The Economy

HC Deb 25 November 1993 vol 233 cc592-681

Madam Speaker

Before we commence today's debate, I should inform the House that I have selected the amendment standing in the name of the Leader of the Opposition. I have also selected for Division at 10 o'clock the amendment standing in the name of the leader of the Liberal Democratic party.

4.8 pm

Mr. Gordon Brown (Dunfermline, East)

I beg to move, at the end of the Question, to add: But note that, to pay for Government mismanagement, election promises are being broken again by raising national insurance and other taxes; humbly regret that the Gracious Speech excludes a new industry, skills and employment policy for Britain; demand urgent measures to end mass unemployment and to implement the skills revolution; and call for the reconsideration of the policy of imposing VAT on fuel and the removal of the threat of further cuts in vitally important public services and in Britain's welfare state.

Instead of a Gracious Speech whose individual measures do little or nothing for industry, nothing for employment, nothing for skills and nothing for rebuilding the economic and social fabric of Britain and that does nothing but pursue the old, tired and crude dogma of privatisation and deregulation, the British people need a new Government programme.

Looking to Tuesday in particular, we need a Budget that first acknowledges and faces up to the mistakes of the past, secondly takes new measures to strong recovery now, and thirdly, tackles the fundamental problems of rebuilding our economic capacity for the future.

We need a Budget that is pro-fairness, pro-industry, pro-jobs and pro-investment. We need a Budget for fairness that will bridge the gap between rich and poor by attacking poverty and therefore promises to abolish VAT on fuel. It would therefore reduce the £8.50 burden that the typical family will have to pay in higher taxes on what they spend and in their pay packets as a result of the Government's economic mistakes.

Secondly, we need a Budget that is pro-jobs and pro-industry, and therefore not only releases past capital receipts so that we can build, and introduces the energy-saving and job-creating programmes that we have put forward in our submissions, but encourages employers to take on many of the long-term unemployed by rebating the national insurance contributions.

Thirdly, we need a Budget that is pro-investment, with not just the working party but a task force that will get public-private partnerships moving quickly, a small business grant scheme, a technology investment allowance so that we can move ahead in innovations, and the creation of regional development agencies in England to match those in in Scotland and Wales.

We therefore need a Budget that faces up to our three problems of a trade deficit, a borrowing deficit and a jobs deficit with 2.8 million people unemployed; which recognises that the root of our problem is the smallness and diminished capacity of our economy; which understands that the deficit will return, as will the trade deficit, and unemployment will remain high, unless we tackle those basic and fundamental issues, and which recognises the importance of Government having a role in helping to ensure the investment that we need in people, industry and our social and economic fabric.

The Government talk about people accepting personal responsibility for their actions. Is it not about time that the Government and Ministers assumed some personal responsibility for their actions? This month, Japan, with 2.5 per cent. unemployment, has introduced its third programme to inject resources into the economy. This month, America, with far lower unemployment than ours, is planning a world employment summit. This month, a new Government in Canada are announcing a programme that will bring more people back to work. Yet only this Government believe that it is better for the unemployed to be doing nothing, because they do not believe in the case for Government doing anything.

The Opposition's argument is that, after all the economic experiments from 1979 onwards—monetarism, the medium-term strategy, the 1988 Budget, the promises of a balanced budget that have led to the biggest deficit that we have ever had—here in Britain, the Government, if they do not change course, are about to repeat the mistakes that gave us the stop-go economics of the 1980s.

That is why we need a Budget that faces up to the reality that our economy is suffering from a diminished capacity. It is 5 per cent. smaller than it was at the beginning of the 1990s. Manufacturing, which lost 15 per cent. of its capacity in the recession of the 1980s, has lost another 5 per cent. of its capacity already in the 1990s. During 14 years, our manufacturing industry, even in the oil-rich years, has grown by only 5 per cent., while in Japan growth has been more than 50 per cent. and in America, more than 35 per cent.

But the problem that the Chancellor and previous Chancellors have refused to face up to is that the economy will remain smaller than it should be unless we have a strategy for investment and a policy for industry for the future.

Investment in manufacturing workers is now half the world's best. Investment in manufacturing has fallen in real terms since 1979. Investment in manufacturing as a share of our national income has been falling, while in Japan, Germany and France, it has risen. This year, business investment is a smaller proportion of our national income than at any time for the past 30 years.

Mr: Nigel Forman (Carshalton and Wallington)

Will the hon. Gentleman give way?

Mr. Brown

I shall be happy to give way to the hon. Gentleman and perhaps educate him on some of our policies.

Mr. Forman

The hon. Gentleman talks about the importance to the Opposition of investment, particularly in manufacturing, but how will the European socialist manifesto, with all its extra costs for employers to which his party is committed, help investment and net return?

Mr. Brown

The hon. Gentleman has come into the Chamber late, and I suspect that he has not read the manifesto that has come from Brussels, so let me tell him what it says. It says that we are committed to jobs, industry and investment for the future, and that is more than can be said for Conservative Members, who have presided over the worst situation for investment in the recession that we have had since 1990.

The problems of the British economy are, first, diminished capacity, secondly, lower investment than our competitors, but, thirdly, which the Chancellor must face up to next Tuesday, the fact that investment in our economy is still falling despite an autumn statement that was meant to enable private investment to take off.

Since the autumn statement and the Budget, investment has continued to fall. Investment in private industry and manufacturing, and investment generally in business, are still falling. If the Government do not face up to that, they will be sowing the seeds for the next recession. Our measures for industry in the Budget would include enhanced capital allowances, a small business grant scheme, new investment agreements between banks, financial institutions, and industry, measures to improve the social and economic fabric, and to take the European regional and social fund money that the Government have failed even to collect over the past few months.

The measures also include those which would enact the skills revolution and would end the discrimination against the unemployed undertaking training. Measures would be included to regenerate regional, industrial, and investment incentives for training and education, and to create a new partnership with business in a new university for industry for our country.

The tragedy of the Government is that they cannot even begin to think of the measures which are necessary for the future. All they are doing is giving the country the plight of having to pay the bills for their past mistakes. That is what taxing pensioners for their fuel is all about. That is what threatening even more tax rises to the tune of £8.50 per week is all about. That is what taxes on what we spend and taxes on our pay packets from April will be all about. Those proposals are all to pay for the mistakes of the past, and they go against every promise made by the Conservatives at the general election.

The issue of the Budget is whether the Chancellor will listen to the British people and whether he will now change his mind as a result of those people telling him what is right for the country. The first thing that I want the Chancellor to do on Tuesday is to abandon the proposals for VAT and to be fair in his taxation policy.

Let us just recall the background to the subject. The increase of VAT on fuel is unfair. It will affect pensioners severely and will hit the weakest and the frailest most. The severely disabled and the housebound, who rely on heating for more hours per day than many others, will be hit harder than anyone else.

Mr. Jacques Arnold (Gravesham)

Will the hon. Gentleman tell the House how the Labour party would meet Britain's commitments on carbon emissions that were made at the Rio summit?

Mr. Brown

The hon. Gentleman should know that my hon. Friend the Member for Islington, South and Finsbury (Mr. Smith), who speaks for the Opposition on the environment, issued proposals at the previous Budget that would do four times as much to reduce carbon dioxide emissions as anything that the Government propose. Let us be absolutely clear that the VAT proposals did not arise because the Government had suddenly gone green. They arose because the Government moved the nation's finances into the red.

Mr. Arnold

rose—

Madam Speaker

Order. It seems that the hon. Gentleman is not prepared to give way again, as he has just done so.

Mr. Brown

The hon. Gentleman should be reminded of what the Prime Minister said at the general election about such a proposal for VAT. [Interruption.] Before the hon. Gentleman shouts, he should listen to what the Prime Minister said. The Prime Minister said that the Conservative party had no plans to increase VAT.

Mr. Stephen Milligan (Eastleigh)

Will the hon. Gentleman now take the opportunity to answer the question that was posed by my hon. Friend the Member for Gravesham (Mr. Arnold)?

Mr. Brown

The hon. Gentleman would have an answer if he read the energy and environmental programme that was put out by my hon. Friend the Member for Blackburn. The energy efficiency measures included the insulation of people's homes to cut the amount of energy that people would have to use. [Interruption.] Conservative Members are in a difficult mood this afternoon. Perhaps that is because they are waiting to cast their ballots at 6 o'clock in the 1922 Committee.

Mr. Charles Hendry (High Peak)

Does the hon. Gentleman recall that the Labour party specifically excluded VAT on heating and fuel from those areas which it would exempt from VAT? Fuel was the only area where VAT did not apply, and the Labour party refused to say that it would not put VAT on fuel. Does not that suggest that it was planning to do just that?

Mr. Brown

The hon. Gentleman has got it absolutely wrong. The Labour party was not committed to putting VAT on fuel, and I challenge him to produce such a commitment. I will happily give way to him if he can read the commitment out.

Mr. Hendry

The Labour party specifically stated a number of areas where it would not impose VAT. The only area not mentioned and which is currently zero-rated for VAT was fuel and energy. That suggests to many of my hon. Friends that the Labour party had plans to impose such a tax.

Mr. Brown

The hon. Gentleman may have convinced himself, but he will never convince the country with such statements. He knows perfectly well that I asked him to read out Labour's commitment to put VAT on fuel but that he could not do so because it does not exist.

Mr. Bernard Jenkin (Colchester, North)

rose—

Mr. Brown

Oh, the hon. Gentleman has it.

Mr. Jenkin

I am happy to read an extract from "Looking to the Future", which states: Zero rating on items such as food, fares, books and children's clothing should remain an essential part of the VAT system. We will use the tax system, as well as regulation, to help protect the environment". The document did not mention fuel, but it did mention protecting the environment; what conclusion are we meant to draw from that?

Mr. Brown

I notice that, when challenged, the hon. Gentleman could not read out our commitment to put VAT on fuel. He should apologise to the House for wasting time.

Hon. Members

Answer the question.

Madam Speaker

Order. Hon. Members must stop shouting from a sedentary position. The quality of our debate is not improved by it.

Mr. Brown

I shall be happy to give way to the hon. Gentleman if he can explain what I am about to read out from his election manifesto in Colchester, North. He said that there were 10 good reasons to vote Conservative; the fourth was "low taxes". Can he explain that?

Let us be clear about the nature of the pledge made before the election. On 27 March, the Prime Minister was asked: Can you give the same pledge that Mrs. Thatcher did in 1987 that you will not extend the scope of VAT to children's shoes and clothing, gas and electricity and food? The Prime Minister replied: I've made the pledge in the past. I have made it clear Why did he then break election promises made by the Conservative Government? Before the Chancellor announces his Budget on Tuesday, let him be absolutely clear about what people will think of the compensation schemes he is suggesting. I warn him against VAT compensation schemes which will be the minimum he can get away with rather than the best that the Government should be doing for pensioners and others. I remind him of the motion signed by hon. Members, even Conservative Members, who said quite clearly that they would not allow such a compensation scheme to go through and would not support VAT in its present form unless every pensioner were given compensation for the rise in VAT.

Without a compensation scheme that involves every pensioner, the Chancellor has no majority in the House for pressing ahead. The best compensation for which 10 million pensioners and others who are worried about VAT will be looking would be the abandonment of VAT on fuel altogether.

Let us be clear not only about promises on VAT but about other promises made by the Chancellor, the Prime Minister and the Cabinet on tax generally. Let us be clear about what was said during the election campaign, not in offhand remarks made casually around the country at late-night meetings but as the central element of the Tory campaign on television and in the newspapers.

The then Chancellor was asked on "Channel 4 News" whether he would increase taxes. He said: We will not have to increase taxes. I cannot see any circumstances in which that will be necessary. He was asked: Does that mean direct and indirect taxes? He said: Yes.

The Chancellor will never be able to persuade the country, much as he has tried, that the Government have not betrayed a very clear promise that they would not increase income tax. The Prime Minister said at the time not only that taxes would not rise but that they were going to fall. He said: We will make further reductions in the rate of taxation, but perhaps not at the rate of a penny a year. Was not that supposed to be taken as a commitment?

Mr. John Townend (Bridlington)

The hon. Gentleman criticises the increase in taxes announced in the spring Budget. Will he tell the House how a Labour Government would deal with the budget deficit if they did not increase taxes? Does he support the Conservative Members who advocate cuts in public spending?

Mr. Brown

The first thing that I would do is to refrain from breaking promises made to the electorate during a general election campaign.

Mr. Michael Bates (Langbaurgh)

The hon. Gentleman will recall that, during the election campaign, his party advocated the abolition of the upper earnings limit on national insurance contributions. For the sake of clarification, I ask him whether that is still his party's policy.

Mr. Brown

Our policies are going before the Commission on Social Justice, and we will produce—[Interruption.] The hon. Gentleman does not seem to understand that it is the Conservative party, not the Labour party, that has broken all its promises on tax.

On 28 January, the Prime Minister made another promise. He said: There is no plan to raise the level of national insurance contributions". Yet now the Government are not only increasing national insurance by £3 to £4 a week for the ordinary employee, but are considering reducing the benefits that people receive from their contributions. I can think of no situation more unacceptable than having to pay £3 to £4 a week more in national insurance contributions while, as is suggested by some members of the Conservative party, any unemployment benefit that one might receive is cut by half.

Before Ministers feel that they might have escaped, let me remind the Chief Secretary to the Treasury what he said about national insurance in his personal election manifesto: Higher tax and national insurance would hit those who work harder and do overtime". What does he say now? In America, George Bush said, "Read my lips; no more taxes," increased taxes and lost an election. I predict that the Prime Minister who said, "Read my manifesto—it is all mine—no more taxes," will also lose an election because of what the Government have done.

The fear is not only of what the Government have done on taxation but of what they are doing to public services, despite all their election promises. Their manifesto made promises on child benefit. Under the heading, "Supporting Families," it said: Child Benefit will remain the cornerstone of our policy for all families with children…Child Benefit will continue to be paid to all families, normally to the mother, and in respect of all children. If that promise was made to the electorate, why has a review been set up with the specific object of examining the case for withholding child benefit from people with income or capital above a specified level? Does that not show that the Conservative party is prepared to break yet another election promise to the country?

What about the Conservatives' promise on pensions? Pensions were to be the foundation of the Government's policy for retirement. Yet what is the object of the review that has been set up within the Department of Social Security? Perhaps the Chancellor of the Exchequer does not know about it. Its brief is to consider the idea of opting out of contributory benefits—unemployment, sickness and invalidity benefits, and especially retirement pensions. Does the Chancellor wonder why the country will never trust the Conservative Government again?

What about the public spending cuts that the Chancellor says he will announce in various departmental budgets next week? A few weeks ago, he talked a great deal in interviews about blood on the carpet, and said that Departments' budgets would be cut by millions of pounds. During the election campaign, the Prime Minister said this about the Conservatives' public spending commitments: We will stand by the figures in the Red Book. I see no reason why we should not meet our promises. We have allocated our reserves; we have seen these concerns in the past; it has not been necessary to change plans".

What are we to make of a Government who are now cutting public spending? What do they say now? If incompetence was their excuse for being guilty of breaking promises, perhaps we should have to take what they said into consideration. As we saw this afternoon, the Government bluster all the time about broken promises for which they do not even begin to apologise to the country for having broken. The Chancellor was at it again recently, when he said that we should not take him seriously when it was a matter of half-sentences taken from shredded speeches that someone delivered on a wet night somewhere in Dudley and then quoted out of context in order to maintain the pretence that we have broken our promises. I suppose that is a case of, "You can read my lips, but not on a wet night in Dudley."

We will quote not half-sentences from Dudley but full sentences. I have the manifestos issued in Dudley, where the Chancellor thinks it is not important to examine what was said. The Conservative candidate for Dudley, East promised in his election manifesto: We will get taxes down to 20p in the pound. Does anyone think that he would have secured 20,000 votes if he had told the voters of Dudley, East that the Conservatives would increase VAT and taxes all round?

The Conservative candidate for Dudley, West began his manifesto: You can depend on John. He was referring to John Major. He continued: The Conservatives have the policies, the will and the leadership to see Britain through. The main brunt of that candidate's manifesto, which was issued to people not just on wet nights but every night in Dudley, was: Tax is the dirtiest word in the Conservative philosophy. Unlike the Socialists, who are going down the disastrous pathway of higher taxation and national insurance contributions, taking money out of your earnings, we have started on a pathway to 20p in the pound. The Conservative candidate for Dudley, East won by a majority of 5,789 votes. Would any of Dudley's 12,000 pensioners have voted for that candidate if they had known that VAT would be imposed on fuel?

The Chancellor, instead of telling the people of Dudley that they should not bother to listen to Conservatives, should go to Dudley to apologise to the people there for what is happening. The Conservative victory in Dudley was won on a complete fraud.

It is not only Labour that is unhappy with the Conservative Government. I have just read an extract from a letter sent to Conservative supporters by the treasurer of Hornchurch Tories, in which he askes them to buy tickets for the Christmas raffle. He writes: You may ask, why I should buy anything from the Conservative Party, given the way that they have managed the country recently? We believe that the message to the Government is that you do not want VAT on fuel, you do not want any more tax increases, and you do want services such as the National Health Service improved. He goes on to pledge that the money raised by the Christmas raffle will go not to Conservative central office but to a campaign to mount opposition against Government policy. Astonishingly for the Government, Essex man has become the enemy within. Perhaps the attendance in the Chamber now reflects the fact that divisions in the Conservative party on economic policy go far deeper than Hornchurch.

This week, the right hon. Member for Huntingdon (Mr. Major) completes three years as Prime Minister. Not one celebration is planned, not one party. There will be no street parties, and there are no calls for 10 more years. There is not even the faintest, tentative whisper of "Three more years." Not even a slender commemorative volume has been published, though perhaps it would have to be entitled, "Major: The Forgotten Years—1990–1993."

How is the Conservative party celebrating the three years of leadership? It is having a battle over who controls the 1922 Committee because of the Prime Minister's lack of leadership. The country is raging at the imposition of VAT and public services are under attack, but uppermost in the minds of Conservative Members this afternoon, and the struggle that is concerning them, is who will be running the 1922 Committee. I must warn the Chancellor that, if he speaks at any length, Conservative Back Benchers may start to get restless, and he should prepare himself for an exodus at 6 o'clock as they troop towards the door to cast their votes in the election.

The argument in the Conservative party and in the 1922 Committee goes to the heart of the Government It is a battle between the forces represented by the Chancellor and those represented by the Chief Secretary, with the party leader not so much above the struggle as simply at its mercy.

If one considers what the Chancellor and the Chief Secretary have been saying about economic policy in the last few months, one discovers that the Conservative party is fundamentally divided, not between Front-Bench and Back-Bench Members, not between one or two people on the 1922 Committee and one or two others, but between the Chancellor and the Chief Secretary. The division is right at the heart of the Treasury.

The Chancellor tells us that he supports a single currency and big moves towards European integration, but the Chief Secretary cannot abide the idea. The Chancellor, understandably, wants to abide by his promises on pensions, but the Chief Secretary wants an opt-out scheme for young people to be taken out of state pensions. The Chancellor tell us that there will be no hotel charges for hospitals, but the Chief Secretary says that we must consider further charges in the national health service. The Chancellor said that the poll tax was a bad idea, but the Chief Secretary has never stopped supporting it and wants to get back to it.

What is happening in the Treasury as we prepare for the Budget? The right hand of the Conservative party simply does not know what the extreme right hand is doing. The Chancellor considers himself to be pro-European, pro-public services, pro-fairness, moderate rather than extreme, and centrist rather than right-wing—that is the image that he wishes to convey to the public—but is anybody in any doubt about what the country thinks about the Conservative party? It believes that the party is anti-European, anti-fairness, anti-public services, extreme rather than moderate and lurching all the time to the right. That is the direction in which policy is moving in the Conservative party.

I have one message for the Chancellor as he considers the other measures that he can introduce in his Budget next Tuesday. He must remind people of his views on VAT. He certainly has a one-club policy, which is to extend VAT to all the essentials that he can get his hands on. Is, he reluctantly implementing policies that the right hon. Member for Kingston upon Thames (Mr. Lamont) imposed in March, or is the Chancellor the rnost enthusiastic adherent of the policy on VAT?

Let us be clear where the Chancellor stands on VAT. He wanted VAT on fuel before now. He said in an interview a few weeks ago that VAT on fuel was much overdue. So the issue for the Chancellor is not that it should be introduced, but that it should have been done sooner. That is hardly in line with Tory promises to the electorate.

The Chancellor also said that he wanted the immediate imposition of VAT at 17.5 per cent. and that it should not be imposed in two stages—first at 8 per cent, then at 17.5 per cent. He said: With hindsight, it would have been politically advantageous to go to 17.5 per cent. straight away and bring it in this April. So nobody should be in any doubt that this Chancellor would have imposed more misery on pensioners by raising VAT on fuel to 17.5 per cent. immediately.

What is the Chancellor's attitude to VAT on other items? He said: I have always thought we exempt far too many goods, and services from VAT in this country. VAT is still imposed on little over half of all sales, which is much more restrictive than the sales tax in most other countries.

Again, let us be clear about the Chancellor's views on VAT. He wanted VAT on fuel earlier, he wanted it at 17.5 per cent. from April and he wants to extend it at the earliest possible opportunity to food, transport, children clothes and to books, publications and newspapers.

Given what the Chancellor has said in the past, it is now not a matter of whether he will extend VAT but when; not how little VAT he will impose, but how much; not whether there will be further rises in VAT, but how many, and when. This is a Chancellor with a dangerous dependence on VAT.

Mr. Geoffrey Clifton-Brown (Cirencester and Tewkesbury)

Would the hon. Gentleman increase or reduce public expenditure if he were delivering the Budget? If he would increase it, what taxes would he raise to pay for it? If he would reduce it, what public services would he cut?

Mr. Brown

The hon. Gentleman does not seem aware of what is happening in this country. Public spending bills have risen in the past three years chiefly because of what has happened to unemployment, which is costing £9,000 per person. Any sensible person with a strategy to reduce the deficit and to get the economy moving again would cut unemployment—so much is clear. If the Government had any sense of priorities for the tax system, they would not impose VAT on pensioners' fuel. They would close the well known tax loopholes and anomalies that have been opened up over the past 14 years by themselves, prey as they have been to the financial interests in this country.

I have a number of questions for the Chancellor today—

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

Before the hon. Gentleman gets to those questions, may I ask him whether he is satisfied that there are measures that could affect a significant reduction in unemployment but which can be achieved without any extra taxation or extra borrowing?

Mr. Brown

Of course there are—I was coming to that before I concluded my speech.

Let me tell the Chancellor what any Government could do tomorrow. They could rebate national insurance to employers who take on the long-term unemployed. They could introduce energy-efficiency measures to insulate people's homes and to get people back to work. They could release local authorities' capital receipts to allow them to build homes using the resources that they have accumulated.

To pay for these things, a Government could not go ahead with the plan to abolish stamp duty on shares—£1 billion would come to the Exchequer from that. Secondly, they could impose the windfall tax that we have proposed on the privatised utilities. Thirdly, they should bridge the gap in corporation tax receipts, of £1 billion. Fourthly, they should close down the business expansion scheme today and save millions of pounds before 31 December. That money currently gives top-rate taxpayers allowances for using repossessed homes as tax shelters to defray their tax bills. The Government could close the loophole in advanced corporation tax, which would raise large sums of money. I refer to enhanced share issues being granted instead of dividends.

That series of measures would raise hundreds of millions of pounds, and eventually billions. The Government could implement them to reduce the deficit and to deal with our problems of unemployment.

Given what has been said about the public spending reviews into which the Government have entered, is it now the Chancellor's policy to consider abolishing statutory sick pay contributions from the Government, thereby leaving employees at the mercy of their employers, afraid to be ill and eventually running the risk of being sacked simply for being ill? If that is the right hon. and learned Gentleman's policy, how is it that he regards it as a higher priority than pursuing the offshore and onshore trusts which defray tax bills to the tune of millions by not paying a proper share of tax?

Is the right hon. and learned Gentleman considering—the review has made this clear—the ultimate transferral of industrial injuries benefit to employers? Or will he face up to the fact that companies such as Hanson Trust pay only half their proper share of taxation, using offshore tax loopholes to avoid paying? In this way they have saved themselves millions of pounds over the past few years, and they continue to do so.

What exactly are the Chancellor's priorities? Is it the right hon. and learned Gentleman's priority to target the sick, invalids, the unemployed—or will he now target the tax avoiders and evaders who have been defraying their tax bills at the expense of us all?

Mr. Graham Riddick (Colne Valley)

Having signed the European socialist manifesto, why will not the hon. Gentleman implement a mandatory 35-hour week?

Mr. Brown

The hon. Gentleman should do his homework. That is not in the manifesto. The Government, on the other hand, should be ashamed of not supporting the 48-hour week directive from Brussels. People are now back to having no wage protection and less and less protection at work.

I want to tell the Chancellor about the context in which he intends to formulate his Budget. No one is in any serious doubt that we are dealing with the problems of economic decline and social failure. A million children are being taught in classrooms built before the first world war. As a proportion of their age group, more young people are in higher education in Taiwan than in Britain. A third of our hospital wards were built in the days of the charity and voluntary hospitals. A million people live in slums. Rail investment is being slashed, and public investment in infrastructure is about to be cut again. The state of Britain, in short, is deteriorating because the Government do not believe that they have a responsibility to the community or to public services.

Yet everyone knows that measures could be taken immediately not only to create jobs but to improve public services and infrastructure. Before he took his job, the Chancellor said that the Government were in a dreadful hole. He said that they had no medium-term view; no agenda for two or three years ahead. He said that they had to come to an agreement about how to present such an agenda in a way that gave the Government's followers back a sense of purpose. Where is the Government's purpose? Where is the new agenda, apart from the rhetoric of "back to basics"? Where is the medium-term view?

Little wonder that, a few months later, when asked on 20 September whether the Government were still in a dreadful hole, the Chancellor said that they were. Since then, when has the dynamism and drive been shown? Where is the new energy, the new industrial policy that we need; where is the new deal for the unemployed? Have the Government dropped rail privatisation, or their proposals to extend VAT? The truth is that they have no long-term strategy, no real purpose, no medium-term or long-term view. There is no leadership, no new programme, in the Gracious Speech. There is no new purpose: for that, we will need a new Government.

4.47 pm

The Chancellor of the Exchequer (Mr. Kenneth Clarke)

The first decision I had to take on the first day I took up my new office as Chancellor was to take absolutely no notice of any advice that I would get from the hon. Member for Dunfermline, East (Mr. Brown). I intend to stick to that decision. It was extremely difficult to find any coherent advice in his speech today or any clues about what the Labour party's policy towards the problems that we face might be.

Given that the Opposition can choose the subject matter in our Queen's Speech debate, it was rather silly to choose a debate on the economy just five days before the Budget as there is no way a Chancellor or any other Minister can give the House any hints about what might or might not be in the Budget. It was silly also because some Oppositions might have been able to fill in the time by explaining what their own Budget propositions would be, by giving me advice, by setting out with clarity how the Labour party would grasp the present situation. We have just heard nothing of the kind. We have heard some good jokes, some bad jokes and material that was scratched about for in the most unlikely places.

The hon. Member for Dunfermline East leaves lying in front of him a most impressive pile of books. I was rather impressed by that when I saw it. I thought, "It is a pity that he has not given me notice of his authorities. He has been studying the way forward from our present position." I looked at them and could not make up my mind whether they were the House of Lords debates or whether they were statutes bound. In any event they are merely there to make it easier for him to read photostats of sales of raffle tickets in Hornchurch, which he was using as his principal authority to attack the Government.

As to what he said, as well as what he did not say, occasionally he touched on what he and his right hon. and hon. Friends in office might do if they were confronted by the current situation in the country. Every time he opened his mouth and went into one of those lists for which he is rightly renowned, every item in the list seemed to me to cost public money. It is difficult to keep a running score, with the hon. Gentleman's rapid fire delivery of great long lists of great measures that he would take. By forgoing tax and spending money, he had got through £12 billion by the end of his third sentence. From there on, I abandoned any attempt to keep pace with it.

When the hon. Gentleman gets up to speak on economic policy, he speaks like one of those till rolls coming out of a supermarket, with list upon list of high-spending commitments into which the Labour party would launch to tackle the economic problems of the day. He was given a further chance. My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Clifton-Brown) asked him an extremely relevant and pertinent question, but it was not a very difficult question. It was not a difficult question when it was followed up by the right hon. Member for Berwick-upon-Tweed (Mr. Beith) on behalf of the Liberal party.

Is the hon. Gentleman putting forward what he is proposing on the basis that he will increase spending or not, or that he will increase taxation or not? That is not a difficult question, I would have thought, for a shadow Chancellor who might have been thinking of his own shadow Budget, five days before the Budget. A crowded House heard that he was utterly incapable of giving an answer to that question, except that he went rattling off again, shortly thereafter, into a list of measures which began to include public spending commitments again.

Dr. John Reid (Motherwell, North)

As to simple questions and till rolls, who created the £50 billion deficit that confronts us?

Mr. Clarke

Every country in the developed world is in recession—[Interruption.] If one looks through the western developed economies—the United States, Germany, France, Italy, to the United Kingdom—one finds that a protracted recession has cut Government revenues, increased Government expenditure and caused a problem of public sector borrowing which all Governments in the developed world are having to tackle. Apparently, if we had a Labour Government it would be tackled by £12 billion worth of extra public spending by the end of the third sentence of the Chancellor's Budget speech.

Several hon. Members

rose—

Mr. Clarke

I will give way as generously as the hon. Gentleman did if I am allowed to make a little more progress.

