The Economy

HC Deb 30 October 1996 vol 284 cc658-758

Madam Speaker

I have selected the amendment standing in the name of the Leader of the Opposition. The amendment standing in the name of the right hon. Member for Yeovil (Mr. Ashdown) will be called at the end of the debate for Division. Speeches between 7 o'clock and 9 o'clock will be restricted to 10 minutes.

3.54 pm

Mr. Gordon Brown (Dunfermline, East)

I beg to move, as an amendment to the Address, at the end of the Question to add: but note that since 1979 the Government has broken each one of its central promises: to reverse national economic decline, to cut unemployment which stood at one million when it took office, to raise investment in the United Kingdom's manufacturing industries, to cut tax, spending and debt and to build a cohesive society; regret the absence from the Gracious Speech of measures that will strengthen the supply side of the economy, expand the United Kingdom's long term capacity, ensure high levels of sustainable growth and heal social division; call for a new employment policy which moves people from welfare to work, a new education policy which equips people for the future, a new industry policy for investment that will increase small business and high technology investment in all regions of Britain; and note that these measures are the only sure way of ensuring opportunity for all and a durable recovery that will keep inflation and interest rates low, and bring long term prosperity for all. As we begin the last day of the debate on the Queen's Speech, let us be clear about the reasons for the interest rate rise this morning. That rise was an inevitable result of the Government's policies, and it is happening in no other country. The Government are pushing interest rates up not because of international pressures but because of a problem in Britain.

That cannot be justified or explained by saying that we have lower interest rates than our competitors, and that Britain is merely catching up. We do not have the lowest rate in Europe or even the second, third or fourth lowest. Interest rates are already higher in Britain than in 10 other European countries. We are 11 th out of 15 for interest rates in Europe. Only Spain, Portugal, Greece and Italy have higher rates.

The rise, which is from a higher base than that of other European countries, comes from domestically created problems which are internal to the British economy, and which the Government must explain in the debate. The rise cannot be justified by the huge strength of the economy. The Chancellor has already downgraded his growth forecast for this year from 3 to 2.5 per cent., and in his Budget it may have to be admitted that growth is even lower. The Government are not putting up interest rates because of what is happening elsewhere or because of their success. They have been forced to push up rates because they do not believe that they can meet their inflation targets.

The rise has occurred because, as we have been saying for the past four years, unless a recovery is based on solid foundations, a country cannot sustain anything other than sluggish growth without rising inflationary pressures. As we know, it is the same old British disease returning under the Government.

The rise was inevitable, because the recovery has not produced the investment-led and industry-led growth that the Government predicted. It is the inevitable result of the policy of a Government who have failed to tackle the fundamental weaknesses of the economy. As a result, inflationary pressures are ready to undermine it. That is why the Government should have implemented before now the policies set out in our amendment. We have proposed those policies on many occasions, and they are right for the British economy.

What is the nature of the economic recovery that has led to these higher inflationary pressures? It is not the industry-led recovery that we were led to expect in 1992. Industry has failed to expand in the way that it should if we are to have a sustainable recovery. Industrial production fell in the past three months. It is only 0.6 per cent. up on a year ago. Despite all the successes of individual companies, industrial output in the economy at this stage of the cycle is still weak.

It is not a manufacturing-led recovery, either. Output has fallen over the past three quarters, and is less than 0.5 per cent. lower than a year ago. Despite some great individual success stories by many of our companies because of their efforts, manufacturing output is weak. At this stage, the recovery is not showing massive export growth, despite the devaluation of the pound. The summer economic forecast predicts that imports will grow faster than exports, and we still have the second worst trade deficit in the European Union.

Most of all, the recovery is not investment led. We have been warning throughout about the failure of investment to rise throughout the last years of recovery. Private sector investment has been growing more slowly since the recession than in any recovery this century. At a similar stage of the cycle in the recovery of the late 1970s, investment had risen by 20 per cent. In the recovery of the early 1980s, it had risen by 30 per cent. In this recovery, it has risen by just 6 per cent., and manufacturing investment is falling. It is lower than it was a year ago. Small wonder that the Bank of England reported this year that investment growth has been weak in the recovery.

Look at the complacency of the Chancellor of the Exchequer on investment. Every time, he and his predecessor predicted that there would be an investment recovery that would allow the economy's capacity to be strong enough to sustain growth. We were told that, in 1993, business investment would rise, and it fell by 2.5 per cent. Business investment was to rise by 7 per cent. in 1994, and it rose by only 2 per cent. It was to rise in 1995 by 10 per cent., and it rose by only 1.5 per cent. It is to rise this year by 7.5 per cent., and we wait to hear what the figures are.

This summer, we had the spectacle of the Deputy Prime Minister, faced with all those figures, publishing his competitiveness report and trying to tell us that, in a modern economy, because the record was so poor, investment levels were of no great significance.

I tell the Chancellor of the Exchequer: prudence is absolutely critical to the economy, which is why the interest rate rise was necessary—the one that he has been forced to make—but prudent economic management depends for its success on the firm foundation of a strong economy that is investment rich, and which he has failed to achieve. Without investment-led growth and the export-led and industry-led recovery that was promised, we get to the problems that the Chancellor faces today.

Mr. John Redwood (Wokingham)

When a 10-year-old child can close a school in Labour Nottinghamshire and all the Labour party can do nothing to reopen that school, why should we believe that the right hon. Gentleman has any answers to our economic problems?

Mr. Brown

We must be fair to the right hon. Gentleman. Like the Secretary of State for Education and Employment, he is speaking in a personal capacity. He was the man who coined the slogan, "No change, no chance". What does he think about what is happening to the economy today?

Let us be absolutely clear that the economic fundamentals that a modern economy needs, in addition to the platform of stability that we support, are high investment in industry and in skill, and high productivity through creating employment opportunity. That is why our amendment contains exactly the proposals that the Government should be implementing.

First, the Government should be implementing a policy for investment.

Mr. Rod Richards (Clwyd, North-West)

The right hon. Gentleman has said that it is his ambition to have a starting income tax rate of lop in the pound. He has not specified any parameters such as time scale, band width or whatever, but, in the most general sense, it is his ambition. Will he also say whether it is his ambition, again in the most general sense, without specifying any parameters, to have a single European currency?

Mr. Brown

I ask the hon. Gentleman which he supports: the abolition of capital gains tax and inheritance tax, which is the priority of the Conservative party, or a lower starting rate of tax that would help everyone throughout the community. The sooner he realises that, when he goes to the electorate next year—or whenever the Prime Minister dares to call the election—he will have to defend a Conservative party that will be committed to abolishing capital gains tax and inheritance tax to benefit the few, instead of introducing a lower starting tax rate to benefit the many, the more modest he will be in what he says to the House.

Despite everything that the Government say about low taxation, we have discovered in a publication of the Secretary of State for Social Security that, under this Government, people in Britain are paying marginal tax and benefit rates, not just of 80 per cent. or 90 per cent., but of as much as 150 per cent. For every pound they earn, £1.50 is taken back. I therefore ask the hon. Member for Clwyd, North-West (Mr. Richards): what is his priority? I know what Britain's is.

Let us examine what measures are absolutely essential.

Mr. Tony Marlow (Northampton, North)

As always, the right hon. Gentleman complains about manufacturing investment arid growth. As all hon. Members know, the right hon. Gentleman wants to go, helter-skelter, into a European single currency, which means that he would have to meet the convergence criteria. What does he think would happen to growth and industrial investment if he attempted—helter—skelter-to meet the convergence criteria?

Mr. Brown

The hon. Gentleman might like to ask the Chancellor that question during this debate.

Mr. Marlow

What is the right hon. Gentleman's answer?

Mr. Brown

If the hon. Gentleman had been listening to what I was saying, he would know that I was about to set out the measures necessary to achieve sustainable economic growth without increasing inflationary pressures.

The Budget should contain three measures. First, we need an investment policy in which we build on a more consistent platform of stability, and tackle the investment shortfall in the economy. Even now, I believe that the Chancellor should adopt our proposals to introduce new incentives to increase long-term investment levels in science, technology, industry and small businesses—thereby increasing the economy's capacity—and our proposals to reform the loan guarantee system and the regional agencies across the country that can help to boost investment for small businesses. He should also adopt our new savings policies, which will channel investment.

Time after time, in his complacent manner, the Chancellor has rejected our proposals, and predicted that investment will rise. Time after time, he has had to report that investment is not rising—which is one of the fundamental, underlying problems preventing growth in economic capacity without increasing inflationary pressures.

Secondly, the Chancellor should examine a new national education and training policy that will strengthen the economy's supply side, in which we tackle the skills shortages that act as an inflationary pressure and economic bottleneck. Only a few days ago, Mary Chapman—chief executive of Investors in People—said: It is notable that, as soon as we move out of recession, skills shortages start to re-emerge. That is why our proposals for a university for industry, individual learning accounts and school and college reform—which provide opportunity for all—will raise the economy's sustainable growth rate. Thirdly, the Chancellor should examine a new national employment policy—in fact, we need a national employment policy. The policy should tackle the fact that 20 per cent. of non-pensioner households in Britain have no one bringing home a wage. That figure is an indictment of the Government, who ran posters during the 1979 general election stating, "Labour isn't working-, and that they would sort out the dole queues. In 1979, 8 per cent. of households had no one in work. Today, the figure is nearly 20 per cent.—which is as high as the level in Spain.

Mr. Graham Riddick (Colne Valley)

rose

Mr. Brown

If the Chancellor took action on employment, long-term unemployment and youth unemployment, and adopted our proposals for a windfall levy on the privatised utilities, he would not only cut social security costs but help the economy to run more efficiently.

Mr. David Shaw (Dover)

Does the right hon. Gentleman accept that a £3 billion windfall profits tax would be equivalent to a 20 per cent. value added tax rate on electricity and gas?

Mr. Brown

The hon. Gentleman should consider what has been happening in the utility sector. Today, for example, the water regulator said that there were excess profits in the water industry. Further, we know that four water companies have been privatised, and have never paid a penny in mainstream corporation tax. Moreover, ordinary people around the country pay a tax rate of 24p in the pound, whereas, since privatisation, water companies pay only 2p in the pound. I believe that the hon. Gentleman will have a hard job convincing the electors of Dover that we should not impose a windfall tax on the utilities.

I should tell the hon. Gentleman what he will have to answer for at the general election. He will have to answer for his manifesto, which stated that there are two vital messages to remember. We shall remind him of those messages throughout the campaign, the first of which is: "David lives locally." The second message is: David Shaw supports lower tax. Tell the electors that, after 22 tax rises.

Mr. Riddick

Will the right hon. Gentleman explain why unemployment in France and Germany is so much higher than in this country?

Mr. Brown

The hon. Gentleman gives me a chance to point out a fact that Conservative central office statistics do not often tell him—that male unemployment in Britain is as high as in France and Germany. He cannot deny that one non-pensioner household in five has no one in work and earning a wage. That pathetic situation, after 17 years of Conservative government, stems from the under-registration of female employment, the fact that large numbers of women are not registered or given the opportunity to work, and the concentration of unemployment in no-income households.

Hon. Members may wish to look at their personal manifestos before the election. In his personal manifesto in 1992, the hon. Member for Colne Valley (Mr. Riddick) said: The state has a duty to protect the most vulnerable people in society. So why does he not support action on unemployment?

Action on investment, skills and employment opportunity are fundamental to building the underlying strength of the economy. They were the policies that were missing in the 1980s, when, in the absence of investment to expand capacity, boom inevitably led to bust. They are the essential components of success—policies that recognise that the crude free market economics practised by the Conservatives is not enough, and require the Government to assume their responsibilities to act on industrial, employment and education and training policies. But those policies are still absent in the 1990s. Without them, there are real worries about the durability of any recovery and about the threat of a return to stop-go.

The Government's failure to address those issues has brought us to the problems we have today. The remarkable thing about the Chancellor and the whole Government is that, instead of addressing those problems, they continue to make extraordinary and extravagant claims about their record on the economy, as the Chancellor did in his lunchtime interview today. It is a record that they cannot justify.

Nobody who listened to the claims made at the Conservative party conference about a fundamental transformation of the economy and a low inflation environment would ever have believed that an interest rate rise would come within two weeks. Inflationary pressures forced the Government to act. One would think that, after today, the Chancellor's claims about the economy would be more modest, but the Treasury press release just put out about the interest rate rise says: The economy is performing exceptionally well. It describes the Government's record on growth as "unseen for a generation".

Let me explain the troubling paradox for Conservative Members, because they will have to answer on it to their constituents. Everything that the Chancellor or the Prime Minister says should point to a feel-good factor in the economy, but when Conservative Members return to their constituencies, they find that people do not feel good; they feel insecure about their prospects.

Let us look carefully at the difference between what Conservative Members say is happening to the economy and what is actually happening. For months, the Chancellor has been boasting of low inflation. For months, he has been saying that we should compare his record with that of previous Governments.

When we examine the figures, we find that our inflation is not the lowest in Europe; it is almost the highest in Europe. Inflation is not below the European average; it is above the European average. Our inflation rate is 11th in the European league, and rising. That is how the Government's good news machine works—they compare only with their own record of a few years ago. They do not tell us that, in comparison with Europe, they are near the bottom of the league on inflation.

Mr. Tim Yeo (South Suffolk)

Will the right hon. Gentleman confirm that inflation is now at less than one third of the best level achieved at any time by the last Labour Government, and that interest rates are now lower than at any time during that period?

Mr. Brown

What I am pointing out—[HoN. MEMBERS: "Just say yes."' Let me tell the hon. Gentleman that, when we left government, inflation was below the European average and falling. Let me also point out that interest rates in Europe are as follows: Holland 3 per cent., Germany 3 per cent., Belgium 3.3 per cent., Luxembourg 3.3 per cent., Austria 3.5 per cent. and Britain 6 per cent. Is that a record of which to be proud? Are the Conservatives going to go around boasting that the Government have achieved everything they set out to achieve, and that we are 11th out of 15 in the European league? Are they going to fight the election on that? I do not think so.

When one examines them, a pattern emerges in the statistics that come from Conservative central office. On interest rates and inflation, the Conservatives compare their record with that of the past. On growth and employment, they cannot use the record of the past, so they try to compare themselves with recession-hit Europe. At no point do they advance a case showing that they have a record on growth, employment, interest rates and inflation of which they can be proud.

In other words, the Government always use comparisons carefully chosen for their own advantage. Through such a selective use of statistics, they suggest that Britain has been fundamentally transformed. If the Government were to choose to compare Britain's inflation and interest rates with European rates this year, and Britain's growth and employment rates with those of either Britain or Europe in previous years, they would find the truth—that they are near the bottom of every one of those leagues.

Look at growth over the past 17 years. We should judge the Government on the growth rate, which is 1.9 per cent.—almost half what it was in the 30 years after the war. If oil is excluded, the rate is only 1.7 per cent. That is not the long-term improvement in our prospects claimed by the Government, but one of the lowest growth rates in Europe—11th out of 15 over the past 17 years, and bottom of the Group of Seven table. Once again, we can see the gap between Government rhetoric and reality.

The essence of the Conservatives' campaign is to make comparisons with Europe only when Europe is in a period of recession, and, even then, only as and when it suits them to do so. The truth about the economy is that the Conservatives are economical with the truth. All their claims—

Mr. Jonathan Aitken (South Thanet)

Will the right hon. Gentleman give way?

Mr. Brown

No, I am not giving way.

All the Conservatives' claims are set out in today's briefing document, which tells us less about the underlying strength of the economy than about our temporary position in the economic cycle. The document barely mentions manufacturing, because the record since 1979 is that we lie 10th out of the 15 European countries. We are 11th in respect of job growth and 15th in respect of export growth—bottom or near the bottom of all those European leagues. Of course, the Government barely mention the matters I spoke about earlier—the actions that are necessary to build for the future: investment in people and industry.

It is rather like an up-beat report from a football manager, desperately trying to avoid the sack by declaring that his team has been ahead at half-time in home games more often than not in the past 20 seasons and that it has won more corners away from home than other teams in the second half of the league. The Government omit to mention that, after they have been managers of the team for 17 years, no transformation of economic prospects has occurred, and that they hover on the verge of relegation. If proof were needed that the figures are only about temporary stages in the economic cycle and not about the underlying position of the economy, we have only to look at what the Prime Minister let slip at the weekend. When interviewed on Sky Television, did he say that the economic successes that he was trumpeting were the result of a hard-won economic turnaround that would last? No, he called them a benevolent phase in the economic cycle. That is a devastating insight—that just about every statistic used by the Government only reflects a phase in the economic cycle, and tells us little about fundamental underlying strength.

How do we know that that is true? Because we have heard it all before. In 1986, before the election, the Government put up interest rates and then put them down again—they had a little flutter. What did the Chancellor, then a Minister in another Department, say in 1986? He said then what he has said today: The real economy is doing better than it has for a generation. Where have we heard that before? He said then: The outlook for managers is better than most managers can remember in their lifetime. The Government are making the same claims that they made then: that they had solved the problem of inflation; that they had got interest rates and mortgage rates down; that a fundamental transformation of the economy had occurred; and that prospects were brighter than for a generation.

I can only say that the Government are at it again: the same deceit for the second time. There is legislation in the Queen's Speech to deal with second-time offenders. For these second-time offenders, we would certainly support a minimum sentence: a minimum of life in opposition, and life should mean life. [Interruption.] The hon. Member for Dover (Mr. Shaw) will regret his facetious remarks when he faces the electorate and is defeated.

From his Conservative conference performance, it seems that the Chancellor is familiar with at least one school of economics—the Dolly Parton school of economics. Let me remind him of another sizeable body of economic opinion, which we might call the Nigel Lawson school of economics. That dictates that the bloated claims, the inflated figures, the exaggerated and grandiose pretensions of today will, with the passage of time and when the Chancellor has gone from office, shrink and shrivel to become remarkably slender and insubstantial—a shadow of that former vaunted glory. Now the Chancellor should know the fate that lies in wait for the overblown figures of the Government.

This time, the Government have tried it once too often, and the British people will never trust the Tories on the economy again. The end result after 17 years is that we have moved not just from 13th to 18th in the world economic league, but to the bottom half of the European division as well.

In one of his pamphlets, the Chancellor said that the test of whether an economy was doing well should be national income per head. National income per head in the richest country of Europe is £20,000; in Britain, it is less then £12,000. In France, it is 8 per cent. more; in Germany 11 per cent. more; in Denmark 16 per cent. more. The Chancellor cannot dispute those figures, because they come not from European sources, but from the Government's own published competitiveness review.

When the Conservatives came to power in 1979, Britain was above the European average for prosperity. Today, like it or not, we are unfortunately below average. We had double the prosperity of the poorest country; now we are only one third better off. We were 30 per cent. behind the richest country; now we are 60 per cent. behind. While the Government say that we are the enterprise centre of Europe, in reality we are in the bottom half—the poorer half—of Europe: not first for prosperity in Europe, not in the first five, but ninth out of 15 countries.

In their 17 years, the Government have made the problems we face worse by failing to prepare for the future. A report out today from the European Commission analyses regions in Europe, and contains figures that were in the Government's regional trends survey this summer. In the main industrial regions of the UK, income per head is half that in regions such as Hamburg. Even in the most prosperous part of the country, the south-east, we are 30 per cent. behind Hamburg. Is it the Government's aspiration to boast, when we are ninth out of 15 in the European league?

The watchword for British policy in the 1950s and 1960s was "managed decline". Now, in the 1980s and 1990s, the Government preside over mismanaged decline. Remember the slogan of 1983: "Britain great again—don't let Labour ruin it". As we now all know, the slogan was coined just as Britain's prosperity fell below that of Hong Kong and Singapore.

Remember the false promise of 1987: "The next move forward"—just as we were making the next move backward, falling behind Italy. Now the slogan is "The enterprise capital of Europe". If anything sums up the hollowness of that claim, it is the Government's statement in the Queen's Speech a few days ago: not that we are the enterprise centre of Europe, but that they aim for Britain to be the leading European industrial power "in the medium term".

It is an aim. It is not a statement of achievement or a promise of what we will have at the next election or just after it and it is not something for the present. The Government are admitting that we are not the enterprise capital of Europe, and that the only chance we have of catching up with France and Germany is in the medium term. If the Government had made that claim 17 years ago, when they first took office, it would have been a perfectly understandable undertaking. However, after 17 years, nobody will believe their claim that they will sort things out in the medium term.

It is precisely because the Government have failed to sort out the fundamental and underlying problems of the economy that they have broken every election promise they made on tax, spending and borrowing. They promised to cut public spending, but, under their rule, it averages 42.5 per cent. higher than in 1979. They promised to cut taxes, but there is a higher tax burden now than in 1979. They said that they would eliminate borrowing and achieve a balanced budget, but the public sector borrowing requirement is £27 billion. National debt has doubled since 1990 under the Prime Minister's rule.

What are the Government going to say in their next manifesto?

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

Will the right hon. Gentleman give way?

Mr. Brown

I will not give way again.

Let me tell the House what was said in a pamphlet written by Mrs. Tessa Keswick, the Chancellor's closest confidant and special adviser until a few months ago. It is entitled "A Conservative agenda, proposals for a fifth term." She says: The Government has made determined efforts to reduce public spending but has not succeeded … The Government's spending is a similar proportion of national income as it was in 1979. That is true, but the Chancellor cannot agree. She goes on to say: Unfortunately, the overall tax burden has failed to fall. The relentless upward rise of public spending in Britain has forced up both tax and borrowing. Is that not a damning indictment of everything the Government said in 1979 when they took office? Is that what they will be honest enough to put in their election manifesto when the time comes?

In addition to the 22 tax rises that we have had—the largest peacetime rises in history—including the rise in national insurance, VAT on fuel and everything else, Mrs. Tessa Keswick proposes that the Government should go into the next election with a manifesto promise to remove the zero VAT rating on food, water, books and magazines and domestic passenger transport. She says that it should be put in the manifesto. I suppose that means that they should tell the truth rather than leave it on the hidden agenda.

How can the Chancellor deny that he supports those proposals when he is on the record, year after year, supporting the extension of VAT to food, water, books and magazines and domestic passenger transport? In fact, he wants to extend VAT to children's clothes as well. [Interruption.] If Conservative Members do not think that that is true, I can tell them what the Chancellor said. On Radio Nottingham in 1993—during this Parliament—he said: I was in the House of Commons when we introduced VAT. If we could start again, we could have VAT on everything, which is the way they live quite comfortably on the continent and nobody complains about it. Hon. Members should know that there are more quotations from the Chancellor on this from just about every year. VAT, particularly VAT on fuel, will be a central issue at the next election. We hate VAT on fuel and will try to reduce it. The Chancellor likes VAT on fuel, and he wants to extend it. He would like to double it to 17.5 per cent., the highest level possible. We will cut it to the lowest level possible. Is that not an example of how we will deal with the problems of an unfair Britain?

Let us remember all the central economic pledges of 1979. The Government promised to reverse national decline, but Britain has fallen from 13th to 18th in the world prosperity league and to ninth out of 15 in Europe. They claimed that industry would benefit with higher investment, but we now have the lowest share of investment of any of the major industrialised countries.

The Government promised to lead in education. The Chancellor should explain why we have the lowest participation rate in higher education in the European Union. They promised to cut unemployment. They said that Labour was not working. They should explain why unemployment, which was 1 million in 1979, is still more than 2 million. They should explain why they failed to meet their central promises to cut taxes, spending and borrowing.

The Government's central promise in 1979 was that, somehow, they would rebuild British society. We heard the words of St. Francis of Assisi on the steps of Downing street—that where there had been discord, there would be harmony. When the Prime Minister came to power in 1990, he stood on the steps of Downing street and spoke of a nation at ease with itself, and of a classless society with opportunity for all. Last week, however, he had to agree with a courageous widow, Mrs. Frances Lawrence, that we now have a fractured society.

After 17 years, the Government must accept their responsibility. There is no opportunity for all when executives of utility companies are paid telephone number salaries without any criticism from the Government, yet the same utilities leave pensioners unable to pay their fuel bills in the winter months. There is no opportunity for all when the Government divert resources to the assisted places scheme for a tiny minority of the population, when they could use the same resources to extend opportunity to every schoolchild in the country. There is no opportunity for all when the Chancellor agrees with the Prime Minister to make it a priority to abolish inheritance tax and capital gains tax, with half the benefit going to the richest 5,000 people in Britain, when a lower starting rate of tax would be fairer, and would encourage employment and opportunity.

How can the Conservatives ever be the party of opportunity for all when they are responsible for the privilege and the sleaze, and they have done nothing to deal with the problems of the social fund and homeless teenagers? They were responsible for the poll tax as well as for VAT on fuel.

