hon Paddy Cohen, Harry
Ashley, Rt Hon Jack Cook, Frank (Stockton N)
Ashton, Joe Cook, Robin (Livingston)
Banks, Tony (Newham NW) Corbett, Robin
Barnes, Harry (Derbyshire NE) Corbyn, Jeremy
Barnes, Mrs Rosie (Greenwich) Cousins. Jim
Barron, Kevin Cox, Tom
Battle, John Crowther, Stan
Beckett, Margaret Cryer, Bob
Beith, A. J. Cummings. John
Bell, Stuart Cunliffe, Lawrence
Bellotti, David Cunningham, Dr John
Benn, Rt Hon Tony Dalyell, Tam
Bennett, A. F. (D'nt'n & R'dish) Darling, Alistair
Bermingham, Gerald Davies, Rt Hon Denzil (Llanelli)
Blair, Tony Davies, Ron (Caerphilly)
Blunkett, David Davis, Terry (B'ham Hodge H'l)
Boateng, Paul Dewar, Donald
Boyes, Roland Dixon, Don
Bradley, Keith Dobson, Frank
Bray, Dr Jeremy Doran, Frank
Brown, Gordon (D'mline E) Douglas, Dick
Brown, Nicholas (Newcastle E) Dunnachie, Jimmy
Brown, Ron (Edinburgh Leith) Eadie, Alexander
Caborn, Richard Eastham, Ken
Callaghan, Jim Edwards, Huw
Campbell, Menzies (File NE) Enright, Derek
Campbell, Ron (Blyth Valley) Evans, John (St Helens N)
Canavan, Dennis Ewing, Harry (Falkirk E)
Carlile, Alex (Mont'g) Ewing, Mrs Margaret (Moray)
Fatchett, Derek Marshall, Jim (Leicester S)
Faulds, Andrew Martin, Michael J. (Springburn)
Fearn, Ronald Martlew, Eric
Field, Frank (Birkenhead) Maxton, John
Fisher, Mark Meacher, Michael
Flannery, Martin Meale, Alan
Flynn, Paul Michael, Alun
Foot, Rt Hon Michael Michie, Bill (Sheffield Heeley)
Foster, Derek Mitchell, Austin (G't Grimsby)
Foulkes, George Moonie, Dr Lewis
Fraser, John Morgan, Rhodri
Fyfe, Maria Morris, Rt Hon A. (W'shawe)
Galloway, George Morris, Rt Hon J. (Aberavon)
Garrett, John (Norwich South) Mowlam, Marjorie
George, Bruce Mullin, Chris
Gilbert, Rt Hon Dr John Murphy, Paul
Godman, Dr Norman A. Nellist, Dave
Golding, Mrs Llin Oakes, Rt Hon Gordon
Gordon, Mildred O'Brien, William
Gould, Bryan O'Hara, Edward
Graham, Thomas O'Neill, Martin
Grant, Bernie (Tottenham) Orme, Rt Hon Stanley
Griffiths, Nigel (Edinburgh S) Parry, Robert
Griffiths, Win (Bridgend) Patchett, Terry
Grocott, Bruce Pendry, Tom
Hain, Peter Powell, Ray (Ogmore)
Hardy, Peter Prescott, John
Harman, Ms Harriet Primarolo, Dawn
Hattersley, Rt Hon Roy Quin, Ms Joyce
Haynes, Frank Radice, Giles
Heal, Mrs Sylvia Randall, Stuart
Henderson, Doug Redmond, Martin
Hinchliffe, David Rees, Rt Hon Merlyn
Hoey, Kate (Vauxhall) Reid, Dr John
Hogg, N. (C'nauld & Kilsyth) Robertson, George
Home Robertson, John Robinson, Geoffrey
Hood, Jimmy Rogers, Allan
Howarth, George (Knowsley N) Rooker, Jeff
Howell, Rt Hon David (G'dford) Rooney, Terence
Howells, Dr. Kim (Pontypridd) Ross, Ernie (Dundee W)
Hoyle, Doug Rowlands, Ted
Hughes, Robert (Aberdeen N) Ruddock, Joan