Let me just turn to the paucity of any response to that. It is no good trying to pretend that a £50 billion public sector borrowing requirement is not relevant to the view that the principal Opposition party has to take about our present position. [Interruption.] It is no good laughing at it when it is mentioned, or pretending that if we had a Labour Government in the European Union we somehow would not confront the problem which all the other member states are confronting and all are having to tackle.

It is not good enough to come back with answers based on photostats of election addresses in Dudley and the sort of tatty material that the hon. Gentleman used and, in the middle of what could have been a statesmanlike shadow Budget, actually to resort to making criticisms about our party elections, to which I personally am not party—I do not have a vote. The hon. Gentleman treads on some delicate ground. We have not had our party elections yet. We know that the Labour party has had party elections. It is clear that, to get northern and Scottish members of the Labour movement to vote for women, one has to give them no choice. That is what was revealed the last time they had internal party elections. [Interruption.]

Mr. Deputy Speaker (Mr. Geoffrey Lofthouse)

Order. I am finding it very difficult to hear what the Chancellor has to say and I am sure that many other people are trying to do so. The House must now settle down. Chancellor of the Exchequer.

Mr. Clarke

Let me move on to the subject matter of the debate. Having just dealt with the one point that was trying to be made out of those election addresses for Dudley, the question of where taxation plays a part in where we are now, the hon. Gentleman plainly retreads the same speech when he comes here. Much of it he must have delivered on the stump of the last election, and much of it after the last election, trying to re-fight the last election. He had a shadow Budget at the last election—or, more to the point, the right hon. and learned Member for Monk:lands, East (Mr. Smith) had a shadow Budget.

Under that Budget, every person earning £25,000 a year in this country would have paid £2,050 more a year in taxation. The reason was that the Labour party was fighting the last election on the basis of hugely expensive spending promises—promises about pensions and about child benefit—all of which were designed to win votes. I will not re-fight the last election beyond that, but it is time the Labour party discovered what its policy is, addressed the issues which confront the nation and stopped trying to re-fight the last election on the basis of total mythology about the respective spending plans of both parties and the taxation consequences which might have followed its being elected.

Mr. Tony Banks (Newham, North-East)

rose—

Mr. Clarke

I will turn next to the current economic situation, but first I give way to the hon. Gentleman.

Mr. Banks

Does the Chancellor of the Exchequer accept that if he had to re-fight the last general election, in view of what has happened since, the Conservative party would be destroyed? What other word would he use to describe a party which says during an election campaign that it will not extend VAT and that it will not increase national insurance contributions, and then after the general election does precisely that? What word would he use to describe such a party?

Mr. Clarke

If we fought the last election against a Labour party with the high-spending and high-taxing manifesto that it has now scrapped and tried to forget, we would win again. We would win more forcefully when people could see the real economic problems that confront the country. We have not broken any of our manifesto commitments in the last election, and it is quite wrong to go scratching around for cyclostat material from candidates in the black country to try to prove the contrary.

Mr. Gordon Brown

rose—

Mr. Clarke

I will give way, but the hon. Gentleman, having heard that I intend to move on to the present economic situation, is obviously now trying to prevent me getting there.

Mr. Brown

The difference between us and the Conservatives at the last election is that we told the truth and they did not. Will the Chancellor now tell the public: does he accept that the Conservatives promised not to increase taxes, and will he apologise for breaking those promises?

Mr. Clarke

We gave no commitment whatever to say that we would never increase taxation. It is descending—as the hon. Gentleman did in his speech—to the most puerile politics to claim that the Conservative party has ever said that in no Budget, at no time, will we ever increase any taxation. We have not said that. It is quite clear to anyone who objectively studies the present position, let alone the past position, of the political parties that in any circumstances a Conservative Government would have lower taxation than a Labour Government would have, tackling the same position, precisely because, every time they confront even a £50 billion borrowing requirement, Labour Front-Bench Members are quite incapable of stopping themselves just spending public money' as the answer to every question.

Let me move on—

Mr. Brown

On that question, so that we can clear it up, the Prime Minister was asked whether he gave the same pledge that Mrs. Thatcher did in 1987: that you will not extend the scope of VAT to children's clothes, gas and electricity and food? The Prime Minister replied: I have made the pledge in the past. I have made it clear. Is that not the breaking of promises?

Mr. Clarke

During the campaign, the Labour party made the strong assertion that it had costed our programme and we would have to raise the basic rate of VAT. That was spurious then and it continues to be spurious. I advise the hon. Gentleman to move on and to think about policy. He should stop fighting the last election because Labour lost it fairly and squarely. Indeed, it deserved to lose it because, while our aim was to come out of recession, Labour made hugely expensive promises that would have meant huge increases in taxation. It is obvious that, even now, it is still not prepared to forswear those increases.

Let us now move on to deal with something with which, to my astonishment, the hon. Gentleman did not deal—Britiain's current economic position. He did not deal with that because it is now much more encouraging than in any other major economy in the European Union. I have been in opposition; I am one of those veteran Members who recalls the time when the Conservative party was in opposition. I understand the difficulty of having an Opposition day to debate the economy at a time when it is clearly recovering and getting better—[Interruption.] Labour Members are expressing disbelief.

Mr. Michael Connarty (Falkirk, East)

At the Engineering Employers Federation briefing in October, which I attended, its director said that the upturn was over. He said that it would be funny if it were not so serious, but that it was serious and not very funny. A few days later, he was then mysteriously asked to resign. Is the Chancellor not willing to face the fact that people in manufacturing do not think that there is an upturn? Indeed, they think that there is a downturn.

Mr. Clarke

No one could accuse me of over-selling the present recovery. I agree with the sensible prevailing view that there is a recovery, but that it is fragile and needs to be stronger. If the leader of the EEF and the hon. Gentleman both believe that the recovery is over, it is my opinion that they are talking nonsense. Indeed, I do not know whether the EEF has been quoted accurately.

I shall quote an unlikely source, the editor of The Sunday Times—[interruption.] Andrew Neil is an old friend of mine, but he and I are hardly in political agreement on a large number of issues. However, he pointed out this week: Britain stands on the brink of a new era of growth and prosperity, built on a competitive exchange rate, the supply side reforms of the 1980s and the fact that alone in Europe, managers and workers here have grasped the realities of economic survival of the 1990s and beyond.

Let us examine what reality lies behind that. Unemployment has fallen by almost 140,000 since January. It has fallen in seven of the past nine months. That is not happening anywhere else in Europe. It is happening in Britain only because we have a more flexible labour market than existed before the Government came to power. That is why there is increased employment and falling unemployment so early in the recovery.

Dame Elaine Kellett-Bowman (Lancaster)

Does my right hon. and learned Friend rejoice in the fact that the latest fall in unemployment, which was much larger than expected, will save the Government£180 million a year in unemployment benefit-not to mention all the tax that those affected will now be paying?

Mr. Clarke

My hon. Friend is right. One of the principal reasons, although not the only reason, why we have such a large borrowing requirement is that recession reduces the take from corporation tax, income tax and other revenue, while putting up expenditure—in particular, on unemployment. One way in which a recovery can be strengthened is that, with the falls in unemployment currently being achieved in Britain, forecast expenditure on unemployment will drop and we shall move into the early stages of what could become a virtuous cycle—if we behave sensibly, which is more than we can expect from the Opposition.

The hon. Member for Dunfermline, East did not mention inflation. In his torrent of words, "inflation" did not cross his lips. Inflation has been below 2 per cent. in each of the past 10 months—something which had not happened since 1960. It has remained below the European average every month since August 1991. This month, headline inflation stands at the spectacularly low figure of 1.4 per cent. There are some good reasons for that. Pay is now under control and whole economy unit wage costs are down 1 per cent. in the year ending the second quarter of 1993. That is the largest fall since records began in 1960. Despite low inflation, however, consumer spending is rising. Retail sales are at record levels, even higher than at the top of the cycle when we last had good times. Car sales in October were up 17 per cent. on a year earlier.

It is absolutely no good the Opposition dismissing all that. They cannot ignore the fact that, if we had taken various items of their advice, it is highly unlikely that the British recovery, which puts us ahead of the field in coming out of recession, would have occurred or been maintained.

Mr. William Cash (Stafford)

I congratulate my right hon. and learned Friend on the award that he received yesterday. Will he add to the catalogue of reasons why the recovery is getting better the fact that Britain has left the exchange rate mechanism? In the light of remarks that he made—I hope off the cuff—at a news conference at the Confederation of British Industry, will he make it crystal clear that his enthusiasm for European economic and monetary union—and, by implication, the ERM—is not something in which he really believes? If we were to return to the ERM, we would lose all the benefits that he has just descr[...]

Mr. Clarke

With respect to my hon. Friend, the argument that the recovery started because we left the ERM is simply mythology. It is clear that the recovery that we are now enjoying began 18 months ago, a long time before Britain left the ERM. One reason why we are enjoying such a strong recovery and why we have done well both before and after leaving the ERM is our great success in bringing down inflation and lowering interest rates. When we lost the discipline of the ERM, my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont) wisely replaced it with the discipline and the monetary policy that we are now imposing upon ourselves. Successive reductions in inflation have helped.

What I have just described has preserved our competitive position. The changed climate in this country means that although we have had a devaluation of the currency and reductions in both inflation and interest rates, we have also had good management, successful control of costs and, in particular, unit wage costs being kept down so that Britain has been able to keep its competitive edge. All of that is apparent in a variety of other areas, although listening to the speech of the hon. Member for Dunfermline, East we would never know that.

Industry is doing better despite an exceptionally difficult exporting climate in our principal markets within the European Union. Export volumes are well up and our exporters have done especially well in non-European markets. Our manufacturing output and industrial production are up and the productivity record this year is extremely good. Our industrial relations remain good, with industrial disputes at their lowest level since records began.

There is also the monetary position. I have said that I always ignore—although, of course, I listen to it with respect—the advice of the hon. Member for Dunfermline, East. His main advice, day in and day out, is to reduce interest rates. Day in and day out, he advised each of my predecessors to reduce interest rates. I do not know whether he would ever raise interest rates in any circumstances, but it seems unlikely. Even when inflation was running at 8 per cent. three years ago, he wanted to reduce interest rates. It is his automatic approach to life.

I did not take the hon. Gentleman's advice and, consequently, monetary conditions in Britain have enabled me to reduce interest rates to the lowest level in the European Union. Taking all the available factors into account and paying regard to the monetary policy set out by my right hon. Friend the Member for Kingston upon Thames, which I have followed, I was able to lower interest rates to 5.5 per cent. That was announced by the Governor of the Bank of England on Tuesday. It is the lowest rate of interest since 1977.

When interest rate cuts since October 1990 are passed on, they will reduce the interest bill of companies in the country by almost £12 billion a year and it will reduce the monthly payments of the average mortgage payer by £170 a month. Sound money is worth real money to real people. The effect of what we have been able to do has been to stimulate the recovery to which my hon. Friend the Member for Stafford (Mr. Cash) referred.

Having listened to two minutes of the speech of the hon. Member for Dunfermline, East, it is obvious that none of that would have been achieved if we had a reckless, high-spending, spending one's way out of trouble, high-taxation Government in power with Labour politicians who do not even mention the word "inflation" in any dissertation that they give on economic policy.

Mr. Beith

Why does not the Chancellor seize the opportunity to lock in that monetary discipline and make himself the first Chancellor to recognise the merits of an independent central bank while still in office, rather than waiting until he has left it?

Mr. Clarke

My joke the other day may have been misunderstood. There are some financial journalists in front of whom one should never make jokes. I do not wish to break the tradition of my predecessors by pronouncing on that subject while in office. I have made it clear—I hope that the right hon. Gentleman will support me on the point —that decisions on interest rates are made on the grounds of monetary policy in conjunction with the Governor of the Bank of England, who now handles the operational end of those activities, precisely on the basis that we have set out.

We considered broad money, narrow money, asset values and exchange rate activity before I decided that we could reduce interest rates by 0.5 per cent. in the past week. I made that announcement nine days before the Budget precisely because I did not wish anyone to think that the judgment of interest rates was affected by my equivalent of the knockabout political rubbish that we have just heard from the hon. Member for Dunfermline, East. It is a step in the direction taken by the right hon. Member for Berwick-upon-Tweed (Mr. Beith), but I warn him that there are much bigger and more serious matters of parliamentary accountability to be addressed before anybody makes a decision one way or another about the independence of a central bank.

I remind the Opposition of our more serious economic achievements, on which everybody in the House should be concentrating on building. We are especially keen in the area of the manufacturing industrial base. At the moment, as we sustain the recovery, our performance in that area is better than any of our major competitors. Over the past year, industrial production fell by nearly 2 per cent. in Italy, by 3 per cent. in France, by 4 per cent. in Japan and by 7 per cent. in Germany, but in the United Kingdom it rose by almost 3 per cent.

Our performance coming out of the recession is based on many things that the Government have done over the past 14 years and it is plainly necessary to keep to the instinctual policies of the Conservative party if we are to keep that good comparative performance. Having listened to today's debate, nobody in their right mind would contemplate the reckless step of putting the Labour party back into any kind of responsible office dealing with such an important and delicate situation as the revival of our industrial economy.

Hon. Members

Try it.

Mr. Tony Marlow (Northampton, North)

Would my right hon. and learned Friend agree that leaving the exchange rate mechanism has had an effect on the recovery and, if so, has that effect been beneficial or negative? Given the lessons that we have learnt since leaving the ERM and the occurrence of other events in Europe, would my right hon. and learned Friend say how those lessons will affect rejoining the ERM and, if we are to rejoin it, what benefits shall we receive from doing so?

Mr. Clarke

Leaving the ERM has had some beneficial effects, although I do not agree with the proposition of my hon. Friend the Member for Stafford that the recovery somehow started when or because we left it. We were driven out and the whole mechanism was given wider bands 12 months later because of the totally different conditions that prevailed in Germany compared with those in the rest of the Community.

I will concede to my hon. Friend the Member for Northampton, North (Mr. Marlow), with whom I have had many interesting debates on the European question, that those differing circumstances in Germany and the wise policies that were being pursued by the Bundesbank to deal with the German domestic conditions were imposing higher interest rates on the United Kingdom, France and other western European countries than our monetary conditions could justify. That began in the summer before we were driven out of the ERM and had a damaging effect on the performance of our economy.

When we left the ERM, it would have been disastrous if our monetary policy were decided by a seat-of-the-pants response, in response to newspaper headlines or if it were in the hands of anybody like the hon. Member for Dunfermline, East who always wants to lower interest rates. That is why finding ourselves outside the ERM, which I have always supported because I thought that it was a discipline for monetary policy in the country that helped us to get inflation and interest rates down, it was right of my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont) rapidly to put in place a British domestic monetary framework by which we have successfully proceeded.

When I take part in European discussions now, I say that it is wrong to go back to get fresh blueprints for fresh versions of the ERM out of the drawer since those events have taken place. I still believe in exchange rate stability. That is best when pursued by convergence and sensible economic policies that produce similar economic circumstances in the different member states, as we are now doing.

I am surprised that I keep being asked about an aim of economic and monetary union. I made my first speech in the House in favour of it in 1971 or 1972 and have not changed my views. I have always thought, as have the Government, that the timetable for economic and monetary union set out in the Maastricht treaty was nonsense. That is now plain and we should not proceed on any automatic timetable and I do not know when we will ever get back into any process of that kind. [Interruption.] There has to be somebody in the House who puts an interesting question.

Mr. Dennis Skinner (Bolsover)

rose—

Mr. Clarke

With respect. I am delighted to see one of the intellectual heavyweights of the Labour party coming to the fore. I remember the hon. Gentleman putting forward his own shadow budget many years ago—and the last time he was totally out of sympathy with his own Front Bench. Now, the Opposition Front Bench could not possibly put together a shadow budget, so I am delighted to hear the authentic voice of the Labour movement.

Mr. Skinner

Will the Chancellor tell us where is the real economic recovery? In the real world, there are 4 million without jobs. The Government have all but closed down the shipbuilding industry and they are shutting pits every week. People are lying in the streets. Old-age pensioners are dying of hypothermia and yet the Government are proposing to tax them more heavily. A Chancellor of the Exchequer in the real world should be ensuring that the £5.2 billion that has been handed out in tax cuts to the richest 5 per cent. since 1988 should be clawed back and used to build houses for pensioners, to rebuild the welfare state and to put people back to work. That is the real world.

Mr. Clarke

The real world is similar to that to which the hon. Gentleman refers, although he increases the figures. Of course, he is absolutely right to say that we are still facing the problem of there being far too many people unemployed. I point out the good news that unemployment is now coming down. It is also true that we must achieve a higher industrial production, I point out that it is rising, unlike any other G7 country. I also appreciate that we must ensure that the wealth-creating economy produces wealth so that we can tackle some of the social problems that we face.

We sharply clash, however, on the claim that the Government have done nothing to strengthen the welfare state and the social security system over the past 14 years. I strongly refute that. I am explaining the background against which I shall deliver a constructive Budget next Tuesday that will nurture what I have been describing.

I have not said that there is no problem out there and that everything has recovered. We all meet business men and people working in industry who know that conditions at the moment are very difficult. However, we should not react to that in this country by pretending that there are no first signs of good news and that no recovery is taking place. This country's performance is better than that of our competitors. The circumstances here are more encouraging than those of our competitors. We need a view far more responsible than the view coming from either branch of the Labour movement if we are to move forward from here as we wish.

As I cannot speak about my Budget, I shall continue to speak about the suggestions thrown out to me by the hon. Member for Dunfermline, East. He could not answer the question about the Rio targets. He said that of course he was against VAT on fuel. He did not bother to listen to the questions asked by my hon. Friend the Member for High Peak (Mr. Hendry) or to the quotations that my hon. Friend used, which were very pertinent. He asked why, when the Labour party committed itself at the general election to not putting VAT on exempt and zero-rated goods, it did not mention domestic fuel. Did the Labour party have the kind of thoughts that were also contained in Liberal Democrat policy documents?

Labour's environment spokesman spoke about hitting the Rio targets by a combination of tax and other measures. What taxes, pray, did Labour have in mind for hitting those environmental targets, if not taxes on the fuels which cause the emissions? [Interruption.] It is not Labour Front-Bench Members who stir there. I debated against a Labour environment spokesman recently. Labour environment spokemen take to the hills when we tax them on such a question and when we approach them about a tax which still has the support of Friends of the Earth, but which does not have the support of environment spokesmen from the great Opposition parties, who plainly hinted at exactly what we are doing.

The hon. Member for Dunfermline, East criticised my views on the extent of VAT. I have no idea what the views of the Labour party are on the extent of VAT. My views, as slightly misquoted by the hon. Gentleman, sound like the views of Lord Desai, the Labour spokesman in the House of Lords. The poor chap found himself sacked for saying that we should extend the base of VAT. Never mind, Labour did not really know. He was put back on the Front Bench because the official spokesman for the Labour party does not have to have a view on the extension of VAT. We cannot tie down the Labour party on that or on anything else.

When asked about tax, the hon. Member for Dunfermline, East has one response—loopholes. I hope that he does not try to pay his personal bills with such loopholes. He thinks that loopholes would raise billions of pounds to pay for everything he promises. He tries to break down his loopholes which, he claimed at one time, would raise £10 billion. Every Budget we present keeps up with the tax avoidance industry and tries to close loopholes, year in and year out under every Government. Every Chancellor tries to do that.

Let us look at the £10 billion referred to by the hon. Member for Dunfermline, East. Some £2 billion of it is what he calls underpayment of corporation tax. What he means is that he intends to put up corporation tax on British business by £2 billion. When one searches the Labour party's policy documents, which are not lying in front of us, one finds that Labour still believes in demand management, although it does not explain how it would operate that. Labour uses phrases such as: The public sector must become the engine of growth. There is no explanation of what that means. Earlier this year, the Opposition spokesmen for education and for employment committed the party to the renationalisation of gas, water and electricity—the great public utilities.

We know that Labour talks about radical changes in the City. One of the novel ideas for the Bank of England, of all institutions—it will never be independent under a Labour Government—is that it should promote industrial investment. It is strange for a Labour Government to channel their intervention through a central bank into direct investment in industry.

Labour is getting close to the Liberal Democrats. I must pardon the Liberal Democrats in some respects, because they gave us their Budget earlier today. We listened to the leader of the Labour party talking to the Trades Union Congress and one could imagine that one was listening to a totally different man from the leader of the Labour party who talked to the Confederation of British Industry. The right hon. and learned Member for Monklands, East is back on the cocktail circuit. He talked about his friendship for business, but when he talked earlier to the TUC, he talked about minimum wages, about statutory trade union recognition and about putting the old inflexibilities back into our labour market—the things from which we should now be getting away.

Mr. Nigel Griffiths (Edinburgh, South)

Does the Chancellor accept that, because so many lies were told by the Tory party to get it into power, the habit of telling lies has caught on and the Tory party is now incapable of telling the truth but continues to tell a pack of lies?

Mr. Clarke

The hon. Member for Edinburgh, South (Mr. Griffiths) gets very exicted. He did not specify which of my various descriptions did not attach accurately to his party or to his party leader.

Mr. Griffiths

Will the Chancellor give way?

Mr. Clarke

I will not give way again. I can give the hon. Gentleman chapter and verse for my quotations from the words of the Labour spokesmen for education and for employment. I looked them up before I quoted them. Time does not permit me to go on to explore the previous occasion when it might have been possible to find out what the economic policy of the Labour party was.

The European socialist manifesto, to which the right hon. and learned Member for Monklands, East signed up last week, makes the position clear. It is said that the commitment to a 35-hour week is not in the manifesto—[HON. MEMBERS: "Read it out."] The manifesto is said not to have a commitment, although the whole tone of the document favours high spending. The manifesto is committed to the social chapter and to costs on employers. It uses the rather telling phrase that the principle of free trade should not interfere with social standards in Europe. I thought that that was a rather dangerous retreat from previous policy. [HON. MEMBERS: "Read it out."]

All right. I was doing the House a kindness by saying that I did not have time to go into the European manifesto. Opposition Members can stop smiling; I have found the relevant passage. I quote: The principles of Free Trade must not be allowed to undermine social standards in Europe. That is a phrase of which Ross Perot or Mr. Chirac could be proud. Labour has joined the old protectionist tendency in western Europe although the general agreement on tariffs and trade is one of the most vital things affecting our well-being between now and the end of the century.

I do not have time to tax Labour about the European recovery fund, to which it has signed up and to which it keeps referring. That fund is no less than a £77 billion recovery fund—a Euro-megaversion of the Labour party's approach to all such problems.

I have described the present economic situation. As the House knows and as the Opposition knew when they tabled the amendment, that situation must be addressed in next Tuesday's Budget. I am working on my Budget speech and I strongly advise the hon. Member for Dunfermline, East to go away and to work again on his. He cannot give another retread of the speech he has just used.

The principles that we shall adopt—the principles that, in Europe and in this country, will take us back to economic health—are, first, the principles of free trade, of beating the single market in Europe, of getting rid of state aids in Europe, of having a competition policy and of keeping to budget disciplines in our national economies and in Europe as well.

We must aim at conditions of low inflation and at achieving healthy public finances. We must seek to get stable exchange rates based on sensible, national economic policies which produce the right conditions. We must tackle the problem of the competitiveness of our economy, both in the short term and in the long term. That is what the Government will continue to do and part of that will be the Budget measures I shall announce next Tuesday. I shall come back next Tuesday completely untroubled by the prospect of the Opposition having any worthwhile or sensible economic ideas in their head.

5.29 pm

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

The Chancellor of the Exchequer certainly put on a good turn this afternoon. He is right to pick out the areas in which the economy is showing some long overdue signs of improvement, and to concede that the recovery is very fragile and that serious problems still need to be addressed. I shall argue later why I do not think that the Government have addressed those problems satisfactorily.

I advise the Chancellor that he should give his driver the night off and go home on the London underground—if he can get home on the London underground. He will then experience some of the problems that one of a number of public 'assets up and down the country are having. Those assets are in a desperate state and in urgent need of new investment and action. The Chancellor will know what happened a couple of days ago when the underground system was almost completely closed down.

Construction work to rebuild our public transport system is clearly required, and is one of the ways in which the Government can accelerate recovery. If the recovery is not accelerated to a higher level than the Government have forecast, we will not deal with the deficit that the Chancellor has described.

The Gracious Speech said that the Government would bring the Budget deficit back towards balance over the medium term. That is a cunning rephrasing of what appeared in the Gracious Speech more than 18 months ago at the beginning of the Session that has just ended. The Gracious Speech at that time said: They will balance the Budget over the medium term. Now we are only going to bring it back towards balance —and not very far towards balance, on the Government's own projections.

I do not know what the Government mean by the medium term, but it is not the next three years or five years if growth is at forecast levels of about 2.75 per cent. Growth will have to be significantly above that level—and it certainly ought to be—if we are to get the deficit down.

We have not only a public sector borrowing requirement, a public sector deficit, but a trade deficit on current account. The most recent figures do not offer a clear guide to the seriousness of that problem, but everybody acknowledges that it is a serious problem. It is one that has persisted even in times of recession. There is an extraordinary tendency in Britain to buy large amounts of consumer goods from abroad, even in times of recession.

We also have the investment deficit that I referred to a moment ago—in the London underground system, in many parts of British Rail, such as the west coast main line, in housing, in schools and in hospitals. In all those areas, investment is needed.

Our public sector net worth is steadily declining—public wealth minus public sector debt—and it will be at zero by 1998 from more than 100 per cent. of GDP in the 1980s. An item appeared recently in the Lloyd's Bank review which said: the current mix of capital spending and borrowing implies a gradual reduction in the net worth of the public sector, i.e. a declining bequest of net public sector assets to future generations. We are consuming far more public goods than we are paying for in taxes.

I hope that the Chancellor has noted the comments of the chairman of Ford of Europe, who, in addition to giving advice about the cutting of interest rates, said that the British Government should spend much, much more on infrastructure and its education and training … Britain needs its people educated, motivated and trained to compete at world level. Indeed it does, but we cannot get those things without paying for them.

I intervened in the speech of the hon. Member for Dunfermline, East (Mr. Brown), because I do not believe that his package of loopholes stands up to examination as a basis for paying for some of the things that he also agrees are necessary for our country.

If we look at his package in detail, we find that the £10 billion is a two-year, not a one-year, figure. As the Chancellor has pointed out, it involves trying to get a lot of corporation tax out of companies that lost significant amounts of money in the recession. At best we might get £1 billion, or a little more, out of it, but certainly not £10 billion in one year. We will not get enough to meet the very important and urgent requirements of the public sector.

Consideration of the Budget has been dominated by the size of the deficit. The Government helped to create that deficit and are now in danger of making it worse by a panic reaction in the Budget. There is no way that the deficit can be reduced to reasonable proportions without economic recovery; there is no way that by trimming a bit of capital spending here and current spending there we can achieve a reduction in the deficit of £50 billion and get it right down towards balance. When we talk about getting the deficit down towards balance, we mean a deficit that can be measured in single figures, or at least not much above £10 billion.

We will not get anywhere near that figure by the Chancellor making the kind of public expenditure cuts that will be publicly acceptable—even within his own party, let alone in the country as a whole. If he makes significant cuts in capital expenditure, he will put more people out of work, increase the money spent on benefit and cut his tax revenues. If he cuts welfare benefits, he will reduce the spending power of the poorest. They are the people most likely to spend every penny that they get because of their desperate need to pay for the basic essentials of life.

We have to put people back to work. In order to do that, it is necessary to invest money in the renewal of the public assets which have been so badly neglected. Now is the best time to do that. We will currently get the best deal and best prices possible from the construction industry—an industry which, as the Chancellor has admitted, is still not feeling the effects of the recovery.

One of the classic things that we do in this country is wait until we have boom conditions, and then say that we can now afford to improve our schools and hospitals, and to invest in the public sector. We do that when to do so is to worsen the problems of scarcity, to pile on inflation and to push up wage pressure in these crucial industries. We should do that when the industry needs the work, the country needs the assets and the prices are at their most favourable. The best time to do that is in a recession or when we are trying to get out of a recession, which is what we are currently doing.

I urge the Government not to cut capital expenditure in the Budget but to increase expenditure on the public transport system and on those parts of the road programme that are environmentally sensible. That programme could be brought forward and started now. That would help industry to get its goods to markets. It is ludicrous that, at a time when access to markets is crucial to our industries, we are so far behind in getting direct access to the channel tunnel.

We should release council house receipts for house building and housing renovation. That would deal with the desperate problems of housing that the private sector is not able to meet. We should increase rather than cut the grants to housing associations that are engaged in this very important social housing.

Another way, which does not cost money—on the contrary, it brings in money—by which the Government could give a significant boost to the housing market is to learn from the mistake of the former right hon. Member for Blaby, the noble Lord Lawson. Among many other mistakes that he made at the same time, he announced a change in mortgage interest tax relief, which encouraged people to rush out and take on mortgages at the height of the housing market. That pushed the housing market further forward and generated some of the boom conditions that have led to the depth of the current recession.

The current circumstances, with the housing market in serious difficulty, are the right circumstances in which to announce a change in mortgage tax relief at some date in the future, which I suggest should be 1 January 1995. It would not be a change that affected existing borrowers. The sort of change that the Government propose to make will mean that from 1 April existing borrowers will pay more because their tax relief will be reduced to the 20 per cent. level. The change that we suggest would provide that new mortgages after that date would not attract tax relief, but mortgages previously taken out would; otherwise, people would be locked into their properties. They will have to be able to carry their tax relief if they buy another house.