Mr. Alex Salmond (Banff and Buchan)

Will the right hon. Gentleman give way?

Mr. Brown

No, I am not giving way.

Today is the last day of the debate on the Queen's Speech. Two weeks ago, at the Conservative party conference, the Prime Minister told his party and the nation that henceforth the Conservative party would display unity and single-mindedness, and that divisions and U-turns were all in the past. Last Wednesday, his policy on law and order lasted from 11 am to 4 pm. Yesterday, the new education policy lasted from 8.15 am until 10.21 am—the swiftest U-turn was made possible by the invention of the mobile telephone. As he faces the House this afternoon, the Chancellor must be relieved that Madam Speaker has banned the use of mobile telephones in the Chamber, and he cannot receive a telephone call from the Prime Minister.

The Queen's Speech shows that, whether it is education, law and order or the economy, none of the problems that the country faces can be solved by the Government. Problems will be camouflaged, disguised, made the subject of U-turns, and exploited for narrow party political ends. The Government may even try to throw money at them, but they will never solve the fundamental problems. No amount of propaganda, no Saatchi and Saatchi billboard campaigns, no selective use of statistics and no U-turns could disguise the fact that the Government offer the country only drift, which is damaging our national interest. They no longer have any purpose or direction in solving the problems we face.

Nothing now can be sorted out by these men and women. Their 18th Queen's Speech cannot undo the damage caused by the previous 17. They should do now what they should have done long ago: they should put their record of failure before the British people, and face a general election which they will lose.

4.35 pm

The Chancellor of the Exchequer (Mr. Kenneth Clarke)

It is always painful for the Opposition to have to talk about the economy. They do it only rarely in the House, on the ritual two or three occasions a year. We have an economy day in the debate on the Loyal Address and a debate on the Budget. Months go by and there is then another debate in the summer. The Opposition always refuse the offer of the business managers to have a debate on the economy in the spring. They never select the economy for debate. That is because it is painful for the Opposition to talk about the real economy.

When we have the rare pleasure of listening to the right hon. Member for Dunfermline, East (Mr. Brown) make a speech about the economy, the terrible thing is that it is always the same speech. Over and over again, we have a meaningless strategy for investment. We hear also a meaningless strategy for employment. We have league tables, about which he becomes extremely muddled. The right hon. Gentleman produces more and more league tables, which he claims support his arguments. His speech, his gloom and his claims of disaster are entirely unchanging, but the real world is changing and the British economy is doing better and improving. We are producing the strongest recovery in western Europe, and the right hon. Gentleman and his party do not know what to say about it.

Let us consider the news that is the background to the right hon. Gentleman's speech. Over the past few weeks, we know that activity, with the third quarter figures, is moving up again. It is obvious that growth is set to rise faster than in Germany and France for the fourth successive year. Trading figures for August reflected the best trading performance for nine years. Exports were referred to by the right hon. Gentleman; they are up by nearly 20 per cent. over the past two years.

Unemployment fell by a marked amount and it is down to its lowest level for five and a half years. Consumer confidence is at its highest levels for eight years. The Labour party is finding all this good news hard to take, but there is more of it. There is more of it to come. It will come month by month all the way through to May 1997 and beyond.

Labour Members are doing themselves no credit by seeking to deny all the obvious good news. The right hon. Member for Derby, South (Mrs. Beckett), an Opposition Front-Bench spokesman, said last week, to my absolute amazement, that the forecast recovery would be modest, short-lived and possibly jobless. I cannot think of a better description than that of the right hon. Lady's career as leader of the Labour party. On the economy, her comment is wrong, wrong and wrong again.

The right hon. Member for Dunfermline, East tries to produce—against a background that every member of the public knows is one of a strong and growing economy—a picture of gloom. He concentrates, as on his lecture tours, on investment. Since 1979, overall investment has grown faster in this country than in any other major European Union country. Whole economy investment has grown at about double the average rate of the 1970s. Business investment has risen by a third. Investment in plant and machinery has increased by about 50 per cent. Productivity has improved, because the quality of investment is good.

Business investment is 7½ per cent. higher than it was 12 months ago. The Confederation of British Industry survey of investment in manufacturing plant and machinery reveals that the expectations of business are plus 18 per cent. The chambers of commerce survey produces a figure of plus 22 per cent. That is for good reason. Selective league table figures are nonsensical.

The climate for investment is excellent because profitability is high, company finances are strong, company tax and interest rates are low by all historical standards, the economy is growing and there is demand.

The right hon. Member for Dunfermline, East does not believe his own gloomy picture. He produced an extraordinary picture of investment intentions and said that that was why he was so gloomy. Faced with the news of the day, however—the increase in interest rates—the right hon. Gentleman said that he agreed with me that an increase in interest rates was called for. What kind of a shadow Chancellor of the Exchequer do we have? He describes an economy that, on his own account, is in decline and in crisis. Is he tightening monetary policy in the face of the dreadful picture that he describes? How is he proposing to set interest rates if he ever becomes Chancellor of the Exchequer? Will he look up a league table and see what Luxembourg is doing? That is a preposterous position, and he poses a serious threat to the economic recovery that is under way.

Mr. Malcolm Bruce (Gordon)

rose—

Mr. Clarke

The only people who could doubt the health, strength and breadth of the recovery are either mad, dead or sitting on the Opposition Benches. On that note, I give way to the hon. Member for Gordon (Mr. Bruce).

Mr. Bruce

The Chancellor will remember that the Liberal Democrats warned him when he cut the rate on 6 June that he was wrong and that he would have to reverse the cut. Does he acknowledge that he was wrong, and does he accept that, if the Bank of England inflation report to be published next week says that it still believes that he will not hit his inflation target, he may have to increase interest rates again?

Mr. Clarke

I shall come back to interest rates in a moment. I remain confident about our inflation forecast and I have set policy to achieve it. I have said and done that consistently, and I have delivered low inflation.

We have been hearing about U-turns and changes of policy, but the hon. Member for Gordon has changed his position even today: early this morning on the "Today" programme, he gave a confident prediction to the world that I would not raise interest rates; that was his expert forecast. He said that I ought to raise them, but by lunchtime he was on the air criticising me for doing so. Half an hour later, the right hon. Member for Dunfermline, East was on the air, giving the Labour party's first solid promise to reduce VAT on domestic fuel. That has lasted until half-past 4, and now he says only that he will "try to".

The Financial Secretary to the Treasury (Mr. Michael Jack)

It will be gone by 10 o'clock.

Mr. Clarke

Indeed, it will be gone by 10 o'clock and the windfall tax will be back. Economic policy does not require that approach; it requires decisions. The Labour party does not take decisions; it would be incapable of taking decisions on any of the great economic issues of the day—inflation, tax, public borrowing or public spending.

Mr. Salmond

On interest rate policy, in the past 15 months, since the current Secretary of State for Scotland took office, Scottish unemployment has had the worst trend in the United Kingdom. Does the Chancellor believe that the Scottish economy is overheating; if not, why is he tightening monetary policy in Scotland?

Mr. Clarke

Figures about the trend in unemployment in Scotland over the past 15 months are so blatantly selective as to be utterly meaningless. I am glad to say that the Scottish economy has done extremely well in the course of the recovery. Scotland is one of the strongest regions in the United Kingdom in terms of expansion, and the steps that I have taken will ensure continuing growth for Scotland for many years to come, and that is the sole aim of policy.

I want to move on to a little policy and to bring us back to the real world of a successful economy that will strengthen for many years to come. So far, we are into the fifth year of recovery. As I have said, I have taken and will continue to take every step that is necessary to avoid all those economic pitfalls that, as all hon. Members will remember only too well, have brought to an end every previous recovery for 30 years.

What I said in 1986 was cited at me; it was right. In 1986, we were performing better than we had for a generation and better than the rest of western Europe; we were on course for a healthy recovery, but monetary policy went wrong and we went into a recession that was deeper than elsewhere. I take the decisions that I do to ensure that that does not happen again. We are back with all the benefits of our supply-side changes, and this time they will last—as long as we have a Conservative Government.

I shall sustain the brightest economic prospects for a generation by keeping inflation down to levels that will allow us to compete and to grow for years to come. So far, I have delivered the best inflation record for nearly 50 years, but I am determined to go on seeking to establish new records.

We are on course to deliver our inflation target of 2i per cent. or less next year, but I am not simply aiming to deliver the target next year: decisions that I take today are aimed at the position of a Conservative Government in 18 months' or two years' time. We have to go on delivering year after year. That is why I decided to put up interest rates by a quarter per cent. this morning.

Let us cut through the waffle that we hear from the right hon. Member for Dunfermline, East and decide why it was right to move rates now—because, as far as I can see, most people agree that it was. The economy is extremely healthy. It is growing as I predicted it would and that growth is strengthening as the year goes on. The immediate inflationary pressures remain subdued. Producer price inflation remains very low—producer input price inflation is still negative—and earnings growth remains modest. The economy is clearly set to grow by more than 3 per cent. next year, as I think everyone will agree, and it will go on growing rapidly.

My decisions have to be based on judgments on how we keep growth going for 18 months or two years ahead, when we will still have a Conservative Government in power. At that time, I want growth to be motoring steadily, more new jobs to have been created and Britain still to be competing, and that is why I have decided to make a small increase in interest rates now—neither of my major critics has the nerve to offer a squeak of disagreement—to ensure that we continue to deliver healthy, sustainable growth and to meet our inflation target.

I have done what I have always done when I have changed interest rates and made monetary decisions. I intend to look ahead and to stay ahead of the game. If I had waited for the recovery to show signs of inflationary pressures, it would have been too late to act. We would have missed the opportunity, and that is what we have done in the past. Because I move in advance, I am able to change interest rates by only a quarter of 1 per cent. and that is why we can be confident that rollercoaster interest rates are a relic of the past unless we return to a Government where the right hon. Member for Dunfermline, East takes the approach to monetary policy and the state of the economy that, to my total alarm, he described only a few moments ago.

Mr. Denis MacShane (Rotherham)

Is not one rollercoaster that has gone up and up the national debt, which has doubled since 1990, so much so that British citizens are paying £25 billion a year to the Chancellor for his economic incompetence? That is a tax of £1,000 on every taxpayer, which we are paying for his flippant, clownish mismanagement of the economy.

Mr. Clarke

We have one of the lowest levels of debt in relation to gross domestic product in western Europe. I shall come later to the tight fiscal policy that I am running to ensure that we control that level of debt and get back towards a balanced budget. Moreover, the level of debt in relation to our gross domestic product now is far lower than it was at any time when we had a Labour Government in the 1970s. It is nonsense to produce those preposterous figures, as the hon. Gentleman did in an earlier debate a few days ago. Proper fiscal policy and control over debt, combined with monetary policy, are the key to the sustained recovery of our economy.

Mr. Gordon Brown

First, the reduction of VAT on fuel will be in our manifesto. Will it be in the Chancellor's? Will he do that in the Budget? Secondly, can he explain why he predicted 3 per cent. growth this year? Now that growth is not even 2.5 per cent., but perhaps less, he has an inflationary problem which has forced him to act. Will he accept that the slowness of the recovery of investment since the recession is a big problem that he must face and take action on?

Mr. Clarke

The promise on VAT on fuel is back again by 4.47 pm. Until today, the right hon. Gentleman has said that he cannot say anything specific about tax, because he wants to look at the books. At last he has got around to reading the books. If he wants to tell us about tax, can he tell us who will pay the 50 per cent. higher rate and at what level they will start paying it? How will he introduce his 10p standard rate of income tax? Who will pay the windfall tax, be it £3 billion or £10 billion, and what effect will that have on electricity, gas, telephone and water bills? If he is in a mood between now and, say, 10 o'clock this evening to produce some policies on tax, let him start answering some serious questions. He is trying to change the subject from the real economy and inflation.

Mr. Brown

No. Our manifesto will contain proposals for the windfall tax and proposals to cut VAT on fuel. Will he tell us whether he still agrees, as he said he did in 1993, with the extension of VAT to books and newspapers, travel and children's clothes—yes or no?

Mr. Clarke

I produce Budgets so everybody can see my tax proposals, but we have only an inkling of the right hon. Gentleman's proposals. He might have made those points in his speech, but I am delighted that he is volunteering them now. Will he say to which industries the windfall tax will apply? Will it apply to gas, electricity and water in Scotland and England? Will it apply to telecommunications? How much does he intend to raise—£3 billion or £10 billion?

Will the right hon. Gentleman answer the question of my hon. Friend the Member for Dover (Mr. Shaw), who referred to equivalence in terms of VAT? I have not heard about that figure before—a 20 per cent. rate of VAT—but it sounds about right. The right hon. Gentleman's patent refusal to answer that question shows that he also feels that the figure is about right. My hon. Friend was right. I compare the windfall tax with income tax, and it equates to about 2p on income tax.

If the right hon. Gentleman does not answer questions on the windfall tax, how does he expect us to take him seriously? He proposes to raise all this revenue, and we hear about the spending promises of his colleagues, but he will not answer a solitary question about the windfall tax that drifts in and out of his speeches on the economy. He usually calls it a windfall levy to avoid being too direct.

Mr. Brown

The Conservative party has now become the "defence of the utilities" party. People in the country will understand exactly what is happening. Does the right hon. and learned Gentleman agree with me that the privatised utilities have made excess profits, especially during the recession, and that the case for a windfall tax on the utilities is supported overwhelmingly throughout the country?

Mr. Clarke

We defend the people who work in those utilities. We defend the small shareholders in successful companies. Above all, we defend the customers of the companies that supply electricity, gas, water and telephone services. They will notice that the right hon. Gentleman never answers any questions about a tax that will increase costs and result in losses for many people. The cost will fall on all those people whom the Labour party used to call the stakeholders in the utility companies, and whom he now wants to tax.

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

rose—

Mr. Clarke

I shall not give way. I want to get back to the point from which the right hon. Member for Dunfermline, East is trying to distract us—what is happening out there in the real economy and how policy is being pursued. I have already dealt with the fact that, above all, we seek to ensure that we hit an inflation target. The right hon. Gentleman does not even have an inflation target. He has the nerve to attack me because he is not sure that I will hit the 2½ per cent. inflation target. This country has never combined such low inflation with a recovery.

The right hon. Gentleman must watch me taking decisions with which he reluctantly agrees and which are keeping us on course. I have achieved such a low inflation climate that I am able to move interest rates by small amounts. I bet that no hon. Member can remember when we last saw an increase in interest rates of only a quarter of 1 per cent. Past Chancellors would have given their eye teeth to live in a world where they moved interest rates by only 25 basis points, or a quarter of 1 per cent. We can all remember rates going up by 1 per cent., half a per cent. or 2 per cent.

My approach to monetary policy of keeping ahead of the game has enabled me to keep interest rate movements within a narrow range, and it has produced the healthiest and strongest economic recovery in western Europe.

Mr. William Cash (Stafford)

Is my right hon. and learned Friend aware that, in the past couple of weeks, the European Commission has introduced radical proposals for a uniform rate of VAT throughout the European Community? Does he agree that we would veto such proposals, and that it is perfectly clear from what the right hon. Member for Dunfermline, East (Mr. Brown) has said that the Labour party would not?

Mr. Clarke

I am not in favour of a uniform rate of VAT. I am sure that we would be against that, as I am sure would most other member states. No one will go to a uniform level of VAT throughout western Europe. I am in favour of minimum levels; otherwise, attempts are made on either side of a border to win markets in particular goods by attracting customers.

I am in favour of some approximation of taxes that bear on sales, such as excise duty, because that would help many industries in this country. I firmly believe that taxation should rest in the hands of member states. It always will, and any British or German Minister, and most of the other Ministers in western Europe, would veto any proposals to the contrary.

As I said, our recovery is stronger than that of any of our major western European competitors. It is becoming balanced and sustainable. The whole point of our policy is to keep it that way.

We are generating growth without inflation. We are generating growth without a balance of payments crisis—something which damaged this country so much in the past. We are generating growth while keeping relatively low interest rates. Too often in the past, we have allowed recoveries to run out of control. We will not allow that to happen again.

One of the guidelines which I have laid down throughout my chancellorship is no return to boom and bust. The public can see that that is what we are delivering. They can also see that the Opposition can offer only the threat of boom and bust, in equal proportions, if they run the economy in the way indicated by the right hon. Member for Dunfermline, East.

Mr. Barry Sheerman (Huddersfield)

If the Chancellor wants to know about the real economy, he should talk to some of our manufacturing sector which, since 1992, has suffered a massive recession. Now, after just one year of good times, manufacturing is falling back; it is heading back to another recession. Is that the sort of management of the economy of which the right hon. and learned Gentleman is so proud?

Mr. Clarke

We have had five years of recovery. Manufacturing was strong at the beginning of the recovery. Of course, there has been a slowdown, just as there has been a slowdown in continental Europe. Now, manufacturing is picking up again as the stocks that built up earlier in the year are reduced. There is no point in the hon. Gentleman and me exchanging tales about different manufacturers, although I meet manufacturers who certainly do not share his views. If he looks at the surveys done by the Confederation of British Industry and talks to the Federation of Engineering Employers, he will find that the climate among manufacturers is one of considerable optimism for the foreseeable future. That optimism is based on what we have already achieved and what we will preserve.

Not only will we not throw away the best prospects for economic growth that we have seen for a generation by not letting inflation destroy it, but we will not throw away those prospects by letting public borrowing get out of control. Public borrowing is coming down and I shall keep it coming down towards balance over the medium term. Again, that is a clear policy objective that is not matched by the right hon. Member for Dunfermline, East, who has no such objective in this key field of economic policy.

The public sector borrowing requirement is now half what it was three years ago. Throughout the period of the last Labour Government, it averaged almost twice as much as it is now. The hon. Member for Rotherham (Mr. MacShane) intervened earlier about the national debt. National debt, as a share of national income, has been lower every single year under this Government than it was for any single year under the last Labour Government. At the beginning of the debate, the right hon. Member for Dunfermline, East spoke about national debt. If our average deficit since 1979 had been as bad as it was under the last Labour Government, our national debt would now be twice as high as it is—£650 billion, or more than 90 per cent. of gross domestic product. That is what has happened in many continental countries, which are now trying to recover from that.

It is obvious that, if there had been a Labour Government in the late 1970s and the 1980s, Britain would be in the same public debt mess that half of continental Europe is in now. Instead, our debt is among the very lowest in the European Union; under Labour, it was among the highest. The right hon. Member for Dunfermline, East spreads scare stories about public finances. He tries to prepare people, in the most alarmist way, for the Budget. He has spread a scare story about a shortfall in tax revenues, by looking back at tax forecasts and comparing them with the revenue variants. The fact is that, because of profitability and growth, tax revenues are rising faster than public spending. That is why public sector borrowing is falling. That is the key element to hold on to in looking at the state of the public finances.

Put another way, revenues are rising slower than activity. That has surprised both me and my forecasters. However, although revenues are rising slower than activity, spending is rising even slower than revenues. The Government are committed to sound, sustainable public finances—and we are on course to deliver just that. We will keep Government borrowing coming down.

I do not intend to give away the brightest economic prospects that we have faced for a generation by giving in to the siren calls for higher public spending—calls that will come at me and at the right hon. Member for Dunfermline, East from the Opposition Benches over the next few months.

Mr. Thomas Graham (Renfrew, West and Inverclyde)

Is the Chancellor telling us that, after 17 years, my constituents are once again going to face potholes in the road, schools falling down and empty hospital beds that could be filled with patients who need health treatment? Is that the type of system and society that you are expecting my constituents to face when you claim that Britain is booming and doing well? Tell that to the unemployed people in my constituency. Tell that to the elderly people who are waiting for a hospital operation. Tell that to the young people in my area who cannot get full education because the Government have not provided the wherewithal. Chancellor, you should be ashamed.

Mr. Clarke

I apologise—

Madam Deputy Speaker (Dame Janet Fookes)

Order. I remind the hon. Member for Renfrew, West and Inverclyde (Mr. Graham), not for the first time, that he should address me and not the Chancellor direct.

Mr. Clarke

I apologise to the hon. Gentleman for the fact that my NHS figures may relate to the English NHS rather than the Scottish NHS, but in England he will find that, throughout the period of our government, we have increased the level of spending on the NHS by about 70 per cent., in real terms over and above inflation. We have committed ourselves to continuing to increase spending on the NHS in real terms, year in year out. As far as I am aware, that is something to which the Labour party will not commit itself, and, anyway, it is something that the Labour party failed to deliver when it was last in office, because it is the only party in office since the war that has ever cut spending in real terms on the NHS in any single year.

We have run an enterprise economy that first generated the wealth to provide the finance for key public services. That is what is put at risk by the prospect of a Labour Government and it is that which puts at risk the public services in Renfrew, West and Inverclyde.

I will achieve the target that I have set to get public spending down below 40 per cent. of national income. We will get it down there and we will keep it there. Again, the right hon. Member for Dunfermline, East has no such target and he is surrounded by people, including the hon. Member for Renfrew, West and Inverclyde (Mr. Graham), who will make it utterly impossible for a Labour Government to control either public spending or public borrowing and, therefore, taxation, and, therefore, the continued growth of the public economy.

Mr. Hugh Dykes (Harrow, East)

Before that exchange on the NHS, my right hon. and learned Friend referred to the extremely encouraging signs of a reduction in the deficit and the rise in tax revenues, but he said that the rise in those revenues was somewhat slower than expected. Is it not even more encouraging that, by the end of the fourth quarter this year, the rise in tax revenues will accelerate, so the deficit will come down even faster?

Mr. Clarke

That should happen, but we have to set policy just to ensure that we deliver sound public finances, because that is necessary to ensure the continued growth of the economy and the healthy state of affairs I have described. Of course, if those revenues accelerate the recovery, we will be able to keep our commitments to the great public services—that we Conservatives ensure that the real economy creates the wealth first and then we devote it to those great public services.

The revenues are rising, although our intention is to lower taxation because we believe that that, too, is essential to the growth of the real economy.

Mr. Gordon Brown

Those are exactly the statements that the Chancellor and his colleagues made in the early 1980s. Can he now explain to us why it is that the share of national income for public spending is exactly what it was in 1979, and why people are paying a higher share of their income in tax than in 1979? Why, with all the right hon. and learned Gentleman's great statements, has the action been exactly the opposite of what he and his colleagues have said?

Mr. Clarke

The proportion of GDP is almost exactly the same in both cases, as the right hon. Gentleman has said, but as my hon. Friend the Member for Dover has already said, when Labour left office there was a huge unsustainable level of Government borrowing on top of taxation, which we had to tackle. That is why taxation reached its peak in 1981, as we sorted out the mess that Labour had left. Now, the level of taxation and that of public spending is far below those of 1981. We have maintained those levels, whereas they have risen much higher in the rest of western Europe, both as a proportion of spending and as a proportion of taxation taken by the state.

We have a Government who are plainly on course to reduce the burden of spending and the burden of taxation and we have clear, measurable commitments to do so. We are faced with the threat of a return to a Labour Government of high spending, high taxation, high public borrowing and pressures upon them, of which we have just heard from the hon. Member for Renfrew, West and Inverclyde, which will ensure that they will take us right back to the kind of mess we had in the late 1970s.

Mr. Brown

If all the problems were caused in the 1970s, why is it that, since 1992, we have had the biggest peacetime rises in taxation in our history?

Mr. Clarke

What we have had since 1992 is the fastest growth in western Europe, a huge fall in unemployment and a recovery that is combined— [Interruption.] The right hon. Member for Dunfermline, East may wish to wave away the measures that created the current economic conditions. It is true that we have got where we are today with no thanks to the Labour party, which has fought every essential measure that we have taken to take this country from recession to recovery. As far as I can see, the Opposition would fight them still and would take us back to recession again.

We are committed to our 20p standard rate of taxation on income tax and people believe us. We are committed to the abolition of the inheritance tax and capital gains tax. People trust us to deliver that because they see our record. The Labour party, certainly on the strength of the speech we have heard today, is not capable of being trusted with any of those measures.

I keep challenging the Opposition, and I have had some success this afternoon, to come clean and to level with the people. Labour should have a serious debate with us about Labour's tax plans, Labour's inflation targets and Labour's views on interest rates other than just responding to the day's news. How about some openness? How about some honesty from the Labour party about precisely what its approach would be to the real economy if it got into government?

Mr. Terry Lewis (Worsley)

Honesty?