Hughes, Roy (Newport E) Salmond, Alex
Hughes, Simon (Southward) Sedgemore, Brian
Ingram, Adam Sheerman, Barry
Janner, Greville Sheldon, Rt Hon Robert
Johnston, Sir Russell Shore, Rt Hon Peter
Jones, Barry (Alyn & Deeside) Short, Clare
Jones, leuan (Ynys MÔn) Skinner, Dennis
Jones, Martyn (Clwyd S W) Smith, Andrew (Oxford E)
Kaufman, Rt Hon Gerald Smith, C. (Isl'ton & F'bury)
Kennedy, Charles Smith, Rt Hon J. (Monk'ds E)
Kilfoyle, Peter Smith, J. P. (Vale of Glam)
Kinnock, Rt Hon Neil Snape, Peter
Kirkwood, Archy Soley, Clive
Kumar, Dr. Ashok Spearing, Nigel
Lamond, James Steel, Rt Hon Sir David
Leadbitter, Ted Steinberg, Gerry
Leighton, Ron Stephen, Nicol
Lewis, Terry Stott, Roger
Litherland, Robert Strang, Gavin
Lloyd, Tony (Stretford) Straw, Jack
Lofthouse, Geoffrey Taylor, Mrs Ann (Dewsbury)
Loyden, Eddie Taylor, Matthew (Truro)
McAllion, John Thomas, Dr Dafydd Elis
McAvoy, Thomas Turner, Dennis
McCartney, Ian Vaz, Keith
McCrea, Rev William Wallace, James
Macdonald, Calum A. Walley, Joan
McFall, John Warden, Gareth (Gower)
McGrady, Eddie Wareing, Robert N.
McKay, Allen (Barnsley West) Watson, Mike (Glasgow, C)
McKelvey, William Welsh, Michael (Doncaster N)
McLeish, Henry Wigley, Dafydd
McMaster, Gordon Williams, Rt Hon Alan
McWilliam, John Williams, Alan W. (Carm'then)
Madden, Max Wilson, Brian
Mahon, Mrs Alice Winnick, David
Marek, Dr John Wise, Mrs Audrey
Worthington, Tony Tellers for the Ayes:
Wray, Jimmy Mr. Jack Thompson and
Young, David (Bolton SE) Mr. Eric Illsley.
Adley, Robert Dover, Den
Aitken, Jonathan Dunn, Bob
Alison, Rt Hon Michael Durant, Sir Anthony
Allason, Rupert Dykes, Hugh
Amery, Rt Hon Julian Eggar, Tim
Amess, David Emery, Sir Peter
Arbuthnot, James Evans, David (Welwyn Hatf'd)
Arnold, Jacques (Gravesham) Evennett, David
Arnold, Sir Thomas Fallon, Michael
Ashby, David Farr, Sir John
Atkins, Robert Favell, Tony
Baker, Rt Hon K. (Mole Valley) Fenner, Dame Peggy
Baker, Nicholas (Dorset N) Field, Barry (Isle of Wight)
Baldry, Tony Finsberg, Sir Geoffrey
Banks, Robert (Harrogate) Fishburn, John Dudley
Batiste, Spencer Fookes, Dame Janet
Bellingham, Henry Forman, Nigel
Bendall, Vivian Forsyth, Michael (Stirling)
Bennett, Nicholas (Pembroke) Forth, Eric
Biffen, Rt Hon John Fowler, Rt Hon Sir Norman
Blackburn, Dr John G. Fox, Sir Marcus
Blaker, Rt Hon Sir Peter Franks, Cecil
Body, Sir Richard Freeman, Roger
Bonsor, Sir Nicholas French, Douglas
Boscawen, Hon Robert Fry, Peter
Boswell, Tim Gale, Roger
Bottomley, Peter George, Bruce
Bottomley, Mrs Virginia Gilmour, Rt Hon Sir Ian
Bowden, Gerald (Dulwich) Glyn, Dr Sir Alan
Bowis, John Goodlad, Rt Hon Alastair
Boyson, Rt Hon Dr Sir Rhodes Goodson-Wickes, Dr Charles
Braine, Rt Hon Sir Bernard Gorman, Mrs Teresa