I do not think there is any logical defence in principle for taking money from the not very well-off taxpayers and giving it to far better-off taxpayers, who are able to use the maximum relief and have the income with which to do it.

The only defence for keeping that system is that it is difficult to get right the process of change and to ensure that people who made commitments on the basis of what they could afford when they took out a mortgage do not suffer. Such people have suffered a great deal during the period of rising interest rates.

It must be done in a way which does not create problems in the housing market. The change I suggest would actually help the housing market by stimulating it at a time when it needs to be stimulated. It is a measure which, over the longer term, would reduce deficits. It would not bring in significant revenue initially, but as the years go by it would, and to a very considerable extent.

As I said earlier, it is impossible to achieve some of what I believe is necessary without paying for it. I believe that tax increases are needed to finance extremely important measures. At the time of the general election, we said that we would be prepared to put a penny on the standard rate of income tax to fund drastic improvements in education. We stand by that commitment, and we would fulfil it if we were presenting our Budget now. We would also increase the higher rate, although we would also raise the threshold, so that those on the highest incomes made a greater contribution to the handling of society's problems.

Incidentally, that suggestion has been backed by a number of Conservative Back Benchers. They have said that, in the current circumstances, those who have benefited most—the top earners—should surely be willing, as I think many are, to contribute more to extricating the country from its present difficulties. I expected to hear that view from Labour Members as well, but I have not heard it in the debate so far; it has been expressed mainly by Conservative Back Benchers and members of my party.

We believe that everyone who pays taxes should contribute to our education commitments through the penny on income tax, but that only those earning over £27,200 a year should finance other changes through the increase in the higher rate. We think that such measures are necessary—and they can be backed by measures to tackle waste, of which there is plenty. The separate administration of income tax and national insurance is extremely wasteful, particularly for Government but also for business. The two systems could be brought together: although complicated further measures would be needed, the end result would be a much more economical arrangement.

As the National Audit Office has demonstrated, there is a tremendous amount of waste in the social security system. People are overpaid, and very large sums are involved. There are enormously wasteful Government-funded advertising campaigns. Huge departmental entertainment expenditures have come to light in recent months. Then there are policy reversals such as the poll tax mess, as well as unclaimed support from European funds for measures that we could be introducing in this country and many other examples of waste. I do not think, however, that measures to deal with waste would solve all the problems. We must tell people honestly that some things need to be done, and that they must be paid for.

I believe that we must give at least some interim help to pensioners, who have fared very badly in the past few years. We would cost into our programme an immediate £2 increase over and above the price-related increase, and entirely separate from compensation for the imposition of VAT on fuel. In fact, we would not proceed with that; we consider it a particularly harsh measure, which, moreover, is not tailored to bring about changes in the amount of fuel that is used. It is not backed by measures to enable people to insulate their homes, which would have offset the cost of the tax.

The Chancellor should not forget charities or the overseas aid budget, which is now under pressure as a result of the desperate situation in sub-Saharan Africa. It would be possible to provide at least a small measure of help, even within the current constraints.

I told the Chancellor in an earlier intervention that I thought the time had come to lock in the monetary discipline against which any expansionary measures such as these need to be set. He may wish to claim some credit for having managed monetary policy cautiously over a relatively short period, but I do not share his confidence in all the members of his own party—let alone members of the official Opposition—in regard to the way in which other Chancellors might conduct monetary policy. I certainly do not believe that the market is entirely free of the belief that even he might, in some circumstances, press for or pursue an interest-rate decision whose timing was related to powerful political pressures, rather than to the longer-term objective of price stability.

Mr. Jacques Arnold

The right hon. Gentleman said that he did not believe that the imposition of VAT on energy had had the impact that it should have had. The Liberal Democrats' document "Costing the Earth" states clearly: The impact on consumers of energy taxes must also be recognised. In its 1992 election manifesto, the party said equally clearly that it would support a Community-wide energy tax on all energy sources. Why is that?

Mr. Beith

That was and is our policy. The hon. Gentleman must have missed several earlier debates in which his hon. Friends have read exactly the same passage to me, and have secured exactly the same answer.

What is so crazy is the imposition of VAT, which does not cover the whole area of energy at the generation end, but applies directly to consumers, on such a scale and with so little regard for their circumstances that there is no reasonable way in which they can adjust to it. Indeed, some of the biggest adjustments that could be made to reduce energy emissions would be made not in the domestic sector, but in the transport sector. Those least able to adjust are pensioners confronted with a rate of first 8 per cent. and then 17.5 per cent., who do not even own their houses and have not the means to insulate those houses effectively.

An energy tax should not be a revenue-raising measure, as the Government's VAT is; it should be a behaviour-changing measure, preceded by provisions enabling people to insulate their houses, thus reducing rather than increasing their net gas and electricity bills. [Interruption.] The hon. Member for Gravesham (Mr. Arnold) has heard that argument several times before. If he cannot understand it now, I think that he is being a little slow.

The Government must also consider smaller business. It is clear that the business expansion scheme, and the various other measures that have been tried, have not yet solved the problem of conveying venture capital effectively to small firms. Even the capital allowances that came to an end a month ago had a disappointing effect on investment. The Government should not give up the search for measures to help match venture capital, on sensible terms, with the businesses that can make use of it.

By "sensible terms", I mean a greater dependence on long-term interest rates, rather than the short-term rates that have bedevilled small businesses and driven so many of them to the wall during the recession. At present many exist on overdrafts and other forms of finance that are peculiarly vulnerable to interest-rate changes. Nevertheless, I hope that a longer-term policy of consistently lower rates will be possible.

I am arguing for a Budget for recovery. I do not believe that the Gracious Speech gives us any hope that the recovery will be the basis of the Chancellor's Budget; I fear that the Government will be panicked by the size of the deficit into introducing measures that will not help to lower that deficit, and may even make it worse. I want expansion that we know can feed back in tax paid by people who are back in work, benefits that those people no longer require and assets that will equip industry to compete more successfully in the future. I ask the Government to engage in longer-term investment in education, which I believe is essential.

The Budget will be viewed against the background of a Gracious Speech that is in large part devoted to undoing the Government's past mistakes in regard to the economy and law and order. I am told that they have introduced more than 60 pieces of law-and-order legislation, but they have found it necessary to devote a quarter or a third of the legislative programme to law and order because they have got so much wrong in the past.

This is a speech presented by a Government dedicated to the centralisation of power, desperate to centralise control of the police and magistrates courts; a Government who have opened up a whole system of appointed bodies —quangos to whom they appoint their friends to control more and more of people's everyday life; a Government hopelessly divided on the fundamental question of Britain's future in Europe. Earlier, the Chancellor rightly remarked on the diffrence between the flavour of what the right hon. and learned Member for Monklands, East (Mr. Smith) said to the TUC conference and what he told the CBI. There was an equally marked difference between the tone of Ministers' speeches to the Conservative party conference and their speeches to the CBI conference. One would hardly think that they came from the same Government —in some instances, indeed, the same Ministers were involved. The tone was entirely different, because the Government are deeply divided on an issue that is fundamental to our future.

We certainly do not wish to give our support to such a Gracious Speech. We invite the House to support our amendment, by which means we seek to express our belief that the country could be run very much better.

5.49 pm

Mr. Edward Leigh (Gainsborough and Horncastle)

Today's debate gives us a rare opportunity to take a broad view and to give our own views of which direction the Government should take. I hope, therefore, that the House will forgive me if I do not confine myself to speaking solely about economic matters.

The Queen's Speech is addressed to Parliament assembled of the United Kingdom and ends with the words: I pray that the blessing of Almighty God may rest upon your counsels. That neatly encapsulates in a few words what a Conservative Government are elected to defend—the traditions of monarchy, the supremacy of Parliament, the unity of the realm, including Northern Ireland, and the moral authority of the churches. All four are under threat as never before, despite, or perhaps because of, unprecedented prosperity and materialism. However, all four need to be defended by Tories, even, sometimes, from themselves.

It is up to us to defend the monarchy as a sacerdotal symbol of national unity and shared history and tradition. It is up to us to ensure that the supremacy of Parliament, so hard won by the Bill of Rights and civil war, cannot be the plaything of diplomacy or party management; it is probably our greatest gift to world civilisation. It is the nearest thing to an absolute in politics.

We must retain a Union based on consent. Two truths are self-evident in the argument on the Union. Only the people of Northern Ireland can decide, and only they should be allowed to run their own affairs. That logic can produce only one result—a free Parliament or assembly for Northern Ireland. A deal cannot be brokered in Dublin or London—only in Derry and Belfast. Self-government will bring responsibility; with responsibility will come compromise; with compromise will come settlement.

We must maintain the moral authority of the Christian churches not by preaching ethics as politicians—that is for the Churches—but by creating a social environment where Christian concepts of care for others by ourselves and our families, not by others and certainly not by the state, are the norm and where the material gains of capitalism are always balanced by the spiritual rewards of service. Capitalism is not enough. Left to itself, it can degenerate into destructive materialism.

Such institutions are not swept aside in a moment. They are worn away by neglect. Can we, therefore, promise the House and our electorate that we shall never sleep on our watch?

The debate is an opportunity to reflect on the guiding lights for Conservatives that shine through the defence of the institutions I have mentioned. They are, first, the maintenance of national sovereignty that flows directly from the defence of the historical privileges of Parliament; secondly, the defence of the nation or its interests from external aggression and the preservation at home of freedom, under the law, from lawlessness; and, thirdly, the maintenance of sound finances—a balanced budget without increases in direct taxation.

Any Conservative Government or legislative programme of a Conservative Government is judged by those three yardsticks. The first reminds us that power does not derive from some supranational institution, treaty or solemn constitution, but from the consent of the people at general and local elections. Thus, the essential building block is the local community and not the European Community.

This year, we need to use the opportunity of the Boundaries Commission to break down the structures of government, remove distant layers in health care and local government and create unitary authorities based on whatever town, suburb, area or even large village that people relate to; we need enabling and not providing bodies, efficiently contracting out work on competitive tenders. As far as possible, they should be given such powers as they can finance from their own resources.

We need to reinvigorate the Government as a vehicle for furthering consumer and local choice at the expense of impersonal bureaucracies or even ideologies. For instance, it is fashionable to argue that the march towards a liberal market world trading system is unstoppable and that, inevitably, more and more power will be diverted from local communities and national Parliaments into the boardrooms of multinational companies and the councils of international trade negotiators. I disagree.

The people themselves will rise up against politicians who distance themselves from their needs. A parish council in Lincolnshire trying to achieve more control of its planning from a distant, bureaucratic council; a Nottingham miner operating a so-called uneconomic pit: further afield, a Neapolitan voter sickened by Mafia or city boss corruption; a farmer in the Auvergne trying to preserve his rural culture and employment; a steel worker in Pittsburgh threatened by cheap Mexican imports; or a fisherman in British Columbia rebelling against giving into to the distant Quebecois—they are all small and unfashionable people who are derided by the great and the cynical in their political and industrial elites, but their power is enormous. It is being heard with increasing force. It is a distant rumble, but it moves ever closer.

Before then, the grandiloquent posturings of world-weary statesmen in their council chambers will be seen as the mutterings of emperors without clothes. A new force is arising in Europe and the world. It is spurred by mass unemployment and it is protectionist and nationalistic.

Our duty is to acknowledge that force and to harness it into positive and creative channels—into a patriotism that is not fearful to fight for national self-interest, yet promotes free trade where it is fair, which is proud but does not dominate; that provides essential public services, but ensures that they are efficiently privately and competitively delivered to meet the needs of consumers and not the desires of producers.

If we become so concerned with cutting sophisticated deals in the conference chamber of NATO, the UN, the EC or GATT that we lose touch with our electorate, their pride and their prejudices, we will be swept away like the Canadian Conservatives or the French socialists. We have to remember and acknowledge that warning.

Nowhere is the gap between the leaders and the led diverging so widely as in the development of European co-operation. We must gain support by saying that the drive towards European unity of purpose is essentially a process of equal peoples, from time to time co-operating on certain issues, but always preserving the power to act unilaterally and to take back control over a certain issue.

Power and authority must flow up, not down. The essence of nationhood and Parliament is that, in theory, it is supreme under God. That is its magic and its imperative.

We can and must gain support by saying that the drive towards greater free trade which is sensible cannot be seen as an end in itself or an inflexible ideology, but as a sensible device by sovereign nations reducing for a time barriers to the creation of wealth where essential self-interest and strategic industries are not threatened.

It is absurd for us to argue that the small, traditional Japanese rice farmer should be destroyed by cheap American rice imports from California so that Detroit car workers are put out of work by imported Japanese cars. We can take the drive towards world free trade to ridiculous lengths.

The first guiding light is that nations should seek not to dominate but to co-operate, not to pool sovereign power and thereby surrender it, but temporarily to accommodate themselves to others.

It is permissible for Great Britain, as it has done for 400 years, to involve itself in continental politics and to preserve the balance of continental power—whether threatened by Philip II, Louis XIV or the Commission—and to promote trade. It is not permissible for one generation of parliamentarians to bind their successors or irrevocably reduce the sovereign power of a successor Parliament.

Against the institutional bedrocks of Conservatism, the monarchy, Parliament and the Church, the guiding light of the defence of the nation is complementary; is, indeed, essential.

The second guiding light is the defence of the citizen from external aggression and internal lawlessness. Yet in pursuit of cost cutting in the first, or liberal nostrums in the second, it is easy to lose sight of this essential light on the horizon to aim for.

The Queen's Speech recognises that, and that is to the good, but the public will view with well-founded cynicism anything that smacks of gimmickry in any Queen's Speech. That should remind us that consistency and action —even, sadly and inevitably, sometimes the wrong consistency and the wrong action—are better than inconsistency and inaction.

The jury is out on whether prison reforms or destroys, although it certainly deters and removes from society. It may be that the only sort of action that would really impress the public on law and order would be automatic custodial sentences for theft from private dwelling houses and violence against the individual.

Equally, we should not be defensive about law and order. Perhaps we should have more of a can-do attitude in crime prevention, whether by installing deadlocks or tracking devices in cars or greater security in the home. Such measures could make a dramatic difference.

Once we are sure of our institutional support and the guiding lights are clear, we should ask ourselves why we want to be in office and what we want to achieve. Physical works are invariably a greater monument than a wealth of legislation. That is a lesson that we should have learnt during the past 15 years.

One example is transport. We should be completing now, not in the next century, a new international railway station, preferably in east London, connected on a fast line to Dover. What a pity that we are consigning hundreds of thousands of people to dispiriting unemployment, dependent on benefits. Should we not be giving them proper training and community work in return for those benefits?

People do not expect simply speeches, treaties or slogans from their Government. Oppositions must content themselves with that. People want action, and Governments who fail to provide it invariably become Oppositions. Action this day should not mean action until some Back Bencher threatens to vote against it. It is better to fail honourably in the Division Lobby than to languish as a weathercock of newspaper editorials.

That sort of tough action applies to balancing the budget over the lifetime of this Parliament. We must do it and it must be done through cutting non-wealth-creating public spending. A Government who balance their budget exude confidence, responsibility and ability.

But that cannot be done by raising direct taxation. Quite apart from its effects on consumer confidence, it knocks away the very bridge that connects us straight to the hearts of our supporters which, sadly, in this real world, a bad world perhaps, follow closely on from their wallets. From now until eternity every Tory Chancellor should read George Bush's lips and remember.

That leaves the Chancellor between a rock and a hard place, and cutting public demand not directly linked to wealth creation is a hard place indeed, as my hon. Friend the Economic Secretary knows all too well. The only real opportunity lies in social security. That brings us up against our Christian conscience. Should the underprivileged, the weak, the poor, the disabled, the unemployed suffer because we have allowed expenditure to outstrip earnings? Of course they should not.

But our aim in this Government, this year, in this Queen's Speech, in this House, must be to convince people that we are not just looking for cuts, because that will not get anywhere with the general public; we must convince them that we have a philosophy, a positive and creative one, to help people to help themselves.

As Conservatives, we need the courage to argue our case for self-reliance and for family support. It is no kindness to substitute impersonal state support for our own personal responsibility. The very generosity of the state gradually erodes the traditional role of the extended family in providing for its most needy members. Where the state can intervene is to set people on the road to self-reliance, not trap them in terrible dependency which leads them to a state of despair.

There is a role for the state in providing training and community work for people who cannot find it under their own resources. We do not need to attack any class or people, whether it is one-parent families or anyone else. We must nurture and not destroy the human spirit. Government must be seen not as a struggle for daily survival but as a crusade for regeneration. If we remain true to the guiding lights of national sovereignty that I have mentioned, of freedom under the law and self-responsibility, we may suffer some short-term unpopularity, particularly if we seek to balance the budget, but in the long term we shall not founder; we shall prosper, and ultimately we shall win through.

6.4 pm

Mr. Robert Sheldon (Ashton-under-Lyne)

The astonishing thing about the Chancellor of the Exchequer's speech was that it did not deal with the central economic issue facing us today, and that is the balance of payments. The balance of payments deficit is £17.5 billion and it was not referred to once. I find that astonishing.

We have a depression unequalled in our history. We cannot export enough and we continue to import. That is a fundamental change from previous depressions and crises in our history, not just after the second world war but before that.

The automatic way to restore the balance of payments was to depress the economy. That was harsh medicine, sometimes wrongly attributed, sometimes wrongly phased, but it was medicine that everyone knew. That is the medicine that has been followed, but this time it has not resulted in any success.

What has happened is that 14 years ago we had a reduction in capacity in our industry and that has not been put right. I can hardly ever contribute to an economic debate without mentioning that in my constituency we lost 30 per cent. of our manufacturing industry between 1979 and 1981—good firms, firms that every country has, medium-tech firms, one or two hi-tech firms, firms that had everything to gain, but they could not exist with a 17 per cent. bank rate, the highest rate ever, and a pound worth $2.40. They lost out.

Now we have another recession. I notice that the Chancellor believes that it started to end 18 months ago. He had better get round the country pretty fast if he thinks that the recession started to end 18 months ago. Some would say that it has not ended yet. There are some signs of that, but to say that it ended 18 months ago is something of which the Chancellor would have a great deal of difficulty convincing anyone.

For one calculation I can join my constituency with the area next to it—Tameside and Stockport. I join them together because a branch of the Amalgamated Engineering Union used to be based on Ashton-under-Lyne, but we have lost the Tameside branch and it is now joined with Stockport.

The Amalgamated Engineering Union used to have just over 20,000 members, highly skilled, the sort of people for whom the country is crying out. In the same area today, there were 5,000 when I investigated the matter a few months ago and I suspect that there are now fewer than 5,000. That reflects the level of skill that has been lost. We must remember that they were trained, highly skilled people, happy to give their work and achieve the kind of rewards that skilled people have traditionally always had.

Manufacturing industry is important. I was pleased that, in some of the questioning that is even now being put, the Chancellor has accepted that. Manufacturing industry sells things.' By all means, let us sell other things. Let us sell services and insurance abroad. I am all in favour of that, but the economies that are succeeding at the moment are those that continue to sell the products of manufacturing industry.

Therefore, we need investment. It will not bring quick returns, but we need investment in our manufacturing industry. I hope that the Chancellor will say something about investment incentives. They are crucial. I would go beyond 40, to 60 or 70 per cent. What is important is the use of new machinery and equipment that can make goods and produce skills. New machinery gives rise to the skills that are commensurate with it. Of course, I also want a competitive pound which would help us to sell abroad and to stop imports.

Production is required, not just because jobs are produced—that aspect can be overstated—but because goods are produced, and that affects our balance of payments. That is enormously important. More jobs will be produced over a period, but I accept that the number of jobs in manufacturing industry will decline as the industry becomes more efficient. People design machines so that fewer people are employed but the wealth which those people create will spread to other areas of the economy. However, goods must be produced. The failure to deal with the balance of payments deficit will occupy the Chancellor's mind and he will not be able to leave it alone when he comes to the Budget.

My hon. Friend the Member for Dunfermline, East (Mr. Brown) rightly mentioned the £50 billion budget deficit. The Government talk of dealing with that deficit by cuts in the welfare state. The deficit is not due to the welfare state. Why are the Government talking now about cuts?

I refer to pensioners. People of pensionable age were born in the 1920s and 1930s, and there was no baby boom at that time to bring about large numbers of pensioners. There has been an increase in life expectancy, but that is not remarkable, and there has not been a sudden surge in the number of pensioners during the past two or three years.

The Government are doing quite well out of pensioners because they have not increased pensions in line with earnings, but instead have increased them in line with prices. As the economy grows, pensions will form a relatively smaller part of the cost of running Government. That is an enormous advantage for the Government. Although people will live longer, the benefit that the Government will get from linking the pension to prices is more than will be obtained from the greater expectancy of life.

Where did the £50 billion deficit come from, and where is it going? As my hon. Friend the Member for Dunfermline, East rightly mentioned, the deficit comes from unemployment. My hon. Friend made a good speech, but I am afraid that the Chancellor's answer was a bit of knockabout stuff. I cannot blame the Chancellor, as it must be rather difficult for him with the Budget five days away. Nevertheless, the serious points raised by my hon. Friend will remain serious next week, whereas the knockabout stuff will be forgotten long before then.

The deficit comes from unemployment, added to which we have council tax subsidies, a recession and incompetence. Those are the elements of the horrifying budget deficit. However, we must not be mesmerised by that figure, because we can still borrow for investment. We can do so even with the £50 billion deficit, but the investment must be genuine. Anyone can go to his bank manager with cash flow problems as long as he has a good case to argue.

There are some good investment opportunities available which will produce genuine returns. One example is repairs of council houses which are rotting away. The Government could borrow against those houses, and would save money in the end. Those houses cannot be demolished and they have long years of life ahead of them.

The Public Accounts Committee has produced report after report showing how disgraceful the country's roads are. The Government's failure to keep the roads in good repair has led to roads having to be reconstructed at enormous cost. The worst thing is that they do not know which roads have to be reconstructed. Such work on roads is a sensible investment which can produce a return in a few years; the railway system is a similar example. Training people is a good investment, while education is a longer-term investment for which a good case can be made. Even with the £50 billion deficit, certain forms of expenditure can be undertaken which can produce returns.

I will talk now about VAT, and the ending of the zero rating. It fell to me to take the chair during consideration of the sixth directive in May 1977 during this country's presidency of Europe. The directive went well, and a deal was done with the Dutch Finance Minister, as a result of which we kept virtually everything that we had. Few people realised that anything had changed in this country regarding VAT, although things had changed in other countries.

I made the point strongly at that time—I have believed it ever since—that VAT is an important tax because it is broadly neutral. It is not a progressive tax—it never was —but it is not regressive either. The danger now is that by abolishing the zero rating, the Government are turning a broadly neutral tax into a regressive tax, which means that those with the least pay will suffer the most. If the Government start to move in that direction, they could make virtually all taxes regressive, such as taxes on petrol, tobacco, and alcohol, and vehicle excise duty. There are taxes the same for everybody, whatever their income may be. The poor will be taxed at the same level as the rich.

All this country's taxes will be regressive, except one —income tax. That will remain as the only progressive tax, and it is the one tax which the Government are determined to reduce. Everybody knows that income tax is fair, although the rate can be changed. It can be argued that the rate is too high at some stages, and too low at others, but it is the one progressive tax.

I will now say something about the proper conduct of public business, a matter which has been causing both me and the Public Accounts Committee concern. Today we have seen the Committee's report on the West Midlands regional health authority. It is right that concern should be expressed in the House about the serious shortcomings in that case.

One official in the authority who was new to the NHS made a bonfire of all kinds of controls, while the chairman and the board seriously neglected public accountability. A total of £2.5 million was spent on consultants without the authority being notified, despite there being rules that any expenditure of more than £50,000 had to be the subject of a special statement made to the board. However, £2.5 million was spent without that authorisation.

The Carver committee, which was set up to inquire into the matters, said that a "new culture" had been brought into the organisation. That worries me greatly. Many public bodies, such as hospitals and schools, have people coming in to them who do not have the disciplines, do not have the "culture", of the civil service.

I believe that those people can give certain advantages, but they did not give them to the Welsh Development Agency. The WDA was culpable, and it made a laughing stock of the rules by which public money ought to be handled. The agency had the disgrace of recruiting into a civil service post a conman who had served three prison sentences in the United States. That man came to Wales and took responsibility for publicity. He was spending money wrongly, with one example being that he interviewed a number of model girls in his hotel room on a Sunday afternoon. All that was paid for by the taxpayer. That is a scandal.

I have expressed concern at a number of other cases that the Committee has looked at recently. People from the private sector can bring valuable skills to public office—there is no doubt about that. However, they do not seem in all cases to have regard to public accountability, of which I am aware every day in my room in the House.

I have a splendidly stern Victorian room, and I always think that Gladstone knew something about the room when he set up the Public Accounts Committee more than 130 years ago. There is a sign at the top of the room which I see every day, which says "assiduity"—a splendid Victorian word. Some of us try to retain the concept of assiduity in our work.

I used to say that the eradication of fraud and corruption was more important than anything else that I did, although it was a minor element of my work; much the most important element of my work was the securing of value for money. I cannot say that now. One hundred and forty years ago, Northcote Trevelyan highlighted the need for integrity and competence in public service and laid down the foundations on which we have been governed since. The standards in our civil service have not come easily. They have had to be fought and worked for and they have been adhered to. However, a number of dangers now face US.

I see a danger in fixed-term appointments in the civil service. Who will the civil servant be most anxious to please when the time comes for reappointment or when he or she has to seek a job outside the civil service? Those who are perceptive have already seen signs of people being more anxious to impress than to achieve. Performance-related pay is also a problem. Who is to say what is the value of a civil servant who pleases only his or her political masters?

Twice this week, I have spoken to delegations of visitors from overseas who are worried about the levels of fraud and corruption in their countries. I am used to that and meet such delegations frequently. They come here to see how we have managed to remain relatively fraud-free. How many countries have standards of probity which would satisfy the House? If one starts counting, does one reach a dozen, or 15, of 180 countries? We are rather special in terms of the standards that we have maintained, and we take risks with them at our peril. The trouble with corruption in administration is not only a moral issue, which, as I know from our visitors, is serious; one aspect that should concern us is that corrupt administration is inefficient administration. Today, people who are not accountable take decisions involving public money. There are more than 1,000 public bodies and we are not able to discover what goes on in all of them, but we must retain the ethos that we have created and which we have so maintained successfully.

My right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris) mentioned Manchester airport yesterday. I was on the fringes of the argument when it was first actively discussed whether Manchester should have its own airport. The risks were enormous: Manchester would have been the only city to have control of such expenditure and the responsibility for creating its own airport.

It was remembered that Manchester had created the Manchester ship canal which, in its own way, was an even greater venture in the early years of this century. Those involved were determined to prove that the imagination, strength and conviction of their predecessors could be matched. Over the years, the airport has turned into a magnificent international airport which arouses the envy of everyone in the country. What are the Government going to do? They are going to sell it, and those who have taken the responsibility and still bear it so well will be denied that satisfaction. It is a thousand pities that that is to be allowed to happen.

My hon. Friend the Member for Dunfermline, East said that there were no new purposes in the Government. Sadly, it is true. I can predict the way in which the Government will handle the Budget and our economic affairs in the months and years ahead—it will be a sad time for this country if their policies are not changed.

6.23 pm

Rev. Ian Paisley (Antrim, North)

The Gracious Speech from the Throne contained a paragraph on Northern Ireland. It read: In Northern Ireland My Government will continue their efforts to defeat terrorism through impartial and resolute enforcement of the law, to uphold the democratic wishes of its people and seek political progress by broadly based agreement, to strengthen economic progress and to create equality of opportunity for all sections of the community. They will maintain positive relations with the Republic of Ireland. The gravity of the situation in Northern Ireland dare not be underestimated at this time. Those who would do so are deliberately blinding themselves to the truth. The darkest of facts stare us all in the face.

We are facing a campaign that arrogates to itself the sign of peace in the name of two persons, the hon. Member for Foyle (Mr. Hume) and the leader of the IRA-Sinn Fein movement, Gerry Adams. Those who long and sigh for peace are told that the proposals are a recipe for peace in a week and peace's best chance for 25 years. The cardinal of the Roman Catholic Church has given his blessing and approval; Mr. Mandela has been given the details of the so-called peace plan; the Kennedy lobby in the United States has been made privy to it, as have the Dublin Government; and the army council of the IRA is aware of the details. But the people of Northern Ireland, whose safety, well-being and destiny are at stake, are not to be given the details. Rather, if they do not support wholeheartedly that which they do not know about, they will be, and have been, castigated for throwing away the best chance of peace since the IRA commenced its hostilities.

True peace cannot come through concealment, a hidden agenda or the buy-off of the men of blood. If anyone eke tried a con trick such as the Hume-Adams proposal on the public, he would be laughed out of court. Those whose destiny is at stake have a right to know what their planned destiny is to be, especially when its authors are both dedicated to the utter destruction of Northern Ireland within the United Kingdom. IRA-Sinn Fein is dedicated to the genocide of the Protestant population of Northern Ireland.

The proposal is that, as soon as the IRA announces the end of violence, it will immediately have the right to the conference table to help decide the future of our part of the United Kingdom. Such a proposal is anathema to the vast majority of the people in Northern Ireland. Those with blood on their hands and the guilt of years of devilish carnage have no right to be at that negotiating table, no matter what their religion may be or what votes have been cast for them at any ballot box. The conference table is for ever blocked to those murderous murderers.