Mr. Clarke

Well, it is no good the Leader of the Opposition talking all his empty pious phrases at the Labour party conference. The one memorable thing I can recall from the right hon. Gentleman's conference speech was his amazing phrase about a covenant with the British people. That strikes me as a bit of a crib from Newt Gingrich for a change—the contract with America put into slightly more Scottish language. It is a rather odd time to switch from cribbing from Bill Clinton to cribbing from Newt Gingrich. Instead of tub-thumping sermons from us, one gets decisions today. Instead of messianic waffle, one gets the results that I have described, and that speak for themselves, and they are not challenged by what the right hon. Member for Sedgefield (Mr. Blair) said.

The threat to our position lies with the right hon. Member for Dunfermline, East and his friends. Labour needs to tax more as night follows day. It needs to tax more to pay for the new spending to which it is now committed.

Let me quote from the conference speech of the right hon. Gentleman. In the course of one speech—not one he has repeated here yet—he promised nursery education for all and universal education for all after the age of 16 and he said that he would make available accessible and affordable child care. He said that the benefit tapers must be addressed. He said that the Labour party would implement the social chapter. He talked about creating regional development agencies and introducing, by law, a statutory minimum wage. They are only some of the things that he promised in his speech in front of his party's supporters.

The right hon. Gentleman would not be tough on public spending—he is a soft touch on public spending faced by lobbies from the Labour party. What chance is there that he will control his colleagues when he cannot even resist the temptation to make expensive promises himself? He is like every other Labour politician: they go into politics to spend more, that is what they do, and it is in their blood.

Today, we have had enough of the Opposition's changing policy on VAT and fuel. What about the 10p starting rate of income tax about which the right hon. Gentleman has not risen to answer any questions? At the time, it struck me as sheer desperation—an attempt to outbid a tax-cutting Government with a totally incredible and wildly expensive commitment of his own—£9 billion-worth of desperate electioneering promise. The right hon. Gentleman may shake his head. I accept that he was helpful a few moments ago, although I do not remember any particular answer to any question we asked about the windfall tax, much as my hon. Friend the Member for Dover and I tried.

Let me try the right hon. Gentleman on the 10p rate. They are straightforward questions, and he might have thought about just some of them already. Will it apply to everyone paying tax at the 20p rate now? That is a quarter of all taxpayers. If not, will it apply to half those who are paying the 20p tax? [HON. MEMBERS: "Come on, answer."] Will it apply to the first £1,000 of income liable to tax? There is no point in the right hon. Gentleman making taxation pledges and then being utterly unable to answer questions about a proposition that would cost billions of pounds.

There is only one 10p tax that we know for certain the people would get from Labour. It is the extra 10p on the top rate of tax that the right hon. Gentleman and his colleagues want and which the right hon. Member for Sedgefield will not allow them to talk about. Who will pay the 50p rate and at what level will it start? Who does Labour regard as the wealthy who will make this contribution to its spending plans? The right lion. Gentleman is supposed to be disagreeing with his colleagues on these matters, but I do not understand how they can have disagreements when they have no policies or when no details have been worked out. How have they moved to that elevated state if none of these points can be answered?

We have had a go at the tax on utilities, the so-called windfall levy. [Interruption.] There is no point in laughing. What is difficult about a question as to whether it will apply to telecommunications or to Scottish water as well as to English water?

Mr. Gordon Brown

Scottish water?

Mr. Clarke

They are all privatised, but not Scottish water. Scottish electricity generation is privatised. The right hon. Gentleman has said that he will not impose the levy on non-privatised Scottish water. That is good. Let us ask him a difficult one. What about British Telecom? The Opposition are in a shambles. They are committed to £3 billion or £10 billion of spending and there is to be a one-off windfall tax to pay for permanently recurring revenue commitments on policies to which the right hon. Gentleman has signed up. I shall not ask about the tartan tax, about which the Opposition are never able to answer questions and which apparently is to go to a referendum.

What about the London tax? A new Greater London authority is to come back with tax-raising powers. Are the people of London to have a referendum on that? Will they be told how much it might cost? What about the telecommunications tax to pay for the network? The Labour Front-Bench spokesman was careful in describing that because he said that it was not a tax but would be a modest percentage paid by subscribers to the telephone network. If they pay that modest percentage without a choice at the demand of a Labour Government, it will be a tax, and it will be paid on top of whatever amount the windfall levy produces.

Unlike Labour, we say what our policies are. We stick to them and deliver the results and the public can see that we do that. Our policies are designed to sustain the strongest and longest economic recovery in Europe and they are doing that without inflation or overheating. We shall ensure that the recovery is for keeps. We are in our fifth year of recovery and already unemployment is down by almost 1 million and exports have gone up by nearly 20 per cent. in two years. Inflation is at its lowest for a generation and living standards are rising fast.

We have it in our hands to transform the future of our nation for the better and for good, to break out of the cycles of the past and to raise the nation's sights. We can overtake our competitors and make Britain truly the strongest economy in Europe. In the rest of Europe, people know only too well that that is where we are headed. The only thing that stands in the way of that bright prospect for our country is the possibility of a Labour Government. Their future would not work, but ours does. That is why next spring, after further months of healthy recovery, the British people will make their choice and back the party that is consistently delivering British economic success of a kind that has not been seen before.

5.13 pm

Mr. Gerald Kaufman (Manchester, Gorton)

I hesitate to criticise the Chancellor, partly because he is one of the few recognisable paid-up grown-ups in a Government of adolescent amateurs and also because he made some nice remarks about my book, "How to be a Minister", which will be printed on the jacket of the new edition which is to be published in February. It therefore affects me a little to make some remarks that are not entirely complimentary about him, although he is welcome to quote what I say on the back of any book that he publishes.

To a large extent the Chancellor has been speaking about the past, and when he has looked to the future it was only in the short term. He has made an assumption, which for the purposes of his barnstorming speech he had every right to make, about a Conservative victory at the election and he spoke about the first 18 months or two years. The Chancellor's policies and the Gracious Speech are so lacking in substance because they do not deal with the economic and industrial future of our country beyond the next two or three years—beyond the next Parliament and into the next century.

The Chancellor believes in Europe and believes, by his party's standards, that he is pursuing reasonably sensible economic policies, but he should have looked towards establishing an industrial substructure that will enable Britain, regardless of which party is in power, to sustain growth and prosperity without inflation. At the end of his speech, the Chancellor spoke of his wish to overtake our competitors, but his words rang particularly hollow. Neither in his speech nor in the Gracious Speech was there any planning for the future long-term security and prosperity of this country. That is a Government obligation, regardless of party.

The Chancellor spoke about the real economy, and that is what we ought to be discussing because it is what matters to the people. It certainly matters to my constituents, huge numbers of whom live in deep poverty, and it ought to matter to the electorate as a whole regardless of their economic circumstances.

I strongly support the Opposition amendment because it refers to investment that will increase high technology. It is on such technology that our future and that of any developed industrial country must depend. It is depressing that the Chancellor, who is among the least foolish members of his party and Government, is not looking at the way in which technology is advancing in other countries; in this country it is not advancing sufficiently or being planned for by either the right hon. and learned Gentleman or his colleagues. I am speaking about progress in advancing Britain's future through the information super-highway.

Hundreds of thousands, perhaps millions of jobs are at stake because, as traditional heavy manufacturing declines, these other industries are taking over. There are billions of pounds' worth of exports on which interest rates and the exchange rate depend and on which the Chancellor's championship, which I share, of keeping the options on economic and monetary union and the single currency open also depend. Investment in high technology and plans to promote it are preferable to the Government's policy of turning the United Kingdom into the low-paid sweatshop of the European Union, for that is what we are becoming. I am sure that the right hon. and learned Gentleman does not like that, but he is doing nothing to stop it.

Dr. Keith Hampson (Leeds, North-West)

Some simple statistics seem to be relevant. As the right hon. Gentleman knows, the Select Committee on Trade and Industry has been considering the cable industry. There has been unprecedented investment. Billions of pounds of investment are coming into Britain from American companies which see a future here. Also, we are spending a higher proportion of gross domestic product on primary, secondary and higher education than France, Germany or Japan. How does he reconcile that dramatic turnaround from what was happening under the Labour Government?

Mr. Kaufman

One of the problems with these debates and, frankly, one of the reasons why I am fastidious not only about taking part in them, but even about attending them, is the stale sort of exchange about what was happening in the 1970s under the Labour Government. We are talking now about the 21st century and I do not want to drag in even what the Labour Government did and what I did as a Minister to expand industry, to create British Telecom, which we prepared for, and to build British Aerospace, which was a dying airframe industry. That is not what I am after, but in response to part of the hon. Gentleman's intervention I will certainly talk about the cable industry because I agree about its primacy. What I am not happy about, however, as the hon. Gentleman will hear if he continues to listen to me, is the reliance on overseas investment to expand an indigenous British industry which should have indigenous British investment.

Developments are taking place as technology advances. Unless there is a specific guiding of policy by Government—I am not talking about public ownership or even state interventionism of the George Brown kind 30 years ago—the developments to which the hon. Member for Leeds, North-West (Dr. Hampson) has referred will be in the hands of foreign, mainly north American, companies and a huge opportunity will be lost to Britain for ever.

As we debate this year's Queen's Speech, the technology of television is advancing. There is now a seamless link between television, computers, newspapers and telephones. On Friday, BSkyB, an enormously profitable and successful company, will make a decision on the technology accompanying digital television that will decide the future of all digital broadcasting in Britain. Yet the Government are either taking no action or holding back progress which affects the nation's prosperity.

In the past few days. Cable and Wireless Communications has been formed from the Cable and Wireless company and a collection of cable companies that are subsidiaries of United States conglomerates. We now have a £5 billion conglomerate and there is no guarantee that through that company, which will be a major competitor, British-produced material—what we are good at and what can create more jobs—will get a fair chance on Britain's cables.

Despite the commitment in the Queen's Speech to what the Government call getting rid of unnecessary burdens on industry, it is clear that the wholly British telephone company BT will face even stronger unfair competition. Instead of doing something about that and removing the restraints, the Government are deliberately maintaining them so that BT is hampered from competing with vastly wealthy American and Canadian conglomerates.

Cable and Wireless Communications, in which both United States and Canadian telephone companies will be represented, will be able to undercut BT on telephone provision while having a monopoly on cable broadcasting. The Government believe in markets and competition, but because of their foolish decision BT is excluded from broadcasting to two or more homes simultaneously. American telephone companies, however—the companies that have come into Cable and Wireless Communications, including Nynex and Bell Canada, are all American—are able in Britain both to offer telephone services and to broadcast images. BT, however, is hampered from competing in the telephone sector by the fact that it is forbidden by law to broadcast to two or more homes simultaneously.

BT is discussing with BSkyB forming a partnership to supply programmes down BT telephone lines. If that comes about, as it may do—both sides would be sensible to do so—it will be one of the most powerful partnerships in the world. The News Corporation Ltd. is an incredibly powerful organisation and BT is hugely powerful, wealthy and profitable. BSkyB would also supply programmes for the cable services of Cable and Wireless Communications, so BSkyB would be in a dominant position in supplying television programmes through its satellite programmes, through cable and through whatever arrangement it is able to make with BT.

Where at that point would the British Broadcasting Corporation, Britain's most famous brand name, be internationally? Where would it be in its own country, let alone competing throughout the world, as it should be, with its talent, skills and huge library? It would be a postulant client to BSkyB and to Cable and Wireless Communications. It would be hoping to sell them its programmes, without any commitment on the part of the broadcasters based on the binding arrangements of a partnership.

As for the digital technology on which the BBC places so much reliance, even if Friday's decision by BSkyB generously allows one box to have both terrestrial and satellite digital broadcasting, the BBC will be living on borrowed time because terrestrial digital television is obsolescent. It is dying away, just as terrestrial television is dying. The future is in cable, in optical fibres arid in interactive and on-demand services, in addition to services that are supplied free to air. The whole ethos of public service broadcasting is at stake, together with the future of the BBC as a production organisation. Hundreds of thousands of jobs are involved, as are the many more jobs that could be created as the channels multiply next year.

It is ludicrous that we should be facing this huge challenge from the American and Canadian companies in Cable and Wireless Communications and from BSkyB with the BBC looking totally to the past and appearing to believe that it can create a fruitful future for British communications on the basis of an impertinent and unrealistic demand for an above-inflation increase in the licence fee, which in any event would not supply much money. In addition to the BBC's ridiculous demand for an increase in the licence fee, the best that it can do is to find candle ends from internal savings and hope to receive money from the private finance initiative to fund what I repeat is in any case an obsolescent technology.

The BBC has formed links with Flextech in the UK and with Discovery in the United States, which are American subsidiaries. I acknowledge that that is better than nothing, but those deals are paltry compared with the formidable competition that the BBC faces from BSkyB and cable television. The BBC announced yesterday that its planned Flextech channels will create, as a rival to MTV, a television version of Radio 1, but that can scarcely be regarded as the cutting edge of public service broadcasting.

The BBC is an enormous asset to this country, not simply in prestige but in generating employment. Unless it can form a partnership with a major broadcaster, I believe that its days are numbered. The BBC will dwindle into a British version of the American Public Broadcasting Service, and its precious heritage will waste away with a diminishing audience—which will continue to diminish exponentially. A hugely profitable, productive and industrial future—we are talking perhaps about the most important industry that we possess—will be frittered away.

I am glad to say that the Labour party has a constructive policy for the Internet. Last year, my right hon. Friend the Member for Sedgefield (Mr. Blair) announced one instalment of the policy at the Labour party conference, and he announced another instalment at our party conference at the beginning of this month. But we cannot afford to wait even the six months before a general election. I have spoken to the Prime Minister's office and to successive Secretaries of State for National Heritage about the fact that this is a national issue and not a party issue, and that we should be doing something about it now. We cannot afford to wait six months until, as I am perfectly confident, a Labour Government are elected.

The BBC must be told by the Government to enter into talks with BT, with Cable and Wireless Communications or with both those giants to discover whether, even at this late stage, it can be included in a partnership.

I shall state very clearly that I believe that the current administration of the BBC—Bland and Birt, who have shown themselves to be far from adequately fitted for their vital responsibilities—should be cleared out and replaced by business-minded people who will do the job that must be done and which is currently not being done. When Sir Christopher Bland was appointed chairman of the BBC I said to myself, "That is ideal—a Tory with a background in commercial television; he is the man to take the BBC into the future." In fact, he has gone native so fast that he makes his predecessor seem like a dynamic socialist.

The restrictions on BT must be lifted, and they must be lifted soon. As the Chancellor of the Exchequer knows, it has been some years since I graced my party's Front Bench—for what good that ever did. As Chairman of the National Heritage Select Committee, however, I urge Opposition Front Benchers to facilitate the passage, without opposition, of a Bill to remove the restrictions on BT, should the Government introduce such a Bill during this Session. I believe that most hon. Members would agree with that support. We have a major and crucial opportunity to expand our industry and our economy by assisting and stimulating the expansion of what could be our most important industrial sector as the next century begins and progresses.

Directly and indirectly, satellite television has already created 54,000 jobs, and cable television has created a further 33,000—and the potential for job and wealth creation has scarcely been tapped. Those are the jobs and the technology of the future, and we have the sophisticated workpeople to do those jobs. That is why I am happy that my colleagues on the Opposition Front Bench, whom I praise, have tabled an amendment to the Queen's Speech giving due emphasis to modern technology and I shall have great satisfaction in voting for it.

Mr. Harry Barnes (North-East Derbyshire)

On a point of order, Madam Deputy Speaker. I have just received an answer to a question about lottery funding that I tabled to the Secretary of State for National Heritage. I asked whether details could be provided by constituency, in rank order. The information has been provided on computer disk in the Library. In the answer, however, the Department states that the figures for the most recent quarter cannot be provided in rank order—although the figures have been provided to the hon. Members concerned—because of the disproportionate cost of doing so. I believe that it would be a simple exercise to provide the information. Perhaps I could also suggest to the Secretary of State that her Department should apply for a lottery grant so that my question can be answered.

Madam Deputy Speaker

That is not a matter for the Chair. However, the hon. Gentleman will no doubt find other ways in which to express his disappointment.

5.35 pm

Sir Edward Heath (Old Bexley and Sidcup)

I hope that my right hon. and learned Friend the Chancellor of the Exchequer will not be embarrassed if, in what I hope will be a brief speech, I commend him on his action today on interest rates. I believe that he was absolutely right to do so, although. to some extent, I regret the situation that made such action necessary. I am sure that he realises that we cannot expect to be popular with our fellow citizens by increasing interest rates. From my experience, I know that the great majority of people were hoping that we had reached a point at which there would be no more increases.

I also fear that the increase will create or increase a feeling of insecurity that affects many people, and that they will feel that this is only the first stage. It is commendable that the Chancellor will not hesitate to increase rates further if necessary, if this increase does not solve the situation.

I also regret the fact that the increase is necessary because of high unemployment. I recognise, of course, how much has been accomplished to reduce unemployment, but it is still very high. For many years, some hon. Members, and some Conservative Members, have denied any connection between unemployment and the various social ills from which we suffer. Perhaps those of us with an earlier experience have never accepted that view at all. In a variety of spheres—most recently in our schools, but also in the abuse of drugs and violence on the streets—the malevolent influence of unemployment is increasingly becoming apparent. Therefore, from the social point of view, I think that dealing with unemployment should have the highest priority.

I listened with the greatest interest to what the right hon. Member for Manchester, Gorton (Mr. Kaufman) said about one industry, and I share his views. He has brought home to us the problems that the Government face in trying to facilitate the creation of new industry and in helping it to develop at a satisfactory speed. The problem is particularly acute if the Government have been brought up on the dogma that they must not do anything to influence our industrial life. That outlook has changed gradually over the past three to four years, but the problem remains the same.

As the right hon. Member for Gorton emphasised, the situation can be helped enormously by our official organisations—such as the BBC—which I hope will be the case. The problems facing the Chancellor and the Government are concerned not only with technology and with people making the necessary decisions, however, but with the lack of knowledge of so many UK executives of what is going on in the rest of the world. The Government try to help. The Deputy Prime Minister visits various parts of the world, including China, but we are just not coping with the rapid development of so much of the rest of the world.

I take the example of China, which has a rapid rate of expansion of between 8.5 per cent. and 12.5 per cent. We are not establishing ourselves in those markets as we should be. Later, we shall have an opportunity to discuss the Hong Kong situation, which I see is on the Government's agenda. When the Governor of Hong Kong said that when Hong Kong returns to China on 1 July next year, we shall still have responsibility for looking after Hong Kong, he could not have chosen a better way of upsetting Beijing and affecting the Chinese Government's future attitude towards Hong Kong and towards us. That undoubtedly affects our trading arrangements with Hong Kong. As I know from my discussions with officials in Beijing and elsewhere in China, such comments affect where they place their orders.

As I have said before in the House, I established full relations with Beijing and one of the three main purposes was to get trade. We are at the bottom of the trade list compared with all those who followed us, such as Japan, America, Germany and France. Whereas the Japanese trade is more than £30 billion, we are trying hard to reach £3 billion. That is the contrast between those who find out what is required and produce the answer, and those who do not. It is all very well to say that we should encourage trade, but it is also a question of spreading knowledge and showing our industries how they can achieve such results. I am, therefore, grateful to the right hon. Member for Gorton for his speech.

I know that we are getting near the Budget, so I do not expect answers from my right hon. and learned Friend the Chancellor. However, I point out that he has withstood pressures in making his decision about the bank rate and I hope that he will be absolutely firm in withstanding pressures to reduce direct taxation. From the political point of view, that is not a winner for us, for the simple reason that every Labour and Liberal Democrat candidate, and many others, will say in the constituencies, "You said that last time and what happened?" We do not want to get involved in that argument: I hope that I am being realistic.

There has always been a section of the monetarist wing of the Conservative party which believes that if possible, one should abolish direct taxation altogether and that the whole thing should be done through indirect taxation, whereby everyone, whether wealthy or poor, has to pay taxes. That is not acceptable for me or, I believe, for the party or the country.

The Chancellor and his predecessors have got direct taxation down to a reasonably low level. If we are to persuade people to support our policies, we must show them that we care about the things they care about. It is, of course, right for us to point out, as the Chancellor has done, how much expenditure on the health service has increased, but that does not alter the fact that people want a better health service. The cost of medicine in this country and elsewhere is constantly increasing because of the expertise of those involved in medicine. The more that they can find proper treatment for our citizens, the more the cost will be. What our people want to know is whether we shall give them everything possible in modern treatment. When we can say that that is the case, we shall get support.

The same point applies to education. I must be perfectly honest and say that I am not sure what the position on education is at the moment, anywhere. Parents are equally confused, especially after yesterday's debate. I am not one who puts all my trust in parents' decisions. Some parents know a great deal about education and what is possible, and they can make a choice for their children, but the majority of parents rely on advice from head teachers and other teachers. That is where we need to improve the situation. Teachers have been knocked about for the past 20 years. That has undermined their confidence and schools are suffering as a result. We must restore confidence to them and let them advise parents on what is best.

I look back to the arrangements made during the second world war by Rab Butler and Chuter Ede, who ran the Ministry of Education together. They had an approach that seemed to be the right one at the time and for some time afterwards. There were three different groups: the grammar schools, which were academic, the technical schools, which prepared students for industry and the rest, and the general, co-educational schools, which looked after other children.

There was meant to be no distinction in standing between those three groups. They were meant to provide what was necessary in education for people with particular requirements. Where it went wrong was that under the Government who were in power until 1951, money was not available—or not provided—for the technical schools to develop. The result was that social divisions were created. There were great jealousies about people going to grammar schools and about others not being able to go to technical schools and having to go to the general schools. That system collapsed.

Ever since, the question has been what should be put in place of that system. I do not think that we have been successful in ensuring that our children get the best form of education, which will also produce those who can contribute most to our economy and to our country. That problem remains with us to be worked out. I do not believe that it can be worked out hastily—that also worries me. Plans are produced on the spur of the moment without proper consideration of the effects. Education, like health, is an area in which our fellow citizens want the Government to provide properly. They also want the Government to deal with the immense problem of unemployment.

The Chancellor has had to leave before I could commend him on one other matter, which is the single currency. [Laughter.] He has stood absolutely firm on that, and quite rightly so.

Mr. Lewis

He anticipated the right hon. Gentleman's comments.

Sir Edward Heath

He saw into my mind, which is easy for everyone to do.

The Chancellor is absolutely right to stand firm on the single currency. However, my difference with him—it is not really with him, but with the governmental line—is that nothing is being done to explain to the people what the pros and cons of the single currency are. There is complete confusion between a single currency and a common currency. Citizens write to me asking, "What is this all about a common currency and a single currency?" Nothing is being done to carry on proper public discussion about the issue.

All those who oppose the single currency get free coverage in a hostile press, which is largely owned by foreigners. On the other side, nothing is done. I learned only recently that we contributed to the work done by the Commission, which Ministers approved, explaining the pros and cons of the single currency. Like every other country, we have contributed to that work. Every other country has used the results, but our Government are not allowing them to be given to people in this country. That is disgraceful. We have contributed, but we are not allowing the discussion that should be carried on, and the Government must look at that point. [Interruption.] The chairman of the Conservative Back-Bench finance committee, my hon. Friend the Member for Bridlington (Mr. Townend), could arrange such a discussion if he wanted to instead of sitting there, grinning and laughing the whole time.

Mr. Dykes

Does my right hon. Friend know that in Germany, every passenger on the German railway system receives a bulky pamphlet explaining the pros and cons of the single currency system? Why should we not have something like that here?

Sir Edward Heath

My hon. Friend will have to ask the Prime Minister and the Government; I am no longer responsible. Such discussion should take place. There is so much grumbling about the money that is passed to the European Union, yet we then refuse to accept what is being offered for discussion among people in a free democracy. As I have said, that is deplorable.

There is another point that I want to make about the European Union which is to the Chancellor's good. I had produced for me last night the latest available figures showing the extent to which we are benefiting economically from the European Union. In 1973, when I took Britain into the European Community, it took only 36 per cent. of our exports. In 1995, the last full year, the EU took 58.2 per cent. of our exports. That is the jump which resulted from our joining the European Community. In 1995, the EU accounted for 56 per cent. of UK imports of goods and 48.2 per cent. of invisibles. In 1995, we had a deficit on trade in goods of £11.6 billion. That comprised a deficit of £4.2 billion with the EU and of £7.4 billion with the rest of the world. All that points to the extent to which we benefit economically from the EU.

In 1994, the latest year for which figures are available, 33 per cent. of UK companies' direct investment overseas was in the European Union and 54 per cent. of overseas investment in UK companies was from the 15 countries of the EU. That shows the amount of inward investment that we received. The worrying thing about that is that it means that we no longer continue to run many of our companies, which instead are controlled by overseas countries, particularly the United States.