Brandon-Bravo, Martin Grant, Sir Anthony (CambsSW)
Brazier, Julian Greenway, Harry (Ealing N)
Brooke, Rt Hon Peter Greenway, John (Ryedale)
Brown, Michael (Brigg & Cl't's) Gregory, Conal
Bruce, Ian (Dorset South) Griffiths, Peter (Portsmouth N)
Buck, Sir Antony Grist, Ian
Budgen, Nicholas Ground, Patrick
Burns, Simon Grylls, Sir Michael
Burt, Alistair Gummer, Rt Hon John Selwyn
Butler, Chris Hague, William
Butterfill, John Hamilton, Rt Hon Archie
Carlisle, John, (Luton N) Hamilton, Neil (Tatton)
Carlisle, Kenneth (Lincoln) Hampson, Dr Keith
Carrington, Matthew Hanley, Jeremy
Carttiss, Michael Hannam, Sir John
Cash, William Hargreaves, A. (B'ham H'll Gr')
Chalker, Rt Hon Mrs Lynda Hargreaves, Ken (Hyndburn)
Channon, Rt Hon Paul Harris, David
Chapman, Sydney Hawkins, Christopher
Chope, Christopher Hayes, Jerry
Churchill, Mr Hayhoe, Rt Hon Sir Barney
Clark, Rt Hon Alan (Plymouth) Hayward, Robert
Clark, Dr Michael (Rochford) Heathcoat-Amory, David
Clark, Rt Hon Sir William Heseltine, Rt Hon Michael
Clarke, Rt Hon K. (Rushcliffe) Hicks, Mrs Maureen (Wolv' NE)
Colvin, Michael Hicks, Robert (Cornwall SE)
Conway, Derek Higgins, Rt Hon Terence L.
Coombs, Anthony (Wyre F'rest) Hill, James
Coombs, Simon (Swindon) Hind, Kenneth
Cope, Rt Hon Sir John Hogg, Hon Douglas (Gr'th'm)
Cormack, Patrick Hordern, Sir Peter
Couchman, James Howarth, Alan (Strat'd-on-A)
Cran, James Howell, Rt Hon David (G'dford)
Currie, Mrs Edwina Howell, Ralph (North Norfolk)
Curry, David Hughes, Robert G. (Harrow W)
Davies, Q. (Stamf'd & Spald'g) Hunt, Rt Hon David
Davis, David (Boothferry) Hunter, Andrew
Day, Stephen Irvine, Michael
Devlin, Tim Irving, Sir Charles
Dickens, Geoffrey Jack, Michael
Dorrell, Stephen Jackson, Robert
Douglas-Hamilton, Lord James Janman, Tim
Jessel, Toby Porter, Barry (Wirral S)
Jones, Gwilym (Cardiff N) Porter, David (Waveney)
Jones, Robert B (Herts W) Portillo, Michael
Jopling, Rt Hon Michael Powell, William (Corby)
Kellett-Bowman, Dame Elaine Price, Sir David
Key, Robert Raffan, Keith
Kilfedder, James Raison, Rt Hon Sir Timothy
King, Roger (B'ham N'thfield) Redwood, John
Kirkhope, Timothy Renton, Rt Hon Tim
Knapman, Roger Rhodes James, Sir Robert
Knight, Greg (Derby North) Riddick, Graham
Knight, Dame Jill (Edgbaston) Ridley, Rt Hon Nicholas
Knowles, Michael Ridsdale, Sir Julian
Knox, David Rifkind, Rt Hon Malcolm
Lamont, Rt Hon Norman Roberts, Rt Hon Sir Wyn
Lang, Rt Hon Ian Roe, Mrs Marion
Latham, Michael Rossi, Sir Hugh
Lawrence, Ivan Rost, Peter
Lee, John (Pendle) Rowe, Andrew
Leigh, Edward (Gainsbor'gh) Ryder, Rt Hon Richard
Lennox-Boyd, Hon Mark Sackville, Hon Tom
Lester, Jim (Broxtowe) Sainsbury, Rt Hon Tim