In his embassy in London at the weekend, Albert Reynold's cry that there could be no settlement without the IRA is in reality a plea to strengthen his hand by having his allies with him in the negotiations. Anything to weaken the Unionist position—even bloodthirsty murderers—is welcomed by Mr. Reynolds in his campaign for the destruction of the Union.

There are two matters of which every hon. Member should be aware, and I draw the House's attention to them. The first is the recent visit to Washington of the Dublin Foreign Affairs Minister, Mr. Dick Spring, and the important speech that he made during that visit. I hear people on all sides saying what a gracious, understanding, conciliatory man he is, fully sympathetic to the Unionist position and most anxious to be helpful. He certainly did not have even a tiny vestige of those characteristics in Washington. He must have jettisoned them in the ocean on the way over there because, in that speech, he appeared in his true colours.

I look in vain through the speech for any condemnation of the Irish Republican Army and its activities. Instead I find an indictment of the Unionist population. "No democracy" is Mr. Spring's thrust when he talks about Northern Ireland. He told his American audience: an internal approach to Northern Ireland is unlikely to work", and warned the Unionists that their future depended on what he called the growing nationalist community". In other words, "We are breeding faster than you, so you had better cut your losses before we take you over. You had better make a deal now."

Mr. Spring went on to claim that his country was a country in transition", moving towards perspectives of a modern, self-confident and pluralist society". However, that self-confident pluralist society is encumbered with notions of political and territorial expansion, because it seeks to annex part of the island which does not belong to it, never has belonged to it and never will. Articles 2 and 3 of the Irish constitution rob all the people of the island of Ireland of any notion of plurality, or even of accommodation. Bearing in mind the society that Mr. Spring was addressing, he told his audience that he was dedicated to preserving their "cultural heritage"—that is, of course, the Gaelic Roman Catholic ethos. Mr. Spring went on to claim that the problem of Northern Ireland was about the unresolved legacy of Anglo-Irish history".

To Mr. Spring, the territorial question is unresolved. I have heard that idea continually from the hon. Member for Foyle. They both conveniently forget the truth of the matter. In the 1920s, the Irish leaders resolved the territorial question by signing the 1921 treaty and later the 1925 tripartite accord, which accepted the recognised boundaries and had them ratified in the three Parliaments —the Dail Eireann, the Stormont Parliament and the United Kingdom Parliament. The document was then registered at the League of Nations as a record of international boundaries. Nothing could be clearer than that.

The South, under the leadership of Mr. De Valera, then plummeted into a bitter civil war. We often hear in the House about the treatment meted out to Irish people by people from this part of the United Kingdom, but we are apt to forget that the bloodiest deeds ever carried out in Ireland took place when Irishman fought Irishman in the civil war, led by De Valera. De Valera was defeated, and the settlement was established and stood.

However, when De Valera won power in the Irish Republic, he tore up the agreement and introduced the 1937 constitution, as a result of which we have the problem of the territorial claim in articles 2 and 3—the claim that Dublin, rather than the United Kingdom, was really the possessor of Northern Ireland, and that even the laws of the Republic had power over that part of the territory, which it neither owned nor controlled.

Mr. Spring forgets all that. He went on to say that the nationalist community had little sense of ownership of the structures set over them". That is an amazing statement. Unionists must rightly ask what those structures are. There are no Northern Ireland political institutions over the community in Northern Ireland, whether Protestant, Unionist, Roman Catholic or nationalist. Of course, the structures are joint Anglo-Irish structures, not only owned by the nationalists but controlled by Dublin. Yet Mr. Spring told his American audience that all those evil people in Northern Ireland set over his people institutions that they did not own. He said of the nationalists: there is no prospect that they will ever redefine themselves as British to conform with the official doctrine of their state. So much for the nationalists. But what about the majority, the Unionists? Are they to be forced into a position with which they will not conform? Mr. Spring's answer to that question is yes. He even indicts the Unionist people as being responsible for the Irish civil war.

That is the man who is supposed to be conciliatory, the man with such a great understanding of the Unionist position. He then declared that our Union flag, our symbol of identity, must be changed—the cross of St. Patrick and all. In all Mr. Spring's speech, there is no indictment of the Irish Republican Army, no catalogue of the dreadful crimes, that it has committed. But he did say this: violence is not a problem which can be solved by security means". Are we to take it from that that he considers concessions to the men of violence to be the only way forward?

So much for Mr. Spring, who, I am told, held out his hand in the Senate of the South today and said that he wanted friendship with the Unionist people. That is not what he said when he was in Washington a few days ago.

The second matter of which the House should be aware concerns the confidential document leaked in the Irish press. There was a furore in Dublin when it was leaked, and great denials. But in the Dail Eireann yesterday, the truth came out in the wash. Mr. Reynolds admitted that the document was absolutely authentic, and had set negotiations back by being leaked in that terrible manner. If he could find out who had leaked it, heads would roll, he said. At first the document was denied but now, on the floor of the Dail, it is admitted to be authentic.

The document is amazing. Anybody who expected any Unionist who believed in Northern Ireland as part of the United Kingdom—whether that person were a Roman Catholic or a Protestant—to find anything acceptable in the document would be out of his senses. The document tells us that British and Irish officials were instructed at the Anglo-Irish intergovermental conference on 10 September to use their best endeavours to draft the paper, and it says that the liaison group met and had discussions.

Who is in that? I learned from the Secretary of State in Downing street yesterday that the liaison group consists of a number of civil servants from the Foreign Office, from the Dublin Government and from the Northern Ireland Office. The document was born out of those discussions and represents a hidden agenda—which is why the people of Northern Ireland are so angry about it. It states: It is accepted on both sides"— that is, by the British and Irish Governments— that this joint paper and the discussions related to it will not be the subject of discussion, still less negotiation, with the Northern Ireland parties unless both governments agree beforehand whether and how this should be done.

That means that what is being planned for the people that I represent in the House will not be known without the consent and support of Dublin. That alone damns the document for ever in the minds of all right-thinking people in Northern Ireland. What do they take the long-suffering, law-abiding people of our Province for? They have suffered carnage for years, and have given their young men to fight against the terrorists and buried them in their graveyards. To think that those people should be disfranchised because the Dublin Government say so. Every right hon. and hon. Member should read that document and ask how there can be any settlement on such a basis.

The intergovernmental conference on the Anglo-Irish Agreement will serve as the embryo of a united Ireland Parliament that could interfere in any other structures that might be established in Northern Ireland. It will have supreme authority to interfere in those matters.

It is common knowledge that my colleagues and I visited Downing street yesterday and had a long discussion with the Prime Minister about those matters, which cause us great concern. When we raised the question of the paper, I noted the Prime Minister's remarks. I asked the right hon. Gentleman's permission to use that record, and he said that I certainly could—so I am not breaking any confidence. He said: If this paper had been presented to me, I would have booted it out over the roof tops.

That statement leaves many questions unanswered. Who were the officials that discussed and agreed to that paper? How often does the liaison committee meet? Who agreed that the paper should state that no one in Northern Ireland should hear anything about it until the Dublin Government or the British Government mutually consented to that? The people of Northern Ireland are asking themselves those questions tonight.

I welcome the Prime Minister's comments, but this is not the last of the papers. Another will soon appear from the same source, and it will have the same thrust—and that will be repeated over and over again. Unless the Government have the guts and the resolution to stand up to the Irish authorities on articles 2 and 3—which they are fighting desperately to save and for which they are making all sorts of apologies—and have them removed, there will be no solid basis for peace.

Meanwhile—as was said by the right hon. Member for Lagan Valley (Mr. Molyneaux), who is the leader of the Official Unionists—deep concern is running right into the gut of the whole of the Northern Ireland people. Anyone from Northern Ireland who saw on television last night the array of seized armaments could do nothing but shiver, with every gun a potential murder weapon. One thinks also of the array of armaments already in the hands of the IRA. When no security spokesman can say whether that seized consignment was the first, or put a number to the number of consignments that have got through, the House will understand how people feel at this time.

I say to the Government and to the House that the sooner that situation is dealt with, the better for us all. There is only one way, which is to establish that the Union is not negotiable, that no all-Ireland body can have any say in Northern Ireland's internal arrangements, and that there can be no advance by the Dublin Government towards achieving .the objective of articles 2 and 3—which is a constitutional imperative laid on every Irish Minister according to the Supreme Court in Dublin. Until those matters are laid to rest, the troubles, sorrows and bloodshed will continue.

6.46 pm

Mr. Seamus Mallon (Newry and Armagh)

In normal circumstances, I would have preferred at this stage of the debate on the Loyal Address to speak on the effects of value added tax on fuel costs in Northern Ireland, particularly because of the unique situation that exists there. The cost of fuel in Northern Ireland is 32 per cent. higher than in England, Scotland and Wales, so when VAT is imposed, it will cause a substantial increase. That will be added to by the higher overall costs in Northern Ireland imposed by the necessity to import so many consumer items, which will have a particularly harmful effect on elderly people.

I would have liked the opportunity also to speak not just about peace at any price—a phrase that is becoming increasingly clichéd—but the price of no peace, which is worth considerable scrutiny. A recent article in The Economist tried to analyse the net cost of the North of Ireland to the British Exchequer during the past year, and arrived at a figure of £6 billion. That figure is not verifiable, because many factors in the security budget are not made public. I would like the cost of no peace to be carefully analysed.

I listened with great interest to the version of the hon. Member for Antrim, North (Rev. Ian Paisley) of history and of current affairs. It depressed me almost as much as the account of current affairs given by the right hon. Member for Lagan Valley (Mr. Molyneaux) when he spoke two nights ago. We heard the selective quotations given by the hon. Member for Antrim, North from a speech given by the Tanaiste in the United States. We heard also a garbled version of what is not an Irish Government document, and the conclusions drawn by the hon. Gentleman, with his usual sense of the dramatic.

When the right hon. Member for Lagan Valley referred to the talks between the Prime Minister and the Taoiseach, I hope that it was with a supreme sense of irony that he said that the sovereign Government in Dublin were no more than a conduit for the IRA. He said that about a Government who are spending more per capita in the fight against terrorism than the British Government are spending within Northern Ireland—£1 million a day. He said that about a Government who have had to contend with IRA violence and what it has done to the good name of Ireland for so many years. He said that about a Government who have entered into discussions with this Government at the highest possible level and with the Prime Minister to try to ensure that there is a lasting peace.

I was also struck by the concern of the right hon. Member for Lagan Valley at what he termed the state of the "professional and middle classes." He said: they are now in such a state of anxiety that they disbelieve any assurance, and suspect betrayal in every sentence they hear or read … something must be done to reduce the fever".—[Official Report, 23 November 1993; Vol. 233, c. 362.] I am aware of the professional and middle classes in the Unionist and nationalist communities in the North of Ireland. I would never accuse them of fever in relation to anything that did not affect their economic and financial positions. However, if the right hon. Member for Lagan Valley knows something that the rest of us do not know, I should like him to explain it to us. He sees betrayal, disbelief and anxiety in everything that is said.

Let us test that against some of what has been said about the present controversies. In a notable speech in the Guildhall on 15 November, the Prime Minister said: there may be now a better opportunity for peace in Northern Ireland than for many years. There is a burning desire on each side of the community for peace. This strength of feeling is far more intense than we have ever seen before. I wonder how the Prime Minister has got it wrong. He sees not the anxiety or the sense of betrayal but an expectancy and deep feeling for peace. Are the Prime Minister's words causing a sense of anxiety and betrayal? Are they being doubted by those to whom the right hon. Member for Lagan Valley refers?

On 2 November the Irish Prime Minister said: I want them"— the Unionists— to join us. I want the two communities to join us, in rejecting violence and in the search for peace. Betrayal? Anxiety? Disbelief? How can that be interpreted as anything but what it is—a genuine and sincere reaching out from the Prime Minister of the Irish Republic to the Unionist community in the North of Ireland?

The hon. Member for Antrim, North quoted Mr. Spring at length. In the six principles that he enunciated, he stated, restated and defined as a principle the words: No agreement can be reached in respect of any change in the present status of Northern Ireland without the freely expressed consent of a majority of the people of Northern Ireland free from coercion or violence. Betrayal? Anxiety? Are those the words that are causing the anxiety and fever that has engulfed the professional and middle classes in the North of Ireland?

Let us go further. The hon. Member for Antrim, North was at great pains to labour the position in relation to articles 2 and 3 of the Irish constitution. The six principles enunciated in the Irish Parliament contain the words: If we believe in consent as an integral part of any democratic approach to peace, we must be prepared at the right time and in the right circumstances to express our commitment to that consent in our fundamental law". The fundamental law is the written constitution of the Republic of Ireland. It is a written commitment given solemnly within the Parliament of the Irish Republic. Is that causing the anxiety and sense of betrayal? Is it something much more potent? Is it the fear or apprehension that there just might be peace? Is that frightening people?

Mr. Ken Maginnis (Fermanagh and South Tyrone)

Will the hon. Gentleman give way?

Mr. Mallon

I will give way later.

I see nothing in the statement or actions of the Prime Minister, the Irish Prime Minister or the Irish Foreign Minister that could in any way be interpreted as creating a sense of anxiety, betrayal and fever that is engulfing the professional and middle classes.

What about the other people—the vast majority of people in the North of Ireland who are not professional or middle class? They have suffered most during the past 25 years. Perhaps they are not worthy of consideration. I shall give them that consideration in my speech.

Mr. Maginnis

The hon. Gentleman asks many questions, and I am pleased to have the opportunity to respond to some of them. If one argues from the wrong premise, it does not matter about the logic of one's argument. Therein lies the feeling of possible betrayal. The whole idea of peace seems to emanate from some fallacious assumption that Mr. Adams, Sinn Fein and the provisional IRA want peace. We have not seen a single shred of evidence that that peace is on offer. Hence we do not want decisions made on the wrong premise.

Mr. Mallon

I thank the hon. Gentleman for his observation. Neither would I. I do not care who delivers peace, as long as it is created, and more power to the people who try to bring it about. I will give them every support and all the help I can. I will do that at all times, because I am not particular about who is the hero. I am concerned about peace for the people in the North of Ireland and the whole of the island.

What is the recipe that we have heard from the leaders of the two Unionist parties for the ending of violence and the creation of peace? We have a document from the party represented by the hon. Member for Antrim, North called "Breaking the Logjam." Anyone who bothers to read it will see that it says, in effect, that one sets up a little body in Belfast, gives it some type of name and it will have friendly relationships with the Government of the Republic of Ireland. Where is the solution? How will this solve the problem or end the violence? How will it create permanent peace on the island of Ireland?

Much more subtly, in his speech two nights ago, the right hon. Member for Lagan Valley repeated almost word for word what we had read in "Breaking the Logjam". He seemed to be saying in a more sophisticated way, "Let us set up a county council structure in the North of Ireland and then enjoy a neighbourly relationship with the Republic, and then everything in the garden will be rosy." It will not: peace will not come that way. It will have to be created. Peace will involve all of us making concessions and biting our lips, politically speaking, because it will not be easy.

This is why there is a sense of anxiety—it is where the fever derives from. There are those in our community who cannot accommodate the idea of compromise or of thinking themselves into a new peaceful century. They prefer the stagnation of the status quo with which we have lived for so long. That is the cause of the fervour; not the Irish Prime Minister or Foreign Affairs Minister, or the leader of the SDLP, who has made honest and valiant attempts to bring about an end to the violence.

There is a fear that, if peace comes, the central basis of Unionism will be weakened. So it will: as will the basis of my party, and the basis of the British and Irish constitutional positions, as Mr. Spring showed in the six principles. The price of peace is the ability to compromise and to be imaginative, instead of sticking in the morass in which we have been stuck for so long.

Mr. David Trimble (Upper Bann)

The hon. Gentleman has just referred to modifications in the constitutional positions of the United Kingdom and the Republic of Ireland. What is his response to the proposition that future constitutional structures relating to Northern Ireland are a matter for the people of Northern Ireland to decide, and for no one else?

Mr. Mallon

I have already answered that comprehensively. The first article of the Anglo-Irish Agreement answers the hon. Gentleman's point, restated by Mr. Spring in his six principles: No agreement can be reached in respect of any change in the present status of Northern Ireland without the freely expressed consent of a majority of the people of Northern Ireland free from coercion or violence.

Mr. Trimble

rose—

Mr. Mallon

I will not give way. If the hon. Gentleman wants a constitutional debate on this issue, let him visit the people who have invited him to have one—the Irish Government—and hold his academic debate with them. He should be listening to this political message, but he is afraid to listen to anything positive, just as he is afraid of the notion of peace.

Mr. Trimble

Will the hon. Gentleman give way?

Mr. Mallon

I will not, because I have answered the hon. Gentleman's point.

Ever since I entered the House, I have consistently asked the Prime Ministers and Governments of the two countries to take upon themselves the task of solving the problem of Northern Ireland. It is the duty and business of Governments to do that. I have criticised them in the past for not doing so, but this was a guiding principle on which the Anglo-Irish Agreement was based.

That principle underlies every intergovernmental meeting between the Irish and British. It underlies the joint statement issued by the Prime Minister and the Taoiseach in Brussels. I hold to that principle, because only the two Governments have the power and authority to effect the changes that will create peace and build new political structures. If the Governments undertake the task, will give them my full support. I offer them the full support of our party to try to solve this intractable problem. In the Brussels statement, they said that only the two Governments can produce the necessary initiatives to solve these problems.

I give the two Governments credit, at a time when they are not getting any credit. We have seen the Unionist reaction to the Prime Minister's attempts, even though they have a close relationship with him. We have also seen the reaction of the other form of Unionism, which is even more loyal than the official kind. The Unionists have beaten a path to the Prime Minister's door—it is even rumoured that there is now a Molyneaux room and a Paisley room at No. 10.

What are they doing if they are not listening to the Prime Minister? Are they agreeing with him that only the two Governments acting together can solve the problem, or are they talking about fervour and the sort of potted histories that we heard today from the hon. Member for Antrim, North? Are they giving the Prime Minister the version of current affairs that we have heard from both the right hon. Member for Lagan Valley and the hon. Member for Antrim, North?

In their attempt to create peace, the two Prime Ministers have the full support both of my party and of the vast majority of people in Northern Ireland, be they professional or middle-class people, or Catholics or Protestants. People are watching closely, believing what the Prime Ministers said in Brussels—that it was their business to get on with solving the problem.

This is an urgent matter. If we needed proof of that urgency, we had only to look at the television footage from yesterday showing the interception of the arms haul. There is more proof of the urgency when we recall how quickly peace initiatives and momentum towards change can turn sour. There will be people in both communities who do not want peace, and who try everything they know to ensure that violence continues.

I ask the Government to respond to this urgency. If they do, history will judge them as people of courage and imagination who took us into the next century without the stain of blood on everything to do with Northern Ireland. If they run away from the problem—to use the vernacular, if they funk it—history will judge them harshly, as will the long-suffering people of the North of Ireland, Protestant and Catholic.

Will there be a way back if a mistake is made now? Another such chance may not come for 25 years. Those are the stakes that we are playing for; that is why it is so important to move forward.

Mr. Roy Beggs (Antrim, East)

I have met no one, in Northern Ireland or elsewhere, who is not totally committed to peace, but I wonder whether the hon. Member will tell the House what price of peace—his price, the price for the SDLP—is to be exacted before there is full commitment to the security forces, to the RUC, to bring an end to terror?

Mr. Mallon

That is a valid question, and I will answer it honestly. We have paid part of our price. We take no satisfaction in entering into discussions with those who publicly support violence. We will talk to anyone in our community if we believe that we can stop violence. We recommend to representatives within the Unionist community as well that they talk to loyalist paramilitary groupings.

When we get that type of peaceful basis, we can all start to negotiate in the proper way of negotiating—not through this type of intervention. We do not know what the outcome will be, any more than the hon. Gentleman does, but the hon. Member for Upper Bann (Mr. Trimble) has a certitude at bottom which is so frightening in terms of that absoluteness which blinkers him on many occasions. That is the type of thing that should be broken down.

We have heard of the Unionist position—the Prime Minister must be sick of hearing about the Unionist position. The Unionist position is discussed almost daily in the Irish Parliament, and discussed at great length. May I remind people that there are two communities living there? I have the honour to represent the other part of the Northern Ireland community.

I represent a nationalist position. That is a legitimate position, and the aspirations of the nationalist community are legitimate. Let not the way in which the IRA have devalued and debased nationalism be reflected in Government thinking or thinking in the House. Let it be said—and be seen—that the aspiration to create a united Ireland, to create unity of the Irish people, is a legitimate aspiration, pursued by peaceful, democratic means without violence and without coercion, and is a crucial factor in what is happening now.

Do the Government believe that? Or are the Government now so frightened of some of the ancillary factors in what has been happening during the past months that they will not recognise that basic point? I repeat it: will they state that the desire to create, and the aspiration to create, Irish unity through peaceful means is a legitimate political process? I believe that it is. I believe that the Government believe that it is. I believe that that is part of long-term Government thinking. Let me tell hon. Members why.

I refer hon. Members to a statement that was made by the Foreign Secretary in the House: I do not agree that partition can be the basis for a settlement. My hon. Friend's underlying thought is perfectly right—there are two communities on the island and they must be given rights as two communities—but if there is to be a lasting settlement, it must be within the sovereignty of one Cypriot Government " —[Official Report, 28 October 1992; Vol. 212, c. 1006.] May I refer that statement of the Foreign Secretary to the Prime Minister and to the entire Government. I ask him to apply the principle that is involved in that statement of that senior member of the Government when dealing with the problems that we are dealing with at present, conditioned only by that one single factor which I have already quoted twice—that there can be no change in the status of Northern Ireland without the agreement of the majority of the people of Northern Ireland without coercion and force.

Is that not something that the Government must honestly answer for themselves? Is not that the type of thinking that will ultimately solve the problem? Or will the Government, like so many other Governments down through the decades and the centuries, be caused to deviate from making the fundamental decisions for peace and development by the type of bluster that we have heard from the Conservative Benches and the type of attitudes that we have heard from the Opposition Benches? Time will tell whether the Government and the Prime Minister are up to it.

7.14 pm

Mr. Barry Legg (Milton Keynes, South-West)

I shall confine my remarks this evening to the economy.

I begin by recalling events that took place earlier in the day and the speech of the hon. Member for Dunfermline, East (Mr. Brown). Once again it has been a sad day for the Labour Front Bench. The hon. Gentleman was unable to put forward any coherent alternative economic policy. One tries to detect an alternative economic policy from the mists which surround him. If one can detect anything, it is that he is in favour of a bigger Budget deficit. A Budget deficit of about 7 per cent. of GDP does not seem to be big enough for the hon. Gentleman. Running higher Budget deficits, as he will learn one day, leads to higher long-term interest rates. If Governments borrow more money, they must finance that in international markets and pay the appropriate rate. A higher Budget deficit, which the hon. Member for Dunfermline, East advocated, would be harmful to the wealth-creating sector of the country and harmful to the manufacturing sector which he claims to support.

The big idea of the hon. Member for Dunfermline, East seems to be loopholes; loopholes will provide the answer. I have here Butterworth's yellow tax handbook. I am not sure if the hon. Gentleman is familiar with that tax handbook. It runs to 2,142 pages.

Mr. Eric Maley (Barnsley, Central)

What is the orange one?

Mr. Legg

Thank you very much. The yellow book is a small book compared with the orange book—the orange handbook runs to no fewer than 3,822 pages. We therefore have nearly 6,000 pages of tax legislation and the hon. Gentleman says that the answer is the loopholes in that legislation. Again, I urge the hon. Gentleman to examine the detail of that legislation. If he thumbs his way through the 6,000 pages he will find page after page of anti-avoidance legislation. His answer seems to be, if it is not working, regulate it, regulate it again and regulate it some more—more regulation, more tax legislation, more anti-avoidance legislation.

All Conservative Members know that that is not the answer. There is a vacuum at the heart of Labour's economic policies. There is not only a vacuum; Labour Members have also become disoriented because the economy is not performing in the way in which they thought it would and it is not performing in the way in which they wanted it to perform.

First, Labour Members were hoping that unemployment would carry on increasing throughout this year. The hon. Member for Dunfermline, East had his speeches on his word processor to back up what he thought would be months of increasing unemployment. Instead unemployment has come down steadily. That has been a disappointment for him. Last month's unemployment figures were the best for many years, with the non-seasonally-adjusted figures decreasing by 100,000 and the seasonally-adjusted figures decreasing by 49,000. There has, therefore, been good progress on unemployment.

Secondly, there has been good progress on inflation. Inflation is much lower than the Treasury or any independent economic forecaster foresaw about six to seven months ago. It is running at 1.4 per cent. The figures last month were the best for October for 30 years.

The current account has shown a marked improvement. At the time of the Budget the Treasury was forecasting that the current account deficit for the current year would be about £17.5 billion. That is running at about £1.5 billion a month. Recent figures show the current account deficit running at the much lower level of £0.5 billion per month. Worst of all for the Opposition, growth is performing much more strongly than commentators thought it would a few months ago. Only six or seven months ago, the consensus was that the economy would grow by just under 1 per cent. However, it is now likely to grow by some 2 per cent. in the current year.

What do all those improved indicators tell us about the performance of the British economy? It is that the supply side is performing much better than anyone had anticipated. All the reforms and all the legislation put through this House in the 1980s is bearing fruit. All the legislation that was opposed by the Labour Members is bearing fruit. The deregulation of the labour market and the reform of the trade union movement, which the hon. Member for Dunfermline, East fought tooth and nail, are now bearing fruit.

The supply side is strong. The devaluation last year has not produced the inflation that some commentators predicted. That is because we are living in a competitive economy and are following sound domestic monetary policies. Inflation cannot be imported. The idea that the prices of imports will rise in these circumstances is not valid while we follow sound domestic monetary policies. Importers cannot sell goods at a price higher than the markets will accept.

I want to refer to the output gap. Growth is coming through more strongly than anticipated because there is a significant output gap in the economy. Some commentators estimate it at about 5 per cent., others at 10 per cent. If we have a blend of policies designed to help industry and commerce in the coming months, that output gap should mean that the economy grows at above its trend level.

In some ways, we are being modest in the economic strategy laid down in the Queen's Speech. First, it expresses the hope that recovery will be based on permanently low inflation. That is too modest an objective. Price stability is now within our grasp. We have been through a great deal of pain and difficulty to reduce inflation—initially at 25 per cent. under Labour, but even in recent years at 10 per cent.—to 1 per cent.

Now our objective should be price stability, which would be good for the British economy. It would allow business men to plan against a background of stable prices. It would mean that businesses did not need to be so concerned about asset price inflation. During recent years, all too many business men have been more concerned about the value of their assets than about the long-term success of their businesses. Stable prices would be of great benefit to them. Therefore, I believe that further consideration should be given to the independence of the Bank of England.

Secondly, the Queen's Speech stated the aim of continued economic growth. Again, the objective is somewhat modest—we can do better than that. As I have said, the output gap is at a significant level, so the British economy should be growing at an above-trend level.

A number of years ago, my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont) said that he spotted green shoots. Since then, Ministers have been cautious in their comments about the prospects for the economy—but unduly so. Certainly it was difficult to maintain green shoots during our membership of the ERM, but now that we are outside it and can set domestic monetary conditions consistent with what the domestic economy needs we can be a great deal more optimistic and realistic about our economic prospects. It would be good if we were to publicise more forcefully our confidence in the growing recovery of our domestic economy.

Thirdly, the Queen's Speech states that the budget deficit should be brought back towards balance over the coming term. Those words are somewhat vague. We seem to have drifted away from the objective of balancing the budget over the cycle, which is something that a sound, back-to-basics Conservative Chancellor should have at the forefront of his economic policies.

The budget deficit for the current year is thought to be about £50 billion. The control level for spending targets next year is to increase from £241 billion to £251 billion —an increase in cash terms of 4 per cent. In control terms, increasing our level of spending by 4 per cent. when inflation may be running at 1 or 2 per cent. next year shows that there is further leeway for controlling public spending.

My right hon. and learned Friend has rightly said that he does not want public sector pay bills to grow this year, which means that that significant portion of public expenditure will be kept under control. However, much firmer control needs to be placed upon the balance. If the spending totals are too generous, there is no doubt that the Department responsible will spend those sums.

Running large budget deficits is not sustainable. As I said in the Budget debate earlier this year, delayed tax increases are a mistake. I think that my right hon. and learned Friend agrees with that. Announcing tax increases for future fiscal years adds to certainty in the economy. It is an economic mistake to delay them and it is undoubtedly a political mistake to do so.

We have further work to do on reducing the budget deficit. Not only are we planning to increase the control totals by £10 billion next year, but there will be an additional £4 billion debt clocking up from the extra borrowings needed to finance that deficit. The cost of our debt, in real terms, is currently about 5 per cent., while the growth rate is about 2.1 or 2 per cent. That means that our debt interest is running at a much higher rate than the rate at which the real economy is growing. That position is not sustainable.

Mr. Peter L. Pike (Burnley)

If the picture is as good as the hon. Gentleman paints and there is to be a reduction in unemployment, will not that reduction negate the necessity for an increase in tax, especially through VAT as the Government suggest it should be?

Mr. Legg

Unemployment will continue to fall over the coming months. That will provide some improvement in our public finances, but not a marked improvement. It may improve the figures for next year's deficit from, say, £44 billion to £40 billion, but it will not produce a significant reduction in the budget deficit. Therefore, further measures must still be taken because the level of deficit, whether it is £50 billion or £40 billion, is not sustainable.