I have some other interesting facts. In 1994, 80 million Germans bought £17.7 billion-worth of British goods, but 240 million Americans bought only £16.9 billion-worth. The average German spent three times as much as the average American. Holland, with only 15 million people, took £9.7 billion-worth of exports from us—more than the Asian countries, China, Indonesia and the Philippines together. We sold more to Sweden than to the whole of Latin America from Mexico to Cape Horn. The Irish Republic alone, or Belgium and Luxembourg together, were better customers than Canada, Australia, New Zealand and South Africa put together.

That flies in the face of everything that we hear from the Euro-sceptics—one of whom, the right hon. Member for Bethnal Green and Stepney (Mr. Shore), I see sitting in the corner on the Opposition Benches—and shows exactly how much we are involved with the European Union and how foolish we would be to endanger that relationship in any way.

One other subject on which I want to touch concerns the question that has now become prominent in party politics on both sides of the House—morality. That is now being combined with religious beliefs. That is mistaken. It has not been in the British tradition—although it has been in some European countries—to have parties either named or dominated by a particular religious belief. There is a saying that a Member owes his constituents not only his energy but his judgment. It is up to us to give our judgment about those matters.

To say that one party is the Christian party is, first, not true, but, secondly, Britain now has a mixed population in which there are Hindus, Buddhists and Muslims, and I suspect that some of my constituents are atheists. That may also be true elsewhere. Therefore, we should abandon the idea of proclaiming that our policies are the policies because of a particular religious belief. That is really the responsibility of archbishops and cardinals. They not only can but should do it and it is up to the individual citizen, not us, to decide what he believes and which belief he wants to join.

I hope that we may continue our political life on the road that we have always followed and which has always been demonstrated in the House. There are those who want to come to Prayers at the beginning of the day and those who do not. That is a matter for them. It would be a great mistake if we put forward our policies on the basis of a particular faith and its morality.

I commend the Chancellor on what he has done and I hope that he will be successful, but, in addition, I want to point out the need for a much wider approach in the rapid development of modern technology. I say rapid because there are so many examples of where we have missed the bus. We now have the channel tunnel. It always receives unnecessarily bad reports in the press. However, we do not have a fast link. We have been discussing that for eight years.

When I go through the tunnel, there is a fast link on the other side down to Nice or wherever I want to go. I went on it up to Lille a little while ago and one can travel on it to Copenhagen. But in this country there is nothing. One comes through the tunnel and slows down. Having travelled at 175 mph across the French plains with their beautiful agricultural land, one travels on this side at 35 to 45 mph. Moreover, the horrifying stink and rubbish on this side is deplorable and disgusting. Who is responsible for clearing that away under the new system I do not know, but one does not want to see it oneself, let alone allow one's visitors to see it. That is indicative of the times.

We had the same problem when we decided to decimalise our currency. We started discussing that in 1846 and it was carried through by a Labour Government in 1966. By that time, the rest of the world had already done it. When we did do it, we did it the wrong way, because we decimalised the pound with the result that inflation was given a tremendous push. Had we decimalised on 10 shillings, like the Australians and New Zealanders, we would have missed that enormous push.

We refused to go into Europe in 1950, when the European Coal and Steel Community was founded. It took us 22 years to get in and by that time so much had already been decided. Again, we missed the boat. We cannot afford to go on like that in modern history. Above all, we cannot afford it on the single currency. The decision will have to be taken, but we must be ready to take it. There is no point in my hon. Friend the Member for Bridlington shaking his head in disagreement. I am sorry that the chairman of one of our major committees should believe that one should be unprepared for one of the most important decisions that we have to make. We must be prepared for it. That involves not only the Bank of England, but the Government. If people in the Treasury are still living in 1945, they must be removed and proper Treasury officials appointed. We do not want to be living in that age. It is time that we took some action and dealt with the matter.

Those are the matters that are vital not only for the future of the Government, but for the future of our country.

5.58 pm

Mr. Malcolm Bruce (Gordon)

It is always a pleasure to follow the right hon. Member for Old Bexley and Sidcup (Sir E. Heath), who has an individual style. Years of experience mean that he is no longer beholden to the Whips or the Government, and what he has to say is all the more refreshing for that. That contrasts sharply with the exchange at the beginning of the debate, when extravagant claims were made about the total wisdom on one side and the total lack of it on the other, when, as always, the truth is always somewhere in between.

As we are debating the economy, it is relevant just to pick out the strands that the Government have highlighted in the Queen's Speech. They are right about the issues, and there is some agreement about the policies, but not necessarily about their delivery. The speech says that firm financial policies are essential to secure sustained economic growth, and continues: Fiscal policy will continue to be set to bring the public sector borrowing requirement back towards balance over the medium term. That is a greatly watered-down version of what used to be the Government's objective, which was to achieve a balance, full stop.

The result is that there can and should be agreement about the need for financial discipline and the need for strict inflation policies—and the need to deliver on those policies. I welcome the Chancellor's announcement of today, not because people like to pay for higher interest rates but because of the recognition that it was necessary to take action.

Just to put the record straight: when the Chancellor announced a reduction of a quarter per cent. on 6 June, we said at the time that we thought the move was misjudged and that it failed correctly to read the pressures building up in the economy. We said that it would have to be reversed. Now the Chancellor has been forced to acknowledge that he was wrong, and he has had to adjust the rate accordingly. The signs are that next week's inflation report from the Bank of England will argue that the Government are still not on course to hit their inflation targets, so the Chancellor may have to increase rates yet again.

All this reinforces the case for removing day-to-day interest rate decisions from politicians, who are under pressure before elections to do things for electoral advantage in the short term—things that may damage the performance of the economy in the medium to long term. That is the classic way of reaching wrong decisions.

The right hon. Member for Dunfermline, East (Mr. Brown) quoted interest rates from a number of European countries, saying that they were significantly lower than the United Kingdom's. One factor that he did not point out was that all those countries have an independent central bank, which is a significant reason for interest rates being lower there than here. It remains, however, the united view of both main parties that they have no intention of setting up an independent central bank, even though the Maastricht treaty requires one whether or not we join European monetary union. [Interruption.]

I hear mutterings from below the Gangway to the effect that the Governor and the Bank of England have been wrong in the past. That misses the point. There will always be differences of opinion on short-term judgments; we cannot say now who is right and who is wrong about what will happen in two years' time. The fact remains that, although bankers can make errors of judgment on the basis of their economic analyses, they remain economic analyses. They are not politically based.

This independence would remove the premium that we all have to pay for political interventions. In other developed countries operating with independent central banks, long-term interest rates are persistently and consistently lower than ours. The costs to our public sector borrowing and to private investors who must pay these premium rates in the United Kingdom are high.

I agree with the right hon. Member for Old Bexley and Sidcup that one of the chief arguments in favour of monetary union, assuming that the criteria are met both by the core member countries and by the United Kingdom, is that such a union would exert further downward pressure on interest rates, thereby benefiting investment here and reducing the costs of borrowing. That would also assist in the management of the deficit, which this Government have failed to control.

Dr. Hampson

This is all very nice post facto academic analysis, but I remember the hon. Gentleman a year ago saying, as did Labour spokesmen, that the economy was stagnating and needed an injection of growth. He called for a reduction in interest rates then.

Every commentator has applauded the fact that the Chancellor overruled the judgment of the Governor of the Bank of England. Is the hon. Gentleman saying that he would have kept interest rates higher over the past two years?

Mr. Bruce

No, but I made it clear in June that I would not have cut interest rates—and said so at the time. We also said that the Chancellor would be forced to reverse his decision, which he has. My point remains that allowing decisions to be taken in this political way requires a premium on long-term interest rates which we all have to pay.

Extraordinarily enough, the Conservative and Labour parties say that, if Britain opts into monetary union, they are willing to hand over the management of monetary policy to a European central bank, but they are not prepared to allow a British central bank the same responsibility inside the UK economy. That is clearly inconsistent.

If we are to manage our economy properly in the long term, we need to remove short-term political opportunist decisions from the equation. There have been many examples in recent years of Governments taking short-term decisions to foster short-term booms for electoral advantage. That has cost the country dear in the long term.

The right hon. Member for Dunfermline, East rightly pointed out the problems of under-investment, which have created the pressures to which the Chancellor is now facing up. We have under-investment partly because of a lack of confidence that inflation and interest rates will stay down and that the exchange rate will remain stable.

The reason why Germany, regardless of its difficulties, has sustained its economic performance year after year for 40 years is that its people knew that inflation and interest rates would stay low, and that the mark would enjoy a stable exchange rate. That enabled the Germans to plan, and it gave them the confidence to invest at lower rates of return. with the result that many more investment opportunities were taken up in Germany than in the United Kingdom, where the risks were simply too high.

Ms Diane Abbott (Hackney, North and Stoke Newington)

Is the hon. Gentleman really saying that the only factor in Germany's remarkable economic performance in recent decades has been low interest rates? What about German training and skills, not to mention other factors?

Mr. Bruce

Of course other elements are involved. It is disingenuous, merely because I have highlighted one strength of the German economy, to suggest that I do not recognise its other strengths, too. I intend to deal with them later in my speech.

The Prime Minister claims that inflation is in the box. Current low investment, however, suggests that this country's investors do not yet believe that. We shall need to sustain low inflation for rather longer before they do. In fact, inflation in the UK is still the fourth highest in the EU. We welcome the fall in unemployment, but it is still considerably higher than it was when the Conservatives came to power—and it has not improved much under this Prime Minister.

As for growth or stagnation, the United Kingdom's economy is growing at 2.6 per cent. a year—hardly a boom. It is a worthwhile recovery; we want to ensure that it continues, and we expect it to improve slightly. The worry remains that, with a growth rate of 2.6 per cent., we are already hitting inflationary pressures. That is surely a sign of under-capacity and under-investment, both of which the Government have failed to deal with.

When it comes to taxes, the Government are not on strong ground. They cannot even be honest. The right hon. Member for Old Bexley and Sidcup is not alone in his party or among supporters of business and industry on the issue of taxes. Organisations not previously thought of as sceptical about Government tax policy are now saying strongly that the Government should not go for a tax-cutting Budget. No less a body than the Institute of Directors has said: We do not now believe there is scope for further cuts in income tax … in the next Budget. That is astonishing coming from that organisation.

Perhaps less astonishing, but still interesting, is the Confederation of British Industry, which said: The CBI believes work force skills are crucial to business success, but … our research identifies significant current deficiencies … we have called for investment in transport to increase … These spending priorities are more important to business than tax cuts. The Institute for Fiscal Studies said: To cut taxes now in the expectation of hitting these medium term spending plans would be dangerous. The Association of British Chambers of Commerce said: The Government should not consider tax cuts while the PSBR remains so high … The British Chambers of Commerce urge the Chancellor to make education a spending priority. Perhaps most interesting of all are the comments of the right hon. Member for Witney (Mr. Hurd) at a meeting at St. Stephen's club on 25 September. He said: It would be great foolishness for Conservatives … to promise that we could cut taxes without cutting public spending. It would be more honest … to promise the electorate both extra tax cuts and big reductions in public services which would be required to fund them … I do not believe that elections … can be won by reducing income tax against a background of sacked teachers or closed hospital wards". That is the climate in which this debate is being conducted.

I suppose I should hope that the Government and the Cabinet are not listening to the debate, and that they will go ahead regardless with a tax-cutting Budget. I must tell them that, if they do, they will be wrong. The British people will not believe that they can sustain those tax cuts while claiming that the health service will be safe in their hands. The British public will not believe that they have a genuine commitment to the problems of the poor and to investment in education. It does not add up, and it is not honest or credible. The Chancellor has made it clear that he does not believe that the Government are trusted on taxation, and he is soft-pedalling on the issue of tax cuts.

I will take up the point raised by the hon. Member for Hackney, North and Stoke Newington (Ms Abbott). We need to ensure that we continue to invest in education and training, so that we have people with the proper basic skills to be able to adapt to a rapidly changing world. We cannot deliver a record comparable to most of our competitors, and we will not be able to do so if we go on cutting investment in local authorities so that they cannot maintain teachers in the classroom or the fabric of our schools, let alone develop nursery education and the use of new technology within schools, which requires a great deal more equipment. Those things require investment at all levels, and that investment must be paid for, as a matter of public policy and public responsibility.

Mr. MacShane

Is the hon. Gentleman aware that sometimes one can get money for nothing? The European Commission is offering £300 million for job creation in Yorkshire under the Resider II steel regeneration programme. It has been blocked by the Minister for Small Business, Industry and Energy, who is insisting that no elected councillor should sit on the programme allocation committee. Such is the anti-European mindset of our Ministers that they are blocking that important Euro-cash for Yorkshire because of an absurd belief that only Whitehall should control the money, and that elected councillors should have no part in it. It is a scandal.

Mr. Bruce

I am sorry that I gave way. The hon. Gentleman has made his constituency point, and I will leave it at that.

I believe that the British public are looking for a more intelligent and honest debate about real resources. The Chancellor has talked about driving the public share of spending down below 40 per cent.—he maintains that in the Queen's Speech. That should happen as a matter of routine over the cycle, so it does not require any additional action and is no big deal. When the Government talk about driving it down further, they mean that they will have to privatise health care, unemployment and social security, and require people to pay more for health, education and services out of their private income. Most people would like to have an intelligent debate about whether that is better done through the existing institutions.

I see heads shaking on the Conservative Benches. There is room for debate, but there is no room for dishonesty which suggests that one can cut taxes and not cut public spending, and that the consequences would not damage existing services and prevent investment in them. It is our contention that the Government should recognise that they need to press down against inflation to try to achieve stability, and ensure that the growth rates are sustainable and that we have the necessary education and skills to provide a long-term basis for the future.

The Government must resist short-term pressures to come up with electoral gimmicks that will not work and which, worse than that, will damage the recovery we have and the possibility of ensuring a genuinely competitive economy in the long term. We need to ensure that people will invest because they believe that inflation and interest rates will stay down. We must be part of a strong monetary union, exchange rate union and European Union in which we are fully participating members, shaping the destiny rather than bobbing around in the wake of decisions made by other people.

6.14 pm

Sir Terence Higgins (Worthing)

After participating in debates on the Queen's Speech for 32 years, it feels strange to realise that one is standing up, probably, for the last time.

When I first arrived in the House, I was taught that it was polite to refer to the arguments of other hon. Members, since we are supposed to be debating. I should like to pick up on the point about cable television which was mentioned in the fascinating speech of the right hon. Member for Manchester, Gorton (Mr. Kaufman).

As cable television spreads, more and more people will have a continuous feed of events in the Chamber. That is rather worrying. We now have television sets in our rooms with that facility, and more and more hon. Members are staying in their room to get on with their constituency duties and so on, turning up the volume if a speech is interesting and turning it down if it is not. Consequently, hon. Members are not appearing in the Chamber. In future, that will give a create a bad impression for the public at large. I hope that, as technology improves, it will be possible to have split screen coverage, showing, for example, the work in Select Committees at the same time.

I want to address my initial remarks to the Leader of the House and the shadow Leader of the House, who, by tradition, reply to the debate on the final day of the Queen's Speech. I am glad to see the Leader of the House here, and I hope that what I have to say will be conveyed to his shadow.

I believe that we are suffering serious problems as a result of the decision by the former Chancellor—it was announced with virtually no consultation and was contrary to what had been recommended—to introduce a unified Budget in the autumn. I believe that that is unsatisfactory. The Opposition tend to choose the last day of the Queen's Speech debate for discussion of the economy, when we do not have the Chancellor's economic forecast, we have none of the up-to-date information, and the Budget is only a short time ahead.

That is unsatisfactory, and, as the Chancellor pointed out in his opening remarks, it means that we have a long gap in the rest of the year when nothing is happening. One could say that the Chancellor and his colleagues could go on holiday after Christmas for the rest of the year. It also has serious effects on the congestion of our parliamentary programme. There is a little more time this year between the Queen's Speech and the Budget, but it is difficult to cram in Second Reading debates in time to set up Committees.

I strongly advocate the suggestion floated by my right hon. Friend the Prime Minister and taken up by the Leader of the House in a debate on 11 July, that we should hold the Queen's Speech in the spring. That would be far more satisfactory. We could then have the major Second Readings through, and the Bills would be making progress. When we returned after the summer recess, the Budget would open the second part of the annual programme. That would spread our economic debates and our programme as a whole in a far more efficient and satisfactory way.

I accept that we will not return to the old system, because the Treasury has decided that the current arrangement is rather good, for the reasons I have just mentioned. If we are not to return to the old system, there is a strong case for having the Queen's Speech in the spring and the Budget and autumn statement in the autumn.

That has frequently happened after a general election, when the Queen's Speech has taken place in the spring. So next year will provide an ideal opportunity to carry out that reform. However, we should not then have an 18-month Session. It would be better if we then had a yearly Session such as I have described. As it is not a partisan matter, but one for the House, I very much hope that the usual channels will give the idea serious consideration.

I should also like to commend the suggestion that was picked up in the speech by my right hon. Friend the Prime Minister at the beginning of the debate on the Queen's Speech this year. He said: I should like to move towards a position where we can announce in future a two-year legislative programme and, so far as possible, publish draft Bills and consult on the second year's Bills before they are introduced."—[Official Report, 23 October 1996; Vol. 284, c. 31.] That happened many years ago when we introduced value added tax. That was the first time draft Bills were published well in advance.

That practice has much to commend it. It would give Select Committees the ability to consider Bills months in advance. Select Committees are a better vehicle for that than Special Standing Committees, and they could work more effectively if they had a longer time scale. I very much hope that we can pursue the idea that my right hon. Friend the Prime Minister proposed and that—I hope—has general support in the House.

I should mention in passing, as no doubt we shall debate it later, that that idea seems quite contrary to the hurried introduction of particular measures, such as the proposed legislation on guns. Tragic though the Dunblane experience was, in my opinion it is unlikely that the current proposals will significantly reduce the risk of another such tragedy. Had the existing law been enforced properly, it probably would not have happened.

The danger of driving it underground so that gun maniacs had to obtain weapons illegally is that there would be rather less check than before. I shall not labour the argument, but it is important that the legislation should not be rushed, and that we should carefully consider how to make it as effective as possible.

Turning to the main subject of this afternoon's debate, I agree with my right hon. and learned Friend the Chancellor's view of the economy. The present prospects are extremely good, and I hope that, in his Budget, my right hon. and learned Friend does not react too dramatically to concern about the level of the public sector borrowing requirement. At this stage in the cycle, it is not wholly inappropriate.

None the less, the economy is growing rather faster than anticipated. The latest quarterly figures show growth at 0.8 per cent., and the two previously quarterly figures were revised upwards, so I can understand the concern about that. As the economy recovers, it is important that we slow down the rate of growth in line with the anticipated growth in productive potential. By then, we shall have some idea of the size of the real underlying deficit, but we do not have a clear idea of it at the moment. I do not consider that it will be necessary to take savage steps to cut the PSBR; that would be inappropriate at this stage in the economic cycle.

Development in the United Kingdom economy has to be judged against the background of the world economy and what is happening in Europe. I am concerned by what is virtually organised deflation in almost every European country seeking to meet the Maastricht criteria. They are doing things that they would not do were they not seeking to meet those criteria. That is dangerous.

I hope that we can get away from the expression "single currency". We are now considering the prospect of a core currency, but there is no prospect of a single currency over the now vastly expanded European Union not only within our political lifetime, but possibly within our actual lifetime. Therefore, it is misleading to continue to refer to a single currency.

My right hon. and learned Friend the Foreign Secretary was right in his speech in Switzerland a few weeks ago to say that, if a small core of currencies join the so-called first wave and others do not join for a long time, the Union will be undermined. There cannot be a Union if some are in and some are out of what is generally regarded as its most important aspect, apart from the single market.

Secondly, the policy that my right hon. Friend the Prime Minister has set out very clearly is absolutely right. At this stage, it would be absurd to rule out joining the single currency in the next Parliament. Inevitably, that would mean that we could not play our full part in the negotiations, and we have a responsibility to do that for the sake of the United Kingdom and the future of Europe. My right hon. Friend was right to stress that important point.

The way in which the process is continuing gives me grave cause for concern. Europe is seeking to achieve the Maastricht criteria, but it is quite clear that the degree of convergence that we are likely to achieve on the present timetable is bound to be inadequate. That is a serious consideration.

It would be different had we achieved convergence and a single currency, and there were then particular variations in prices and costs in a particular part of the European Union, because, at that stage, we would have given up for all time the main means of adjusting differential movements in costs and prices. That would have the inevitable effect of causing unemployment to become endemic in certain parts of the Union, or it would involve huge subsidies from one part of the Union to another. That would be unlikely to happen, and we know that such subsidies are frequently ineffective.

That is not the position, however. Britain and the European Union are contemplating going ahead when there is inadequate convergence. The Herald Tribune and the Financial Times point out today that German economists are saying that Germany is unlikely to meet either of the main criteria. The French are employing an extraordinary method of proceeding, which is reminiscent of Mr. Robert Maxwell and the pension funds. Serious dangers are involved, and there are likely to be enormous problems.

One must give a warning: it will be dangerous for us and for the future of Europe and the single market if we go ahead with a single currency on the present schedule with inadequate convergence. Were I being rhetorical, I would say that some of the more enthusiastic politicians in the EU seem to be acting rather like the Gadarene swine. Perhaps I sound unduly pejorative. I am suggesting not that they are going in the wrong direction, but that they are proceeding at a suicidal pace.

Whether or not we are in the first wave, we have a responsibility to persuade the EU that the present timetable is dangerous. Whatever one's views on the single currency, and whatever decision is made about whether we are in the first wave, there is a danger that the first wave will create a core group on a basis that is not sustainable. If it goes ahead on that basis and on the present schedule without adequate convergence, the system will break down. That will be an enormous setback to the creation of the single market, and will create serious problems. Therefore, we must take part in the negotiations. We must not be excluded from them. If we fail properly to play our part, the real negotiations will take place outside the normal forums. That must be borne in mind.

Sir Edward Heath

rose—

Sir Terence Higgins

My right hon. Friend may not have agreed with everything that I have said. I note that he wishes to intervene.

Sir Edward Heath

I am trying to find something on which I agree with my right hon. Friend. Will he first agree that we must stop kidding ourselves as to what other major countries in the European Union will do? They are determined to get a single currency, and to do so within the time period of which we are aware. There are powerful politicians who will be in place for a considerable period. The President of France is in that position. He will make sure that the programme is carried through. That is the situation that we must face.

Secondly, why are the other major countries in the European Union so determined? They know that it is not possible to keep a single market unless there is a single currency. All history proves that. Indeed, the present world proves that. That is why they are determined to go ahead.

Lastly, let us consider convergence and the United States of America. How much convergence does the US have? There are enormous differences between California, New York state and the southern states, yet the US is the most successful country in the world.

Sir Terence Higgins

I take up, first, my right hon. Friend's final point. The first question put to me during my third year at Cambridge on economics related precisely to the United States. The reality is that some parts of the United States would probably gain if they did not have a single currency. Some parts of Mississippi, for example, might gain by devaluing. That is not, however, historically the way in which the United States has grown up.

I do not accept my right hon. Friend's premise that there cannot be a single market if there is not a single currency. That is disputable.

I am seeking to put over the case that, if Europe proceeds as some suppose, and in the pejorative terms that I used earlier, the leaders of France and Germany are likely, in pursuing a timetable in the absence of adequate convergence, to bring about the self-destruction of that which they wish to construct.

Ms Abbott

Will the right hon. Gentleman give way?

Sir Terence Higgins

I have little more to say, but if the hon. Lady really wishes to intervene, I shall give way.

Ms Abbott

The right hon. Member for Old Bexley and Sidcup (Sir E. Heath) made the real point, that the political elite of Germany and France are determined to go ahead with economic and monetary union come what may. Does the right hon. Gentleman agree that, merely because the Gadarene swine are determined to go over the clifftop, that does not mean that sensible porkers should go along with them?

Sir Terence Higgins

There are serious problems. I understand what my right hon. Friend the Member for Old Bexley and Sidcup (Sir E. Heath), who has perhaps more knowledge than anyone else of European leaders on this issue, is saying. I am saying that those leaders are putting us in a dangerous position. We should seek to persuade them of the dangers that I have described. Indeed, that is the purpose of my speech. As I have said, I have left undebated the question whether we are in or out.