Lloyd, Sir Ian (Havant) Sayeed, Jonathan
Lloyd, Peter (Fareham) Scott, Rt Hon Nicholas
Lord, Michael Shaw, David (Dover)
Luce, Rt Hon Sir Richard Shaw, Sir Giles (Pudsey)
Lyell, Rt Hon Sir Nicholas Shaw, Sir Michael (Scarb')
McCrindle, Sir Robert Shelton, Sir William
Macfarlane, Sir Neil Shephard, Mrs G. (Norfolk SW)
MacGregor, Rt Hon John Shepherd, Colin (Hereford)
MacKay, Andrew (E Berkshire) Shepherd, Richard (Aldridge)
McLoughlin, Patrick Shersby, Michael
McNair-Wilson, Sir Michael Sims, Roger
McNair-Wilson, Sir Patrick Skeet, Sir Trevor
Madel, David Smith, Tim (Beaconsfield)
Major, Rt Hon John Soames, Hon Nicholas
Malins, Humfrey Speed, Keith
Mans, Keith Speller, Tony
Maples, John Spicer, Sir Jim (Dorset W)
Marland, Paul Spicer, Michael (S Worcs)
Marlow, Tony Squire, Robin
Marshall, Sir Michael (Arundel) Stanbrook, Ivor
Martin, David (Portsmouth S) Stanley, Rt Hon Sir John
Mates, Michael Steen, Anthony
Maude, Hon Francis Stern, Michael
Maxwell-Hyslop, Sir Robin Stevens, Lewis
Mayhew, Rt Hon Sir Patrick Stewart, Allan (Eastwood)
Mellor, Rt Hon David Stewart, Andy (Sherwood)
Meyer, Sir Anthony Stewart, Rt Hon Sir Ian
Miller, Sir Hal Stokes, Sir John
Mills, lain Summerson, Hugo
Mitchell, Andrew (Gedling) Tapsell, Sir Peter
Mitchell, Sir David Taylor, Ian (Esher)
Moate, Roger Taylor, Sir Teddy
Monro, Sir Hector Tebbit, Rt Hon Norman
Montgomery, Sir Fergus Temple-Morris, Peter
Moore, Rt Hon John Thompson, Sir D. (Calder Valley)
Morris, M (N'hampton S)
Morrison, Sir Charles Thompson, Patrick (Norwich N)
Morrison, Rt Hon Sir Peter Thorne, Neil
Moss, Malcolm Thornton, Malcolm
Moynihan, Hon Colin Thurnham, Peter
Mudd, David Townend, John (Bridlington)
Neale, Sir Gerrard Townsend, Cyril D. (B'heath)
Nelson, Anthony Tracey, Richard
Neubert, Sir Michael Tredinnick, David
Newton, Rt Hon Tony Trippier, David
Nicholls, Patrick Trotter, Neville
Nicholson, David (Taunton) Twinn, Dr Ian
Nicholson, Emma (Devon West) Vaughan, Sir Gerard
Norris, Steve Viggers, Peter
Onslow, Rt Hon Cranley Wakeham, Rt Hon John
Oppenheim, Phillip Waldegrave, Rt Hon William
Page, Richard Walden, George
Paice, James Walker, Bill (T'side North)
Parkinson, Rt Hon Cecil Walker, Rt Hon P. (W'cester)
Patnick, Irvine Waller, Gary
Patten, Rt Hon Chris (Bath) Walters, Sir Dennis
Patten, Rt Hon John Ward, John
Pawsey, James Wardell, Gareth (Gower)
Warren, Kenneth Wolfson, Mark
Watts, John Wood, Timothy
Wells, Bowen Yeo, Tim
Wheeler, Sir John Young, Sir George (Acton)
Whitney, Ray
Widdecombe, Ann Tellers for the Noes:
Wilkinson, John Mr. David Lightbown and
Wilshire, David Mr. John M. Taylor.
Winterton, Nicholas

Question accordingly negatived.

Main Question put:

The House divided: Ayes 317, Noes 227.