Prospects for the United Kingdom economy are good. The supply side is performing well. We need sound Conservative policies that work with markets not against them. We need policies that work with labour markets, to make them flexible, and we need policies that recognise the power of currency markets and do not seek to defy those markets. Sterling needs to be allowed to continue to float, and we should not consider rejoining the exchange rake mechanism.

My right hon. and learned Friend the Chancellor of the Exchequer said earlier, in a speech which displayed both his idealism and his pragmatism, which we all admire, that it should be no surprise that he supports economic and monetary union, as he has been doing so since 1971. That is all well and good, but the world has changed significantly since 1971. Markets are now much more powerful and exchange controls that existed even in the 1980s have disappeared.

I do not believe that, in the modern world, it is possible to have a fixed exchange rate system without exchange controls. I believe that Conservative Members are beginning to accept those facts of life, but I suspect that Opposition Members have not yet done so.

Prospects are good and a significant recovery is within our grasp. If we stick to sound Conservative policies, bring forward a balance of economic measures, reduce public spending, and reduce the Budget deficit, and if we have the monetary policies that are needed for the British economy, success will be achieved. That success can deliver above-trend growth, higher employment, stable prices and a balanced budget. That is the agenda that we should be setting for the rest of the life of this Parliament. That agenda will generate economic success and it will make the comments and so-called policies of Opposition Members even more ineffective, hypocritical and irrelevant.

7.32 pm

Dr. Roger Berry (Kingswood)

One of the most striking features of speeches by Conservative Members, which were reflected in the comments of the Chancellor of the Exchequer, is that any good economic news is the Government's responsibility and the result of sound economic management, while any bad economic news is the fault of someone else.

For example, we are supposed to give the Government credit for—in the words of the Chancellor—the faltering recovery, but not the blame for the recession that necessitated the subsequent recovery. We are urged to congratulate the Government on reducing interest rates, but not to criticise their policies that produced the high interest rates in the first place. Every month that the number of unemployed claimants is reduced is seen as a triumph for Government economic policy. However, an increase in unemployment is the fault of perhaps the world recession or even Labour Members who have been "talking Britain down".

I was especially interested in the speech of the hon. Member for Milton Keynes, South-West (Mr. Legg), who, I suspect, is rather more Milton than Keynes. I apologise for that joke, but representing that constituency, giving such a dry speech on the economy and receiving a response from a neo-Keynesian, he must expect that kind of crack. The hon. Gentleman let it out of the bag on a number of occasions when he said that the unemployment figures just announced are "the best for many years". There are 2.85 million claimants and it is the best figure for many years. Who has been in office over that period?

The second feature of the Government's approach—I am learning quickly because I have been here for only a year and a half—to economic matters, as it is to so many other issues, is the way in which they break promise after promise without the slightest evidence of shame. We heard the Chancellor of the Exchequer do so again today, so I do not apologise for repeating the point. At the end of January 1992, a few weeks before the general election, the Prime Minister said: I have no plans to raise the level of national insurance contributions". On 27 March 1992, a few days before the election, the Prime Minister said: We have no plans and no need to extend the scope of VAT". On 31 March 1992, even closer to the election, the ex-Chancellor of the Exchequer said: We will not have to increase taxes".

I know that the Government want to go back to basics and if that means a bit more honesty and integrity, I say amen to that. It does not reflect a desire to return to those traditional values repeatedly to break promises. Anyone who now realises that they cannot trust the Government on taxation any more than they can trust them on anything else will not give credibility to that "back to basics" position. The tax hikes announced by the previous Chancellor of the Exchequer will impose an extra tax burden of £8.50 a week on the typical family. Not only was that not promised before the general election: it was explicitly promised that it would not be done.

Perhaps the most important area in which to go back to basics is on the Government's economic record. Recently, I have noticed a tendency to assume that the Government acquired office some time between six and 12 months ago. We ask questions and are answered by reference to an economic indicator that is slightly better now than it was six or 12 months ago. It is reasonable when the Government have been in office for 14 years to judge their performance over that period. It is long enough to judge the performance of any Government, and they cannot blame anyone else for their records of economic stewardship.

Like other right hon. and hon. Members, I have been reading with great interest the memoirs of the noble Baroness Thatcher. In case there is surprise among Labour Members, I hasten to add that I have not bought a copy. I go into a book shop, read a chapter and pop out again. In that way, I have worked my way through her memoirs. I am reminded that, in 1979, unemployment stood at 1.2 million and was falling.

The Conservative party was so convinced in 1979 that unemployment was too high and that the Government were responsible, that it made unemployment the central issue of the election campaign and promised to do something about it. Since then, as Lady Thatcher's memoirs remind us, we have experienced an economic miracle and, as a result of that miracle, in no single year since 1979 has unemployment fallen below 1.2 million, despite more than 30 adjustments to those figures that just happen, in all cases but one, to have brought down that official figure.

Unemployment today stands at almost 3 million, using the current method of enumeration, and almost 4 million using the method that the Government inherited in 1979 —all despite the enormous, unprecedented benefit of £110 billion of North sea oil revenue.

Mr. Pike

Is not the point that the difference between the 1979 figure and the present figure accounts for the biggest section of the £50 billion public sector borrowing requirement about which the Government are so worried?

Dr. Berry

It is the case that unemployment at 3 million is costing the Exchequer about £30 billion a year, which is the bulk of the public sector borrowing requirement. An economy in recession necessarily incurs a higher level of public sector borrowing. Even the Government have appreciated that, albeit to their embarrassment. The party that was once—I notice that it tends not to do so that often these days—anxious to proclaim itself the party of sound economic management has given us unemployment on the scale of the 1930s, affecting not only my constituents in Kingswood, but millions of people throughout the country.

However, the Government's appalling economic record does not end there. Fourteen years of Conservative rule have given us the worst rate of growth of any post-war Government. The Government will not tell us that at Question Time because they stopped measuring growth about six months ago. The Conservatives have also given us the two worst recessions since the war, and they have given us a record trade deficit in the midst of that recession.

Yesterday, the Chancellor of the Duchy of Lancaster questioned in the Chamber the assertion that the recession from which we were staging a modest recovery was especially severe. When I tabled a question to the Chancellor of the Exchequer on the matter, he kindly referred me to last December's edition of the Organisation for Economic Co-operation and Development publication "Economic Outlook." I read it with great interest although, I confess, I had read it before I tabled the question. I read it again and saw that the OECD statistics—perhaps the most authoritative in the area—confirmed that this country had just been through the worst recession, as normally measured, of any major economy in 25 years. That is the OECD's view, which reveals the wretched state of the economy last year, the year before and the year before that.

So appalling has the Government's record been that I occasionally lapse and wonder whether it might be better if the Government had no economic policy at all and if they simply left things to free market forces. It is difficult to imagine a record worse than the one that we have experienced. I note that there have been no Conservative interventions up to this point. Yet in debate after debate, the Government tell us that we have had an economic miracle. The Chancellor told us that again this afternoon. Even now, we are told that it is Government policy that is dragging us out of recession.

Mr. Milligan

The hon. Gentleman has suggested that this country's record is worse than that of any other country. How many countries in western Europe have a high growth rate, falling unemployment and inflation at 1.4 per cent?

Dr. Berry

The remarkable thing about that question is that, first, the hon. Gentleman attributes to me a statement that I did not make. I did not compare this country with any other; I compared the present Government's record with the record of all other Governments since the war. Secondly, I note that the hon. Gentleman confirms my previous proposition that Conservatives mainly want to look at the recent record rather than at the record of the whole period of Conservative Government. The hon. Gentleman appears to be so embarrassed by the record of the past 14 years that he wants us to debate the snapshot position today.

I am not at all surprised, as I have said, that, having come out of the worst recession in any major economy in 25 years, there is some evidence of improvement in growth and in other economic indicators. It would be astonishing if that were not the case and I shall deal with the reason why it is the case.

It has been said that the improvement reflects the success of Government economic policy. All right, let us forget the previous 13 years and look at the past 12 months. Let us say that that reflects the success of Government economic policy. Being a bit of a reconstructed Keynesian, I have to say that, if one devalues the pound by 15 per cent., if one halves nominal interest rates and if one allows the public sector borrowing requirement to rise from a predicted £27 billion last year to £50 billion this year, it would be astonishing if there were not some signs of the economy being turned around.

The Chancellor may wish to say that the Government do not engage in demand management. When one gives such a boost to the economy, what is remarkable is not the existence of some recovery, but the fragility of that recovery, given such a massive economic stimulus.

What is truly astonishing is the Chancellor's assertion that all that reflects the success of Government economic policy. That does not reflect the honesty of a back to basics approach; it simply beggars belief. Until last September, the Government's policy was perfectly clear. Sterling would be set at 2.95 deutschmarks. Indeed, according to the Prime Minister, the aim was to replace the deutschmark as the strongest currency in Europe.

The Government imposed record interest rates to prop up the overvalued pound, inflicting, as we all know, enormous damage on industry and on home buyers, and putting another 1.2 million people on the dole. If that was not bad enough, the ex-Chancellor, presumably regretting nothing, said in the House after the fiasco of September last year that, if holding the base rate at 15 per cent. on that day had worked and had kept sterling in the exchange rate mechanism at 2.95 deutschmarks, we should still be there.

It is astonishing to reflect on the lunacy of that economic policy. Thank goodness that somebody, whether the men in red braces or someone else, prevented us from having a 15 per cent. base rate and a pound valued at 2.95 deutschmarks inflicted on our economy. I suspect that Conservative Members would not be saying today that there was a recovery if their policy had been successful last year.

Devaluation and low interest rates were forced on the Government by sterling's ejection from the ERM. That was something to which the Government were totally opposed. We were told that all sorts of dire consequences would follow—that there would be inflation and high interest rates, which would be a betrayal of our country and goodness knows what else.

A staggering indictment of the Government's policy 12 months ago and of economic orthodoxy in this country is that one cannot now find anyone who, 12 or 15 months ago, was defending that policy arguing now that, heigh ho, we should go back to 2.95 deutschmarks, even if that meant interest rates of 15 per cent. Nobody now will defend that position. It is thanks to the total collapse of Government economic policy and not to its success that we are now staggering out of recession.

Mr. Robert Ainsworth (Coventry, North-East)

My hon. Friend has, with some ability, exposed the way in which we have come out of the cycle and the weaknesses in the Government's policy and their refusal to defend their policy over 14 years. Some of us fear that we shall merely go round the cycle again and that no fundamental problem will be solved. We fear that the recovery will be short-lived and that our economic base will not be put right. We shall wind up in two or three years' time with the problems that we have had repeatedly under this Government. Is that not the case and is that not the scenario for which we are all heading?

Dr. Berry

My hon. Friend is right, as I shall try briefly to explain by turning to some of the back to basics of the Government's economic arguments. First, the Government repeatedly assert that, if we simply eliminate inflation, we shall get economic growth and recovery. They say that eliminating inflation is all that is necessary to bring about higher growth and employment. It is a pretty hard-line monetarist position for the Government to be concerned merely with price stability and to do nothing to create employment or to have the economy operating at a high level of activity. It is, of course, true that high inflation has costs, but in seeking price stability—or zero inflation—the Government's strategy has been, both in the recession through which we have just come and in previous recessions, to achieve low inflation by pushing the economy into recession.

Any idiots can achieve price stability if they are prepared to put enough people on the dole and throw away enough billions of pounds in lost output and national income. It is surprising that there are still some people who believe that zero or near zero inflation will automatically give rise to higher growth. We heard that from the hon. Member for Milton Keynes, South-West.

Mr. Legg

I pointed out the merits of price stability for businesses and for the financing of businesses. I also said that we needed appropriate monetary conditions to reflect the domestic economy. Currently, those appropriate monetary conditions involve short-term interest rates and underfunding the deficit.

Dr. Berry

I hear what the hon. Gentleman has said, and I will come back to that in a moment.

The point about low inflation is that there is no argument in economic theory—and certainly no evidence —that countries that achieve very low rates of inflation automatically subsequently achieve higher rates of growth.

A recent exhaustive study was published in the Cambridge Journal of Economics that confirms the previous evidence in innumerable articles in the Financial Times over the years—that those who argue that low inflation automatically solves the problem of economic recovery and full employment are deluding themselves. There is no basis for that position in either theory or fact.

The longer that resources are left idle in our economy, the more likely it is that when demand increases, inflationary pressures will be stored up. Ask any construction company or enterprise in this country of the problems that they fear they will have to face because they have had to lay off workers and operate plants at very low levels of capacity utilisation. It would be a disservice to the people of this country if anyone ever again trotted out the proposition that low inflation guarantees that everything else in the economic world will come good. That is not true.

The Government appear, as my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) said earlier, to be unconcerned about the record current account deficit. The Government also appear unconcerned about the need for a massive increase in manufacturing investment, in order to generate sufficient net exports to sustain a high level of employment.

On 4 November I asked the Chief Secretary the following question: Is the Chief Secretary aware that we have never before had such a large trade deficit at this point in the business cycle, and that, for the first time ever, we have had a record trade deficit in the midst of a recession? Who does he believe is responsible for this?"—[Official Report, 4 November 1993; Vol. 231, c. 506.] It is hardly surprising that the Chief Secretary ignored the question of responsibility; he said that he would prefer the deficit to be less, but that there was no problem because the trade deficit is fundable. Of course it is fundable; if it were not, we would be in very dire straits. That failed to address the real issue, which is that the rates of growth that are necessary to significantly reduce unemployment will worsen the current account and create an unsustainable balance of payments position unless something is done.

The Institute for Fiscal Studies, in its green budget, said at page 20: it would be very optimistic of the government to conclude that the current account deficit will not prove to be a problem if the UK achieves a satisfactory rate of GDP growth over the medium term. The overwhelming likelihood is that it will prove to be a constraint on recovery in a way which did not apply in the 1981-88 period, simply because the starting position for the current account deficit was so much stronger in 1981 than it was in 1992. In terms of a strategy for full employment, manufacturing matters—not because it will directly provide all the jobs that we need, but because it is the major determinant of our performance on current account, net exports. Without a dramatic improvement in net exports of manufactures, we will not be able to sustain a credible balance of payments position at anything approaching full employment. That is why the current account matters, and that is why the supply side measures to boost manufacturing investment mentioned by my hon. Friend the Member for Dunfermline, East (Mr. Brown) are important.

As hon. Members have mentioned, the Queen's Speech talks about setting fiscal policy to bring the budget deficit back towards balance over the medium term. That is sufficiently bland, and so far away from earlier Government policy, that even I agree with it. Over the medium term, that is a reasonable thing to aim for.

The issue for the Chancellor in his Budget next week is whether it is sensible at the present time to have a fetish about the PSBR and either cut public expenditure or increase taxation, or both. That would not be an appropriate response. The Government are concerned about public sector borrowing—after all, they are doing a lot of it. It was always suggested that sound Conservative economic management does not have to rely on it, so I understand why the Government are embarrassed. A £50 billion PSBR is a fair distance away from the £27 billion they promised at the general election a year or so ago.

The point that needs to be stressed is that it is not the size of the PSBR that matters but how it is spent. We are in the absurd position where the Government prefer to borrow to finance high levels of unemployment rather than borrow to finance economic recovery and jobs.

At the same time, the Government are desperate to encourage private sector borrowing and for consumers to shoot out into the high street, with their plastic cards, and spend more money to get the economy going. The Government believe that for the public sector to engage in additional expenditure funded that way is wrong.

Even if we were to get a consumer boom—which is unlikely—that would have a significant effect on imports. If we had public sector borrowing to finance investment, it would not only improve the supply side position and the competitiveness of our economy, but it would have no harmful effects on the balance of payments.

If we wish to reduce the PSBR in the future, we must get unemployment down. One way of doing that reasonably quickly is to borrow to fund investment in the short term. I hope that next week—although I fear it will not happen—that we might see a programme for economic expansion, for investment, for recovery and for jobs. Such a programme is not shown in the Queen's Speech, and I fear that we will not see it. At some stage, we will have a Government that will aim for full employment. It can be achieved, and for the sake of our country it must be achieved.

Several hon. Members

rose—

Madam Deputy Speaker (Dame Janet Fookes)

Order. Before I call the next hon. Member to speak, may I suggest that there is no expansion of speeches because there are a number of people who still wish to contribute to the debate.

7.58 pm

Mr. Stephen Milligan (Eastleigh)

We have just heard a litany of gloom from the hon. Member for Kingswood (Dr. Berry), which was characteristic of most of the speeches that the Opposition have made. They have not mentioned the fact that recent figures show that our exports, particularly exports outside the Community, are at record levels. They have not mentioned that the trade deficit is coming down. They have not mentioned that we are the one country in Europe where unemployment is falling. We have the highest growth rate in Europe and, as the Sunday Times pointed out this week, the economic outlook for this country is better than it has been for many years. It is characteristic of the speeches from the Opposition today—party politics and point scoring, but no practical suggestions.

The issue that most people in this country are concerned about is unemployment. I agree with one point made by the hon. Member for Kingswood (Dr. Berry): 2.8 million unemployed is 2.8 million too many. That figure is far too high—although the hon. Gentleman did not go on to say that virtually every country in the developed world faces the problem of high unemployment.

In this country, millions of people who clock in each day face a nightmare. They do not know that they will still have a job by the time they clock out. Besides the 2.8 million who are unemployed, there are the millions of family members who depend on the people who are out of work and the millions who worry about retaining their jobs. The need to reduce unemployment is a central issue.

People fear those euphemistic phrases "You are surplus to requirements" and "We are going to have to let you go". Unemployment may not be accompanied by the same level of poverty that was seen in the 1930s, but it means waste, deprivation and all the other social consequences. It certainly contributes to the current high level of crime. Reducing unemployment must continue to be a central objective of the Government's economic strategy.

There are practical ways in which the Government could reduce unemployment further. Let me start, however, by noting that it has fallen by more than 140,000 while in other European countries it is rising sharply. Today, the Prime Minister is talking to Chancellor Kohl. I think that Chancellor Kohl could learn something from this country. German unemployment is rising fast: a Financial Times survey showed that a third of all German companies are thinking of leaving the country.

What can this country do to deal with unemployment? Most people would suggest that we adopt Keynesian techniques, as we did in the 1930s—that we spend more than we raise in tax revenues. That is exactly what the Government have been doing for the past two years. When the Opposition parties criticise the high level of the public sector borrowing requirement, they should ask themselves what would have happened if the Government had cut spending far more, or raised taxes by far more, in the last couple of years. The answer is that unemployment would have been far higher—perhaps 4 million or 5 million. I believe that the Government were right to engage in a period of high public borrowing.

That policy, however, cannot be continued indefinitely. Although it brings short-term benefit—it certainly saves jobs in the short run—high public borrowing, if continued for a long period, is bound to push up long-term interest rates and crowd out the capital available for private investment. In the long run, it is bound to destroy jobs. That is why I hope and believe that my right hon. Friend the Chancellor will introduce measures to reduce borrowing.

I do not think that there is an easy way of borrowing more—although the Liberal Democrats produce absurd policies in the belief that even higher borrowing is possible. I think that even those on the Opposition Front Bench acknowledge, in their heart of hearts, that that is not the right way in which to deal with unemployment.

What is the appropriate wage level to maximise employment? According to those on the Opposition Front Bench, we do not want to be a sweatshop economy; we want to be a high-wage economy. We all share that objective, but how are we to achieve a high-wage economy? Do we achieve it by passing resolutions at the Labour party conference, by signing declarations in Brussels, or by earning it?

If high wages are earned through higher productivity and good quality, they are justified, and it is economic to pay them; but the only result of paying them in a low-productivity economy is to increase unemployment. The policy of a minimum wage which the Opposition Front Bench recommends is a policy for minimum employment.

Many companies in my constituency do not pay high wages—for instance, a company that provides home helps for elderly people. If a minimum wage were introduced that company would be bust, jobs would be lost and the help for those elderly people would end. [Interruption.] Opposition Front Benchers laugh scornfully; let me remind them of what their colleague the hon. Member for Kingston upon Hull, East (Mr. Prescott) said to Brian Walden on 24 May 1992.

When asked what the consequence of a minimum wage would be, the hon. Gentleman said that of course there would be some shake-out; any silly fool knew that. Any silly fool, that is, except some of the hon. Gentleman's colleagues, who apparently do not realise what the consequence of a minimum wage would be.

One Labour Member, the hon. Member for Birkenhead (Mr. Field), has presented a number of radical and brave ideas for dealing with unemployment. He is one of the few members of the Labour party who think seriously about the issue.

Mr. Jacques Arnold

That is why he is not on the Front Bench.

Mr. Milligan

Indeed.

The hon. Gentleman has put forward some interesting ideas, and has recognised that lower wages may be a way of maximising employment. Wage cuts would clearly not be a good idea; they deflated the economy further in the 1930s. We need wage rises that are appropriate to the productivity of our economy. I believe that we are getting those now; pay rises in British industry are at a 30-year, low, which makes it economic to employ more people. That may be one reason why unemployment is falling and employment is rising.

Job sharing has become very fashionable in Europe. Only today, Volkswagen put most of its workers on a four-day week and introduced pay cuts. Reducing the level of pay and the number of hours worked makes it possible to increase the number of employees; the trouble is that most people, quite naturally, want to maintain their current pay levels if their hours are reduced, which means that unit wage costs often increase. That is the way in which to reduce competitiveness and destroy jobs. I think it pretty unlikely that job-sharing policies will do much for employment.

If shorter working hours and longer holidays lead to an increase in jobs, why is there far more unemployment in Europe than in America and Japan? In Europe, people work, on average, 10 per cent. fewer hours than are worked in America, and 20 per cent. fewer than are worked in Japan. Holidays in Europe tend to be long, and working hours tend to be short.

What about incentives? Last year, measures were introduced to encourage companies to take on people who had been unemployed for more than a year. That is an interesting idea, and it will be interesting to see the result of the limited experiment that has been carried out; however, there are dangers. Pursuing the policy too far will simply encourage employers to shed labour, and then take on people who have been unemployed for a long time. That would not result in a net creation of jobs.

Better training—the provision of better opportunities —is an essential component of any policy to reduce unemployment. Recent studies have shown an increasing demand for those with high skills or university education; there are fewer job opportunities for those with manual skills, or no skills at all.

I was interested to learn the views of the chairman of a company in my constituency— Vosper Thornycroft, the shipbuilding firm, which has been outstandingly successful in winning new orders. It now has a record order book, and is creating 200 jobs. Incidentally, the company was privatised 10 years ago, and has been an outstanding success in my constituency.

The chairman is concerned about a serious problem. If people are trained, companies that do not invest in such training may have an incentive to poach the people who have been trained. We should consider introducing measures to discourage such poaching and to make it worth while for companies to train.

What about helping particular kinds of firm, especially small firms? A couple of academics at Newcastle university carried out an interesting study of job creation between 1987 and 1989—a period when there was a large expansion in the number of jobs. They discovered that no fewer than 98 per cent. of all net new jobs in that period were created by companies employing fewer than 20 people.

Only last week, my constituency produced exceptionally good unemployment figures: unemployment has fallen more in Eastleigh than in any other Hampshire constituency. In the local travel-to-work area, it is down to only 4.9 per cent.; the total figure has fallen by 1,000 since January. That is an excellent result. That is partly because Eastleigh is an excellent place to build a business—it has very good transport links, an airport and motorways. It is partly because it has an extremely good jobcentre, but it is also because small businesses thrive there.

The local jobcentre tells me that most of the new jobs are coming from small companies—two, three or four jobs here and there—yet, in the past few months, 60 companies have been recruiting which had not recruited staff in the previous six months.

It is important to encourage small businesses. Obviously, because of the financial situation, there is no scope for large tax breaks, but small companies could be helped in other ways, such as the forthcoming deregulation Bill. The reduction of paperwork is extremely important for small companies. A number of business men in small companies have written to me to complain about certain forms, particularly about the census form, which was ridiculously long.

I was pleased that my right hon. and learned Friend the Chancellor agreed to consider imposing a penalty for those who do not pay debts on time. The late payment of debts is a huge problem for small businesses. The average period for the payment of debts is now 75 days. That is absurd. Although the Government have already taken some measures, we could do more to help small businesses to deal with late debts.

The central issue is the flexibility of markets, particularly the labour market. There is a paradox, because flexibility is part of the disease, but it is also part of the cure. Let me explain what I mean by that. For many of my constituents, flexibility means they do not know whether they will keep their jobs. It is not attractive to be told that one's job is flexible and could disappear, but that flexibility could make it easier for companies to hire people. They are more likely to take risks, because if things go wrong they will have the flexibility to alter their employment level.

On the borders of my constituency, Ford produces Transit vans. In the past couple of years, the factory has shed a number of jobs, all by voluntary redundancies, but in that period the factory has reduced the number of man hours it takes to produce a Transit van from 79 in 1991 to 62 today. As a result, the gap between productivity at the Ford Transit plant in Southampton and that in the equivalent factory in Belgium has been halved. The reduction in the value of the pound since we left the ERM means that it is cheaper to produce Transit vans in Southampton than in Belgium. As a result, the jobs of those who remain working there are far more secure and Ford can invest in that plant. It is easier to fire in Southampton than in Belgium, but the flexibility may make the jobs in Southampton and the future of the plant more secure.

The most striking statistics are found in considering Europe as a whole. Why has Europe created one third as many jobs as America in relative terms, and far fewer than Japan in the past 20 years? Why is the percentage of work force in employment lower in Europe than in America?

I put it to the House that the reason is that Europe has become inflexible, that it still suffers from Eurosclerosis —too many regulations and too high burdens of social security. I am disappointed to hear that Mr. Delors, in the paper that he is producing for the next summit, does not seem to have reached a proper analysis of the problem. I am sure that my hon. Friend the Member for Stafford (Mr. Cash), who nods his approval on the Back Benches, was also hoping that Mr. Delors might have had a change of heart and realised that over-regulation and high social costs have been destroying jobs in Europe.

The differences between European and American records of employment are striking. In Britain, we have been moving closer to the American pattern; we have been trying to remove regulation. We have made it more difficult for trade unions to hold the country to ransom, we have given managers more freedom, and we have tried to strip away unnecessary regulations. That may be one explanation of why unemployment has started to fall at a much earlier stage in the economic cycle than most economists would expect.

No one has a complete reason why unemployment is falling, but the new flexibility of Britain's labour market seems to be the best explanation. The pattern of British employment is different from that in Europe, in a variety of ways. There are far more people working longer hours than in Europe. About 16 per cent. of people are now working more than 48 hours a week—far more than in France and Germany—and, at the other end of the spectrum, there are more people working shorter hours and doing part-time work, which is frowned on by European regulation but provides a necessary income for many people, particularly for working wives.

The success of women in finding employment and the fact that unemployment rates among women are far lower than those for men suggest that flexibility is the key. In general, women are more willing to work flexible hours and to adapt their skills. Men have to learn a lesson from women. In order to get and create jobs today, it is essential to match oneself to the needs of employers. The flexibility of our labour market is in stark contrast to what happens on the continent.

We heard a long speech from the hon. Member for Dunfermline, East (Mr. Brown). It was full of fury, but did not contain a single idea or suggestion—[HoN. MEMBERS: "Rubbish."] It was rubbish; that is a very good description of it. It scored points, but most people are fed up with political point scoring. They want action to reduce unemployment, and that may require radical measures.

The facts that there are more people in employment in the country than in most European countries and that unemployment is faling, although the recovery so far has been relatively fragile, suggest that the Government are on the right track. They could take additional measures, such as providing more help for training, and more help for small firms which could do more to create jobs. However, the evidence is that our approach is the right way to create more jobs and that the approach of those on the Opposition Front Bench is antediluvian.

I was interested in the remarks of the hon. Member for Kingswood, which echoed those of the hon. Member for Dunfermline, East, that the way to economic recovery is to cut unemployment. That blinding insight is rather as though the medical profession had suggested that the way to reduce measles was to cut down on spots or the way to reduce colds was to cut down on sneezing.

Change is necessary to reduce unemployment; a policy to reduce unemployment is no policy at all. For those reasons, the Government are moving in the right direction, but I hope that they will keep the objective of reducing unemployment central to their economic policy.

8.17 pm

Mr. Eric Illsley (Barnsley, Central)

The Chancellor asked why Labour Members were debating the economy a few days before the Budget. The answer is that we want to draw attention to the number of pledges that the Government have broken in relation to VAT on fuel and other items.

It is incredible that the Chancellor stood at the Dispatch Box and denied that the Government had broken any pledges, especially when we are about to have VAT on oil and gas and we are contemplating VAT on books, newspapers, food and children's clothing. VAT is a tax which affects the least well-off in our society and the £50 billion public sector deficit that the Government have created will have to be paid for by people who can ill afford it.

The Gracious Speech mentioned measures to bring the budget into balance and I shall concentrate on one or two measures that have been canvassed today. One example is the proposal to harass single mothers, who are to be taken out of benefit although the Government's evidence shows that single parents did not jump housing queues or get pregnant on purpose and that they are not responsible for the ever-increasing levels of crime in the country.

The Government intend to save money by harassing people on invalidity benefit. We are to have a review of eligibility for benefits simply as a way for the Government to save money.

The Child Support Agency was set up to find absent parents. It was revealed only recently that that agency has been set targets which it is seeking to meet by finding parents who already make regular payments to their former partners. They will now have to pay sometimes as much as three times their previous contribution, not to the child of the former relationship but to the Treasury coffers. The children will not receive any of that extra money because the parent with responsibility for the child is usually in receipt of income support.

Mr. John Marshall (Hendon, South)

Will the hon. Gentleman give way?