I have a strong feeling that, if the leaders of Europe go ahead with a core currency without adequate convergence, they may well find themselves—the Germans will certainly regret this—with what has been described as a camembert currency, with a soft section in the middle. We may find that that currency weakens, and that the value of sterling increases. The arrangements to prevent the value of sterling declining may have the reverse effect of what is expected. If that happens, there will be serious implications for our competitive position at that stage. It would be rather good, however, for some other sections of the economy.

We face serious dangers. In his peroration al the Conservative party conference, my right hon. and learned Friend the Foreign Secretary quoted William Pitt in terms of saving Europe by our example. We must bear in mind what the example may be, and what the arguments are at a technical level. I understand very well the point that my right hon. Friend the Member for Old Bexley and Sidcup made about political drive, but at the end of the day—I quote someone whom perhaps neither my right hon. Friend nor I have always agreed with—we cannot buck the market.

6.34 pm

Ms Diane Abbott (Hackney, North and Stoke Newington)

It is a pleasure to take up the remarks of a distinguished ex-Chairman of the Select Committee on the Treasury and Civil Service. The decision whether to join the economic and monetary union is the one most important economic decision that faces the British political class. It gives me great pleasure to talk about something of substance such as the economy when over the past few weeks politicians of both major parties have been vying with one another in pontificating on morality and Christianity. I do not believe that the public have much stomach for professional politicians going on about matters of morality. We should concentrate on matters within our competence, such as the decision to join EMU.

It seems, sadly, that the debate on EMU has been hijacked by nationalists. It has been presented all too often in the popular press as a debate between nationalists and internationalists.

My parents came to the United Kingdom nearly 50 years ago from across the Atlantic. I am not a xenophobe and I hold no truck with petty little Englander ideas. I believe that there is a practical case against economic and monetary union on the criteria and timetable that are before us. That is the case that I hope to set out in a modest way.

I am a member of the Treasury Committee. I served under the distinguished chairmanship of the right hon. Member for Worthing (Sir T. Higgins). During my membership of the Committee we have conducted two major inquiries into economic and monetary union. When the right hon. Member for Worthing was speaking, a colleague said to me, "I did not know that he was so anti-Europe." I said, "He is not anti-Europe, but as it happens economic and monetary union is one of those matters where the more you know about it, the more sceptical you become."

One of the arguments that the Europhiles like to advance in trying to confuse the issue is to ask, "Why are we talking about economic and monetary union now? The decisions are a long way away. The issue can wait. It is a long way down the track." In fact, 1997, next year, is the key year. It is the reference year. It is the year when the decisions of early 1988 will be taken on board. It is also the year during which Parliament will have to vote on whether to make the Bank of England independent in line with the Maastricht decisions, with a view to us going into an independent European central bank. That being so, the arguments that we should not be discussing these matters now because they are a long way ahead of us are simply tosh.

The hon. Member for Gordon (Mr. Bruce), the Liberal Democrat spokesman on these matters, produced as Liberals are wont to do, the orthodox view of an independent Bank of England. The hon. Gentleman suggested that it would be a magical elixir that would be the cure for Britain's long-standing economic decline. The orthodoxy relating to an independent Bank of England is not exactly the fact. The issue will have to be debated next year. There is a case for an independent Bank of England, and one that bears more scrutiny than fashionable opinion has bothered to give it.

There are right hon. and hon. Members on both sides of the House who like to talk about a European central bank as if it is nothing to worry about. They say that at the end of the day politicians will have the final say. That is completely untrue. Martin Woolf of the Financial Times has said that a European central bank would be the most powerful and politically unaccountable bank in the world. It is the political unaccountability of both an independent Bank of England and a European central bank on which the House should focus tonight and in future debates.

Much of the argument, inasmuch as people argue rather than make assertions in a fashionable way, for an independent Bank of England, rests on the notion that there is a causal relationship between an independent Bank and low inflation. The Treasury Committee considered the issues before the hon. Member for Gordon became a member of it. We found that the factual evidence for a causal relationship was slender. There is a relationship: as fashionable opinion always says, Germany has historically had low inflation since the war and it has an independent central bank, but I always argue—the advisers and the information available to the Select Committee back me up—that to find the roots of Germany's low inflation one has to look at Germany's searing experience of hyper-inflation in the 1930s and immediately after the second world war and at a political consensus between management and labour to take inflation seriously. I challenge any of the fashionable pundits to come up with some academic evidence to show that there is a genuine causal relationship between an independent central bank and low inflation.

Andrew Wood, our specialist assistant to the Select Committee, said: Whilst the relationship between inflation and Central Bank independence is undisputed, it is generally acknowledged that that relationship may not be causal".

Dr. Hampson

The reverse argument is this country's track record since the war. Far too often, politicians—or the Government of the day—have interfered, and devalued. I hate to make a party political point, but it is Labour Governments who have been especially prone to do so. Governments devalued the currency to help British manufacturing industry, which was in a relatively weak position. It is that track record that led to there being little trust in the strength of the British currency—had we had an independent bank, the financial markets around the world might conceivably have had a different perception.

Ms Abbott

I am grateful to the hon. Gentleman for mentioning one of the other shibboleths of fashionable opinion, which is that we do not want politicians interfering with interest rates and that somehow monetary policy is different from any other aspect of economic policy. I would argue that monetary policy is of course very important but no more important than any other aspect of economic policy such as fiscal policy and public expenditure. What is the basis for saying that one aspect of economic policy can be taken separately from the others? My argument is that monetary policy is too important to be left to central bankers.

I pray in aid not some rabid right-wing Euro-sceptics or even some left-wingers but two distinguished ex-Treasury knights, two distinguished ex-permanent secretaries to the Treasury—Sir Bryan Hopkin and Sir Douglas Wass, who said in evidence to our Committee: It follows that decisions about the pace and rigour of the fight against inflation ought to be taken with full consideration of the costs involved—unemployment, recession, bankruptcies not to mention the cost to the public purse arising from higher social security payments … It seems to us to be fundamentally mischievous for … these issues to be removed from the domain of … democratically elected … Government and handed to an appointed and unaccountable central bank. I quote a little more as this is the heart of my argument. They continued: It is not the job of central bankers to judge how far it is right to go in damaging the standard of living of some members of the community or destroying the jobs of others in order to bring inflation on to some particular path. These are broad matters as much of social welfare as of economics. My view runs contrary to fashionable opinion: monetary policy is very important but no more so than other aspects of economic policy. The argument for taking it out of democratic control does not stand up. Monetary policy is too important to leave to central bankers, even those as urbane as the great and the good Eddie George.

Mr. Malcolm Bruce

Is not the hon. Lady explaining exactly why there is some concern? What credibility will one's inflation target or monetary policy have if one is determined to try to vary it as and when political expediency requires? Does not that undermine confidence in the policy-making process and is not that why there is a premium on interest rates?

Ms Abbott

The hon. Gentleman was not listening to what I was saying. I was not talking about political expediency. My point is that monetary policy is not about numbers on a page; it affects unemployment, bankruptcy and people's lives in general. Because it is not just a theoretical accountancy exercise, it should remain under democratic control. Monetary policy is important but the House deals with many important issues. Why should it not be left in the hands of politicians? For too long, monetary policy has been described in the abstract rather than in terms of its effect on the lives of people in Hackney or even those in Milton Keynes.

The distinguished Treasury knights went on to say: It is inherently wrong to give such a responsibility to central bankers. Quite simply it is not their job: it is the proper responsibility of the elected representatives of the democracy and should stay with them. I now leave the question of an independent central bank, but the House will have to return to it. Far from it being a remote debate at the end of the millennium, the matter will be debated on the Floor of the House within 12 months.

Labour Europhiles trying to influence the debate on economic and monetary union sometimes say that we should not worry about a European central bank because when it comes down to it, it will be under the control of ECOFIN, the Economic and Finance Council. I have heard that argument deployed by distinguished colleagues and I have even heard something similar from the Chancellor of the Exchequer. People who use such an argument need to read the treaty, which is very clear. A European central bank will by law not be accountable to any body, especially not ECOFIN. I know many colleagues are genuinely pro-European, but I plead with them to stop using the bogus argument that ECOFIN will be a counterbalance to the central bank.

Members of the Select Committee went to the Bundesbank several times, and the Bundesbank is clear that there is no question of a European central bank being subordinate to any elected authority.

Mr. Legg

I am grateful to the hon. Lady for giving way, but she did mention the constituents of Milton Keynes. She rightly refers to the unaccountability of a European central bank. Will she confirm that the Maastricht treaty in fact forbids politicians to give any instructions to central bankers about the central bank? If there were a camembert currency, as outlined by my right hon. Friend the Member for Worthing (Sir T. Higgins), would not there be a danger that unelected central bankers would impose even more deflationary policies on the people of Europe?

Ms Abbott

That is so. I am happy to confirm that the Maastricht treaty forbids politicians to give any instructions to the European central bank. As to the possible deflationary consequences of EMU, I intend to deal with them later in my speech. That is a very important point.

Another argument, or non-argument, used by people in both main parties who favour EMU, is deliberately to oversimplify the issue. They say that it will be nice to have one currency as we will not have to change money at the borders; we should just take a deep breath and plunge in. However, having a single currency involves more than simply reprinting our bank notes so that they bear the European symbol. Having a single currency requires that, to a greater or lesser extent, we lock the economies of the countries involved. The seriousness and difficulty of that project are not properly explained to the public by Europhiles of any party.

I hear people talk glibly about EMU and gloss over the difficulties of locking economies and wonder whether they have learnt nothing from our experience in the exchange rate mechanism. I followed the debate in the press and remember how all fashionable opinion, the Liberals and goodness knows who else were saying that all we had to do was join the ERM, lock our exchange rates and all sorts of magical consequences would flow from it. It was to be the silver bullet to cure this country's long-standing economic problems. We locked exchange rate parities and, as the right hon. Member for Worthing said, the thing imploded.

People who have such confidence in the notion that one can lock the economies of major European countries according to arbitrary political timetables or the lifespan of Chancellor Kohl ought to re-examine the history of the ERM and how it exploded.

I want to move on to what for me is one of the most fundamental problems with the EMU project—I speak as a member of the Labour party—and that is the price, in deflationary economic policies, that ordinary people are paying in Europe and may have to pay in Britain if we go into EMU on the arbitrary political timetable. In Germany—and there is no leader in Europe more committed to EMU than Kohl—they have had strikes and upheaval caused by the price that the German people are paying in cuts in public expenditure to enter EMU on the timetable. Recently, the Institute for Economic Research in Germany said that there will be a rise in unemployment and stunted economic growth if Germany tries to fulfil the entry criteria on time.

In France, they are considering budget cuts of £7.5 billion and the unions were on the streets last year and will have a series of days of action against the cuts in health care, education and public sector pay. That is all because France has to meet the Maastricht criteria. In Spain, 300,000 people demonstrated against the cuts and the deflationary policies caused by entering EMU. In Austria, the two-year austerity programme has resulted in a record growth in the votes for right-wing parties in the recent Euro-elections.

I like to go along with fashionable opinion as much as the next person. It is so much easier and the sunshine of one's leader's smile glows upon you, but if we consider the price that ordinary people in Europe are paying for deflationary EMU-linked policies and the prospect for communities such as Hackney, which already suffers from endemic mass unemployment, anyone who calls himself a socialist or has any concern for the population will be given cause to pause at the necessity for a Gadarene swine-like rush into economic and monetary union on that timetable and according to those criteria. It has been calculated that, to hit the criteria on the borrowing deficit, we would have to cut public expenditure by £18 billion. If my hon. Friends on the Front Bench imagine that having—touch wood—won the next election, they would ever win another one if they implemented public expenditure cuts of that magnitude, they are deluding themselves.

I do not pray in aid left-wingers or Euro-sceptics, but the great and the good Eddie George, the Governor of the Bank of England. He said, with his usual cautious understatement, that if we went into EMU on that timetable and on those criteria, without paying attention to the important and underlying differences in the European economies, particularly in unemployment you would have the risk that some parts of the community would be stuck with low activity and high levels of unemployment and would have very few options for addressing them. That, coming from the Governor of the Bank of England, is an understatement.

Some of my hon. Friends try to pooh-pooh a serious debate on EMU by saying, "Don't you understand, Diane, the criteria are flexible and they will be moved around. Don't worry about the criteria." I urge them to listen to Commissioner de Silguy who has said, about the notion that some Europhiles have that the criteria are flexible, We require total and strict appliance of the treaty without anything being added to it. We have always said that we should not add any criteria—for example a criterion on unemployment. The Treasury Committee has, on several occasions, spoken to the Bundesbank about the issue of the flexibility of the criteria and, whenever we mention it, their faces freeze. The only people who think the criteria are flexible are deluded Europhiles in left-of-centre parties.

I am glad to have the opportunity to address the House on what will be the most serious economic issue facing us in the coming 18 months. I feel that we have had a misleading debate until now. It has concentrated on issues of nationalism and so on and not on the practical and democratic issues that relate to the question of Maastricht. I am weary—so I suspect is the British public—of politicians talking about issues of morality and the family of which some of them know little and which, certainly, we have no power to affect. We do have the power to shape this country's economic future. A serious economic decision faces us within the next 18 months and, although I bow to no one in my internationalism and my wish to see Britain part of Europe, we would be irresponsible and deluded if we imperilled the economic stability and the possibility for growth by simply following fashionable opinion on the question of economic and monetary union.

Madam Speaker

The 10-minutes rule starts operating at 7 o'clock.

6.55 pm

Mr. Nigel Forman (Carshalton and Wallington)

I congratulate the hon. Member for Hackney, North and Stoke Newington (Ms Abbott) on a persuasive, entertaining and—I know—well-researched speech which put her strongly held view on the important question of European monetary union. The speech was none the worse for the fact that I have had the honour to hear it before many times in the Treasury Select Committee.

Equally, I pay tribute to my right hon. Friend the Member for Worthing (Sir T. Higgins) for what turned out to be his valedictory remarks on the Queen's Speech in view of his regrettable decision to retire. We have always listened with the utmost respect to his remarks on anything to do with the economy and I am sorry that on occasions such as this in future we shall not have similar opportunities.

I disagreed significantly with only one point in the right hon. Gentleman's speech. He said that he thought it would be unwise at this stage of the economic cycle to act aggressively—or words to that effect—to reduce the public sector deficit still further. I shall return to the point later, but I believe that we must be somewhere near the peak of the cycle, by anybody's best reckoning; if ever there were a time when we should be acting as effectively as possible to reduce the deficit, it is now, rather than later. I beg to differ with my right hon. Friend on that.

Perhaps the high point of the debate so far, notwithstanding the spirited speech by the hon. Member for Hackney, North and Stoke Newington, was the brio of the performance by my right hon. and learned Friend the Chancellor of the Exchequer. He put on a magnificent performance, matched only by his bravura speech in Bournemouth a few weeks ago. I commend him for that and it is good to know that the economy is safely in his hands. Long may it remain that way.

I noted a contrast with the speech by the right hon. Member for Dunfermline, East (Mr. Brown) which seemed to be based on the woolly and meaningless notion of "addressing" various difficult issues. The verb "to address" seems to be the key to new Labour's policy. It says that it will address long-term unemployment, it will address nursery school places and it will address skill shortages. To address those big questions is not a substitute for a valid and thought-out policy and is certainly not a substitute for a fully costed policy with real numbers and real choices. I remember that Nye Bevan was famous for his much-quoted phrase that socialism has to be the language of priorities. We may be faced with a chameleon-like Labour party, which has apparently changed its ways, but it must still focus on the language of priorities if it is to be taken seriously by the British people.

I also have a small bone to pick with the Liberal Democrats and I am glad to see their Treasury spokesman in his place. I have sat through a few days of this debate recently and I was present on the opening day. I sought to challenge the right hon. Member for Yeovil (Mr. Ashdown), the leader of the party, when he expressed one of his typically pious concerns about the size of the public deficit. When I intervened on him to ask what practical proposals he had for reducing the public debt in the short term, he simply replied, in what I considered a very inadequate way: We would not cut taxes."—[Official Report, 23 October 1996; Vol. 284, c. 37.] That is one side of the account, of course, but it was a wholly inadequate answer.

In the intervening period, I went away to do a little research on known and recorded Liberal public spending commitments since the autumn of 1995, when the Liberals produced something called an alternative Budget. I do not wish to weary the House; I shall simply say that, if we tot up those commitments—I have a list before me—we find that they come to more than £6 billion. The Liberals have very honestly said—I give them credit for this—that, to finance their education commitment, they would be prepared to put perhaps an extra penny on the standard rate of income tax. Broadly speaking, that could mean £2 billion. But that would still leave them £4 billion adrift, which—at this stage of the economic cycle, and given the size of the current deficit—would add to the problems of the deficit and all the attendant financing problems, rather than solving any problem.

Mr. Malcolm Bruce

Will the hon. Gentleman give way?

Mr. Forman

Very briefly.

Mr. Bruce

I accept what the hon. Gentleman says, in broad terms, but I must tell him that our alternative Budget and our manifesto have been strictly costed. He must not assume that commitments outside those are commitments other than the difference between what we would spend and what the Government are committed to spending. Our commitments have been not only costed, but audited by Treasury accountants and the Institute for Fiscal Studies.

Mr. Forman

I do not think that we should take up too much of the time of the House with that point, but I will send the hon. Gentleman a list of the commitments to which I refer, and he can draw his own conclusions.

Given that monetary policy is at the heart of today's debate, my main purpose is to commend my right hon. and learned Friend the Chancellor on the way in which he has exercised both prudence and responsibility in the conduct of monetary policy, with the aim of maintaining non-inflationary economic growth. I stress the word "maintaining". The important thing about this "recovery", as it is rather wrongly called, is that the period of growth has lasted for more than four years. If my right hon. and learned Friend continues with his current prudent policies, with any luck it will last for another four years, and perhaps for a further four years after that.

As my right hon. and learned Friend said himself, the secret is to stay ahead of the game in monetary policy, and to move with small, timely steps. That is true whether we are talking about upward movements or downward movements in interest rates. As can be seen from the way in which my right hon. and learned Friend has conducted monetary policy recently—often in the face of contrary advice from the Governor of the Bank of England—such action has been characteristic of his methods. I suggest that today's small adjustment in an upwards direction will prove just as effective in sustaining a period of sound, non-inflationary growth as my right hon. and learned Friend's policies in the other direction.

In the longer run, I hope that the Government will pay careful attention to the three key objectives mentioned in one of the economic sections of the Queen's Speech. The Government speak of returning the public sector borrowing requirement towards balance in the medium term. We should note that they say only "towards" balance, and refer to the medium term: their phraseology is fairly vague. They also speak of further reductions in public spending as a share of gross domestic product—ostensibly, lowering it to below 40 per cent. of GDP by 1998–99. They also speak, perhaps over-ambitiously, of doubling living standards over the next 25 years—an objective of Rab Butler's in the early 1950s, which implies a compound rate of economic growth of some 3 per cent. a year for quite a long time.

I hope that the Government will not try to pursue incompatible objectives. I hope that they will give priority to reducing the deficit. It is vital not to saddle future generations with the burden of paying off public debt, which is little more than deferred taxation under another heading. We should try to remove that deficit as soon as we reasonably can. I remind the House that, not long ago, one of my right hon. and learned Friend's predecessors was able to repay some public debt and to reach that stage in the equation.

Within the total of public expenditure that is available, I hope that my right hon. and learned Friend will give priority to assisting the young. That means education and training, the youth service and the voluntary sector. At the other end of life, he should give priority to helping the elderly and the poorest pensioners. From time to time, I have presented proposals designed to do precisely that. I also hope that we can knock on the head the threatening idea of limiting treatment on the national health service to those over 75.

All in all, I commend the Chancellor on his stewardship of the economy. I think that he has been running the ship very prudently and well. I am confident that, if we pursue the same course in future, we shall have not just another four or five years of Conservative government but—more important for the country—another four or five years of sustained non-inflationary economic growth.

7.5 pm

Mr. John D. Taylor (Strangford)

We have had an excellent debate, featuring many interesting contributions. I certainly enjoyed the speech of the hon. Member for Hackney, North and Stoke Newington (Ms Abbott), who spoke up for the people of the United Kingdom and reasserted the importance of democracy in this country. She said that the ordinary people should control their economic future.

Today's announcement of an increase in interest rates came as no surprise: there were clear signs of increased inflationary pressures. If no action had been taken and then, a month later—at Budget time—the Government had reduced taxation, there would have been a further increase in those inflationary pressures. It was, therefore, an astute move by the Chancellor to act quickly, a month before the Budget, and increase interest rates. It will make it easier for him to consider the option of reducing tax next month.

Having said that, I have to say that this debate takes place at a time when the economy of the United Kingdom is good. The Chancellor and, indeed, his predecessor deserve our congratulations on what has been achieved during the past five years. We have the lowest mortgage rates for 30 years, the lowest basic rate of tax for more than 50 years and lower unemployment than any other major European country. When we look at France and Germany, we realise how well we are doing. We have had the longest period of low inflation for 50 years. Above all—we certainly notice this in Northern Ireland—we are No. 1 in Europe for foreign investment. We in Northern Ireland share that. Companies are coming in from South Korea, Taiwan, Hong Kong, Singapore and, indeed, Indonesia.

As I have said, Northern Ireland is sharing the improvement in the United Kingdom's economy. We have a record of high unemployment, but in recent years, even before the ceasefire, our unemployment had begun to decline. Last year, a record number of new jobs were created in Northern Ireland. Only yesterday—once more, good news—Holiday Inns opened its second new hotel in Northern Ireland in three years. Tesco opened its first metro-store in the city centre of Belfast. Sainsbury made a big announcement of investment in Northern Ireland, and two new factories opened in Strabane. The news from Northern Ireland is very heartening—but there is one black spot, in agriculture, which is one of our main employers and one of the main contributors to the economy of the Province.

The problems of bovine spongiform encephalopathy in the meat industry continually concern us, not only in rural areas but throughout Northern Ireland. Northern Ireland depends on its beef industry more than England: 50 per cent. of our beef is exported. That is why it is important for the Government to continue to give priority to resolving the problems facing Northern Ireland's beef industry.

Interestingly, both the Chancellor and the shadow Chancellor—there was a great battle between the two of them—accused each other of not looking to the future. But, as the hon. Member for Hackney, North and Stoke Newington said, one of the most important questions for the future is whether we should have a single currency in Europe. Both the Chancellor and the shadow Chancellor avoided that issue. Both argue and both deliberately avoid the issue.

I do not want to go into the matter in detail today, other than to say that my party reaffirms that it is against the idea of a single currency—or a core currency, as it has been called—because it would restrict our right to increase interest rates, as happened today, or to reduce them according to the circumstances that apply on a particular day in our country. It would also restrict the right of a future Labour Chancellor—the shadow Chancellor is not in his place at the moment—to reduce interest rates.

The right hon. Member for Dunfermline, East (Mr. Brown) mentioned VAT on domestic fuel. My party voted against the Government on 17.5 per cent. VAT on domestic fuel for heating, and rightly so. I am glad to say that our votes won the day and the Government were defeated. If a future Labour Government introduced a proposal to reduce VAT on domestic fuel from 8 to 5 per cent., we would support them. However, the right hon. Gentleman did not point out that, because of the Labour party's policy on Europe, that VAT rate cannot be reduced below 5 per cent. The Opposition are committed to a position in which they will no longer have the freedom to decide whether they want zero VAT—they cannot reduce it below 5 per cent.

The single currency is creating problems in Europe as countries try to comply with the Maastricht criteria. Look at Germany's current attitude to the Eurofighter—it is stalling because it has to reduce public expenditure. The right hon. Member for Old Bexley and Sidcup (Sir E. Heath) referred to the great TGV trains in France. They have had to be abandoned because the French Government, in an attempt to comply with the Maastricht criteria, can no longer invest capital in their railway system. Britain must avoid the problems now faced in Europe.

I want to mention just one other European issue relating to Northern Ireland—the peace and reconciliation money that the European Community has kindly decided to give to Northern Ireland. Who would refuse money? We welcome that £240 million, but we need to examine more carefully how it is invested. I want the money to be spent on schemes and projects which, in 10 years' time, we can look back upon and say, "Look at what that money achieved for the people of Northern Ireland." Instead, money is spent on, for example, teaching the Catholics how to enjoy Scottish dancing, or teaching the Protestants how to enjoy Irish dancing. Money going into such projects is basically going down the drain. In 10 years, there will be nothing for us to look back on and say, "Look what Europe achieved with its £240 million."