Division No. 50] [10.13 pm
Adley, Robert Cran, James
Aitken, Jonathan Currie, Mrs Edwina
Alison, Rt Hon Michael Curry, David
Allason, Rupert Davies, Q. (Stamf'd & Spald'g)
Amery, Rt Hon Julian Davis, David (Boothferry)
Amess, David Day, Stephen
Arbuthnot, James Devlin, Tim
Arnold, Jacques (Gravesham) Dickens, Geoffrey
Arnold, Sir Thomas Dorrell, Stephen
Ashby, David Douglas-Hamilton, Lord James
Atkins, Robert Dover, Den
Baker, Rt Hon K. (Mole Valley) Dunn, Bob
Baker, Nicholas (Dorset N) Durant, Sir Anthony
Baldry, Tony Dykes, Hugh
Banks, Robert (Harrogate) Eggar, Tim
Batiste, Spencer Emery, Sir Peter
Bellingham, Henry Evans, David (Welwyn Hatf'd)
Bendall, Vivian Evennett, David
Bennett, Nicholas (Pembroke) Fallon, Michael
Biffen, Rt Hon John Farr, Sir John
Blackburn, Dr John G. Favell, Tony
Blaker, Rt Hon Sir Peter Fenner, Dame Peggy
Bonsor, Sir Nicholas Field, Barry (Isle of Wight)
Boscawen, Hon Robert Finsberg, Sir Geoffrey
Boswell, Tim Fishburn, John Dudley
Bottomley, Peter Fookes, Dame Janet
Bottomley, Mrs Virginia Forman, Nigel
Bowden, Gerald (Dulwich) Forsyth, Michael (Stirling)
Bowis, John Forth, Eric
Boyson, Rt Hon Dr Sir Rhodes Fowler, Rt Hon Sir Norman
Braine, Rt Hon Sir Bernard Fox, Sir Marcus
Brandon-Bravo, Martin Franks, Cecil
Brazier, Julian Freeman, Roger
Brooke, Rt Hon Peter French, Douglas
Brown, Michael (Brigg & Cl't's) Fry, Peter
Bruce, Ian (Dorset South) Galbraith, Sam
Buck, Sir Antony Gale, Roger
Budgen, Nicholas Gardiner, Sir George
Burns, Simon Gilmour, Rt Hon Sir Ian
Burt, Alistair Glyn, Dr Sir Alan
Butler, Chris Goodlad, Rt Hon Alastair
Butterfill, John Goodson-Wickes, Dr Charles
Carlisle, John, (Luton N) Gorman, Mrs Teresa
Carlisle, Kenneth (Lincoln) Grant, Sir Anthony (CambsSW)
Carrington, Matthew Greenway, Harry (Eating N)
Carttiss, Michael Greenway, John (Ryedale)
Cash, William Gregory, Conal
Chalker, Rt Hon Mrs Lynda Griffiths, Peter (Portsmouth N)
Channon, Rt Hon Paul Grist, Ian
Chapman, Sydney Ground, Patrick
Chope, Christopher Grylls, Sir Michael
Churchill, Mr Gummer, Rt Hon John Selwyn
Clark, Rt Hon Alan (Plymouth) Hague, William
Clark, Dr Michael (Rochford) Hamilton, Rt Hon Archie
Clark, Rt Hon Sir William Hamilton, Neil (Tatton)
Clarke, Rt Hon K. (Rushcliffe) Hampson, Dr Keith
Colvin, Michael Hanley, Jeremy
Conway, Derek Hannam, Sir John
Coombs, Anthony (Wyre F'rest) Hargreaves, A. (B'ham H'll Gr')
Coombs, Simon (Swindon) Hargreaves, Ken (Hyndburn)
Cope, Rt Hon Sir John Harris, David
Cormack, Patrick Hawkins, Christopher