Mr. Illsley

No, I shall not give way. Some Conservative Members have spoken for as long as 25 minutes and I shall not waste time by giving way to the hon. Gentleman who I do not think has been in the Chamber all that long.

Court settlements where one parent gave up the right to a property are being ignored and the parent is being required to pay additional money to the agency. In my constituency, new relationships are being torn apart when one partner to a relationship has to make such payments to the agency.

The Queen's Speech mentions the sale of British Coal. How much that will raise is debatable, bearing in mind the current rate of pit closures. It is ridiculous to contemplate the sale of British Coal at a time when all will agree that the market for coal is deteriorating rapidly. Only a handful of collieries, if any, are likely to be left by this time next year.

All Britain's coal requirements can be met by imported coal and opencast mining, so we no longer need collieries. It is sad that collieries are being closed when even National Power is talking about coal gasifiers being put on new gas-fired generators within 20 to 30 years. We shall need to turn coal into gas to put through the new combined-cycle stations. That is a disgrace. It is a crying shame that the President of the Board of Trade did not take action with regard to the French interconnector, licences for new gas-fired stations and the nuclear subsidy in order to assist the British coal industry.

British Coal's unwillingness to allow collieries to go out to licence or to be bought, its lack of any sensible rationale, shows its desire to slim down the industry in advance of a management buy-out—a small industry sold off to the chairman and his fellow directors at some time in the future. So far, the Government have issued no consultation documents on any of the residual liabilities after privatisation. Those include concessionary coal, responsibility for subsidence and for the Coal Industry Social Welfare Organisation, a major owner of land and buildings throughout Britain.

The Gracious Speech refers to the further contracting out of local authority services, despite continued evidence of poorer services from the private sector and the fact that we are awaiting the government's review of standard spending assessments.

My local authority has some 70 per cent. less finance than other metropolitan authorities for standard services. No one in government can explain why the SSA methodology allows such a difference between Manchester and Barnsley. Why has my local authority been starved of finance so that it will be forced once again to put services out to tender, which will mean a restriction of those services in the future?

Sunday trading was also mentioned in the Gracious Speech. Most hon. Members have been lobbied to death on the issue, so I do not intend to spend long on it, but it would be nice if the Government would bring forward an option giving employees security, making work on Sunday voluntary and providing premium payments for such work. At present, the big supermarket chains are leading the way towards total deregulation. I have been lobbied by local shopkeepers, whose small businesses are likely to suffer from such deregulation. Already, companies such as Rumbelows and Sainsbury are making it clear that Sunday will be part of the existing working week. The hon. Member for Hendon, South (Mr. Marshall) shakes his head, but he will know that Rumbelow's has now altered all its shopworkers' contracts, making Sunday part of their working week. Again, there will be no chance of premium payments for people who work on Sundays.

The hon. Member for Eastleigh (Mr. Milligan) said that deregulation would reduce industry's costs. I am extremely concerned about some aspects of the deregulation Bill. I mentioned yesterday that the deregulation task forces have no local authority involvement. Trading standards officers throughout Britain, the people best placed to determine which regulations are redundant and which need enforcing, were excluded from the consultation.

One idea to be canvassed is that flame resistant fabric coatings will no longer be a requirement, with the result that children's nightclothes will no longer have to be flame resistant—an incredible deregulation exercise. A company in my constituency has increased employment during the past year or so by about 150 employees. It manufactures chemical coatings for foam furniture. That company will have a bleak future if we deregulate safety regulations for such flame-resistant coatings. That could lead to a loss of jobs in my constituency—not decreased costs, but the closure of the factory and the loss of all the jobs, quite apart from the fact that we are increasing the danger to the average consumer by allowing furniture and clothing which is not flame resistant.

Another area of concern is the deregulation of market franchise rights at the whim of a member of a deregulation task force who may be involved in private markets. The market in my home town was granted a royal charter in the 13th century. It is one of the biggest markets in the north of England. Yet the Government will seek to deregulate it, despite the fact that regulation enables a balanced provision of market trading within the area. Having a regulated market means that we avoid unscrupulous market owners and the type of weekly car boot sales that give no protection against buying faulty or stolen goods.

Market traders are happy with the current market franchise rights. They are protected from private markets where rents are undercut and where they lose business. If the market in my home town loses its royal charter, trade there will fall off. We are doing all we can to encourage trade to come into my constituency rather than lose it to the large shopping malls springing up nearby, but deregulation will make a complete mockery of that. Before introducing a Bill, the Government should have sought a consensus with Opposition parties as to which regulations could be easily done away with.

The Government have backed down on the Sheehy report, but they still intend to go ahead with the removal of local accountability for police forces throughout Britain. There is also the threat of the amalgamation of forces which may mean that my force in South Yorkshire will extend as far as Lincolnshire and the east coast. That is opposed by most people within the area and by the police authorities and it is a measure that the Government should withdraw.

The Gracious Speech contains no measures to reduce unemployment or to try to rescue the economy. We have already heard how fragile the current recovery is—if, indeed, there is any recovery at all. The measures included in the speech are a ragbag of deregulation and a decrease in health and safety provision which pander to the self-interest of the business community. All in all, it is a poor programme for the forthcoming year.

8.29 pm

Mr. Jacques Arnold (Gravesham)

I will refer briefly to the comments of the hon. Member for Barnsley, Central (Mr. Illsley). I thought his speech contained the most disgraceful scaremongering which will put fear into householders who buy the furniture that is produced in his constituency. The company's employees will also now fear for their jobs. The hon. Gentleman might bear in mind that the safety regulations were brought in by this Government.

In respect of deregulation, Ministers have said clearly that they will not put health and safety requirements presently in regulations in jeopardy. The hon. Gentleman's speech was a remarkable piece of scaremongering, and I hope that employees of the firm in question note what the hon. Gentleman said in the House and not just what is released to the Barnsley newspapers.

Today's debate takes place against a new background in the economy which contrasts considerably with the background of a year ago. Inflation has been below 2 per cent. for the longest period since the 1960s, and is at its lowest for 30 years. Interest rates are at the lowest level that we have enjoyed for many years. It is worth noting that that has lifted £11 billion from industrial costs, and has saved the average mortgage payer £160 per month.

Unemployment has been dropping steadily for months. In my constituency, 300 fewer people are unemployed than was the case at the peak last April. Notable improvements have been made in our balance of trade, and it is interesting to note that exports of our manufactures are up by 15 per cent. in volume terms on a year ago. The United Kingdom has the highest growth in the European Community.

The scene is now set for a long period of growth and stability. We have great scope for growth, and a pool of talent among the unemployed. That is not least due to training programmes which have been instituted by the Government. However, that potential could be impeded by a blot on the landscape, and that is the scale of the current budget deficit which looms large at £50 billion. That subject was ignored almost entirely by Opposition Members.

It is worth remembering that the budget deficit needs to be financed. Week in, week out, the Treasury must go to the City with its cap in its hand to get each extra billion pounds. That just cannot go on. Eventually the Treasury will be met with a higher price demand, which will mean higher interest rates. That would be disastrous for our industry and our home owners. If we end up with the City saying no, our only recourse will be to go to the International Monetary Fund. That may have been good enough for the Labour Government in 1976, but it is not an option for the present Government. We are not a banana republic, but a major economy. The Labour party may allow us to go to the IMF, but we should not, and that is why we must take steps to close the deficit.

We must ask ourselves why we can finance the deficit. First, Conservative Governments have had a long-standing reputation for sound finance. My right hon. Friend the Member for Kingston upon Thames (Mr. Lamont) announced in his last Budget a package of tax increases which was worth £10 billion and which will take effect in April 1994. That shows the City and the financial community that we are in earnest. Secondly, during the recession the call for investment funds in the City has been depressed, leaving much more scope for the Treasury to raise the necessary funds.

We must realise that, as recovery progresses, the taking up of funds by private industry will increase. That will limit the ability of the Treasury to pick up funds, and would create extra pressures for higher interest rates. If we are to sustain the recovery, we must cut the deficit to clear the way for private investment.

We heard nothing from the hon. Member for Dunfermline, East (Mr. Brown) about genuine ways to cut the deficit. As a starting point, the hon. Gentleman would have to tackle that £50 billion, to which he could add a further £37 billion which, of course, was the cost of the promises the Labour party made at the general election. The Opposition said that it was not in the business of cutting promises, so let us add that figure to bring the total to £87 billion. Let us further extend it. The hon. Gentleman's opposition to the widening of the VAT net and the extension of national insurance contributions would cost another £10 billion. Therefore, a Labour Chancellor would have to finance a deficit of £97 billion.

The hon. Gentleman's colleagues such as the hon. Members for Kingston upon Hull, East (Mr. Prescott) and for Holborn and St. Pancras (Mr. Dobson) spray promises of vast spending left, right, and centre, so the hon. Gentleman would be in the business of trying to raise £100 billion. He did not address the present £50 billion, and certainly did not address £100 billion.

Mrs. Margaret Beckett (Derby, South)

Not long before the general election, I had a conversation in a bar in this place with a junior Minister. He said to me that he was fast getting to the stage—and, in fact, had reached it—that he would rather "see you and Smith trusted with the nation's finances rather than that bunch we have in charge." Listening to the hon. Gentleman's arithmetic, I know just what he meant.

Mr. Arnold

I was not in the bar with the right hon. Lady. All I say is that if she were to tot up the figures, she might realise the scale of the problem.

The hon. Member for Dunfermline, East did not try to tackle the deficit either at current levels or at the level the Labour party's policies would take us to. It is worth recalling that the deficit would have been wider still if this Government had not taken some sound decisions during the past 14 years.

Take the nationalised industries, for example. In the last year of the Labour Government the nationalised industries took £6.5 billion at today's prices in grants and borrowing alone. British Steel alone took £1.8 billion in that year, and the National Coal Board took £.1.6 billion. Today most of those industries are privatised and are no longer a weight on the Exchequer. Indeed, they are profitable and contribute many billions of pounds to the Exchequer through taxes.

Mr. William O'Brien (Normanton)

The hon. Gentleman refers to the costs of some of the public utilities. Will he take into consideration the fact that the poll tax cost this country £17.5 billion? Will the hon. Gentleman address that point?

Mr. Arnold

I was not going to address it, but I will. That £17.5 billion went into spending by local government on education, social services, and the rest of the services. The figure which the hon. Gentleman dredges up is the total amount which was put into local government finance, the overwhelming majority of which went into services —even under Labour councils.

While on the subject of public utilities, it is worth noting the impact of privatisation on prices to consumers. Since British Telecom was privatised in December 1984, the price of calls in real terms has fallen by 14.9 per cent. Since the privatisation of British Gas in December 1986, the real price to consumers had dropped by a startling 20.2 per cent. Even in the short time since the regional electricity companies were privatised in December 1990, prices to consumers have dropped in real terms by 1.4 per cent.

Those facts should also be considered in the context of VAT on energy. The purpose of VAT on energy is twofold: for tax-raising reasons to which I have alluded, and for meeting the Rio earth summit commitment to reduce carbon dioxide emissions by 10 million tonnes. VAT on fuel will make a significant contribution to achieving that. All hon. Members know that, but I was somewhat surprised by the cynical reaction and the opportunism that has been shown.

Before the previous Budget, when VAT on fuel was announced, the Labour spokesman on the environment told Green Magazine that Labour was thinking of a number of other "small but effective" tax measures which included increasing VAT on "environmentally unfriendly products." Of course, that was said before the Budget and the public reaction to it. Post-Budget, of course, political cynicism and opportunism have been all the rage among the Opposition. That was best summed up by the Leader of the Opposition on Radio 4 in October. We wouldn't go back to zero-rating, it's as simple as that … but the Labour Party will be voting against VAT on domestic fuel". In other words, the Opposition will vote against it to obtain votes but they would hang on to it for dear life because they know that it is the right and necessary thing to do.

The Liberal Democrats, whose Members, of course, are not here, are no better. This afternoon, the right hon. Member for Berwick-upon-Tweed (Mr. Beith) attempted to rush past the matter, but he cannot overlook the fact that in his party's 1992 election manifesto the Liberal Democrats were absolutely clear about their policy, which is somewhat unusual for them. They said: We will support a Community-wide energy tax on all energy sources". Then, however, the Newbury and Christchurch by-elections occurred and, needless to say, the Liberal Democrat candidates were against the very energy tax that their party had supported.

What is the Liberal Democrats' position today? They have published a very glossy new document called "Facing up to the Future". I went to the Library to acquire a copy. The section entitled "The Environmental Challenge" contains some lovely apocalyptic quotations. It states: Human-made emissions of greenhouse gases are now causing climate change at ten times the rate of any other period in the planet's recent history. Melting of the polar ice caps, thermal expansion of the oceans, rising of sea levels and disruption of weather patterns are expected as a consequence … Depletion of the ozone layer, originally detected over Antarctica, now occurs over Europe in the spring and summer. Increases in skin cancer and in damage to animal and plant species will result. I read further to find what the Liberal Democrats would do. They would do nothing. They have no proposals: they refer to the issue in apocalyptic terms but then duck it. That is always the way with the Liberals, I suppose.

What of the other environmental organisations that are usually so vociferous—for example, Friends of the Earth and Greenpeace? They could be described as the dogs that did not bark in the night. For many years, they have complained about emissions from the burning of sulphurous coal, but when the reduction in the burning of such coal was announced in the past year or so, where were those two environmental organisations? They were conspicuous by their silence; and the same is true in relation to VAT on fuel.

I searched hard for statements on VAT on fuel by Friends of the Earth and Greenpeace but the best that I could do, with the help of the Library, was a joint letter from the two groups to The Independent on 13 July. It is noticeable that the letter, signed by Friends of the Earth, Greenpeace and a number of other organisations, mentions organisations some of which are against the imposition of VAT on domestic fuel and some of which are in favour of the measure. It does not specify which are in favour. The groups are right to express concern about the impact on poorer pensioners and the less well-off, but the letter does not mention the environmental advantages to be gained. I should expect organisations such as Age Concern, the Child Poverty Action Group and the Royal Association for Disability and Rehabilitation to worry about pensioners and the less well-off, but the environmental organisations did not offer strong support.

In a joint letter to The Times on 27 March, in which the organisations are semi-submerged, they state: The decision to impose VAT on domestic fuel has led to considerable public debate and concern regarding fuel poverty. Along with increased transport fuel costs, higher energy costs will be an essential component of an integrated strategy aimed at paying a truer price for energy use (for example due to pollution damage) and encouraging greater energy efficiency and conservation. Having said that, it was rather churlish to continue: The Budget measures barely scratch the surface of this issue". Are the organisations in favour of taking steps or not? They cannot welcome even those which they claim barely scratch the survace.

Those organisations are right to express concern about the elderly and the less well-off, and all hon. Members share that concern, but we well remember what the Chancellor of the Exchequer said last month: No sensible person should condemn the tax before they have even seen our package of help for those least able to pay". The Government have also made it absolutely clear that extra help will be given—through income-related benefits—to poorer pensioners and other people on low incomes to pay higher fuel bills as soon as they arrive. This help will be additional to the automatic increase in pensions to reflect the impact of an increase in fuel bills on the RPI. We shall look forward to hearing the details shortly after the Budget.

I enjoyed the Chancellor's speech this afternoon. As it continued, I saw something that I had also observed in my early days in the House in the mid-1980s when the economy was growing strongly: members of the Opposition Front Bench fell silent. They were gobsmacked by the nasty feeling that the political situation was slipping away. After only a few months, our right hon. and learned Friend the Chancellor has shown that he is master of his new brief, whereas the hon. Member for Dunfermline, East does not have a brief, let alone a shadow Budget, to parade in this debate on a subject chosen by the Opposition.

I found my right hon. and learned Friend's candour about the events of last autumn, and since, in relation to the exchange rate mechanism and economic and monetary union most refreshing. Yes, in an ideal world, there certainly should be convergence of the European economies. That would be good, but economic policy should be set for Britain's interest and, to that end, we need to retain a sound British currency and a sound British economic policy. To achieve those, we need a central bank—the Bank of England—under the control of a Chancellor of the Exchequer. It is a cop-out to hand monetary policy to uncontrolled bankers, although, were we to have a Labour Government, it would be an improvement. However, Britain expects a Conservative Government to run a sound monetary policy in conjunction with responsible fiscal and other economic policies. We cannot have the luxury of passing the buck.

I should like to make a Budget plea on the issue of late payment, which was raised by my hon. Friend the Member for Eastleigh (Mr. Milligan). Like other hon. Members, I have companies in my constituency which have carried out their contracts properly, largely in the construction and contracting business, only to have payment delayed to the point where they have collapsed. It is an outrageous state of affairs, and it is high time something was done to ensure that such companies are paid on time and without prevarication by smart alec treasurers in major companies.

I have been encouraged by today's debate, and I look forward to the recovery broadening and strengthening.

8.47 pm

Mr. William Ross (Londonderry, East)

I am sure that the House has listened with considerable interest to the speech of the hon. Member for Gravesham (Mr. Arnold). Like other hon. Members, I should like to venture after him into the subject of value added tax on domestic fuel. It is a large topic and we have not yet discussed the insulation of existing dwellings and why and how we should upgrade the standard of those dwellings and those yet to be built. That is where the real savings in fuel and improvements in efficiency can be made but no one has yet thought it worth while to mention that aspect of the problem. However, it is too large an issue for what remains of this debate.

The debate was supposed to centre on economic conditions and I shall, in the main, speak about them, although I confess that the hon. Member for Newry and Armagh (Mr. Mallon) has also sparked other thoughts in my mind, and I shall return to them if I have time.

The Gracious Speech informed us that the intention in the coming year is to reduce public expenditure as a percentage of GDP, an interesting observation as it is currently down to what it was 14 or 15 years ago, to move back towards a balanced budget—there is certainly some moving to be done there—to keep permanently low inflation, and to increase tax on income.

The Budget will no doubt start those processes next week, and I believe that the road towards their realisation will be financially painful for the taxpayer; it cannot be otherwise. The exact means by which the revenue-expenditure gap, now so large, will be closed is still a matter for conjecture, and will remain so until the Chancellor of the Exchequer finishes his speech next week.

First, I shall glance quickly at the consequences of the change in timing caused by the amalgamation of the autumn statement with the Budget. That matter was explored and widely welcomed on both sides of the House when it was first announced, and in the spring Budget debate. However, as always, time and experience have brought to light consequences not foreseen by politicians. Those consequences may have been foreseen by Treasury officials, who perhaps do not think about political implications, but politicians—not least those on the Front Bench—should think about them. I must assume that politicians did not foresee the political implications, because nobody thought it worth while to mention them.

First, it has been put to me that the general unwillingness of the population to go out and spend money in the high street over the past two or three months is partially due to the change in timing. People looking forward to a Budget in fairly stringent financial times have in their hearts and minds a fear of the unknown. Such fear is a powerful factor influencing human behaviour. People wonder what they will have left when the tax increases are announced.

Until that unknown is resolved, which cannot happen until next week, people are unwilling to spend their money. They have held tight to it, and high street spending over the past month or two has slowed down and even dropped. Whether cash will be released when the Chancellor has finished his Budget speech has yet to be decided. I believe that, however good or bad folk may consider the Budget to be, they will still spend a certain amount of money for Christmas, so traders may yet get all the money back; it may simply have been dammed up.

The second and more serious consequence for any Prime Minister, whatever party may form the Government of the day, is that in future we shall be locked into having general elections in spring or early summer. I have already referred to the reason for that—the fear of the unknown. The impending Budget will make it difficult for any Prime Minister to choose an autumn election unless circumstances are extremely favourable, which rarely happens. The Government would be open to attack on every side. The Opposition would attack, and scaremongering and fears would be fed by comments from every side. No sensible Prime Minister would be willing to go for an election in October, which in the past has been one of the favourite times.

The election could not be held after the Budget, either. Who wants a snowman's election? We had one many years ago in Northern Ireland, and we do not especially want to be out electioneering in December, January or February again. In future, elections will take place in March, April and May; that will be the sensible time. However, it will also be far enough away from the Budget for any good to have been dissipated, and close enough to the next one to allow the scaremongering to start again. So, politically, the decision on timing may not have been the happiest.

During the coming year, we shall see the 1 per cent. increase in national insurance contributions. In effect, that is a 1 per cent. increase in income tax, and it is only a forerunner of what will have to be done to national insurance contributions over the next few years. The aged population is steadily increasing, and that trend will continue for many years. The change in the balance of the population between age cohorts—between those who are working and those who have stopped working—will have profound consequences which it will not be easy to resolve.

One sees all sorts of straws in the wind in the financial press about changes in the funding of pensions. Any such development will require a great change in the way in which people prepare for their old age, and that will have to be a generational change; it cannot come about quickly or easily. There is no quick fix, and the sooner the facts are faced and the necessary effort made to educate the public, the better it will be for all of us. The problem will not go away.

The finance required to support the number of people older than the normal working age will represent a large element of our national income in future. I put it in those terms because I do not think that it matters much whether the necessary sums are provided through a system of state pensions or through private schemes. In the end, that money will have to be provided by the working population at the time. Unlike the Japanese, we have not managed to play an immense part in industry overseas to help pay for our pensions.

That is only one obstacle which has to be overcome if the Government are really to reduce public expenditure as a percentage of GDP, not to mention their commitment to return to a balanced budget. Given the present £50 billion deficit, cuts in the growth of public expenditure are certain. I must say in passing that it seems better to me for a Government to find their expenditure overshooting than to be accused of having a cut a year or two down the road, but whether they would be prepared to put up with the temporary problems created by an overshoot is another matter.

Tax increases next week are certain. Even if we do the best that can be done both now and in the longer term, the best hope of meeting the Government's present commitments and those that will face any future Government must lie in faster economic growth and increasing employment. As has been said time and again, that is the best way of getting rid of a large part of social expenditure.

This week's cut in interest rates was belated and, I believe, too small—perhaps the Chancellor is saving something for next week. Much more is needed—at least another 1 per cent., to bring the real interest rate down to continental levels, will be necessary at the beginning of next week. When I read that the Chancellor was saying that he now meant to leave such decisions to be made by the Bank of England, I was horrified. I was certain that he had painted himself into a corner, and that he would soon find himself not so much painted into that corner as entombed in it. However, sure enough, the paint has dried a little and today I noted the Chancellor tip-toeing gently away from Bank decisions and asserting once more that he was the one making the decision. That was not quite what we read in the press, and no doubt it will be made clear to us later which account was correct.

The reality is that the Chancellor and the Government are elected to a position to take decisions by themselves in the best interests of the country, as they perceive them at any particular time. Whenever the buck arrives on their desk, they should deal with it. Given the Chancellor's behaviour in his previous incarnations, I always believed that he was a man who was prepared to stand up and take it on the chin, and to make the necessary decisions.

It troubles me that if the remarks attributed to him earlier this week are correct, the only thing that can be downstream is a European central bank—which would find much less favour on this Bench than on most, not least because the Chancellor's words earlier today indicated that German decisions in respect of the exchange rate mechanism reflected Germany's interests rather than those of any other country. That is evident to those of us who take a sceptical view of a European central bank in any event.

The Government must create the conditions that will spawn a high-income, high-productivity economy, which in turn implies a considerable increase in our manufacturing capacity. We have not replaced the capacity lost in the early 1980s, and priority must be given to investment in restoring that capacity and to exports—not least those outside the EC, where we seem to be doing rather better than with exports within it. We should build on that success and not become too dependent on Europe, but look to the wider world and make full use of the sea lanes that are open to us.

The Government might make a start by considering the hundreds, perhaps thousands of aging ships around the world and reviewing the recommendations for building new ships made by those in the shipping industry, for that would spawn an enormous amount of engineering work far beyond the confines of any individual shipyard. That would be of tremendous help to the whole of the United Kingdom.

Construction also offers potential, but unfortunately too many of the products used in that industry are made in France, Germany or elsewhere and imported into this country—products that we used to make ourselves, and which could be made here again, given some encouragement in the proper places.

Others will have their own ideas, and the Government should be generous enough to acknowledge that right hon. and hon. Members on this side of the House also want a prosperous and happy United Kingdom as we rush towards the end of this turbulent century.

That returns me to my earlier remarks about the speech of the hon. Member for Newry and Armagh, who took considerable credit for his party's willingness to talk to Sinn Fein—which as far as anyone on these Benches is concerned is to talk to the IRA: if there is a thread between them, it is well nigh an invisible thread.

The hon. Gentleman went on to say that we on this Bench should talk to the Protestant paramilitaries. It is not all that long since spokesmen for the hon. Gentleman's party were wrongly accusing us—both in the House and outside it—of talking to the Protestant paramilitaries, and condemning us for doing so. The hon. Gentleman's party is now only too willing to urge us down a road that it once condemned because its members have talked to a group of the most murderous thugs in the western world. The House would do well to keep in mind the underlying reason for the urgings of the hon. Member for Newry and Armagh.

The hon. Gentleman also drew attention to the situation in Cyprus, and said that a British Minister stated recently that there should be one Government for Cyprus. The hon. Gentleman forgot to mention that so long as this nation was the protective power in Cyprus the situation which now prevails in that country did not exist. It was only when those who wanted union with Greece murdered our soldiers and fought us tooth and nail, so that the Greeks could take over the whole island, that the present situation was spawned and bore its evil fruit. That is an exact analogy of the situation in Ulster. That lesson should be learnt not only here but farther afield.

The hon. Member for Newry and Armagh condemned my right hon. Friend the Member for Lagan Valley (Mr. Molyneaux) for his remarks the other day, when he drew attention to the unease that has spread to what might be described as the middle class in Northern Ireland. He did not seem to think that the middle class was affected. My right hon. Friend the Member for Lagan Valley may have been wrong, but my experience suggests that his remarks were accurate.

After yesterday, we can say one thing with certainty: there are people in Northern Ireland who are uneasy. Their attempt to import a large cargo of firearms is a direct reflection of that. It should concern us all. It concerns me and those whom I represent that such a thing should have happened. As the hon. Member for Belfast, East (Mr. Robinson) said, it was a preparation for war. Why would people take such action if they were not afraid of their long-term position in this nation?

The hon. Member for Newry and Armagh said that he was speaking from a nationalist position. I and those who sit with me also speak from a nationalist position. We speak from the position of the British nation resident in Ulster. We are intensely proud of our membership of that nation. We are not prepared to give it up or to have it undermined. We are not prepared to accept a system of governance for our Province that will be used to undermine our place in this nation and take us into a nation and a society that we and our fathers have detested and in which we will have no part. That view should be made clearly and bluntly in case anyone thinks that our resolution is weakening.

We are British and we intend to remain so. That is the position of the Unionist People. They have shown what they believe over many years and will go on showing it. They will continue to elect Members such as myself and those who sit with me to represent their views in this House.

9.7 pm

Mrs. Margaret Beckett (Derby, South)

The Government's programme, as embodied in the Queen's Speech, was rightly described by my right hon. and learned Friend the Leader of the Opposition as thin. Tonight, after six days of debate, we know clearly why. The real debate on the real agenda is taking place elsewhere, behind closed doors, away from the public gaze. That debate is about whether to get rid of state pensions, how to tax us even further by stealth and how to break up the national health service.

The purpose of the Queen's Speech is to give the Government an opportunity to address the state of the country, to set goals and put forward proposals on the role that Government can play in meeting those goals. The purpose of this Queen's Speech has been to conceal those goals and to fob us off with rhetoric, sound bites and scapegoats.

Instead, the nation awaits, with some trepidation, the real Conservative programme that may begin to emerge in next week's Budget. It will be set, of course, against the background of the ticking time bomb left by the former Chancellor, the right hon. Member for Kingston upon Thames (Mr. Lamont). That time bomb is made up of the biggest tax hike in British history and is brought to us by a Government who fought an election promising no new taxes, no tax increases, no extension of VAT, no increase in national insurance and no change to mortgage tax relief. We were promised cuts in income tax "year on year", to quote the Prime Minister, and no cuts in public expenditure.

The Government have been more economical with the truth than they have been with our public finances. Furthermore, they fiddle the figures. The figure that they gave for public borrowing before the general election was £20 billion adrift of the post-election reality, a reality of which they must have been aware.

That borrowing—£50 billion of it—is not to fund investment in Britain's future; it is to pay off the cost of the Government's incompetence. Over and over again, Opposition Members warned the country of just these dangers.

But what about Conservative Members? How many of them voted for tax cuts before the last election; how many of them will vote for tax increases now? How many of them warned of VAT on energy before the election? How many will vote for VAT on energy now? How many of them warned of increases in national insurance before the election; how many will vote for such increases now? How many Conservatives warned of cuts in mortgage interest relief?

I am waiting for volunteers from the Conservative Benches—I will give way readily to any Conservative who wants to intervene. [Interruption.] Here comes a volunteer now. Does the hon. Member for Gravesham (Mr. Arnold) want to tell us that he warned his constituents of cuts in mortgage interest relief before the election? But will he vote for cuts in it now?

Did any Conservative Member warn of tax increases through freezing allowances—because they will all vote for that today? How many of them, if any, warned the British people that they would be stung to the tune of £8.50 a week if they voted Tory? How many of them will vote for tax increases of £8.50 a week?

Earlier today, the Chancellor accused my hon. Friend the Member for Dunfermline, East (Mr. Brown) of searching for material in what he called the most unlikely places, by which he meant the election addresses of Conservative party candidates—a remark more candid than flattering. Every Conservative Member won his seat on a false prospectus, and they know it—and so do the British people.