The Government may propose lower taxation in next month's Budget; we shall wait and see. The people of Northern Ireland do not want lower taxation simply for electoral purposes—we want it to be related to the state of the economy and the needs of the people in our country. That involves public expenditure. Northern Ireland has reached the bottom line in that respect. Over a period of two months just before the summer recess, I visited 20 primary schools in my constituency. We have two school systems—the Catholic system and the state system. I visited both. I found that every school had budgetary problems. Teachers were being made redundant and services were being reduced, especially those for children with special problems.

The same applies to Northern Ireland's hospitals. In my constituency, the Ards hospital is slowly being closed through lack of funding. There are also problems in the Ulster hospital. We want public expenditure in Northern Ireland to be maintained at a level—that means direct taxation being maintained at a level—that will ensure good services for the people.

We need more public expenditure on the roads between Northern Ireland and Scotland. I know that the Confederation of British Industry in Northern Ireland wants to spend all the money on the roads to Dublin, but it does not represent the business men of Northern Ireland. I am a business man in Northern Ireland and I can tell the House that only 10 per cent. of businesses that employ 10 or more people belong to the CBI. It is more politically oriented than most of the political parties in this House. The business men of Northern Ireland want improvements to the road to Stranraer—the A75 in Scotland, as the hon. Member for Banff and Buchan (Mr. Salmond) knows—and to the A8, in which respect I am glad that my hon. Friend the Member for East Antrim (Mr. Beggs) is present. That is the gateway for Northern Ireland—

Mr. Deputy Speaker (Sir Geoffrey Lofthouse)

Order. Time is up.

7.15 pm

Dr. Keith Hampson (Leeds, North-West)

I have a great deal of sympathy with the attitude of my right hon. Friend the Member for Old Bexley and Sidcup (Sir E. Heath) and of the hon. Member for Hackney, North and Stoke Newington (Ms Abbott) towards the moralising tone in current political debate. I agree that the public do not want politicians to hector and lecture them. It does no service to the public if politicians knock the country and sow an image of self-doubt in people. We are destroying people's self-image.

Of course there are problems—there are ghettos, there is a cycle of deprivation, there are poor families, there are deprived families, there are single families, there are ignorant parents and there are delinquent children. There are bad schools, but to imagine that all schools are full of young villains tearing the place apart and that everything is of the worst is not only wrong but denies the true perspective that we should be bringing to bear. Those are not just long-standing problems in this country; they are problems faced by every modern society in the western world. It is our duty to find practical solutions, not to take the moralising attitude that some people do.

We must live in the real world. Some people and the popular press go on about the horrors of this country; yet people abroad are desperate to come here. Even The Independent, a few weeks ago, said in its leader that this country was now "vibrant" and "exciting". In other words, we have put the buzz back in Britain. We have also put life back into the city of Leeds. When I went there 23 years ago it was a mere shadow of what it is today. It is now one of the most exciting and vibrant cities in the land.

I know that this is a nice middle-class judgment, but when I went to Leeds there were only two restaurants in the Good Food Guide, both Chinese. Leeds now has Michelin restaurants. The whole of the inner city centre spreads down to the canal south of the tracks. There is a wonderful pedestrian area—[Interruption.] Those on the Labour Front Bench are typically doing what we expect of them. If I say that Leeds now has Harvey Nichols, they will laugh—yet I am talking about the symbols of success. Do not they realise that that is what is important?

That success has come about not because of the Labour-controlled council in Leeds, but because of the climate of success created by the Conservative Government over the past decade. In particular, we established an urban development corporation in the city centre. At the time, it was opposed by the Labour council; indeed, it is still opposed by the hon. Member for Leeds, Central (Mr. Fatchett). That UDC has galvanised the whole city of Leeds. That is why the canal is alive and vibrant when previously it was derelict. That is why the Royal Armoury is there. That is why there are bars, bistros and restaurants. That is why people are in the city centre at night.

None of that has anything to do with Leeds city council. What it is doing now is simply on the back of what we have shown is possible. For example, we have shown that it is possible to have a partnership between the public and private sectors. All credit to the Labour party in Leeds for having learnt that lesson. We did up one side of Boar lane. That was so dramatically successful—it has the best hotel in Leeds—that the Labour council is now doing up the other side. Government policies have shown what a catalyst such things can be. It was not a council-led initiative.

What does the Labour council do, apart from setting up 205 committees and sub-committees, on which it has spent a great deal of money? It has real sickness benefit problems, costing council tax payers millions of pounds. The council needs to get a grip on that. Yet it says that it has no money.

Let us consider nursery provision. In my constituency one in 10 children gets the chance of a nursery place out of Leeds city council. In the Labour wards, however, it is down to almost every single child or children having a one in two chance of obtaining nursery education. Such is the disgraceful disparity of provision by Leeds city Labour-dominated council.

It does not help when the leader of the Labour party also knocks Britain. We have gone from the age of excitement and enthusiasm of the 1980s into the knocking nineties. In his contribution on the Queen's Speech, the right hon. Member for Sedgefield (Mr. Blair) cited two broad, loose, flabby, generalised statistics. He said: We have the lowest proportion of 16 to 18 year-olds in full-time education … of virtually"— thankfully he used the word "virtually"—" all our main competitors. Of course, we have a much lower ranking than the Germans. That has always been true, but he did nor say that when we took office in 1979 just 48 per cent. of 16 to 18-year-olds were staying on in education. That figure now stands at just over 73 per cent. I accept that that is still not good enough, but my God—what a rate of improvement we have seen. It has gone up from 64 per cent. in the past nine years.

We inherited an appalling state of affairs. There is a long lead time in education, but we have started to get on top of the problem. The right hon. Gentleman then said: We are 42nd in the education league."—[Official Report, 23 October 1996; Vol. 284, c. 19.] What on earth does that mean? I found out where that figure came from. I discovered that according to the International Institute for Management Development we are 42nd out of 46 countries. I asked the Library about the methodology used to create the statistic cited by the Leader of the Opposition. The figure was based on a survey conducted among 3,000 business men from 46 countries, who were asked what they thought about their countries' education system in terms of how it helped their economy. Obviously, business men in the Singapore regime put their country at the top, so top of the league table in which we are 42nd is Singapore. Is it surprising that the same type of survey has Chile ranked 34th in 1994, 25th in 1995 and, this year, suddenly ranked seventh? There is no sound statistical methodology behind that load of rubbish.

The Leader of the Opposition is speaking tosh when he runs down the country by saying that we are 42nd in the education league. That comment is totally and utterly meaningless, but it does a hell of a lot of damage, because that is what other people abroad believe. That is fed through the press and people think that our children are not getting the same opportunities as others. That is ridiculous: they are getting those chances.

Yesterday, the hon. Member for Sheffield, Brightside (Mr. Blunkett) said that Labour wanted to created a wind of change through the education world, but we have done that, and for one particular reason—we have managed to prise away so much of the decision taking from local councils. As I repeatedly ask my right hon. Friend the Secretary of State for Education and Employment, why do we call our schools "state" schools when in fact they are "council" schools? The councils decide what education methods should be used and determine whether they want grammar schools or comprehensive schools. It was, of course, a Labour Government who tried to force comprehensives on every council, but councils control schools and it is they who determine how much money those schools receive relative to the council's overall budget.

Mr. George Galloway (Glasgow, Hillhead)

Rubbish.

Dr. Hampson

I will point out two little—

Mr. Graham

rose—

Dr. Hampson

I cannot give way because time is running out.

We talk about whittling away the powers of councils, but let me remind hon. Members of two little facts. Until 1957, education was awarded a specific grant, 60 per cent. of which came from central Government. We then introduced a block grant. As a result of the Local Government, Planning and Land Act 1980 we allowed for virement between actual services. We abolished Whitehall's detailed control of housing projects and education. In many ways councils have more powers and they determine how much money goes to their schools.

Those councils also perpetuated the worst dogmas in education. At last we have an instrument, in the guise of the Office for Standards in Education, which is now trying to sort out the problem. Through research it is highlighting the weakness of the nostrums on which primary education in particular was run. Unless we get the base right it does not matter what we say, and quite rightly, about the needs of the new intellectual revolution of information technology. Unless the base education is correct, one will not be able to produce the people of the calibre necessary to meet the requirements of modern-day industry. Frankly, we know how badly we are performing at the primary level. Ofsted also has evidence that shows that 40 per cent. of secondary schools are not performing as well as they should.

Education is at the heart of the modern economy and we will be competitive only if we get our education system right. But what have we got? We have Blair's boys, professors at the Institute of Education in London, a woman in Durham and one or two other members of reputable institutions of higher education who are trying to knock Ofsted. They are gunning for Chris Woodhead, the chief inspector of schools. The right hon. Member for Sedgefield owes it to everyone to say that if he becomes Prime Minister he will keep the chief inspector of schools as a symbol of common sense.

It is not just Mr. Woodhead who talks about the problems. The 1992 Government report also referred to them. When Lord Callaghan was Prime Minister, he said exactly the same in his speech at Ruskin college, when he said that the education system had been running on progressive methods for far too long and that we had to—

Mr. Deputy Speaker

Order. Time is up.

7.25 pm

Mr. John McAllion (Dundee, East)

Against all expectations, I have quite enjoyed the debate so far. I was particularly amused by the speech of the hon. Member for Leeds, North-West (Dr. Hampson), who told the House that the Tory Government were at last beginning to come to terms with the problems affecting Leeds, after 17 years in office. I do not know how long they need to be in office before actually doing something about the problems faced by the people in Leeds.

I was also very impressed by the speech of the right hon. Member for Strangford (Mr. Taylor). It started off badly with his glowing testimony to the economic policies pursued by the Tory Government. He then went on to discuss the European Union. I was not quite sure what to make of his remarks as I am a Catholic who already enjoys Scottish dancing. I do not know whether that hinders or helps the case that he was trying to make.

I was greatly reassured, however, that the right hon. Gentleman was at least prepared to say that the Ulster Unionists will back Labour when we table an amendment to reduce the level of VAT on domestic fuel to 5 per cent. What really amused me was the sight of so many Conservative Members nodding in agreement with him. It seems that they think that Labour is terrible because it will merely reduce the rate to 5 per cent. They all want to put it up to 17.5 per cent., but there they were nodding in agreement and attacking Labour for merely trying to reduce the rate to 5 per cent. That is sheer hypocrisy on the part of those who hold views like that.

A number of hon. Members on both sides of the Chamber have paid compliments to the Chancellor. I hope that Conservative Members will understand if I choose to criticise his speech, in particular the inconsistency of one of the points that he made when he was in full flow. He claimed that the record of Labour in government was such that we could not possibly match the high levels of public spending which the Government have sustained, particularly on the national health service. In his very next breath, however, he argued that spending more money than the Tories was in Labour's blood and that we could not possibly match the low levels of public investment achieved by the Tory Government. Tory Members must get the line right—it must be one or the other; it cannot be both. If the Chancellor and his hon. Friends continue to make such inconsistent and rubbish arguments in the run-up to the election, they can only expect that the outcome will be as everyone else expects: they will be kicked out of office by the people with short shrift.

The Chancellor argued that the success of what he described as the Government's firm financial policies rested upon the fact that tax revenues were rising faster than public spending and that, as a result, public borrowing was falling. Technically, he is absolutely right, but let us look behind those technicalities at the real significance of that fact. The key point of the scenario is that public spending is being cut at such a rate that tax revenues, even with a 1p cut in the basic rate of income tax, inevitably rise faster than public spending. What does that mean for the economy and the people? Let me cite the example of local government in Scotland, which this year suffered a cut of £395 million in central Government grant that would otherwise sustain the level of public services in our country.

This summer, my hon. Friend the Member for Dundee, West (Mr. Ross) and I visited a number of social work facilities around Dundee. We went to a number of family and child centres run by the local Labour council. Unlike private nurseries, those centres are genuinely committed to transforming the life chances of the children and parents who use those centres.

I met one young single mother with two children who lived on the 11th floor of a 12-storey block in Dundee. She said that she was going out of her mind because she was trapped in isolation with her children. Then she heard about the family and child centres and, as a result of getting a place in one of those council centres, not only were her children given a flying start which will stand them in good stead for the rest of their school careers, but she was given the space and encouragement at the centre to take classes at the local college, where she obtained an HND qualification and greatly improved her chances of finding employment locally.

If the only alternative available to that woman and her family had been private nurseries funded by the nursery voucher scheme, there would have been no possibility whatever of her children getting in or of her getting the kind of life opportunity that was given to her. Public spending by councils sustained a network of those centres across Dundee, thus making it possible for children to get places, but because of Government cuts in public spending this year, one of those family and child centres in Dundee has shut. If there are further public spending cuts, which have been consistently promoted by Conservative Members, more of those family and child centres will close and fewer opportunities will be available for people to get off welfare and back into work to begin the economic recovery.

I agree with the right hon. Member for Old Bexley and Sidcup (Sir E. Heath), who warned about the shift in the balance from income tax towards indirect taxation. I welcomed the commitment by my right hon. Friend the Member for Dunfermline, East (Mr. Brown) to reduce VAT on domestic fuel. At school I was taught about the political unrest in Britain at the end of the Napoleonic wars. We learned about the Spa Field riots, the Manchester blanketeers, the Cato street conspiracy and the radical uprising in Scotland in 1920. It was explained to us that the cause of that working-class unrest was the decision by the then Tory Government to abolish income tax for the rich at the end of the Napoleonic wars and pay for it by increasing indirect taxation, which fell most heavily on the poor.

That lesson has always stayed with me and in this debate it has made me understand that some things never change. Nearly 200 years on, a Tory Government are still increasing indirect taxes on the poor. We heard in the debate that VAT is to be extended to water, children's clothes, books and many other items and that Conservatives still want to slash tax liabilities. The Chancellor said that he would abolish capital gains tax and inheritance tax and that he would introduce tax cuts for the rich. He mocked the idea of a top rate tax for the rich. Tory Governments never change. Throughout the centuries the same old Tories have been attacking the poor to help pay for the rich.

This is United Nations international year for the eradication of poverty and it has been marked by the establishment of an all-party group on poverty which intends to raise poverty issues. However, it has yet to be meaningfully recognised by the Government. It was not recognised in the Gracious Speech nor in any of the speeches by Conservative Members. Of course the Gracious Speech has a vision about the kind of economy and society that the Government and the Tory party are trying to create. It will have free and open markets, deregulated markets, as Conservatives always argue. It will he a market in which those who own and control capital can move it anywhere in the world and in which they will be free to invest where they will get the biggest profit. They will be able to produce goods where labour costs are cheap and where the social costs are at an absolute minimum. In that market the only loyalty of the rich and the powerful will be to self-interest and enrichment.

The greed and avarice of the rich and powerful are dressed up as enterprise and initiative and in that society the poor are discounted and discarded. They do not count or even figure in the speeches or in the thinking of Conservative Members. It is hardly what could be described as high moral ground. It is the kind of economy and society that Conservatives have been shaping for the past 17 years.

I take issue with two of the main pillars on which this selfish Tory society rests. The first is to be found in the Gracious Speech where it states that the role of the Government is to promote what they call flexible and efficient labour markets in Britain. What does that really mean? First, it means that Britain would be the only country in the European Union not to endorse and accept the social chapter and the social protocol. The Government will deliberately place Britain outside mainstream civilised opinion in Europe and British workers will have fewer rights and poorer conditions of work than workers elsewhere in the EU. What kind of vision is that to put to the people?

The Government have an undying opposition to a national minimum wage or, to put it another way, they lend their unequivocal support to making sure that British workers are paid poverty wages in the European markets. The job seekers allowance and the hounding of the unemployed and the slashing of their entitlement to benefit forces people into jobs at £1.50 or £2 an hour. That kind of approach, the legal shackling of trade unions, the rejection of social partnership and decent social standards in the workplace, the use of low pay and mass unemployment to impoverish—

Mr. Deputy Speaker

Order. The hon. Gentleman's 10 minutes are up.

7.35 pm

Mr. David Amess (Basildon)

I cannot say that it is a great honour to follow the speech by the hon. Member for Dundee, East (Mr. McAllion), and I say that as a fellow Catholic. His speech shows how Catholics can differ. There were two splendid speeches from the Opposition parties, one by the right hon. Member for Strangford (Mr. Taylor), the Ulster Unionist spokesman, and the other by the hon. Member for Hackney, North and Stoke Newington (Ms Abbott). If such speeches continue to be made, we shall soon make up the three Conservative Members we have lost. I entirely agree with what was said by my hon. Friend the Member for Leeds, North-West (Dr. Hampson).

This is the last time that I shall contribute to the debate on the Loyal Address as the Member for Basildon, a constituency that I have been proud to represent since 1983. I was the first and I shall be the last Member for that constituency. Boundary changes have meant a 68 per cent. change in the character of the constituency and it has altered in such a way that I would have had 1,000 more votes than I obtained in 1992.

My right hon. Friend the Member for Old Bexley arid Sidcup (Sir E. Heath) spoke about Christianity. The Labour party in Basildon could never defeat me, so it decided to attack my children. My wife and I believe in single-sex education and chose an all-boys Catholic school eight miles from where we live and outside the constituency. There are no single-sex schools in Basildon.

The campaign against that action by my wife and myself was led by a former Labour Member, Arthur Latham. It was joined by the Liberal party in Havering and supported by the Liberal party and the Labour party in Basildon. That is a disgrace, and as a result, my wife did not want me to stand anywhere in the next general election. Those actions by members of the Labour party and the Liberal party were not Christian in any sense.

I am about the same age as the Leader of the Opposition and the shadow Chancellor, the right hon. Member for Dunfermline, East (Mr. Brown). I was elected on the same day as the Leader of the Opposition and the leader of the Liberal party. I believe today in the things that I believed in when I was elected in 1983, but the leaders of the two main Opposition parties have completely changed their views, ostensibly for public. consumption. The Leader of the Opposition has moved to the right—Opposition Members squirm—and the leader of the Liberal party has ostensibly moved to the left. In their amendment to the Loyal Address, the official Opposition refer to 1979, so presumably that means that Opposition Members can remember 1979. So can Conservative Members, and Britain is far better than it ever was when mismanaged by the Liberal and Labour parties between 1974 and 1979.

It should not be forgotten that the Labour party has never won elections for 22 years and has never won elections with a majority for 30 years. In the amendment, it has the cheek—I say this in the light of the speech of the hon. Member for Dundee, East—to say that it would like to build a cohesive society and to heal social divisions.

What claptrap do we get from the Opposition? The shadow Home Secretary suggests that there should be a curfew for children at night. What a stupid idea. How on earth could such a curfew be enforced? Yesterday, the shadow education spokesman said that he wanted a legal contract that could be enforced through the courts between parents, children and schools. Those are the sort of ridiculous policies that the Labour party comes up with.

I wish to refer to the economy's effects on my constituency. In 1983, the caring Labour party decided to erect above the town hall a huge banner showing the number of people out of work. The caring Labour party wanted every unemployed person to vote Labour. I am pleased to say that electors in Basildon were not fooled in 1983, in 1987 or in 1992. As long as unemployment continued to go up, the Labour party kept the banner up.

Suddenly, the sign disappeared. When I asked the Labour chief executive where it had gone, he wrote to me to say that the screws were rusty. What a coincidence that, once the arrow started to go down, the screws became rusty. That is how much the Labour party cares about unemployed people.

What policies did we hear in the stupid speech of the right hon. Member for Dunfermline, East? What suggestions did he make on employment? There is realism on the Conservative Benches. We can never return to full employment. Every day, every week and every month, new technology destroys jobs. It is no good misleading people on the issue and turning it into a political football.

Since the 1992 election, unemployment in my constituency of Basildon has fallen by 2,000. That is a lot of people back into work and I congratulate the Government on that. Obviously, there has been great disquiet about the economic downturn's effects on people's lives. Conservative Members fully recognise those, but no matter which business or local enterprise I speak to, all of them tell me that the economy is far better. They have never been so busy. That is not to say that they are not still angry about some of the things that have happened.

Increasingly, we see on the Opposition Benches a mood of triumphalism. That arrogance came through during the Labour party conference. When I made a speech in 1987, hon. Members used to wave at me and say, "Goodbye." When I stood up in 1992, they used to stand up and wave goodbye. I do not know who runs the Labour party these days—is it old Labour, new Labour or simply the people who were elected in 1992?

Baroness Thatcher transformed Britain for the best. There can be no doubt about it. The fact that the Opposition have changed their views on everything, it seems, is tantamount to agreeing with that. They could never ever be elected on their socialist principles. They are trying to hoodwink the general public and I hope that, when we have the general election campaign and the Opposition try to run the story, "Time for a change," the British people will ask, "Time for a change to what?" It is time for a change from dreadful speeches such as that by the Opposition Front-Bench spokesman during today's debate. I hope that the British people will decide to reject the Opposition and re-elect the Conservative Government.

7.44 pm

Mr. Alex Salmond (Banff and Buchan)

I suppose that I should start by wishing the hon. Member for Basildon (Mr. Amess) a fond farewell. His wife's proposal that he should not stand for any seat in the coming election would command much cross-party support in the House. He also misinterpreted the excellent speech of the right hon. Member for Old Bexley and Sidcup (Sir E. Heath), who warned politicians of the dangers of trying to corner the market in religion.

In recent weeks, the Prime Minister, the Leader of the Opposition and their spin doctors have been guilty of just that. It is foolish because, first, as the right hon. Member for Old Bexley and Sidcup said, cardinals, archbishops and even moderators have the right and entitlement to criticise politicians. Secondly, we live in a multicultural society. Hindus, Muslims and Sikhs in our society might feel irritated that Christianity is viewed as the only religion according to some politicians.

Thirdly, real Christians have a tendency to bite back. The Conservative party south of the border has been embarrassed by the comments of the Catholic bishops. The Labour party north of the border has reacted hysterically to criticisms from Scotland's cardinal. Real Christians are entitled to criticise politicians. When they invite that criticism, politicians leave themselves open and vulnerable. Fourthly, the tenet of Christianity, "By your deeds you are known," is applicable in this case. After all, we are conducting an economic debate on the Queen's Speech and, if morality is to surface anywhere in politics, it should do so at the heart of politics: the economy.

I listened to an exchange between the two Front-Bench spokesmen that did not have much in it of Christian support for the dispossessed, the poor, the marginalised and the excluded in society. It sounded much more like a Dutch auction on personal taxation, so until the Labour and Conservative parties can have a conference season that does not send pensioners away empty-handed from Blackpool, or allow fat cats to be secure in Bournemouth, and until they can match their words with actions, they should heed carefully the words of the right hon. Member for Old Bexley and Sidcup and ca'canny about bringing religion into politics.

I do congratulate the shadow Chancellor, however, on his proposal to reduce VAT on fuel from 8 per cent. to 5 per cent. I welcome his conversion to that cause, particularly because, in the debate on the Finance Bill last year, I proposed exactly that: to reduce VAT on fuel from 8 per cent. to 5 per cent. The amendment was defeated by 283 votes to seven. Seven votes is quite a large total compared with many of the votes that the Scottish National party commands in the House. The Labour party not only abstained on that vote, but the hon. Member for Edinburgh, Central (Mr. Darling), no fewer than four times in a single contribution, described my proposal as a "cynical ploy".

With all this religious fervour creeping through the Labour Front-Bench team, perhaps I should take the attitude of, "Better one sinner that repenteth." None the less, I should like to know why it was a "cynical ploy" for me to advocate that VAT reduction last year, while this year it is represented as a political masterstroke by the shadow Chancellor. None the fewer, both the SNP and the Labour party seem to be making that proposal in the run-up to the coming election.

I want to direct a remark to the Treasury Front-Bench team in relation to a particular VAT issue. When I was practising as an economist, one of the wisest pieces of advice I received was to remember that, to most people, anything over a million was just a big number. The point that I should like to make involves some detail and has many millions in it, but I hope that Treasury Ministers will take special note of it, because it involves the Government in legal action that could run to many hundreds of millions—perhaps billions—of pounds.

Many hon. Members have been contacted by constituents concerned about the impact of the Government's proposed rule changes on reclaiming overpaid VAT. As the position now stands, taxpayers can reclaim for a period of three years, or Customs and Excise can make back-assessments for six years. The policy was introduced, by ministerial diktat, by the right hon. Member for Wells (Mr. Heathcoat-Amory) when he was Paymaster General—before he disappeared, earlier this year, into the anti-European never-never land of the Back Benches. We have never debated or passed that policy in the House, but it has been implemented as if it were policy.

I have a copy of the legal opinion of three of Europe's leading tax lawyers, which I shall arrange to be placed in the Library. Their opinion is that the Government's VAT proposals are illegal because they discriminate between taxpayers, and between taxpayers and the Exchequer. Many tens of thousands of companies across the United Kingdom are involved. The tax position is now retrospective, and it seems to breach the fundamentals of European law.