Couchman, James Hayes, Jerry
Hayhoe, Rt Hon Sir Barney Morrison, Rt Hon Sir Peter
Hayward, Robert Moss, Malcolm
Heathcoat-Amory, David Moynihan, Hon Colin
Hicks, Mrs Maureen (Wolv' NE) Neale, Sir Gerrard
Hicks, Robert (Cornwall SE) Nelson, Anthony
Higgins, Rt Hon Terence L. Neubert, Sir Michael
Hill, James Newton, Rt Hon Tony
Hind, Kenneth Nicholls, Patrick
Hogg, Hon Douglas (Gr'th'm) Nicholson, David (Taunton)
Hordern, Sir Peter Nicholson, Emma (Devon West)
Howarth, Alan (Strat'd-on-A) Norris, Steve
Howell, Rt Hon David (G'dford) Onslow, Rt Hon Cranley
Howell, Ralph (North Norfolk) Oppenheim, Phillip
Hughes, Robert G. (Harrow W) Page, Richard
Hunt, Rt Hon David Paice, James
Hunter, Andrew Parkinson, Rt Hon Cecil
Irvine, Michael Patnick, Irvine
Irving, Sir Charles Patten, Rt Hon Chris (Bath)
Jack, Michael Patten, Rt Hon John
Jackson, Robert Pawsey, James
Janman, Tim Porter, Barry (Wirral S)
Jessel, Toby Porter, David (Waveney)
Jones, Gwilym (Cardiff N) Portillo, Michael
Jones, Robert B (Herts W) Powell, William (Corby)
Jopling, Rt Hon Michael Price, Sir David
Kellett-Bowman, Dame Elaine Raffan, Keith
Key, Robert Raison, Rt Hon Sir Timothy
Kilfedder, James Redwood, John
King, Roger (B'ham N'thfield) Renton, Rt Hon Tim
Kirkhope, Timothy Rhodes James, Sir Robert
Knapman, Roger Riddick, Graham
Knight, Greg (Derby North) Ridley, Rt Hon Nicholas
Knight, Dame Jill (Edgbaston) Ridsdale, Sir Julian
Knowles, Michael Rifkind, Rt Hon Malcolm
Knox, David Roberts, Rt Hon Sir Wyn
Lamont, Rt Hon Norman Roe, Mrs Marion
Lang, Rt Hon Ian Rossi, Sir Hugh
Latham, Michael Rost, Peter
Lawrence, Ivan Rowe, Andrew
Lee, John (Pendle) Ryder, Rt Hon Richard
Leigh, Edward (Gainsbor'gh) Sackville, Hon Tom
Lennox-Boyd, Hon Mark Sainsbury, Rt Hon Tim
Lester, Jim (Broxtowe) Sayeed, Jonathan
Lloyd, Sir Ian (Havant) Scott, Rt Hon Nicholas
Lloyd, Peter (Fareham) Shaw, David (Dover)
Lord, Michael Shaw, Sir Giles (Pudsey)
Luce, Rt Hon Sir Richard Shaw, Sir Michael (Scarb')
Lyell, Rt Hon Sir Nicholas Shelton, Sir William
McCrindle, Sir Robert Shephard, Mrs G. (Norfolk SW)
Macfarlane, Sir Neil Shepherd, Colin (Hereford)
MacGregor, Rt Hon John Shepherd, Richard (Aldridge)
MacKay, Andrew (E Berkshire) Shersby, Michael
McLoughlin, Patrick Sims, Roger
McNair-Wilson, Sir Michael Skeet, Sir Trevor
McNair-Wilson, Sir Patrick Smith, Tim (Beaconsfield)
Madel, David Soames, Hon Nicholas
Major, Rt Hon John Speed, Keith
Malins, Humfrey Speller, Tony
Mans, Keith Spicer, Sir Jim (Dorset W)
Maples, John Spicer, Michael (S Worcs)