To give him his due, the Foreign Secretary seems a little shamefaced about this false prospectus. In the debate on Friday he said: Words come back to haunt us if we cannot live up to the promise that they contain. We must be able to deliver what we undertake and not to undertake what we cannot deliver."— [Official Report, 19 November 1993; Vol. 233, c. 114.] I cannot believe that the right hon. Gentleman said that. I can believe that it is what he really thinks, but if so, why is he still in the Government?

By contrast, a far more authentic note is struck by the Chancellor's cheerful shamelessness. His reaction to the charge that the Government were elected on a false prospectus is as different from the Foreign Secretary's as it is revealing. Today, the Chancellor said that the Government gave no commitment whatsoever not to increase taxation. I could barely believe that he said that, and if I had not heard it with my own ears I would find it extremely difficult to believe.

I remind the Chancellor of what the Government said: We will not have to increase taxes. I cannot see any circumstances in which that will be necessary". That was the Chancellor's predecessor. The manifesto said: We will maintain mortgage tax relief'— not cut it, We have no plans and no need to extend the scope of VAT. That was the Prime Minister. I have no plans to raise the top rate of tax or the level of national insurance contributions. That, too, was the Prime Ministser.

The thesis that the Chancellor is advancing is plain: no one should take too seriously what Conservatives say during an election campaign—and no one will again. Il is clear that the Chancellor has a cavalier way with words, but, more worryingly for a Chancellor, he seems to have an equally cavalier way with figures. This afternoon, he claimed that in Labour's shadow Budget someone earning £25,000 would have had to pay £2,050 more in tax. That is just not true. I have here a copy of Labour's shadow Budget, with which I doubt the Chancellor bothered himself. No doubt such details of fact are beneath him.

In Labour's shadow Budget, some people on earnings of £25,000 a year would have been better off and, in the worst case, a childless single earner would have paid no more than £250 to £;270 more a year. What will they be paying next April under the Government? I will tell the Chancellor: at least £300 and possibly up to £500 more, nearly twice as much, because that is the scale of the Government's failure.

The Chancellor went on to speak about the decrease in the numbers of people who are registered as unemployed. That fall is welcome on both sides of the House if it is true. On 20 May this year it was reported, however, that managers from about 800 benefit offices are receiving performance-related pay, directly linked to reductions in the unemployment register. That may, of course, have no bearing on the fact that during that period the figures of people who are registered as unemployed—not by any means the same thing as those seeking work—have decreased, but it is interesting that it is hard to reconcile those figures with the figures for people who are in jobs, because the figures for people who are in work decreased, in the year leading up to July, by 500,000 in full.

Those are the facts on which the Chancellor touched so lightly and so inaccurately. Two Tory Chancellors now hold the record for the highest tax increases in any one Budget: the first, the former Chancellor, the right hon. Member for Kingston upon Thames and the second, Lord Howe—two Tory Chancellors, who top the league table for taxation hikes.

The question is: is there more to come? That is clearly the belief of the Daily Mail, which told us this week to prepare for "Mr. Clarke's stiletto". That is its description. I must admit, I had always seen the Chancellor more as a club and axe man myself—the man who took the truncheon to the police force, the man who took the cane to the teachers and the man who took the surgeon's saw to the national health service. The Daily Mail, however, with its intimate acquaintance with Tory thinking, clearly sees him rather differently, as the man with the stiletto, "a fine Italian dagger", which the newspaper says that he will use to put the knife in subtly, apparently painlessly but with dangerous long-term effects.

I am sure that the Daily Mail is right, because we see around us everywhere the dangerous long-term effects of the Government's policies—not just the damage that they have done to the nation's budget and, as a result, to the budget of every British family. Far more serious, far more undermining, is the damage that they have done to the confidence and security of every British family.

In Britain today, most people are worried about the state of our country. They feel nervous. They feel insecure. They are worried about rising crime, about their jobs and about their future and that of their children. They see around them rotting buildings, and those buildings are the local hospital and the local school. They see so much that they have taken for granted, at risk and under threat. They fear that they are being cast adrift in a hostile world and, in that concern and fear, they turn to the Government, in whom they placed their trust 18 months ago, for guidance, for reassurance and for leadership. What a waste of time it is to look for leadership from the Government. What do they get? Scapegoats and slogans.

One reason for the scapegoating rhetoric of the recent "back to basics" campaign is that the Government know that many people, whether they live in leafy suburbs, country towns or major cities, live in the fear of crime that today touches every family in the country. And especially—[interruption.]

Madam Deputy Speaker

Order. I am seeking to listen to the hon. Lady. I do not expect to have to compete against a lot of Back-Bench mutterings.

Mrs. Beckett

I think that my hon. Friends are objecting to the unusual use of the officials' box to pass suggestions to Back Benchers.

Madam Deputy Speaker

I did not see that; I was looking at the other side of the Chamber. However, I take the point.

Mrs. Beckett

The problem faced by many families in Britain is that they live in fear of crime that touches us all. In particular, they live in fear of the apparently random, almost casual, attack which appears increasingly to be drugs-related. "Back to basics" is a slogan which acknowledges that things in Britain are falling apart.

The Conservatives, turning and turning in the widening spiral of Government detachment and deregulation, now need to put together that which for 14 years they have torn asunder. They call for community spirit when no Government in modern times have done more to kill it. They have grown bloated, complacent and insolent in office. They have grown so insolent that they reject all advice from business, large and small, that Britain needs a Government who will frame a partnership with industry, not a Government who wash their hands of industry's problems.

The Government are so insolent that they plan to dodge their obligations for sick pay and instead dump them on small businesses. While doing so, they defend tax loopholes for rich contributors to the Tory party, at home or abroad.

That is not the only example of their insolent disregard for standards, whether in business or in public life. The proposed reorganisation of local government in Scotland and Wales to the diktat of the Ministers responsible is one of the most shameless pieces of gerrymandering that this House has ever witnessed.

Mr. Jonathan Evans (Brecon and Radnor)

The hon. Lady alleges that the plan for local government reorganisation in Wales is shameless gerrymandering. In that case, can she explain why the changes in my constituency involve putting five wards that all contain Labour councillors into my seat?

Mrs. Beckett

The hon. Gentleman should direct that question to his right hon. Friend the Secretary of State for Wales, who clearly knows more about the matter than I do. If the hon. Gentleman doubts my claim about gerrymandering, I draw to his attention the observations of The Scotsman that the proposals for Scotland represent a map drawn to no higher democratic principle, no deeper logic, than the electoral advancement of the Conservative Party in Scotland."—[Official Report, 22 November 1993; Vol. 233, c. 210.] The hon. Gentleman will find relevant examples in Monday's Hansard showing how ridiculous many of the proposals are.

The extraordinary thing is that the proposals would not have been acceptable to any previous Government of any political shade. It is an example of how this Government have grown swollen with insolence in office. With each Queen's Speech, they relinquish more and more responsibility for the nation's affairs by the privatisation of assets that most people believe the Government have a duty to manage—for example, British Rail; but also the Post Office, the Royal Mint and the Inland Revenue. Who in this country wants his taxes handled by a private company? It is certainly not the British people or Members of Parliament. I am right, am I not, in saying that it will not apply to Ministers or Members of Parliament?

The proposals are unsought, they will be unpopular, they are unworkable and they are one more example of the Government's insolence and folly. Yet the Government are so insolent that they utterly refuse to listen to others and demand blanket support for this year's criminal justice and police Bills, when the 64 pieces of legislation that went before those Bills have failed to stem the rising tide of lawlessness that so troubles the British people.

Meanwhile, the Government are cutting programmes such as those for drug education, for better street lighting and for video surveillance—programmes that work to help to tackle rising crime. Of course, the reason for such action is that we have a Government for whom catching criminals takes second place to catching headlines. As the chairman of the Police Federation, Richard Coyles, pointed out, the Government are conducting a war against lawlessness by press release and good intent". He continued to cast even more light on the validity of the Government's claims in that regard by saying: If you add up all the extra thousands of bobbies that the last seven Home Secretaries claim to have put back on the beat there would be no room for pedestrians on the pavement.

The Government, who preach responsibility in others, shirk all responsibility themselves. That abdication of responsibility comes from the very top. When he was asked about the state of the economy, the Prime Minister said in The Independent on 4 March: I think you have to consider firstly the inheritance I had when I became Prime Minister: we had 15 per cent interest rates, inflation just under 11 per cent". That inheritance was from himself as Chancellor. When the Prime Minister was asked about rising crime, he blamed it on Labour local authorities in the inner cities. In fact, crime was rising faster in Tory rural areas, which, as a consequence, are Tory no more.

When concern is rising about standards of education for children, every one of whom has had their education under this Government, the Prime Minister blames it on parents. The Home Secretary blames it on grandparents.

What should be in the Queen's Speech is an industrial policy to promote investment and expansion in British industry. There should be an industrial policy that has as its aim the promotion of long-term sustainable recovery that will bring the stability that British industry so badly needs.

Mr. Harry Greenway (Ealing, North)

That is not good enough. We need more detail.

Mrs. Beckett

If the hon. Gentleman does not know of what an industrial policy consists—I can well understand it, if he has been following the Government for many years —he needs only to turn to bodies such as the Engineering Employers Federation or the CBI. All have been giving the Government advice about the need for an industry policy for many years and not one piece of that advice has been heeded.

What should also be in the Queen's Speech is an employment policy to offer hope and purpose, especially to the young. A balanced programme for investment in our infrastructure is greatly needed, as the million people who could neither get to work nor get home in London yesterday will testify. We need a programme for the environment that does not leave all the consequences and all the responsibility with the private sector. The British people pay a heavy price daily for a Government who shirk their proper responsibilities.

The Queen's Speech betrays once more the Government's poverty of ambition for the British people, who are rightly ambitious for themselves and for their families—people seeking hope, purpose, and self-confidence and looking to their Government to provide the framework in which that hope can be realised and that purpose expressed; people whose hope for improvement depends on deliverance from this Government.

The Queen's Speech fails utterly to address in any respect the condition of this country. For that reason, we shall vote tonight not for the speech, but for our amendment.

Madam Deputy Speaker

Before the Leader of the House starts his speech, may I make one point very clear. As the House knows, I did not see a certain incident that took place, but may I, for the record, make it clear that notes of guidance for a Minister coming from the civil servants' Box are for the use of that Minister only, and under no circumstances must they be handed to any other hon. Member.

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

On a point of order, Madam Deputy Speaker. As I understand it, you have just rebuked an hon. Member. Instead of taking that rebuke, the hon. Member for Hendon, South (Mr. Marshall) sits there laughing and joking. You should make clear, Madam Deputy Speaker, what action you will take unless some apology is forthcoming from the hon. Member concerned.

Mr. John Marshall (Hendon, South)

Further to that point of order, Madam Deputy Speaker. I apologised to you and I thought that the Leader of the Opposition heard that apology as well. I certainly apologised, Madam Deputy Speaker, as you will confirm and I am happy to apologise to the whole House for an exercise in excessive enthusiasm.

Madam Deputy Speaker

I thank the hon. Member for Hendon, South (Mr. Marshall). The incident is now closed.

9.31 pm

The Lord President of the Council and Leader of the House of Commons (Mr. Tony Newton)

We have had what can properly be described as a long and, at times, lively debate, inaugurated some considerable time ago, on this day last week. It was started with considerable wit and style by my hon. Friends the Members for Wealden (Sir G. Johnson Smith) and for Bolton, North-East (Mr. Thurnham). Once again, I congratulate them on their speeches in immediate reply to the Gracious Speech.

In the intervening week, we have had a number of interesting moments. There may be some that even the participants might rather forget, including the venture of the hon. and learned Member for Montgomery (Mr. Carlile) in seeking to prevent the Secretary of State for Wales from speaking at all or from putting his points in the debate.

There have been others that have undoubtedly given considerable pleasure to all hon. Members, including, certainly—I was not able to be present—the speech yesterday by my right hon. Friend the President of the Board of Trade, and, undoubtedly, the exchanges today between my right hon. and learned Friend the Chancellor of the Exchequer and the hon. Member for Dunfermline, East (Mr. Brown).

To seek to sum up after such a debate is rather a large task. Before I begin to do that, I should acknowledge and, to a degree, respond to the convention that on these occasions, the Leader of the House says something about one or two House of Commons issues which have featured in the debate. On this occasion, it would have been difficult to avoid doing so given the forthright comments of my right hon. Friend the Member for Westmorland and Lonsdale (Mr. Jopling) on the opening day of the debate.

The whole House is well aware of the way in which my right hon. Friend has put immense effort into and has subsequently pursued with vigour the issue of the reform of the sittings of the House, which is the subject of the report that is most frequently referred to by his name. The whole House takes the view that it owes him considerable gratitude for that effort.

The point that my right hon. Friend has always emphasised and which I must emphasise again tonight, as he did in his speech last Thursday, is that the proposals hang together as a balanced package which recognises, on the one hand, the interests of the Government and, on the other hand, the interests of the Opposition and of Back Benchers. To cherry-pick from the package and, above all, to ignore the recommendations made about automatic timetabling would rapidly destroy that balance. He has rightly pressed me to take this matter forward, and he knows, and the right hon. Member for Derby, South (Mrs. Beckett) certainly knows, that I have attempted to do so in concert with her. It is proving more difficult than I had hoped—and possibly more difficult than the right hon. Lady had hoped—and, as my right hon. Friend understands, I am currently looking for further ways in which we might make progress. It remains my hope that we will be able to achieve agreement on a balanced package of measures that can be brought before the House, but, after the long period in which I have sought to reach an agreement, it would be wrong of me to underestimate the difficulty that there appears to be in doing so. That is not to say that I shall not continue with every effort to do so, but had it been easy I would have brought proposals to the House at a much earlier stage.

As to the current Session and the period immediately ahead of us, I assure the House that I will continue to do everything that I can, within our existing arrangements and procedures, to ensure that the business of the House is arranged for the maximum convenience of hon. Members. Obviously the Government must progress their business, but in doing so we will seek to be as helpful as possible to the House, and take into account all of its interests and the interests of hon. Members.

Mrs. Gwyneth Dunwoody (Crewe and Nantwich)

Is the Leader of the House aware that there is grave dissatisfaction about changes in procedure which occasionally lead to the sort of unwelcome move that puts the Christmas Adjournment debate on a Friday morning, which is unheard of in the House? Will he give an undertaking that we will return to a situation in which Back Benchers' rights are protected as zealously by the Leader of the House as by Back Benchers themselves?

Mr. Newton

This subject was raised at Business Question Time today, and I commented on it then. I very much respect the hon. Lady, even though I do not always agree with her, and I am sorry that she feels the way she does. To repeat the points that I made at Business Question Time, far from attenuating or reducing the rights of Back Benchers, the time for the Christmas Adjournment debate is not in private Members' time but on a Friday which would normally have been a Government Friday. That has enhanced and increased the opportunities for Back Bench Members to take part in discussions about matters that they value.

There is one related issue in the context of the procedures and the Jopling report, to which hon. Members attach particular importance, and that is to have as much notice as possible of the dates of forthcoming recesses. I am always anxious to announce recesses as early as possible, and I was pleased this afternoon—this relates to the matter to which the hon. Member for Crewe and Nantwich referred—to be able to let the House know that, subject to the progress of business, it is planned that the House should rise on 17 December for the Christmas recess, resuming on 11 January.

Looking further ahead, I will make every effort to give the House as early an indication as I can about the recesses for the rest of the Session, although there will be greater difficulty about the dates of the summer recess for some time ahead. I appreciate that this is very helpful and enables Members to plan ahead, and I will try to give as much notice as possible.

Before turning to the wider issues of the debate, I will deal with the House of Commons front. I know that disappointment is felt in some quarters, not least by my right hon. Friend the Member for Honiton (Sir P. Emery), although he is not able to be here, about the caution with which the Government have approached the Procedure Committee report on the handling of the new Budget arrangements. As always, my right hon. Friend and his Committee have done a thorough job of examining the implication of the new arrangements. Like my right hon. Friend the Member for Westmorland and Lonsdale and his Committee, they deserve the thanks of the House for all their work.

None the less, I think it wise to proceed on the basis of gaining experience of how things go with the new unified Budget arrangements before seeking to make large changes in our procedures. I undertake, however, that, in the light of this year's experience, we will be prepared to reconsider —indeed, we will expect the Select Committee to play a leading part—to establish whether there are lessons to be learnt and changes to be made in advance of the second unified Budget in 1994.

To return to the debate on the Gracious Speech, which has ranged widely over the proposals since we began it a week ago, my right hon. Friends have set out fully and clearly the main ingredients of the Government's programme. At the outset, my right hon. Friend the Prime Minister identified the theme of our programme for the session—and, indeed, for a longer period—as "back to basics". The measures that we will present to the House in the coming months undoubtedly support that theme. There will be a criminal justice Bill to shift the balance in favour of the victim and away from the criminal, to clamp down on the abuse of bail and to deal with persistent juvenile offenders. There will also be a deregulation Bill to lighten the burden of regulation for businesses.

Mr. Alun Michael (Cardiff, South and Penarth)

If the Prime Minister was indicating an intention on the part of the Government to clamp down on crime, can the Leader of the House explain why, instead of the 1,000 extra police officers for this year promised in the Conservative party manifesto, there has been a drop of more than 200?

Mr. Newton

The hon. Gentleman should read the proposals presented by my right hon. and learned Friend the Home Secretary. Those proposals, in various ways, will enhance the number of policemen still further—not least the number who can take part in policing on the streets, rather than dealing with paperwork inside police stations.

I am not surprised that the hon. Gentleman—in line, no doubt, with the wishes of his Front Bench—wishes to divert attention from a Bill to lighten the burden of regulation for businesses. As far as I can judge, such a measure is anathema to the Opposition: nothing that they say shows an inkling of understanding about the need for this Bill, which will enable our businesses to compete even more successfully in the world economy.

We shall also present an education Bill—widely welcomed, I believe—to provide new and more practically based teacher training programmes to enhance the teaching of children in our schools. That is very much in line with what the Government have done—and, indeed, advanced further in the past few weeks—to provide more information to enable parents and others to judge what is happening in schools, and to take action where necessary to raise standards. That concerns parents throughout the country.

Some of these issues—and, indeed, the very phrase "back to basics"—have provoked comment, even criticism, from Opposition Members. We have heard some of that this afternoon. I have no doubt, however, that these are among the issues that remain of prime concern to the people of this country, and to many hon. Members. Time and again, the debate has returned to the subject of crime as a central concern; it is, I think, widely agreed that we should give it the high priority that it has been given in our debate and in the Gracious Speech.

My right hon. and learned Friend the Home Secretary set out his proposals very clearly, in spite of some signs that Opposition Members—not least the hon. Member for Sedgefield (Mr. Blair)—were prepared to recognise the existence of a solution, but were unwilling to co-operate in almost any measure that might show any sign of contributing to such a solution. Indeed, over the past few years the Labour party has seemed persistently unwilling to co-operate in that way.

I shall refer only briefly to one or two other points in the Gracious Speech, including the other Bills which will certainly be widely welcomed in the House including the Intelligence Services Bill, putting many of our security services on to a statutory basis and providing a new basis for their oversight and the Sunday Trading Bill which will not be without its controversies and difficulties, but which everyone hopes will resolve the uncertainty that currently surrounds trading on Sundays.

Looking beyond the domestic scene, my right hon. Friend the Foreign Secretary gave an impressive summary of the difficult issues faced in many parts of the world. His report of the forthcoming Russian elections must give us all a great deal of encouragement and on behalf of the House I would wish my right hon. Friend the Member for Mole Valley (Mr. Baker) and the hon. Member for Cynon Valley (Mrs. Clwyd) well in their roles as leaders of the team of British observers in those elections next month.

One point I should mention, particularly in view of the number of Northern Ireland Members who have spoken during the debate, is the importance rightly attached to the way in which the Prime Minister emphasised this issue, not only in a speech at the Guildhall 10 days ago, but also in his speech at the outset of the debate on the Address. He made clear right at the outset of that speech the importance he is attaching to the search for peace in Northern Ireland. I was glad that the right hon. Member for Yeovil (Mr. Ashdown) clearly endorsed those efforts, which would be echoed by the whole House.

I recognise that there have been some concerns expressed most recently by the hon. Member for Londonderry, East (Mr. Ross). I hope that it can be taken that all hon. Members will want to respond to my right hon. Friend's invitation to all citizens of the British Islands to set their hands to the task of laying solid foundations for a real and enduring peace". All I would wish to do is to reiterate the Government commitment and once again draw the House's attention to the guarantee given by my right hon. Friend the Prime Minister on the opening day of the debate, when he said: The future constitutional position of Northern Ireland is a matter for the people of Northern Ireland to determine and for no one else to determine." [Official Report, 18 November 1993; Vol. 233, c. 29.] I hope that continues to reassure the hon. Gentlemen who made those points during the debate.

No less important than the legislative content of the Gracious Speech and my right hon. Friend's efforts in regard to Northern Ireland is the specific subject that has been the main focus of our debate today—the economy and the background to the Budget that my right hon. and learned Friend is to present next week. That background is encouraging; it is one of clear and growing evidence of recovery and, perhaps even more important, of a sound basis for that recovery to continue.

Mr. Peter Luff (Worcester)

I appreciate that my right hon. Friend's duties in the House this evening will have prevented him from seeing a witty, but grossly misleading and economically illiterate, party political broadcast by the Labour party starring Stephen Fry as a tax consultant. Apparently, the major loophole the Opposition wish to close is a £32 billion windfall profit made by Britain's most successful companies. What consequences does my right hon. Friend think an arbitrary tax on legitimate and hard-earned profits of Britain's most successful companies will have on investment and employment in those firms?

Mr. Newton

My hon. Friend is quite right to think that my preoccupations inside the House have spared me the pleasure of watching the Labour party political broadcast tonight, but if I have an opportunity later I will make some comment about the magic wand solution of the so-called tax loopholes by means of which the hon. Gentleman for Dunfermline, East (Mr. Brown) evades every straight question about how he would balance Labour's public expenditure commitments, which mount by the minute with what he says about taxation. The answer is that he cannot, and loopholes are the cop-out that tries to square the circle.

I was referring to the clear and growing evidence of recovery and what I believe to be, and what is increasingly widely accepted to be, the evidence that there is a sound basis for that recovery to continue. Two days before the Gracious Speech we had figures that showed that the rate of inflation had fallen to its lowest for about a quarter of a century. One day before the Gracious Speech, we had unemployment figures that showed us with a substantial decline in unemployment and now below the European Community average. During the debate, we have had the further reduction in interest rates, which gives us the lowest interest rates for more than 15 years.

At least as important as those figures showing what has happened in Britain in the past week or two, and the further progress that we can see being made, is the wider comparison on which my right hon. and learned Friend the Chancellor of the Exchequer spent some little time this afternoon between what is happening in Britain and what is happening almost everywhere else. The latest forecast from a variety of international sources shows that the United Kingdom will have the fastest growth among major EC countries this year and next.

The latest industrial production figures—I make no apology for repeating these striking figures which my right hon. and learned Friend gave this afternoon—show that, on a year-on-year basis, industrial production in Japan has fallen by more than 3 per cent., in Germany by 7 per cent., in France by more than 3 per cent. and in Italy by more than 3 per cent., while in Britain it has risen by nearly 3 per cent. Much the same is true of some of the retail sales figures.

Dr. Berry

The Leader of the House talks as though the Government have been in office for only the last 12 months. Would he care to give those figures for the period from 1979 to the present?

Mr. Newton

If the hon. Gentleman looks at the figures for the 1980s he will find that, in contrast with all those league tables that Opposition Members have used so freely, it was far and way the most successful decade that Britain has had since the war.

To pursue the comparisons for a moment or two more, we now have the lowest headline inflation in the G7 countries and below the average in the European Community where it has been below the average each month since August 1991. We have the lowest interest rates in the EC and our unemployment rate is below the EC average. Our total output, the gross domestic product, is up nearly 2 per cent. on a year earlier and has now risen for six consecutive quarters.

Dr. Berry

Would the Leader of the House care to explain why it is that under the present Government we have had the worst growth record of any Government since the war?

Mr. Newton

We are talking about a situation in which there has been a widespread international recession from which the whole western world has been suffering and which Britain is now leading the way out of as a result of the Government's policies, a fact that I have clearly demonstrated by the figures that I have given in the last few minutes.

I am not a bit surprised that the hon. Gentleman should seek to intervene in the way that he has. It reveals clearly precisely what the Opposition's reaction has been to this and almost every other piece of good news. They prefer to ignore it. As my right hon. and learned Friend the Chancellor pointed out, against the background of our success in restraining inflation, the hon. Member for Dunfermline, East could not even bring himself to utter the word "inflation" today. I am not even sure, against a background of our success in reducing interest rates, that the hon. Gentleman even mentioned interest rates. That must be some kind of record for his speeches.

The hon. Gentleman certainly made no mention of what the Leader of the Opposition said during the debate on the previous Budget: We shall see in the November Budget whether this Budget has brought down unemployment. If Conservative Members want that to be a test, we shall make it a test for the Government."—[Official Report, 16 March 1993; Vol. 221, c. 199.] Well, manifestly the Budget has brought down unemployment by 137,000 this year. The Government have clearly passed that test.

Mr. Derek Enright (Hemsworth)

Will the Leader of the House tell me what to say tomorrow when I go to Frickley pit at South Elmsall, where 800 miners are to be put out of work tomorrow? How do I tell them that the Government have said it is all bright and breezy? Is that not a disgrace?

Mr. Newton

Although it is clearly a matter for the hon. Gentleman, I would suggest that he says three things. First, as has been pointed out today, he can say no Government can completely insulate an industry for whose products there is not sufficient demand following the effects of adjustment. Secondly, he could point to the improving prospects which I have outlined in the past few minutes. Thirdly, he could point to what has happened at one former colliery site in the Barnsley area. A firm in a modern industry, Tunstall Electronics, is to use the site for a factory which will provide 600 jobs in an expanding industry. We should be seeking to encourage that, and that is the objective of the Government's policies.

One of the things which is clear—I do not think that it was altered by the speech of the right hon. Member for Derby, South (Mrs. Beckett) half an hour ago—is the absence of any clear idea of what the policies of the Labour party are, despite their criticism of the Government. The hon. Member for Dunfermline, East's contribution to environmental policy appears to be the recycling of his old speeches, and he appears dedicated to creating what can only be described as a policy-free zone.

The Leader of the Opposition has spotted that, and attempted to fill the vacuum by putting his signature to the European socialist manifesto for the European elections. There was some dispute about that subject earlier, so I have obtained a copy of the document to better inform the House —lengthy and wordy as it is. In outlining the measures that they think sensible in the circumstances, the manifesto suggests a substantial cut in the working time to ensure a better division of the available work. Several approaches are possible: a working week of 35 hours or 4 days, leave for training, voluntary part-time work etc. Sharing out the available work—what a negative, defeatist, and ultimately self-destructive approach.

An impressive article in The Economist states that if shorter working hours and longer holidays reduced joblessness, Europe would now enjoy the world's lowest unemployment. Yet the unemployment rate in the European Community is 11 per cent., in America it is 7 per cent., and in Japan it is less than 3 per cent. There is the answer to the thinking of the Labour party.

The Labour party has nothing to say about how to increase jobs, competitiveness, output, and wealth. The social chapter is against those, as is the national minimum wage, the increasing costs of part-time work, and their proposals on tax loopholes. The Labour party's proposals would not so much close loopholes as close good businesses.

We reject that approach. The policies which we have been pursuing lead in a different and productive direction —the results of which are beginning to be seen—as does our programme that is set out in the Queen's speech, as will my right hon. and learned Friend's Budget next week, and as will the House by its vote to reject the Opposition amendment.

Question put, That the amendment be made:

The House divided: Ayes 276, Noes 317.