The Government are facing a series of defeats on VAT in the courts. The first defeat happened last week in the European Court. When I raised the issue at business questions last week and asked whether the Leader of the House was slightly worried by that court reversal, he looked at me and said that he had been informed that the sum involved was only £200 million. What a great relief. Only £200 million was involved last week!

I am informed, however, that a succession of cases can be taken to the courts, because the Government's position is fundamentally unsound. I advise Treasury Ministers to look for a reasonable compromise with representatives of industry, to review the policy and to put it on a firmer footing. Unless they do so, the issue will blow up in Ministers' faces. Perhaps the Chancellor reckons that he will not be Chancellor when it blows up in the face of the Exchequer. None the less, the wise policy would be to do something about the problem now, and I commend to Treasury Ministers the cross-party early-day motion in today's Order Paper.

I know that the Chancellor hates tables. He makes speeches in economic debates that disregard economic statistics. He says that we should not pay too much attention to tables, because they can prove anything. It is a fact, however, that if one examines economic growth in the United Kingdom during the Government's time in office, it is slightly less than 2 per cent. per annum, which is lower than the average rate for the rest of the European Union. Moreover, no other country in the EU had the benefit of £120,000 million of North sea oil revenues. It is the most staggering achievement for that windfall endowment of Scottish resources—£24,000 per head for every man, woman and child in Scotland—to be flowing into the Exchequer and yet for the UK growth rate to be lower than the average for all the other countries in Europe, none of which has had the benefit of those resources. The Government do not have anything to be proud of in their economic record of the past 17 years.

Let us consider the performance of some of the other countries in Europe. We heard about the performance of the Northern Irish economy from the right hon. Member for Strangford (Mr. Taylor), although I did not agree with all the points that he made. Let us consider the performance of the southern Irish economy in recent years. Last year, the UK's economic growth rate was 2.4 per cent., whereas the growth rate in Ireland was 8 per cent. A few weeks ago, while examining economic records of the past few years, I asked the House of Commons Library to perform an exercise and estimate—based on economic forecasts from the Treasury and from the Department of Finance in the Republic of Ireland—when Ireland would overtake the United Kingdom in gross domestic product per capita. The answer was that, based on current forecasts, it would happen in 2000.

In 2000, the Republic of Ireland will be more prosperous than the United Kingdom. It is already more prosperous than Wales and Northern Ireland, and by 2000, it will be more prosperous per capita than England and Scotland.

Sir Teddy Taylor (Southend, East)

Will the hon. Gentleman give way?

Mr. Salmond

I am caught by the 10-minutes rule. I know that the hon. Gentleman—

Sir Teddy Taylor

Will the hon. Gentleman give way?

Mr. Salmond

I know that the hon. Gentleman will say that Ireland is more prosperous because of European subsidies.

Sir Teddy Taylor

rose—

Mr. Salmond

Will the hon. Gentleman just listen for a moment, and try to contain his anti-European prejudice? Last year, the subsidies amounted to 1 billion punts of cohesion funding, which is about 2 per cent. of Irish GDP. Last year, growth in Ireland was 8 per cent., which was four times greater than the amount of GDP received in cohesion funding. That is not the explanation for the Irish economic miracle. The Financial Times has described. Ireland as the "tiger economy of Europe".

The Irish economy does not possess great natural resources, but it is making the most of what it has. When I think of Scotland and our natural resources, and when I consider the fact that the Government are making so little of so much of Scottish resources—greatly under-performing compared with the rest of Europe, and with a growth rate that should bring shame to Treasury Ministers—it is a matter for shame, not congratulation.

7.54 pm

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

I begin by dealing with the latter point made by the hon. Member for Banff and Buchan (Mr. Salmond) on the Irish Republic. As the Prime Minister has often confirmed to the House, transfer payments to the Irish Republic from the EU amount to 7 per cent. of Irish GDP. For hon. Members to understand the scale of those transfer payments, the United Kingdom would have to receive £35 billion from the EU for it to receive the same percentage of GDP. There would certainly be an effect on the United Kingdom economy if we were to receive an injection of £35 billion. So I think that the hon. Gentleman's attempt to draw a comparison between the Irish Republic and the UK is nonsense.

Mr. Salmond

Will the hon. Gentleman give way?

Mr. Legg

No; I have only 10 minutes.

I had not intended to speak about the single currency in this debate, but today we have heard two excellent contributions on that subject—from my right hon. Friend the Member for Worthing (Sir T. Higgins) and the hon. Member for Hackney, North and Stoke Newington (Ms Abbott). She argued the dangers of a single currency on economic grounds, and her arguments were very soundly based. The issue will not go away. As she rightly said, whether Britain joins a single currency will be the most important issue that the next Parliament must decide. Both sides of the House will continue to debate that question, and it cannot possibly go away. She made her arguments on the basis of the economic dangers, as did my right hon. Friend the Member for Worthing.

Conservative Members, however, also feel strongly about the constitutional issues surrounding a single currency, which the Prime Minister referred to at the Dispatch Box on 9 June 1995. To adopt a single currency must mean that one accepts that there will be one state. The intervention by my right hon. Friend the Member for Old Bexley and Sidcup (Sir E. Heath) on the speech of my right hon. Friend the Member for Worthing was very interesting, because he said that one cannot have a single market without a single currency, and gave the case of the United States as an example.

Those who support the federal vision of Europe, as my right hon. Friend clearly does, cannot have it both ways. Yes, if we had a single currency, we would have a United States of Europe, and there would be one state: it would be unavoidable. My right hon. Friend the Member for Worthing also mentioned the issue of transfer payments, and said that the consequences of a single currency would inevitably require them.

Even in a free market economy, such as the United States, substantial transfer payments take place between states. There would have to be a similar system in Europe to make the European currency area viable. I do not believe that the peoples of Europe form one nation, or that they are close enough to make such payments. In the United Kingdom, people in Surbiton are happy to make transfer payments to people in Huddersfield, for example, because we accept that we are one nation, the United Kingdom.

I do not believe that the people of Europe are so close that people in Surbiton would be happy for substantial transfer payments to be made to people in Essen, Palermo or Athens, and I do not believe that people in those countries would support transfer payments to other countries in the European Union. As my right hon. Friend the Member for Worthing explained, there are great dangers in pressing ahead with the concept of the single currency.

Today we have also heard from my hon. Friend the Member for Basildon (Mr. Amess). He certainly had good news to report from Basildon; and I can report that there is also good news from Milton Keynes. My hon. Friend said that there had been 2,000 new jobs in Basildon since the recession had ended. In Milton Keynes in the past 12 months, we have had 5,000 new jobs. Milton Keynes is middle England. The economy is doing extremely well. It is based on high-technology businesses, and 5,000 new jobs have been created. That shows the success and achievement of the Government's economic policy.

We have a very good economic background, which is delivering a great deal of success for Britain. However, there is much more to do. I do not know whether many hon. Members have seen the Budget submission from the Institute of Directors, which is cogent and well argued.

One of the issues to which the institute refers is public expenditure. If we are to have a really successful and competitive economy in the United Kingdom, we need to cut public expenditure. We need to reduce it because the most competitive economies in the world have a much lower level of public spending than we have. They are much more vibrant, dynamic and enterprising, and they are getting an increasing share of world trade. We must cut expenditure.

The analysis of the economy by the Institute of Directors looks at what has been happening to public expenditure compared with GDP. Most hon. Members know that the Conservative party has the objective of reducing public expenditure as a proportion of GDP. The Prime Minister has given a target of 35 per cent. and at our party conference, the Chancellor confirmed that the objective was to get public expenditure below 40 per cent. of GDP. That is one of our core policies.

The analysis by the Institute of Directors shows how difficult it is to make progress in achieving that key objective. The institute has looked at what has happened to public spending, as a proportion of GDP, over the past four years. It notes that it has fallen from 43.4 per cent. to 42.3 per cent.—there has been a fall of only 1.1 per cent.

Of that 1.1 per cent. fall, 0.8 per cent. has been due to a lower level of capital spending by the state. The cyclical effects on public expenditure have been positive to the tune of 0.9 per cent. Therefore, total public expenditure has hardly fallen, even though we have been trying to achieve the objective of lowering it as a proportion of GDP.

The reason is that so much of the culture of the public sector is still geared to spending ever-increasing sums of money. One has only to take an interest in our national accounts to see that, towards the end of financial years, we still get a higher level of spending than is normal on a month-by-month basis. There are still too many incentives within the system for spending more. The Red Book shows that, although the Government have had the objective of reducing public spending in real terms, public spending comes in at a higher level in real terms year after year.

There must be structural changes within the public sector to get spending down overall. Those structural changes should be directed towards the civil service and towards bureaucracy. We have been pioneers in privatisation, and we need to carry that forward. We need to have plans to privatise the Benefits Agency; we need a lot more imagination in our delivery of social security.

The Secretary of State for Education and Employment has plans for pilot schemes to get the private sector involved with helping people to find jobs. One of our objectives should be to privatise much of the social security delivery system. We should be looking to privatise jobcentres, which are among the most depressing public sector organisations. We need to privatise them and to bring the free market in, so that we can help the economy to be more dynamic and help people to depend less on welfare.

There remains a great deal to be done in our next term in office. I have no doubt that we will have policies that will work with the grain and enable us to build on the tremendous economic success that we have seen over the past four years.

8.4 pm

Mr. Ian Pearson (Dudley, West)

On 8 October, coincidentally during the Conservative party conference, the Government announced a U-turn. It did not receive any publicity, because it was on a rather technical matter, involving companies buying their own shares or paying special dividends. The operation of the imputation tax system and its effect on tax-exempt institutions is not something that the average person in the street is particularly interested in.

The story behind the U-turn, however, is an all too familiar one, of Government dithering, denial and delay, followed by a climbdown and belated action. That would be pretty much par for the course, but what marks this case out is that the Government's negligence has cost the hard-pressed taxpayer an estimated £1.5 billion in lost revenue at the very minimum—probably more.

To put the matter another way, that amount is the equivalent of a penny off the basic rate of tax or about the total given out in grants to good causes since the national lottery began. It is money that could have been spent on improving education and the health service.

Basically, we are talking about an abuse of the tax system or, in other words, a tax loophole—something that the Chancellor always denies exists, but which Labour has pointed out consistently. In this case, a range of smart schemes have been drawn up by corporate financiers which have favoured the big pension funds at the expense of other shareholders, cost the taxpayer millions each time, and distorted competition in takeover situations.

The loophole was becoming known by the time the 1995 Finance Bill was passing through the Commons. and it was glaringly apparent well before the drafting of the 1996 Finance Bill. Selective share buy-backs were increasingly used by large companies throughout 1995, and the use of special dividends was commonplace in the water and electricity industries. Special dividends were also used in other situations, such as Lloyds bank's bid for the TSB and, more recently, Granada's takeover of Forte.

What is more, respected financial commentators, such as Lex in the Financial Times and Graham Searjeant in The Times, pointed out the abuse. On 10 January this year, the Financial Times talked about the special dividend wheeze and its close cousin the share buyback", expressing the view that no public interest is served by a loophole that involves taxpayers subsidising corporate raiders. Labour, both here and in the other place, highlighted the abuse. I tabled a number of parliamentary questions on special dividends, and raised the issue on Second Reading of the Finance Bill last year. I even tabled an amendment to the Bill.

The Government's response was to deny the problem. The Financial Secretary to the Treasury, in a parliamentary answer to me, said: The payment of a special dividend does not involve a tax loophole."—[Official Report, 1 February 1996; Vol. 270, c. 862.] The result of that dithering and denial was that the use of share buy-backs and special dividends escalated. Figures from Kleinwort Benson show that quoted companies cut their equity capital by £3 billion from the start of this calendar year to the end of July through selective buy-backs. The cost to the Exchequer of just that is an estimated £750 million, but it could so easily have been avoided by a half-competent Government. So too could the £50 million or so that the Inland Revenue has had to pay out to subsidise Granada's takeover of Forte, not to mention the money paid out in other special dividends.

Exasperatedly, Graham Searjeant of The Times expressed the hope during the summer that even at this late stage, the Chancellor might be stirred from his supercilious lethargy to take some action in his autumn Budget. If the Chancellor read that article while he was on the beach, it took him until the week of the Tory party conference to act, and then, typically, he blustered through the climbdown, conveniently forgetting his culpability.

An Inland Revenue press release quoted the Chancellor as saying: We have seen recently companies buying their own shares or paying special dividends in such a way that the proceeds end up almost entirely in the hands of those who are entitled to payment of a tax credit. This has costs for the Exchequer. and if action is not taken soon that cost would escalate. The Chancellor went on: we will not hesitate to take any necessary further action should further evidence of abuse appear. At least he finally admitted that it was an abuse—a tax loophole being exploited by companies and their advisers—and in so doing he directly contradicted his Financial Secretary, who all along had said that it was not a loophole.

Who will take responsibility for losing £1.5 billion of taxpayers' money? The Chancellor? The Financial Secretary? Nobody, it seems, but there again, that is no great surprise. If a financial director of a public company was so incompetent in managing his business's finances, he would be dismissed as soon as his blunder came to light.

The public have a right to know exactly how much of their money has been thrown away as a result of the Government's ineptitude. If the Government dispute my figures, I challenge them to publish their own figure of the cost to the Exchequer of allowing the loophole to remain open for so long. I also challenge them to justify their rather dodgy figures suggesting that the changes that they have now belatedly made will yield only £200 million in 1997–98 and £400 million from 1998–99 onwards.

The Government's failure to act speedily in the face of the growing scandal of share buy-backs and special dividends exposes as a myth Tory claims to economic competence. In almost any other sphere of Government spending, a Department losing £1.5 billion would be headline news. The fact that knowledge of this is confined mostly to the City of London and the Treasury cannot disguise the unpleasant truth that it is the honest British taxpayer who has had to fork out to pay for Ministers' negligence. We need answers to those questions.

8.11 pm

Mr. John Townend (Bridlington)

Listening to the right hon. Member for Dunfermline, East (Mr. Brown), I began to believe that I was living in a different country. To hear the right hon. Gentleman, one would think that we had the worst economy in Europe rather than one of the best. It is not I who says that, but the independent Organisation for Economic Co-operation and Development.

I cannot believe that someone who holds himself out as a future British Chancellor does not read OECD reports. Whether the figures are for unemployment, inflation, investment, economic growth, the balance of payments, industrial production, competitiveness or industrial disputes, they are satisfactory or going the right way. All those figures are improving.

When the right hon. Gentleman tried to rubbish the fact that we are the enterprise centre of Europe, and compared us with Hamburg on investment, I could not believe my ears. German manufacturers are not investing in Germany, because Germany is no longer competitive. Volkswagen builds factories in Czechoslovakia, not in Germany, Mercedes in the United States, and Siemens and BMW in Britain.

In recent months, the Chancellor's success in running the economy has resulted in increasing confidence in the markets, and that is why the pound has been rising. Unfortunately, there is a black spot. Like most of Europe, we are spending, borrowing and taxing too much, but does anyone believe that a Labour Government would spend, borrow or tax less? Of course they would not. They would spend, tax and borrow more. I trust that the Chancellor, who started to deal with the problems in the previous Budget, will continue to deal with them further in this year's Budget. But all Conservative Members agree that we must have a responsible Budget, so reductions in spending should, ideally, be in excess of tax cuts.

I have been making speeches since 1979, but I regret that not much notice has been taken of them. In 1979, public expenditure was 42.5 per cent. of GDP, and last year it was 42.5 per cent., so I hope that the Chancellor will take a little more notice of me this year.

I suggest that we cut spending by £7 billion. I should like the Chancellor to spend £5 billion in reducing taxes and the rest on the PSBR. I wrote an article in the "Parliamentary Review" saying how we could do that, but I cannot give the details in 10 minutes, so I refer hon. Members to my article. I hope that there will be no new taxes and no tax increases in the Budget, but any impartial person must accept that the Chancellor has run the economy well, and that his judgment on interest rates has proven correct. I support his 0.25 per cent. increase today.

It is worth saying that, if we joined a single currency, the Chancellor would not have that flexibility, and I would trust my Chancellor far more than the European bank. However, we must not ignore the fact that, had we not left the ERM thanks to Mr. Soros, or if we had gone back into the ERM in a matter of weeks, as the Opposition demanded, my right hon. and learned Friend would not have been able to present such a glowing report to the House today.

Supporters of the ERM should now accept that they got it wrong. Hon. Members will recall how they used to claim that, if we left the ERM, interest rates would rise, the pound would fall and, as a result, inflation would rise. The exact opposite happened. Within four months, interest rates had fallen by 4 per cent., and for the last four years, inflation has been the lowest in living memory. That has formed the basis of four years' sustained economic growth.

Those countries still in the ERM have had low growth and rising unemployment. Would the Opposition like us to have the same level of unemployment as France? Those countries have had mounting fiscal problems, and their problems have been compounded by their mad rush to meet the convergence criteria for a single currency. France in particular is in a real mess.

The main economic and political issue facing Britain in the next few years is the single currency. I regret that we do not have more open debate on that subject, but that is because the supporters of a single currency will not come out into the open. When the right hon. Member for Dunfermline, East was challenged on a single currency today, he did not mention it in his reply. We all know that he is basically in favour of it, and of a federal Europe.

Some of those in favour of a single currency say that, if the euro comes into being, it must be in Britain's interests to join. But they will not get involved in detailed discussions or debates, because they know that, if the British people knew the full facts, they would never agree to support it.

All agree—supporters and opponents of a single currency—that it will be a disaster unless the economies of the various countries which join converge. Eddie George is rightly worried, because the convergence criteria omit one of the most important economic factors—unemployment. Since unemployment in France is 50 per cent. more than in Germany, and that in Spain is almost double that in France, it is clear that there will be no real convergence.

Another factor which is being ignored is the off-balance sheet liabilities—the contingent liabilities of unfunded state pensions—which in Europe are enormous. The unresolved problem is that, even if the economies converge and we have the euro, there is nothing to stop economies diverging in future. That is likely to happen in a federal state. It happens in America, where the rustbelt states have diverged from the sunbelt states, and the east from the west.

If that happens, a country could be in deep trouble. It could not deal with the imbalances by reducing interest rates or flexibility in the exchange rates. The first of the alternatives that have been mentioned is a massive movement of population. We saw that in America, with the movement of workers from the north to the south and from the east to the west. But that would be much more difficult in Europe, because of different cultures and languages and the much smaller land base. I am sure that most countries would not want to have to accept millions of incomers.

That leaves only one other way of dealing with the imbalances—transfers through the federal budget, as happens in America. That would mean that European taxation would have to rise dramatically. More money would go to Brussels, and European expenditure would rise dramatically as more money went to the poorer states. A federal state would become even more deeply embedded; and, like Washington, Brussels would become dominant.

Britain's problem is that its economy is likely to diverge more than the economy of any other country, because we are different in several important ways. We are the only major oil producer in Europe, so a large rise or fall in the oil price would have one effect on Europe and the opposite effect on our economy. That would probably mean, too, that our economic cycle did not coincide with Europe's.

We also have a large floating interest rate housing debt. Most housing debt on the continent—it is a smaller debt—is fixed rate, so major changes in interest rates affect us correspondingly more. We saw the effect of the ERM on negative equity when we were a part of it. More importantly, most of our pension liabilities are fully funded and in the private sector.

Let us consider the so-called benefits of a single currency. Transaction costs are often overstated. Even the EU says that they amount to no more than 0.1 per cent. of GDP. We trade more with the rest of the world, so we would enjoy less of the benefit. Major commodities such as oil and metals are already priced in dollars, anyway.

The next argument is that the single currency is necessary for the single market. Canada and the USA make up the biggest single market in the world. At the Council of Europe recently. I asked a Canadian Member of Parliament whether, now that the Americans and Canadians have a single market, it would be advantageous to introduce a single currency. He said that it might be in economic terms, but that Canadians would never accept it, because they would lose their independence and be incorporated in the United States.

It is also said that a single currency would lead to low inflation. That is a load of rubbish. Any country that runs its economy properly can have low inflation—we proved that when we left the ERM.

It is said that there will be an interest rate premium for countries that stay outside monetary union. There might, in the first instance, but it will swiftly disappear, provided that we run our economy properly as a low-inflation economy based on sound money. Then the interest rate premium might decline, and even turn into a discount.

As for the disadvantages, the costs will be enormous. In the past week, the Retail Consortium has brought out figures showing that conversion will cost £3.5 billion—that does not include the costs to the banks. Every accounting machine, till and computer will have to be changed, and the costs will surely be passed on to the customer. That will be bad for inflation. We all remember how decimalisation was used as an excuse to put up prices.

What is more, we would have to hand over all our gold and hard currency reserves to the central bank—

Mr. Deputy Speaker

Order.

8.21 pm

Mr. Brian David Jenkins (South-East Staffordshire)

The hon. Member for Bridlington (Mr. Townend) mentioned exchange rates, and said that the pound has been getting stronger lately. He failed to point out that our exchange rate now is about 50 per cent. of what it was when the Government came to power in 1979.

This evening I want to take a look at the Government's claims of long-term prosperity for all. Their record on the economy is perfectly simple: "Don't blame us for anything that goes wrong, but we want the credit for anything that goes right. If there is a recession, it is all the fault of the world economy—we can't do anything about it. But when there's a boom—aren't we doing well?"

So let us take a look at our position in the world economy relative to other nations. Where do we fit in now? It is not where we were in the 1960s, 1970s or the last century that matters; Parliament should be interested in where we are now and where we will be in the next 10 years. Beyond that it gets a little more difficult to predict with any accuracy.

On any measure, we have been losing ground against our major competitors. I do not want to repeat all the statistics that are thrown back and forth, but under the Government's stewardship we have slipped from 13th to 18th in the international prosperity league since 1979.

Since 1992—this shows the costs of the Government's mismanagement—almost 1 million people have signed on as unemployed in the west midlands at least once; and nearly 10 million countrywide have tasted unemployment in that period.

I find it hard to think of 10 million people, but I can tell the House about one young man who spoke to me a couple of weeks ago. He came up to me at the bar and said, "When are you going to get rid of this lot?" He meant the Government of this country. He went on to tell me that he was 27 years old and that since he left school he had had 19 jobs and not left one of them voluntarily. He had been on short-term contracts or schemes throughout.

I admired the young man's tenacity. I am not sure that I would have kept going after job No. 16—I might have given up. Then I began to think about his future. With no skills, he is condemned to a lifetime of working for low wages and obtaining benefits to top up his income. We pay out nearly £3 billion a year to low-wage people.

Every pay rise this young man manages to gain will be taken away from him in benefits. He will be taxed, in effect, not at the much vaunted 40 per cent. "maximum" rate but at 150 per cent., owing to his loss of benefits.

What is the man's future under this Government? Given their track record, it is possible to forecast his future fairly accurately. If he finds a partner, together they will try for social housing. In some parts of the country they will have a better chance of winning the lottery than of finding social housing. They may find a private rented property and get housing benefit. That will lock them into the poverty trap for years to come. They will not be able to buy because, on a short-term contract, they will find it almost impossible to get a mortgage. They will certainly face higher prices as the Conservative Government pile yet more VAT on all goods.

If the couple have a family, they will send their children to the same school they attended—except that their children will be in larger classes than they were, being taught by some of the most overworked and stressed members of the work force. Many of the most experienced teachers will have been forced out to allow the school to meet its budget.

This couple will have no dreams that their children will be better off than they were. They will be the first generation since the second world war not to believe that their children will be better off than they were. Our work force of the future is being given a worse start in life than the work forces of our major industrial competitors.

If these people fall ill, they will have to go to a privately run hospital, where they will be asked if they are first-class or standard-class customers. They will live in a country where more than half the population pay top-up fees via private health schemes. The former workers, their parents, will be struggling along on ever decreasing pensions. It is easy, when talking about how brilliantly low interest rates now are, to forget that many of these people put savings by in building societies all their lives and therefore rely heavily on interest rates. Low rates may be good for some; they are certainly bad for others.

All this couple can look forward to is a place in a privately run nursing home, providing they have a house to sell to pay for it.

We end up with a poorly skilled work force, an education system that is failing our children, declining housing conditions, short-term contracts, job insecurity, fear of unemployment and poverty in old age.

Some firms are realising that they need skilled workers, and there are young men and women who want to work and need training. Indeed, many more firms are waking up to this fact. But over the past 17 years a lost generation has arisen. We owe those people the opportunity to acquire skills and increase their human capital, to the benefit of us all. In my area, there is one training centre catering for nearly 300,000 people. It currently has 18 apprentices. Many local colleges have given up engineering training altogether. The whole training infrastructure will have to be rebuilt, and even then it will take three years to produce the end product—the skilled workers.