Marland, Paul Squire, Robin
Marlow, Tony Stanbrook, Ivor
Marshall, Sir Michael (Arundel) Stanley, Rt Hon Sir John
Martin, David (Portsmouth S) Steen, Anthony
Mates, Michael Stem, Michael
Maude, Hon Francis Stevens, Lewis
Maxwell-Hyslop, Sir Robin Stewart, Allan (Eastwood)
Mayhew, Rt Hon Sir Patrick Stewart, Andy (Sherwood)
Mellor, Rt Hon David Stewart, Rt Hon Sir Ian
Meyer, Sir Anthony Stokes, Sir John
Miller, Sir Hal Summerson, Hugo
Mills, lain Tapsell, Sir Peter
Mitchell, Andrew (Gedling) Taylor, Ian (Esher)
Mitchell, Sir David Taylor, Sir Teddy
Moate, Roger Tebbit, Rt Hon Norman
Monro, Sir Hector Temple-Morris, Peter
Montgomery, Sir Fergus Thompson, Sir D. (Calder Valley)
Moore, Rt Hon John
Morris, M (N'hampton S) Thompson, Patrick (Norwich N)
Morrison, Sir Charles Thome, Neil
Thornton, Malcolm Wardle, Charles (Bexhill)
Thurnham, Peter Warren, Kenneth
Townend, John (Bridlington) Watts, John
Townsend, Cyril D. (B'heath) Wells, Bowen
Tracey, Richard Wheeler, Sir John
Tredinnick, David Whitney, Ray
Trippier, David Widdecombe, Ann
Trotter, Neville Wilkinson, John
Twinn, Dr Ian Wilshire, David
Vaughan, Sir Gerard Winterton, Nicholas
Viggers, Peter Wolfson, Mark
Wakeham, Rt Hon John Wood, Timothy
Waldegrave, Rt Hon William Yeo, Tim
Walden, George Young, Sir George (Acton)
Walker, Bill (T'side North)
Walker, Rt Hon P. (W'cester) Tellers for the Ayes
Waller, Gary Mr. David Lightbown and
Walters, Sir Dennis Mr. John M. Taylor.
Ward, John
Adams, Mrs Irene (Paisley, N.) Dixon, Don
Allen, Graham Dobson, Frank
Alton, David Doran, Frank
Anderson, Donald Douglas, Dick
Archer, Rt Hon Peter Dunnachie, Jimmy
Armstrong, Hilary Eadie, Alexander
Ashdown, Rt Hon Paddy Eastham, Ken
Ashley, Rt Hon Jack Edwards, Huw
Ashton, Joe Enright, Derek
Banks, Tony (Newham NW) Evans, John (St Helens N)
Barnes, Harry (Derbyshire NE) Ewing, Harry (Falkirk E)
Barnes, Mrs Rosie (Greenwich) Ewing, Mrs Margaret (Moray)
Barron, Kevin Fatchett, Derek
Battle, John Faulds, Andrew
Beckett, Margaret Fearn, Ronald
Beith, A. J. Field, Frank (Birkenhead)
Bell, Stuart Fisher, Mark
Bellotti, David Flannery, Martin
Benn, Rt Hon Tony Flynn, Paul
Bermingham, Gerald Foot, Rt Hon Michael
Blair, Tony Foster, Derek
Blunkett, David Foulkes, George
Boateng, Paul Fraser, John
Boyes, Roland Fyfe, Maria
Bradley, Keith Galloway, George
Bray, Dr Jeremy Garrett, John (Norwich South)
Brown, Gordon (D'mline E) George, Bruce
Brown, Nicholas (Newcastle E) Gilbert, Rt Hon Dr John
Brown, Ron (Edinburgh Leith) Godman, Dr Norman A.