Division No. 3]	[10.00 pm
AYES
Abbott, Ms Diane	Bell, Stuart
Adams, Mrs Irene	Benn, Rt Hon Tony
Ainger, Nick	Benton, Joe
Ainsworth, Robert (Cov'try NE)	Bermingham, Gerald
Allen, Graham	Berry, Dr. Roger
Alton, David	Betts, Clive
Anderson, Donald (Swansea E)	Blunkett, David
Anderson, Ms Janet (Ros'dale)	Boateng, Paul
Armstrong, Hilary	Boyce, Jimmy
Ashdown, Rt Hon Paddy	Boyes, Roland
Ashton, Joe	Bradley, Keith
Austin-Walker, John	Bray, Dr Jeremy
Banks, Tony (Newham NW)	Brown, Gordon (Dunfermline E)
Barnes, Harry	Brown, N. (N'c'tle upon Tyne E)
Barron, Kevin	Bruce, Malcolm (Gordon)
Battle, John	Byers, Stephen
Bayley, Hugh	Caborn, Richard
Beckett, Rt Hon Margaret	Callaghan, Jim
Beith, Rt Hon A. J.	Campbell, Mrs Anne (C'bridge)

Campbell, Menzies (Fife NE)	Home Robertson, John
Campbell, Ronnie (Blyth V)	Hood, Jimmy
Canavan, Dennis	Hoon, Geoffrey
Carlile, Alexander (Montgomry)	Howarth, George (Knowsley N)
Chisholm, Malcolm	Howells, Dr. Kim (Pontypridd)
Clapham, Michael	Hoyle, Doug
Clark, Dr David (South Shields)	Hughes, Kevin (Doncaster N)
Clarke, Eric (Midlothian)	Hughes, Robert (Aberdeen N)
Clarke, Tom (Monklands W)	Hughes, Roy (Newport E)
Clelland, David	Hughes, Simon (Southwark)
Clwyd, Mrs Ann	Hutton, John
Coffey, Ann	Ingram, Adam
Cohen, Harry	Jackson, Glenda (H'stead)
Connarty, Michael	Jackson, Helen (Shef'ld, H)
Cook, Frank (Stockton N)	Jamieson, David
Cook, Robin (Livingston)	Janner, Greville
Corbett, Robin	Johnston, Sir Russell
Corbyn, Jeremy	Jones, Barry (Alyn and D'side)
Corston, Ms Jean	Jones, leuan Wyn (Ynys Môn)
Cousins, Jim	Jones, Jon Owen (Cardiff C)
Cox, Tom	Jones, Lynne (B'ham S O)
Cryer, Bob	Jones, Martyn (Clwyd, SW)
Cummings, John	Jones, Nigel (Cheltenham)
Cunliffe, Lawrence	Jowell, Tessa
Cunningham, Jim (Covy SE)	Kaufman, Rt Hon Gerald
Dafis, Cynog	Keen, Alan
Darling, Alistair	Kennedy, Charles (Ross,C&S)
Davidson, Ian	Kennedy, Jane (Lpool Brdgn)
Davies, Bryan (Oldham C'tral)	Khabra, Piara S.
Davies, Rt Hon Denzil (Llanelli)	Kirkwood, Archy
Davies, Ron (Caerphilly)	Leighton, Ron
Davis, Terry (B'ham, H'dge H'l)	Lestor, Joan (Eccles)
Denham, John	Lewis, Terry
Dewar, Donald	Litherland, Robert
Dixon, Don	Livingstone, Ken
Dobson, Frank	Lloyd, Tony (Stretford)
Donohoe, Brian H.	Llwyd, Elfyn
Dowd, Jim	Loyden, Eddie
Dunnachie, Jimmy	Lynne, Ms Liz
Dunwoody, Mrs Gwyneth	McAllion, John
Eagle, Ms Angela	McAvoy, Thomas
Eastham, Ken	McCrea, Rev William
Enright, Derek	Macdonald, Calum
Etherington, Bill	McGrady, Eddie
Evans, John (St Helens N)	McKelvey, William
Ewing, Mrs Margaret	Mackinlay, Andrew
Fatchett, Derek	McLeish, Henry
Field, Frank (Birkenhead)	Maclennan, Robert
Flynn, Paul	McMaster, Gordon
Foster, Rt Hon Derek	McNamara, Kevin
Foster, Don (Bath)	McWilliam, John
Foulkes, George	Madden, Max
Fraser, John	Maddock, Mrs Diana
Fyfe, Maria	Mahon, Alice
Galloway, George	Mandelson, Peter
Garrett, John	Marek, Dr John
George, Bruce	Marshall, David (Shettleston)
Gerrard, Neil	Marshall, Jim (Leicester, S)
Godman, Dr Norman A.	Martin, Michael J. (Springburn)
Golding, Mrs Llin	Martlew, Eric
Gordon, Mildred	Maxton, John
Gould, Bryan	Meacher, Michael
Graham, Thomas	Meale, Alan
Griffiths, Nigel (Edinburgh S)	Michael, Alun
Griffiths, Win (Bridgend)	Michie, Bill (Sheffield Heeley)
Grocott, Bruce	Milburn, Alan
Gunnell, John	Mitchell, Austin (Gt Grimsby)
Hain, Peter	Moonie, Dr Lewis
Hall, Mike	Morgan, Rhodri
Hanson, David	Morley, Elliot
Hardy, Peter	Morris, Rt Hon A. (Wy'nshawe)
Harman, Ms Harriet	Morris, Estelle (B'ham Yardley)
Harvey, Nick	Morris, Rt Hon J. (Aberavon)
Hattersley, Rt Hon Roy	Mudie, George
Henderson, Doug	Mullin, Chris
Heppell, John	Murphy, Paul
Hill, Keith (Streatham)	Oakes, Rt Hon Gordon
Hinchliffe, David	O'Brien, Michael (N W'kshire)
Hoey, Kate	O'Brien, William (Normanton)
Hogg, Norman (Cumbernauld)	O'Hara, Edward

Olner, William	Smith, C. (Isl'ton S & F'sbury)
O'Neill, Martin	Smith, Rt Hon John (M'kl'ds E)
Orme, Rt Hon Stanley	Smith, Llew (Blaenau Gwent)
Paisley, Rev Ian	Snape, Peter
Parry, Robert	Soley, Clive
Patchett, Terry	Spearing, Nigel
Pendry, Tom	Spellar, John
Pickthall, Colin	Squire, Rachel (Dunfermline W)
Pike, Peter L.	Steel, Rt Hon Sir David
Pope, Greg	Steinberg, Gerry
Powell, Ray (Ogmore)	Stevenson, George
Prentice, Ms Bridget (Lew'm E)	Stott, Roger
Prentice, Gordon (Pendle)	Straw, Jack
Prescott, John	Taylor, Mrs Ann (Dewsbury)
Primarolo, Dawn	Taylor, Matthew (Truro)
Purchase, Ken	Tipping, Paddy
Quin, Ms Joyce	Turner, Dennis
Radice, Giles	Tyler, Paul
Randall, Stuart	Vaz, Keith
Raynsford, Nick	Walker, Rt Hon Sir Harold
Redmond, Martin	Wallace, James
Reid, Dr John	Walley, Joan
Rendel, David	Wardell, Gareth (Gower)
Robertson, George (Hamilton)	Wareing, Robert N
Robinson, Geoffrey (Co'try NW)	Watson, Mike
Roche, Mrs. Barbara	Welsh, Andrew
Rogers, Allan	Wicks, Malcolm
Rooker, Jeff	Wigley, Dafydd
Rooney, Terry	Williams, Rt Hon Alan (Sw'n W)
Ross, Ernie (Dundee W)	Williams, Alan W (Carmarthen)
Rowlands, Ted	Wilson, Brian
Ruddock, Joan	Winnick, David
Salmond, Alex	Wise, Audrey
Sedgemore, Brian	Worthington, Tony
Sheerman, Barry	Wray, Jimmy
Sheldon, Rt Hon Robert	Wright, Dr Tony
Shore, Rt Hon Peter	Young, David (Bolton SE)
Short, Clare
Simpson, Alan	Tellers for the Ayes:
Skinner, Dennis	Mr. Peter Kilfoyle and
Smith, Andrew (Oxford E)	Mr. Eric Illsley.

NOES
Ainsworth, Peter (East Surrey)	Bright, Graham
Aitken, Jonathan	Brooke, Rt Hon Peter
Alexander, Richard	Brown, M. (Brigg & Cl'thorpes)
Alison, Rt Hon Michael (Selby)	Browning, Mrs. Angela
Allason. Rupert (Torbay)	Bruce, Ian (S Dorset)
Amess, David	Budgen, Nicholas
Ancram, Michael	Burns, Simon
Arbuthnot, James	Burt, Alistair
Arnold, Jacques (Gravesham)	Butcher, John
Arnold, Sir Thomas (Hazel Grv)	Butler, Peter
Ashby, David	Butterfill, John
Aspinwall, Jack	Carlisle, John (Luton North)
Atkins, Robert	Carlisle, Kenneth (Lincoln)
Atkinson, David (Bour'mouth E)	Carrington, Matthew
Atkinson, Peter (Hexham)	Carttiss, Michael
Baker, Rt Hon K. (Mole Valley)	Cash, William
Baker, Nicholas (Dorset North)	Channon, Rt Hon Paul
Baldry, Tony	Churchill, Mr
Banks, Matthew (Southport)	Clappison, James
Banks, Robert (Harrogate)	Clark, Dr Michael (Rochford)
Bates, Michael	Clarke, Rt Hon Kenneth (Ruclif)
Bellingham, Henry	Clifton-Brown, Geoffrey
Bendall, Vivian	Coe, Sebastian
Beresford, Sir Paul	Colvin, Michael
Biffen, Rt Hon John	Congdon, David
Blackburn, Dr John G.	Conway, Derek
Body, Sir Richard	Coombs, Anthony (Wyre For'st)
Bonsor, Sir Nicholas	Coombs, Simon (Swindon)
Booth, Hartley	Cope, Rt Hon Sir John
Boswell, Tim	Cormack, Patrick
Bottomley, Peter (Eltham)	Couchman, James
Bottomley, Rt Hon Virginia	Cran, James
Bowden, Andrew	Currie, Mrs Edwina (S D'by'ire)
Bowis, John	Curry, David (Skipton & Ripon)
Boyson, Rt Hon Sir Rhodes	Davies, Quentin (Stamford)
Brandreth, Gyles	Davis, David (Boothferry)
Brazier, Julian	Day, Stephen

Deva, Nirj Joseph	Jessel, Toby
Devlin, Tim	Johnson Smith, Sir Geoffrey
Dickens, Geoffrey	Jones, Gwilym (Cardiff N)
Dorrell, Stephen	Jones, Robert B. (W Hertfdshr)
Douglas-Hamilton, Lord James	Jopling, Rt Hon Michael
Dover, Den	Kellett-Bowman, Dame Elaine
Duncan, Alan	Key, Robert
Duncan-Smith, Iain	Kilfedder, Sir James
Dunn, Bob	King, Rt Hon Tom
Durant, Sir Anthony	Kirkhope, Timothy
Dykes, Hugh	Knapman, Roger
Eggar, Tim	Knight, Mrs Angela (Erewash)
Elletson, Harold	Knight, Greg (Derby N)
Emery, Rt Hon Sir Peter	Knight, Dame Jill (Bir'm E'st'n)
Evans, David (Welwyn Hatfield)	Knox, Sir David
Evans, Jonathan (Brecon)	Kynoch, George (Kincardine)
Evans, Nigel (Ribble Valley)	Lait, Mrs Jacqui
Evans, Roger (Monmouth)	Lamont, Rt Hon Norman
Evennett, David	Lang, Rt Hon Ian
Faber, David	Lawrence, Sir Ivan
Fabricant, Michael	Legg, Barry
Fairbairn, Sir Nicholas	Leigh, Edward
Fenner, Dame Peggy	Lennox-Boyd, Mark
Field, Barry (Isle of Wight)	Lester, Jim (Broxtowe)
Fishburn, Dudley	Lidington, David
Forman, Nigel	Lilley, Rt Hon Peter
Forsyth, Michael (Stirling)	Lloyd, Peter (Fareham)
Forth, Eric	Lord, Michael
Fowler, Rt Hon Sir Norman	Luff, Peter
Fox, Dr Liam (Woodspring)	Lyell, Rt Hon Sir Nicholas
Fox, Sir Marcus (Shipley)	MacGregor, Rt Hon John
Freeman, Rt Hon Roger	MacKay, Andrew
French, Douglas	Maclean, David
Fry, Peter	McLoughlin, Patrick
Gale, Roger	Madel, David
Gallie, Phil	Maitland, Lady Olga
Gardiner, Sir George	Malone, Gerald
Garel-Jones, Rt Hon Tristan	Mans, Keith
Garnier, Edward	Marland, Paul
Gill, Christopher	Marlow, Tony
Gillan, Cheryl	Marshall, John (Hendon S)
Goodson-Wickes, Dr Charles	Marshall, Sir Michael (Arundel)
Gorman, Mrs Teresa	Martin, David (Portsmouth S)
Gorst, John	Mates, Michael
Grant, Sir A. (Cambs SW)	Mawhinney, Dr Brian
Greenway, Harry (Ealing N)	Mayhew, Rt Hon Sir Patrick
Greenway, John (Ryedale)	Mellor, Rt Hon David
Griffiths, Peter (Portsmouth, N)	Merchant, Piers
Grylls, Sir Michael	Milligan, Stephen
Gummer, Rt Hon John Selwyn	Mills, Iain
Hague, William	Mitchell, Andrew (Gedling)
Hamilton, Rt Hon Archie (Epsom)	Mitchell, Sir David (Hants NW)
Hampson, Dr Keith	Monro, Sir Hector
Hannam, Sir John	Montgomery, Sir Fergus
Harris, David	Moss, Malcolm
Haselhurst, Alan	Needham, Richard
Hawkins, Nick	Nelson, Anthony
Hawksley, Warren	Neubert, Sir Michael
Hayes, Jerry	Newton, Rt Hon Tony
Heald, Oliver	Nicholls, Patrick
Heath, Rt Hon Sir Edward	Nicholson, David (Taunton)
Heathcoat-Amory, David	Nicholson, Emma (Devon West)
Hendry, Charles	Norris, Steve
Heseltine, Rt Hon Michael	Onslow, Rt Hon Sir Cranley
Higgins, Rt Hon Sir Terence L.	Oppenheim, Phillip
Hill, James (Southampton Test)	Ottaway, Richard
Hogg, Rt Hon Douglas (G'tham)	Page, Richard
Horam, John	Paice, James
Hordern, Rt Hon Sir Peter	Patnick, Irvine
Howard, Rt Hon Michael	Patten, Rt Hon John
Howarth, Alan (Strat'rd-on-A)	Pattie, Rt Hon Sir Geoffrey
Howell, Rt Hon David (G'dford)	Pawsey, James
Hughes Robert G. (Harrow W)	Peacock, Mrs Elizabeth
Hunt, Rt Hon David (Wirral W)	Pickles, Eric
Hunt, Sir John (Ravensbourne)	Porter, Barry (Wirral S)
Hunter, Andrew	Portillo, Rt Hon Michael
Hurd, Rt Hon Douglas	Powell, William (Corby)
Jack, Michael	Rathbone, Tim
Jackson, Robert (Wantage)	Redwood, Rt Hon John
Jenkin, Bernard	Renton, Rt Hon Tim

Richards, Rod	Taylor, Ian (Esher)
Riddick, Graham	Taylor, John M. (Solihull)
Rifkind, Rt Hon. Malcolm	Taylor, Sir Teddy (Southend, E)
Robathan, Andrew	Temple-Morris, Peter
Roberts, Rt Hon Sir Wyn	Thomason, Roy
Robertson, Raymond (Ab'd'n S)	Thompson, Sir Donald (C'er V)
Robinson, Mark (Somerton)	Thompson, Patrick (Norwich N)
Roe, Mrs Marion (Broxbourne)	Thornton, Sir Malcolm
Rowe, Andrew (Mid Kent)	Thurnham, Peter
Rumbold, Rt Hon Dame Angela	Townend, John (Bridlington)
Ryder, Rt Hon Richard	Townsend, Cyril D. (Bexl'yh'th)
Sackville, Tom	Tracey, Richard
Sainsbury, Rt Hon Tim	Tredinnick, David
Scott, Rt Hon Nicholas	Trend, Michael
Shaw, David (Dover)	Trotter, Neville
Shaw, Sir Giles (Pudsey)	Twinn, Dr Ian
Shephard, Rt Hon Gillian	Vaughan, Sir Gerard
Shepherd, Colin (Hereford)	Viggers, Peter
Shepherd, Richard (Aldridge)	Waldegrave, Rt Hon William
Shersby, Michael	Walden, George
Sims, Roger	Walker, Bill (N Tayside)
Skeet, Sir Trevor	Ward, John
Smith, Sir Dudley (Warwick)	Wardle, Charles (Bexhill)
Smith, Tim (Beaconsfield)	Waterson, Nigel
Soames, Nicholas	Watts, John
Speed, Sir Keith	Wells, Bowen
Spencer, Sir Derek	Whitney, Ray
Spicer, Sir James (W Dorset)	Whittingdale, John
Spicer, Michael (S Worcs)	Widdecombe, Ann
Spink, Dr Robert	Wiggin, Sir Jerry
Spring, Richard	Wilkinson, John
Sproat, Iain	Willetts, David
Squire, Robin (Hornchurch)	Wilshire, David
Stanley, Rt Hon Sir John	Winterton, Mrs Ann (Congleton)
Steen, Anthony	Winterton, Nicholas (Macc'f'ld)
Stephen, Michael	Wolfson, Mark
Stern, Michael	Wood, Timothy
Stewart, Allan	Yeo, Tim
Streeter, Gary	Young, Rt Hon Sir George
Sumberg, David
Sweeney, Walter	Tellers for the Noes:
Sykes, John	Mr. David Lightbown and
Tapsell, Sir Peter	Mr. Sydney Chapman.

Question accordingly negatived.

Amendment proposed, at the end of the Question, to add: But humbly regret that the Gracious Speech fails to provide for the increased investment and reforms in education that are essential for improving the country's economic competitiveness and expanding individual opportunity; lacks a coherent economic programme to increase public and private investment, including policies to promote competition and encourage small businesses and legislation to establish the operational independence of the Bank of England; makes no provision for promoting sustainable development policies; fails to advance a clear strategy to secure for the people of the United Kingdom the full benefits of participation in the European Community; contains no policy by which the Government will seek to work within strong supranational institutions to preserve peace, protect the environment and combat poverty; does not foreshadow a comprehensive review of the nation's defence needs; and contains no measures to improve the public's confidence in the institutions of Government.—[Mr. Beith.]

Question put forthwith, pursuant to Standing Order No.32 (Calling of amendments at end of debate), That the amendment by made:—

The House divided: Ayes 24, Noes 324.

Division No. 4]	[10.15 pm
AYES
Alton, David	Hughes, Simon (Southwark)
Ashdown, Rt Hon Paddy	Johnston, Sir Russell
Beith, Rt Hon A. J.	Jones, leuan Wyn (Ynys Môn)
Bruce, Malcolm (Gordon)	Jones, Nigel (Cheltenham)
Campbell, Menzies (Fife NE)	Kennedy, Charles (Ross,C&S)
Carlile, Alexander (Montgomry)	Lynne, Ms Liz
Dafis, Cynog	Maddock, Mrs Diana
Ewing, Mrs Margaret	Rendel, David
Harvey, Nick	Salmond, Alex

Steel, Rt Hon Sir David	Wigley, Dafydd
Taylor, Matthew (Truro)
Tyler, Paul	Tellers for the Ayes:
Wallace, James	Mr. Archy, Kirkwood and
Welsh, Andrew	Mr. Don Foster.

NOES
Ainsworth, Peter (East Surrey)	Day, Stephen
Aitken, Jonathan	Deva, Nirj Joseph
Alexander, Richard	Devlin, Tim
Alison, Rt Hon Michael (Selby)	Dickens, Geoffrey
Allason, Rupert (Torbay)	Dorrell, Stephen
Amess, David	Douglas-Hamilton, Lord James
Ancram, Michael	Dover, Den
Arbuthnot, James	Duncan, Alan
Arnold, Jacques (Gravesham)	Duncan-Smith, Iain
Arnold, Sir Thomas (Hazel Grv)	Dunn, Bob
Ashby, David	Durant, Sir Anthony
Aspinwall, Jack	Dykes, Hugh
Atkins, Robert	Eggar, Tim
Atkinson, David (Bour'mouth E)	Elletson, Harold
Atkinson, Peter (Hexham)	Emery, Rt Hon Sir Peter
Baker, Rt Hon K. (Mole Valley)	Evans, David (Welwyn Hatfield)
Baker, Nicholas (Dorset North)	Evans, Jonathan (Brecon)
Baldry, Tony	Evans, Nigel (Ribble Valley)
Banks, Matthew (Southport)	Evans, Roger (Monmouth)
Banks, Robert (Harrogate)	Evennett, David
Bates, Michael	Faber, David
Beggs, Roy	Fabricant, Michael
Bellingham, Henry	Fairbairn, Sir Nicholas
Bendall, Vivian	Fenner, Dame Peggy
Beresford, Sir Paul	Field, Barry (Isle of Wight)
Biffen, Rt Hon John	Fishburn, Dudley
Blackburn, Dr John G.	Forman, Nigel
Bonsor, Sir Nicholas	Forsyth, Michael (Stirling)
Booth, Hartley	Forsythe, Clifford (Antrim S)
Boswell, Tim	Forth, Eric
Bottomley, Peter (Eltham)	Fowler, Rt Hon Sir Norman
Bottomley, Rt Hon Virginia	Fox, Dr Liam (Woodspring)
Bowden, Andrew	Fox, Sir Marcus (Shipley)
Bowis, John	Freeman, Rt Hon Roger
Boyson, Rt Hon Sir Rhodes	French, Douglas
Brandreth, Gyles	Fry, Peter
Brazier, Julian	Gale, Roger
Bright, Graham	Gallie, Phil
Brooke, Rt Hon Peter	Gardiner, Sir George
Brown, M. (Brigg & Cl'thorpes)	Garel-Jones, Rt Hon Tristan
Browning, Mrs. Angela	Garnier, Edward
Bruce, Ian (S Dorset)	Gill, Christopher
Budgen, Nicholas	Gillan, Cheryl
Burns, Simon	Goodson-Wickes, Dr Charles
Burt, Alistair	Gorman, Mrs Teresa
Butcher, John	Gorst, John
Butler, Peter	Grant, Sir A. (Cambs SW)
Butterfill, John	Greenway, Harry (Ealing N)
Carlisle, John (Luton North)	Greenway, John (Ryedale)
Carlisle, Kenneth (Lincoln)	Griffiths, Peter (Portsmouth, N)
Carrington, Matthew	Grylls, Sir Michael
Carttiss, Michael	Gummer, Rt Hon John Selwyn
Cash, William	Hague, William
Channon, Rt Hon Paul	Hamilton, Rt Hon Archie (Epsom)
Churchill, Mr	Hampson, Dr Keith
Clappison, James	Hannam, Sir John
Clark, Dr Michael (Rochford)	Harris, David
Clarke, Rt Hon Kenneth (Ruclif)	Haselhurst, Alan
Clifton-Brown, Geoffrey	Hawkins, Nick
Coe, Sebastian	Hawksley, Warren
Colvin, Michael	Hayes, Jerry
Congdon, David	Heald, Oliver
Conway, Derek	Heath, Rt Hon Sir Edward
Coombs, Anthony (Wyre For'st)	Heathcoat-Amory, David
Coombs, Simon (Swindon)	Hendry, Charles
Cope, Rt Hon Sir John	Heseltine, Rt Hon Michael
Cormack, Patrick	Higgins, Rt Hon Sir Terence L.
Couchman, James	Hill, James (Southampton Test)
Cran, James	Hogg, Rt Hon Douglas (G'tham)
Currie, Mrs Edwina (S D'by'ire)	Horam, John
Curry, David (Skipton & Ripon)	Hordern, Rt Hon Sir Peter
Davies, Quentin (Stamford)	Howard, Rt Hon Michael
Davis, David (Boothferry)	Howarth, Alan (Strat'rd-on-A)

Howell, Rt Hon David (G'dford)	Paisley, Rev Ian
Hughes Robert G. (Harrow W)	Patnick, Irvine
Hunt, Rt Hon David (Wirral W)	Patten, Rt Hon John
Hunt, Sir John (Ravensbourne)	Pattie, Rt Hon Sir Geoffrey
Hunter, Andrew	Pawsey, James
Hurd, Rt Hon Douglas	Peacock, Mrs Elizabeth
Jack, Michael	Pickles, Eric
Jackson, Robert (Wantage)	Portillo, Rt Hon Michael
Jenkin, Bernard	Powell, William (Corby)
Jessel, Toby	Rathbone, Tim
Johnson Smith, Sir Geoffrey	Redwood, Rt Hon John
Jones, Gwilym (Cardiff N)	Renton, Rt Hon Tim
Jones, Robert B. (W Hertfdshr)	Richards, Rod
Jopling, Rt Hon Michael	Riddick, Graham
Kellett-Bowman, Dame Elaine	Rifkind, Rt Hon. Malcolm
Key, Robert	Robathan, Andrew
Kilfedder, Sir James	Roberts, Rt Hon Sir Wyn
King, Rt Hon Tom	Robertson, Raymond (Ab'd'n S)
Kirkhope, Timothy	Robinson, Mark (Somerton)
Knapman, Roger	Roe, Mrs Marion (Broxbourne)
Knight, Mrs Angela (Erewash)	Ross, William (E Londonderry)
Knight, Greg (Derby N)	Rowe, Andrew (Mid Kent)
Knight, Dame Jill (Bir'm E'st'n)	Rumbold, Rt Hon Dame Angela
Knox, Sir David	Ryder, Rt Hon Richard
Kynoch, George (Kincardine)	Sackville, Tom
Lait, Mrs Jacqui	Sainsbury, Rt Hon Tim
Lamont, Rt Hon Norman	Scott, Rt Hon Nicholas
Lang, Rt Hon Ian	Shaw, David (Dover)
Lawrence, Sir Ivan	Shaw, Sir Giles (Pudsey)
Legg, Barry	Shephard, Rt Hon Gillian
Leigh, Edward	Shepherd, Colin (Hereford)
Lennox-Boyd, Mark	Shepherd, Richard (Aldridge)
Lester, Jim (Broxtowe)	Shersby, Michael
Lidington, David	Sims, Roger
Lightbown, David	Skeet, Sir Trevor
Lilley, Rt Hon Peter	Skinner, Dennis
Lloyd, Peter (Fareham)	Smith, Sir Dudley (Warwick)
Lord, Michael	Smith, Tim (Beaconsfield)
Luff, Peter	Soames, Nicholas
Lyell, Rt Hon Sir Nicholas	Speed, Sir Keith
McCrea, Rev William	Spencer, Sir Derek
MacGregor, Rt Hon John	Spicer, Sir James (W Dorset)
MacKay, Andrew	Spicer, Michael (S Worcs)
Maclean, David	Spink, Dr Robert
McLoughlin, Patrick	Spring, Richard
Madel, David	Sproat, Iain
Maginnis, Ken	Squire, Robin (Hornchurch)
Maitland, Lady Olga	Stanley, Rt Hon Sir John
Malone, Gerald	Steen, Anthony
Mans, Keith	Stephen, Michael
Marland, Paul	Stern, Michael
Marlow, Tony	Stewart, Allan
Marshall, John (Hendon S)	Streeter, Gary
Marshall, Sir Michael (Arundel)	Sumberg, David
Martin, David (Portsmouth S)	Sweeney, Walter
Mates, Michael	Sykes, John
Mawhinney, Dr Brian	Tapsell, Sir Peter
Mayhew, Rt Hon Sir Patrick	Taylor, Ian (Esher)
Mellor, Rt Hon David	Taylor, John M. (Solihull)
Merchant, Piers	Taylor, Sir Teddy (Southend, E)
Milligan, Stephen	Temple-Morris, Peter
Mills, Iain	Thomason, Roy
Mitchell, Sir David (Hants NW)	Thompson, Sir Donald (C'er V)
Molyneaux, Rt Hon James	Thompson, Patrick (Norwich N)
Monro, Sir Hector	Thornton, Sir Malcolm
Montgomery, Sir Fergus	Thurnham, Peter
Moss, Malcolm	Townend, John (Bridlington)
Needham, Richard	Townsend, Cyril D. (Bexl'yh'th)
Nelson, Anthony	Tracey, Richard
Neubert, Sir Michael	Tredinnick, David
Newton, Rt Hon Tony	Trend, Michael
Nicholls, Patrick	Trimble, David
Nicholson, David (Taunton)	Trotter, Neville
Nicholson, Emma (Devon West)	Twinn, Dr Ian
Norris, Steve	Vaughan, Sir Gerard
Onslow, Rt Hon Sir Cranley	Viggers, Peter
Oppenheim, Phillip	Waldegrave, Rt Hon William
Ottaway, Richard	Walden, George
Page, Richard	Walker, A. Cecil (Belfast N)
Paice, James	Walker, Bill (N Tayside)

Ward, John	Wilshire, David
Wardle, Charles (Bexhill)	Winterton, Mrs Ann (congleton)
Waterson, Nigel	Winterton, Nicholas (Macc'f'ld)
Watts, John	Wolfson, Mark
Wells, Bowen	Wood, Timothy
Whitney, Ray	Yeo, Tim
Whittingdale, John	Young, Rt Hon Sir George
Widdecombe, Ann
Wiggin, Sir Jerry	Tellers for the Noes:
Wilkinson, John	Mr. Sydney Chapman and
Willetts, David	Mr. Andrew Mitchell.

Question accordingly negatived.

Main Question put and agreed to.

Resolved, That an humble Address be presented to Her Majesty, as follows: Most Gracious Sovereign, We, Your Majesty's most dutiful and loyal subjects, the Commons of the United Kingdom of Great Britain and Northern Ireland in Parliament assembled, beg leave to offer our humble thanks to Your Majesty for the Gracious Speech which Your Majesty has addressed to both Houses of Parliament.

Mr. Bob Cryer (Bradford, South)

On a point of order, Madam Speaker. As you know, there have been some major disruptions to the underground system today. As you also know, there is an arrangement whereby staff of the House of Commons are provided with transport if the Adjournment debate starts after half-past 10. I wonder whether I could have your assurance that, in view of the disruption to the underground, transport can be provided tonight irrespective of when the Adjournment debate starts, even if it starts before half-past 10, as it might well do, because staff of the House can be travelling for up to two hours and departing from here at 11 o'clock means that it can be well after midnight before they arrive home. It seems to me that, with the additional disruption on the tube, it could be a tardy, dangerous and long journey for many people, including women who do not deserve to be put in that position.

Madam Speaker

Is there another point of order?

Dr. Norman A. Godman (Greenock and Port Glasgow)

On a further point of order, Madam Speaker. Will you confirm that my hon. Friend has got it wrong? He has made one of his rare mistakes because I think I am correct in saying that the question of the presentation of petitions must be dealt with.

Madam Speaker

I was just about to remind the hon. Member for Bradford, South (Mr. Cryer). I quite understand his real concern about those matters. As the hon. Member for Greenock and Port Glasgow (Dr. Godman) has brought to my attention, we now have petitions to deal with, so the House still has business to conduct. Therefore, I call Mr. John Denham to move his petition.