Macro-economic Policy

HC Deb 03 March 1994 vol 238 cc1061-2

7. Mr. Hain

To ask the Chancellor of the Exchequer if he will now revise his macro-economic policy targets set in the 1993 Budget.

Mr. Kenneth Clarke

Sustainable economic growth, low inflation and sound public finances remain the key macro-economic policy objectives of this Government.

Mr. Hain

Has the Chancellor of the Exchequer altered his macro-economic policy targets on pay? Contrary to what he told Today this morning, the right hon. and learned Gentleman has the power to intervene on fat cat freebies and to close loopholes in relation to executive share option schemes. He has the power—or, at the least, the Government do—to instruct the regulators of the privatised utilities to stop abuses by executives such as £700,000 in tax-free giveaways for water chiefs. Why does the Chancellor only have a pay policy for the low paid and not for the privileged elite who are getting money as though there were no tomorrow?

Mr. Clarke

Every Conservative Chancellor closes tax loopholes and there was a good crop in the November Budget. My hon. Friend the Economic Secretary said that one should look at where we get income tax and national insurance contributions nowadays. The top 10 per cent. contribute 45 per cent. of the total, whereas they contributed only 35 per cent. 10 years ago. We spread the tax burden fairly, and we do not ever want to go back to the punitive tax rates that so destroyed the economy in the 1970s under Labour.

Mr. Budgen

Will my right hon. and learned Friend offer further explanation of his apparent linking between the level of executive pay and inflation? Does he agree that if any private company pays too much to any of its employees, that will result in its products being priced out of the market, and that that is a matter for the market, not for preaching politicians?

Mr. Clarke

As I am sure my hon. Friend will agree, at present we have our best record on inflation for 25 years. Manufacturing productivity is at an all-time high. It is extremely important that we keep our competitiveness. Therefore, I am extremely glad to see that the level of pay settlements remains at such an historically low level. With respect to my hon. Friend, I have to say that the climate of opinion has contributed to all those good targets and one or two leading individuals could contribute to the favourable climate of opinion that we have created.

Mr. Andrew Smith

On the macro-economic damage inflicted by the huge sweeteners that the Government are giving for rail privatisation, wil the Chancellor admit that the Government instructed British Rail to change its accounts to turn a £968 million capital allowance tax liability into a £683 million tax credit to be passed to privatised companies? Will he now act to stop that monstrous fraud on the taxpayer?

Mr. Clarke

I hope that the hon. Gentleman's indignation will be satisfied when he tables a question for written answer by my right hon. Friend the Secretary of State for Transport on that important matter.

Mr. Smith

I have done so.

Mr. Clarke

I am delighted to hear it. The fact is that privatisation has transformed the performance of most of our public utilities and companies. It has turned British Airways, British Telecom and British Steel into hugely successful international companies. Sad to say, we have been left behind a little on the privatisation of railways: the Japanese, French and others have moved ahead of us. I am sure that privatisation will produce the same transformation in the performance of British Rail as it has in so many others of our previously nationalised industries.

Mr. Jenkin

Does my right hon. and learned Friend take heart from the fact that a substantial depreciation in the rate of sterling in the past 18 months has not thrown economic policy off track? Will he take comfort from the fact that Professor Tim Congdon, who was pessimistic while we were in the exchange rate mechanism, is now optimistic about future growth of our economy?

Mr. Clarke

One of the remarkable achievements of the past 18 months has been that, following a marked devaluation of the currency, we have kept inflation down. It has not led to any adverse consequences for our competitiveness in any other way. We now have a reasonably stable exchange rate at the new valuation. That is one of the favourable factors that are helping to produce the prospects for good, steady, sustainable growth in Britain.