Caborn, Richard Golding, Mrs Llin
Callaghan, Jim Gordon, Mildred
Campbell, Menzies (Fife NE) Graham, Thomas
Campbell, Ron (Blyth Valley) Grant, Bernie (Tottenham)
Canavan, Dennis Griffiths, Nigel (Edinburgh S)
Carlile, Alex (Mont'g) Griffiths, Win (Bridgend)
Carr, Michael Grocott, Bruce
Cartwright, John Hain, Peter
Clark, Dr David (S Shields) Hardy, Peter
Clarke, Tom (Monklands W) Harman, Ms Harriet
Clelland, David Hatters ley, Rt Hon Roy
Clwyd, Mrs Ann Haynes, Frank
Cohen, Harry Heal, Mrs Sylvia
Cook, Frank (Stockton N) Henderson, Doug
Cook, Robin (Livingston) Hinchliffe, David
Corbett, Robin Hoey, Kate (Vauxhall)
Corbyn, Jeremy Hogg, N. (C'nauld & Kilsyth)
Cousins, Jim Home Robertson, John
Cox, Tom Hood, Jimmy
Crowther, Stan Howarth, George (Knowsley N)
Cryer, Bob Howell, Rt Hon D. (S'heath)
Cummings, John Howells, Dr. Kim (Pontypridd)
Cunliffe, Lawrence Hoyle, Doug
Cunningham, Dr John Hughes, Robert (Aberdeen N)
Dalyell, Tam Hughes, Roy (Newport E)
Darling, Alistair Hughes, Simon (Southwark)
Davies, Rt Hon Denzil (Llanelli) Ingram, Adam
Davies, Ron (Caerphilly) Janner, Greville
Davis, Terry (B'ham Hodge H'l) Johnston, Sir Russell
Dewar, Donald Jones, Barry (Alyn & Deeside)
Jones, leuan (Ynys Mon) Quin, Ms Joyce
Jones, Martyn (Clwyd S W) Radice, Giles
Kaufman, Rt Hon Gerald Randall, Stuart
Kennedy, Charles Redmond, Martin
Kilfoyle, Peter Rees, Rt Hon Merlyn
Kinnock, Rt Hon Neil Reid, Dr John
Kirkwood, Archy Robertson, George
Kumar, Dr. Ashok Robinson, Geoffrey
Lamond, James Rogers, Allan
Leadbitter, Ted Rooker, Jeff
Leighton, Ron Rooney, Terence
Lewis, Terry Ross, Ernie (Dundee W)
Litherland, Robert Rowlands, Ted
Lloyd, Tony (Stretford) Ruddock, Joan
Lofthouse, Geoffrey Salmond, Alex
Loyden, Eddie Sedgemore, Brian
McAllion, John Sheerman, Barry
McAvoy, Thomas Sheldon, Rt Hon Robert
McCartney, Ian Short, Clare
McCrea, Rev William Skinner, Dennis
Macdonald, Calum A. Smith, C. (Isl'ton & F'bury)
McFall, John Smith, Rt Hon J. (Monk'ds E)
McGrady, Eddie Smith, J. P. (Vale of Glam)
McKay, Allen (Barnsley West) Snape, Peter
McKelvey, William Soley, Clive
McLeish, Henry Spearing, Nigel
McMaster, Gordon Steel, Rt Hon Sir David
McWilliam, John Steinberg, Gerry
Madden, Max Stephen, Nicol
Mahon, Mrs Alice Stott, Roger
Marek, Dr John Strang, Gavin
Marshall, Jim (Leicester S) Straw, Jack
Martin, Michael J. (Springburn) Taylor, Mrs Ann (Dewsbury)
Martlew, Eric Taylor, Matthew (Truro)
Maxton, John Thomas, Dr Dafydd Elis
Meacher, Michael Turner, Dennis
Meale, Alan Vaz, Keith
Michael, Alun Wallace, James
Michie, Bill (Sheffield Heeley) Walley, Joan
Mitchell, Austin (G't Grimsby) Wardell, Gareth (Gower)
Moonie, Dr Lewis Wareing, Robert N.
Morgan, Rhodri Watson, Mike (Glasgow, C)
Morris, Rt Hon A. (W'shawe) Welsh, Michael (Doncaster N)
Morris, Rt Hon J. (Aberavon) Wigley, Dafydd
Mowlam, Marjorie Williams, Rt Hon Alan
Mullin, Chris Williams, Alan W. (Carm'then)
Murphy, Paul Wilson, Brian
Nellist, Dave Winnick, David
Oakes, Rt Hon Gordon Wise, Mrs Audrey
O'Brien, William Worthington, Tony
O'Neill, Martin Wray, Jimmy
Orme, Rt Hon Stanley Young, David (Bolton SE)
Parry, Robert
Patchett, Terry Tellers for the Noes:
Pendry, Tom Mr. Jack Thompson and
Powell, Ray (Ogmore) Mr. Eric Illsley.
Primarolo, Dawn

Question accordingly agreed to.

Resolved, That this House approves the Autumn Statement presented by Mr. Chancellor of the Exchequer on 6th November 1991; notes that the Government has continued to maintain firm control over public expenditure, while honouring its commitments in full and increasing spending in priority areas; and congratulates the Government on its sound and prudent economic policies, which have led to a substantial reduction in inflation and have laid the foundations for sustainable recovery.