We are currently 42nd in the world skills league, but is that any wonder after 17 years under a Government who saw Britain's future as being a tourist attraction, heavily reliant on service industries? If we are doing better now, it is because of the efforts of our people and the many small firms that realise that they will have to succeed despite this Government.

We certainly know that we have had the pain, but have we had any gain? The Government have made millions from North sea oil, billions from the sale of our assets and all the extra taxes and they have had 17 years of unbroken opportunity to govern. Have they produced long-term prosperity for all? They have looked after the privileged few at the expense of the majority. If they want to bring the feel-good factor back to Britain, the Chancellor should say to the Prime Minister tomorrow, "Let's climb into your limousine, go to the palace and tell Her Majesty, we tried, we failed and we're off."

8.30 pm

Sir Michael Marshall (Arundel)

Twenty-two years ago today I had the opportunity of taking part in the debate on the Loyal Address in the year in which I was elected. As was customary at that time, I spoke about my constituency. In what must now be my last speech on the Loyal Address, I want to return to that theme. I am glad to see my right hon. Friend the Member for Worthing (Sir T. Higgins) in the Chamber because we have shared many common causes in our part of the world.

I should like to touch on what I see as the balance sheet of how the country's economic progress has affected my constituency over the past two decades. I make no apology for dealing with this in constituency terms because, I venture to suggest to right hon. and hon. Members, many of the problems faced by my constituency and many of its achievements can be mirrored in many constituencies throughout the country.

For example, the decline of traditional manufacturing industry has been addressed in various ways. In my constituency, I am happy to say, we have seen the emergence of an important element of the information technology industry. However, at the same time, we have seen the decline of smaller seaside resorts, as has happened in many places along our national coastline.

I should like to pay tribute to what I see as one of the more enlightened parts of public expenditure and that is the pump priming and beneficial effect of the single regeneration budget as well as the imagination that produces fresh opportunities through millennium proposals.

In our case, that has brought new partnerships of central and local government together with local businesses and individuals which have yielded positive results. In Bognor Regis, the recently opened SRB-funded business centre and the current millennium proposals for a pier, a pavilion and a lighthouse, are all part of a spirit of new enterprise. In Littlehampton, similar partnerships have emerged from SRB proposals.

Currently, I place the highest importance on the submission put forward in September this year, based on a public and private partnership for the dredging of the harbour entrance. I know that my hon. Friend the Minister for Science and Technology, who is also responsible for the south coast, is keeping an eye on that proposal following his recent visit. It is only right to remind him that Littlehampton is the only major town on the Sussex coast that has not benefited so far from SRB funding.

In Arundel, the town's natural attractions and its growth in recent years as a major cultural centre, have facilitated the continued growth of tourism. All that is positive, but Arundel immediately reminds us of the other side of the balance sheet and some of the problems that we have to overcome. We are facing major infrastructure problems which can be resolved only by action from the Treasury, together with co-ordinated Government activity. Arundel, like many other places, desperately needs a by-pass—in our case, as one of the last links in the east-west chain. However, the freezing of the present project after a decade of planning and agreement in principle within the national road building programme, threatens the local economy and the local environment.

I was grateful to my hon. Friend the Minister for Railways and Roads for visiting Arundel during the summer recess and seeing the situation at first hand. He will be aware of the growing scale of the problem. I believe that the traffic congestion will become appalling because major work will have to be undertaken soon to meet new EU regulations on axle loads, which will affect the railway bridge at Arundel.

That problem has to be seen as one of the effects of economic stringency in the search for a more stable economy during the lifetime of this Parliament. Now that the signs of that stability are increasingly apparent, we look for imagination and, dare I say it, a sense of urgency, to protect and develop our quality of life.

Similar objectives apply on house building. I must raise my voice against the constant pressure for the infilling of the few remaining rural and green belt areas. For example, there is the situation involving the Ministry of Agriculture, Fisheries and Food and the former horticultural research institute in Littlehampton. Horticulture remains one of our most important industries. We have the largest glasshouse development in the country along the south coast between Chichester and Worthing. The closure of that institute was a major blow to our local economy.

We now have to guard against the immediate clash of policy and objectives between two Government Departments. The Ministry of Agriculture, Fisheries and Food is anxious to protect and preserve farming land such as that on which the institute was based. However, it is required by the Treasury to achieve the maximum sale price on disposal. That means that there is a temptation to sell to those who wish to maximise building for both domestic and industrial use. All that is happening at the same time as MAFF is putting forward its latest consultation initiative on the south downs as an environmentally sensitive area on which the land in question borders. Those are just some of the overall problems and achievements which I urge Ministers to recognise.

Pensioners are a significant group in my constituency and make up one third of my electorate. I have joined that group recently and so have pledged myself to their interests with renewed vigour. I urged a better deal for pensioners in my maiden speech 22 years ago and I have been glad to see progress in the help provided for the most vulnerable as well as the general increase of the value of the state pension above the rate of inflation. That is in sharp contrast to the position in the last days of the Labour Government when pensioners' savings were being halved every two years.

There is still much to do. One bugbear of mine has been the historic growth of ad hoc allowances such as the Christmas bonus, the over-80s supplement and other additions which have quickly become out of date. I urge my right hon. and learned Friend the Chancellor to look in his Budget at tax and benefit reform for pensioners. I believe that the raising of the capital disallowance should be built on as part of a reform of capital taxation. Above all, I look for continued progress in targeting those most in need to replace the costly and inefficient aspects of universal provision.

I cannot end without a word about the wider world as it relates to my constituents. That means the view that they take about Britain's place in Europe and proposals for a common currency. I mentioned earlier the growth in our part of the world of high technology concerns which support the information technology and aerospace industries. I have found that the interests of those small and medium-sized businesses have provided a valuable input to my work in the House on committees such as the parliamentary information technology committee and the parliamentary space committee. In my part of the world, some larger companies such as Matra Marconi are blazing the trail well ahead of the political process in making Franco-British co-operation a success story within the wider context of the European Space Agency, which has enabled Britain to remain competitive with the United States and Russia.

Looking further afield, we can reflect on the new strength and benefit which we derive from the Government's success in attracting inward capital. In our case, there is the Malaysian ownership of Lec Refrigeration. That is a classic case of a company that has established its base in the United Kingdom as the ideal centre from which to develop its Europewide business.

Although I am sceptical about the economic distortion implicit in the early introduction of a common currency, and believe that the European Union's enlargement to include countries such as Hungary, Poland and the Czech Republic is a more important political priority, my constituents well understand the major shift in our trading patterns. For example, they reflect on the fact that Britain now exports more to Germany than to the United States and Japan combined and they are rightly critical of those in our political system who would put our involvement and influence in the EU at risk.

With that final endorsement of the Government's policy—as I believe that they have got the balance right—I take the opportunity to extend my best wishes to those who will follow me and to those who will remain in the House, upon whom will remain the continuing and heavy responsibility to steer the British economy in an increasingly challenging and difficult world.

8.40 pm

Mr. Thomas Graham (Renfrew, West and Inverclyde)

It is a pleasure to speak in tonight's debate. Last year, as every year previously, I read out a wee poem to the Chancellor of the Exchequer. I am sure that he is used to my poems, although they have never seemed to make much sense to him.

Recently, on my way to my surgery on a wild and wintry morning in Scotland—the Minister should listen, although I do not think that she will like my story—I was driving along a country road in my constituency when I saw a man walking and decided to stop. When I reached him, I realised that I knew him, so I asked him how he was getting on. "Not so good, Tom," he said, "I am unemployed." He was a builder and a bricklayer and he could not get a job. As we were talking, he told me that another man whom I knew was not very well. "What is the matter with him?" I asked. "He is suffering from serious depression," he said, "He is a carpenter and he cannot get a job." That is a true story. Many people in my constituency want to work. They want the right to a wage and they are suffering from depression created by the Government.

I have here a report on the construction industry which was sent to most hon. Members. The preface is by Martin Laing CBE, chairman of John Laing Construction Ltd. and chairman of the Construction Industry Employers Council. He is not known to be a Labour supporter, but the report refers to the state of the construction industry and we should bear it in mind that we are debating the economy.

The report states: The very size of the British construction industry means that when it is in recession, as it is at present, then confidence in the wider economy is also undermined. Construction emerged from recession late—in 1994—and after just one year of modest growth, it fell back into recession in 1995 where it has remained since". That does not auger well for the unemployed men and women in my constituency who seek work in the construction industry.

The report also tells us how many people work in the construction industry—an enormous number—yet in the Queen's Speech, the Government provided no hope for the building workers and made no provision for them. Earlier today, when I asked the Chancellor about the broken-down schools and the potholes in the roads, he said that he was not prepared to spend any more on public sector borrowing. What does that mean? He is condemning the country to being in a state of disrepair, ill equipped for the next century.

The Government have lived on the proceeds of privatisation of oil, gas and much more. They have sold their silver. They have an antiques fair every week selling this and that. Do they put anything back into the nation? No, they make their rich friends richer while the poor get poorer. Unemployment is deep seated. Some 2 million people are unemployed.

The Government continually refer back to the Labour Government in 1979. That is fine. If they continue to do that, their message will be lost. If we fast forward, by the next century I shall talk about that Labour Government and say that, in those days, unemployment was under 1 million and most of my constituents were in work; they could afford holidays, pay their rent and enjoy living. Now they do not enjoy living, because the factories are closed—they have been left empty for so long. However, I am delighted that, last week, a company invested some money in my constituency.

Car boot sales are booming. I joked about the Minister who sat on the green Conservative Benches and used to say to the unemployed, "On your bike." The car boot sales are full of bikes. They are the bikes that went to empty factories. The people of Scotland—and of some parts of England—travelled about on their bikes, but they could not find employment.

Young folk in my constituency work for buttons. The low wage economy is shocking. At Glasgow airport—a booming airport—I spoke to a man whom I knew. When I asked, "What are you doing these days?" he said that he was a cleaner. He was working 12 hours a day for £3.06 an hour. He received no payment for anti-social hours. Does anyone in the Minister's family work for £3.06 an hour for a 12-hour day? I do not think that any Minister's family works for such a pittance.

I have two sons who are both computer buffs. One is an honours graduate who is unemployed. He is into the Internet and the information highway. Both my sons are very computer minded. It is unbelievable that they are unemployed in this day and age. They have applied for hundreds of jobs. They have been to interviews and just missed jobs.

What a state we are in. The Government are talking about the possibility of dropping income tax to 20p in the pound. That is absolutely ludicrous, given that that represents a golden opportunity to invest money in education and ensure that every man and woman is capable of accessing the information highway.

It is mind-boggling, as I am sure the Minister has seen. I have seen my son asking questions and getting answers from America within minutes. He asked questions about dyslexia and the woman who replied was a professor in America who said that she had conducted a study. My son has the power of information and education. It is the power to progress. It is mind-boggling that the Government have not sat down and made a plan to provide access to that information for every school, workplace, library and hospital—the Internet also covers medical matters. The Internet is a highway of information and we are a long way behind. The Minister would have people counting on an abacus.

I am not really computer minded, but I watch my sons. My sons have a bit of backing from their father, but many people in my constituency can hardly afford a hot dinner. Because of Government policy, they cannot afford to pay their rent or their electricity bills. VAT on fuel punishes my constituents, some of whom would do well if they had access to information and education to help them to get a job.

Graduates are unemployed when they could be training and educating our young people. Boys such as my sons could be educating the nation in information technology. We should not squander that opportunity. It is unbelievable that, after 17 years, the Government struggle to put up an argument for why they are in power. After 17 years, they will not take the right step and have a general election.

I see that I have only one minute left to speak, but I shall be able to complete my remarks. I heard the Chancellor of the Exchequer knock Scotland like hell. That is because the people of Scotland will have a Scottish Parliament. They will make such a success of that Parliament that it will blaze a trail for the rest of the United Kingdom to follow.

The young people of Scotland have great talents. The same is to be said of Scottish council employees and civil servants. There is great talent also in the private sector. Scottish politicians of all parties will make an incredible success of a Scottish Government and Parliament that are based in Edinburgh. Take my word for it. We shall blaze a trail and we shall be on the highway of power, information and technology. We shall have well-educated young folk.

8.50 pm

Mr. Bob Dunn (Dartford)

I am slightly disappointed because I was hoping that some Labour Back Benchers would take the opportunity to endorse Labour's proposals for a new windfall tax. There has been no endorsement of that policy by Labour Members because they have now realised that a windfall tax on private utilities would be borne by the consumer; in other words, to pay for the tax, companies would be forced either to reduce investment or to charge higher prices. That would be new Labour, higher bills. I gather that the equivalent of a £3 billion increase in windfall tax on the utilities would be a 20 per cent. increase in value added tax.

I am prepared to predict that, about 10 years from now, there will be very few current Members who will be prepared to admit that they were at any time Europhiles. The Maastricht treaty of the European Union is nothing less than a detailed programme and timetable for economic, monetary and, therefore, political union.

Behind monetary union stands an unelected European central bank, which would require and have complete control of the foreign exchange reserves of each European Union member state. It would take away the right of individual member states to determine the level of short-term interest rates, exchange rates, money supply and the extent of public expenditure. As a bank, it would decide the level of taxation, a right which is now exercised by our Government and by us as democratically elected Members.

A European central bank working with the European Commission would secure the total and absolute right to exercise those powers throughout the European Union. It would be able to take punitive action against individual nation states that could not or would not conform. Such a bank, with the Commission, would become the most powerful economic and political institution ever known.

The attempt to ensure that identical economies could be established in each of the very different nation states throughout Europe is both dangerous and unrealistic. It is dangerous because, as my right hon. Friend the Member for Worthing (Sir T. Higgins) said, it would create tensions within individual states, tensions that would erupt into social and economic chaos.

We have only to look at the damage that is being done to France, where every effort to force the country into qualifying for the criteria for monetary union results in public disorder, strikes, disobedience and anarchy. There is a lack of realism, because it will take years to bring the economies of Portugal, Greece and Spain, for example, into line with those of the more advanced nations such as Britain, France and Germany.

Everyone in the House knows that Britain trades across the world. It always has and it always will. Britain is in deficit with every European Union country, with the exception of Italy. Our profitable trade is with the rest of the world. We benefit from massive inward investment from across the globe because of our refusal to impose the social chapter.

Labour is determined to end the Prime Minister's opt-out and to introduce the social chapter. I believe that that would bring back the nightmare of pre-1979 industrial anarchy. It is no secret that Germany, especially, resents the opt-out that has been won by the Prime Minister. That is because the Germans are losing investment and jobs to Britain.

Germany maintains that that gives Britain an unfair advantage and wishes to eliminate it through the imposition of the social chapter. Germany would do so by the introduction of qualified majority voting, a move supported by Labour that would probably result in all reforms introduced since 1979 being eliminated. That, combined with the actions of the European Court of Justice, would see the enforcement of uniform legislation throughout Europe. Our Parliament could do nothing about that. Once protections are swept away never to return, it is all over for those of us who cherish parliamentary democracy and accountability.

There are two significant areas of incompatibility between us and the rest of Europe, the first being pensions and the second interest rates. In the United Kingdom, the state retirement pension is paid for by those currently in work through tax payments and national insurance contributions. All private pensions are funded. It is a system through which individuals have saved money in an earmarked personal fund.

That is not true of the continent, where in Germany, France and Italy, for example, pensions are largely funded by the state: thus a time bomb is being created in Europe where an increasing number of pensioners rely on a decreasing number of workers to provide pensions for those beyond statutory retirement age. Given the increased population of retired people, European countries will reach a point where they are unable to pay for pensions and social benefits unless they tax or raise interest rates to levels that we would consider to be unacceptable and penal.

If we joined a single currency and entered the European monetary union, we would no longer have control over tax and interest rates. We would see our private pension funds being used to subsidise the rest of Europe.

The vast majority of personal borrowing in the United Kingdom is for the purchase of housing, and 90 per cent. of that is entered into at variable interest rates. Home ownership is a markedly British phenomenon. In the rest of Europe, there is little home ownership, and that which exists is on low fixed interest rates. It is clear that any rise in interest rates, for the reasons which I have given, would adversely affect British home owners more severely than their numerically fewer European counterparts.

I am opposed to a single currency and to a federal state of Europe. The Opposition parties hold a different view, with the exception of the hon. Member for Hackney, North and Stoke Newington (Ms Abbott), who made an intelligent and courageous speech.

The answer to the Labour party's commitment to Europe is simple. In The Sunday Times on 9 August 1992, the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) said: Labour has converted to Europe because Europe has converted to socialism. That is the reason for the commitment.

I could talk for much longer on my favourite subject of education. There are education black spots in this country, but we must remember where they are and who created them—the Labour party. Labour has condemned all our education reforms. It hates our grammar schools, the city technology colleges, parental choice, the private system and Church schools—but then it always has. Despite the Opposition's best endeavours to cover up that fact, the public are rumbling them. If I were an Opposition Member, I would not be counting my votes before they were cast. There is still a long way to go and the people are ready and willing to back us, because we are backing the people against socialism, against socialism, against socialism.

8.58 pm

Mr. Stephen Timms (Newham, North-East)

There is a sense of unreality about today's debate. On the one hand, we have the Chancellor's sunny claims about the wonderful state of the economy and our being the enterprise centre of Europe; and there are statistics that can be called upon to support that version of reality. On the other hand, however, there is the growing fear that what we have today is just another pre-election boom engineered, like Lord Lawson's, for electoral purposes, only to lead to massive economic problems after the general election.

Understandably, but undeservedly, the Government want to claim the credit for the current apparently relatively benign economic conditions, but behind those superficially relatively benign conditions lurks the threat of yet another disastrous bust just beyond the election.

The finance director of a major public limited company told me last week that, were it not for the imminent election, interest rates would have been raised well before today. That is what the real condition of the economy unfortunately requires and that is why the Chancellor has reluctantly had to increase interest rates today by 0.25 per cent. Ten days ago, one of the Chancellor's advisers, Professor Congdon, said that the state of the economy was such that a 1 per cent. rise was needed, given the scale of the problems we face.

The financial director to whom I spoke also told me that a tidal wave of cynicism would engulf any tax cuts in the Budget, because the state of the economy means that they can be neither justified nor sustained. It was no surprise this morning to find the director of the National Institute of Economic and Social Research calling not for tax cuts but for tax increases to restrain inflation. That is the basis of the case that I want to develop today.

Like everyone else, I shall enjoy a sunny pre-election boom but, in truth, the condition of the economy demands urgent measures if we are not to slide shortly into a post-boom, post-election slump, just as we have done before. Worry about the state of the economy is spreading, and the most disturbing sign of weakness is the state of the public finances. Indeed, even some Conservative Members acknowledged that fact.

The public sector borrowing requirement remains very high, and the Chancellor's forecasts of it have proved hopelessly over-optimistic. Less than two years ago, he was predicting a PSBR this year of £13 billion, but that figure now looks absurd. Last November, he had revised it up to £22.5 billion. This summer, it was up again—to £27 billion. What he will come up with in the Budget at the end of next month is anyone's guess.

The Chancellor's sunny optimism about the future depends entirely on the same quality of forecast that he made previously. If we are to share his optimism, we have to do so on the basis of forecasts from the same stable, which has been resoundingly discredited in the past. The Confederation of British Industry estimates that next year's total borrowing requirement could well be as high as this year's, so even the slow downward trend will have ground to a halt altogether. The CBI's concerns about Government borrowing are echoed by the Institute of Directors, which describes the state of the public finances as "ever more disturbing". In a succinct and brutal critique, it says: There is nothing wrong with the Government's objectives for borrowing … The problem is the alarming lack of progress towards achieving them. It is absolutely right.

The trend in borrowing is downward only because of the unprecedentedly high PSBR a couple of years ago. In 1993–94, the PSBR stood at £45 billion, or 7 per cent. of gross domestic product. That is high compared with the level under the Labour Government in the late 1970s, despite what the Chancellor said. Judging the current level of borrowing against that benchmark is a thin line of defence, especially given that investment in the economy is so low. That is the Government's central economic failure, the source of the gathering storm clouds beyond the sunshine which the Chancellor exhorts us to bask in today—storm clouds pointed to by the interest rate rise announced today.

Britain is failing on investment. The level of investment has recovered more slowly in the current upturn than in any other this century and, far from being the enterprise centre of Europe, we are investing less per head and less as a proportion of gross domestic product than Portugal or Spain. The welcome investment from outside Europe cannot make up for the disastrously low levels of investment from within the United Kingdom. Our economic problems will not be conquered while that continues.

I have listened to a long succession of Conservative Members denouncing the project for the single currency, but I am doubtful whether we can overcome our investment problems if France, Germany and Benelux—and, in all probability, Ireland—are in a single currency zone with low interest rates and we are outside, inevitably with higher rates. We will not be able to afford to stay outside the Euro-zone. We need that investment and so far we have failed to secure it. The Government have failed after 17 years to secure it. If we are to continue to have significantly higher interest rates than in continental Europe—we heard the figures for a number of countries earlier, not including Italy, and lower rates will be achieved in the Euro-zone—we will continue to fail to secure the investment that we desperately need.

One of the signs that we are heading for a short-term, unsustainable boom is the growth in consumer spending. The Chancellor's statement today announcing the interest rate rise boasts of growth in retail spending of 3.5 per cent. The summer economic forecast projected that consumer spending would grow in 1997 by 4.25 per cent. The last time consumer spending grew by that amount was in 1988: two years later, inflation was at 10 per cent. and we were in the midst of a disastrous slump. In the first part of the 1990s, consumer spending averaged less than 1 per cent. growth annually. Last year, it was 2 per cent., it is now 2.5 per cent. and next year the Treasury says it will be more than 4 per cent. That would be great if it lasted.

I questioned the Governor of the Bank of England when he attended the Treasury Select Committee in July. I asked him whether he thought that a growth in consumer spending of 4.25 per cent. was credible. He said: Certainly, I would think a rate of over 4 per cent … would not be sustainable. Just as the Governor was right today on interest rates, I fear that he is also right on that point.

Aside from interest rates, a number of other indicators are lining up to suggest the return of boom and bust. Barclays bank, in its latest quarterly review, points to signs that it finds worrying. House prices are beginning to spiral upwards, which will bring much-needed relief to people trapped in negative equity, but projections for increases of between 10 and 20 per cent. in the next year are alarming and point to overheating in the economy. The current low levels of retail stock relative to sales are picked out by Barclays because they will have a multiplier effect as they are corrected.

Barclays points to windfall gains for individuals from building society mergers which might cause a surge in consumer spending. A surge of approvals is likely, we hope, for private finance initiative projects currently stuck in the bottleneck the Government have created. A significant number of lottery-funded projects are likely to start in the next 12 months. All those factors could lead to an unsustainable, short-term surge in capital spending. Barclays concludes: as things stand, the risks appear skewed to a period of demand and output growth significantly above trend. The bank is right to warn of the risks of returning to boom and bust. If that is the outcome, after the next election we will face the dreadful problems that we had after the last one.

If there are to be tax cuts in next month's Budget, there is no doubt whom those cuts should benefit the most. They should be targeted on the least well-off—the people who have lost out most through the policies of the Government. The bottom tenth of the population is 18 per cent. worse off, after allowing for housing costs, than they were in 1979. Those are the people whom the Chancellor should be targeting long before he turns his attention to more handouts for well-off people by abolishing taxes on capital gains or on inheritance.

I warmly welcome the commitment that my right hon. Friend the Member for Dunfermline, East (Mr. Brown) gave earlier to reduce VAT on fuel to 5 per cent. The analysis by the Institute for Fiscal Studies in this year's "green budget" shows that that would benefit the least well-off disproportionately. It constitutes a key first step in the right direction, healing some of the wounds.

The Institute for Fiscal Studies also considered the impact of a cut in the basic rate of tax to 20p in the pound. The Chancellor has said that he would like to do that in due course. The institute compared the effect of spending the £7.5 billion that would be needed to achieve the Chancellor's objective with that of spending the same money to introduce a lop tax band. Such a band could be introduced on the first £4,000 of taxable income for the £7.5 billion that the Chancellor would need. The institute has demonstrated that the 10p lower rate would be more beneficial not only to those on the lowest incomes but to middle-income earners. In fact, only the top 20 per cent. of earners would gain more from the 20p basic rate than from the lop rate proposed by my right hon. Friend. Putting at least some of that money into an increase in allowances, or a cut in the overall rate of VAT, would further increase benefits for the least well-off. That is the direction in which we should head.

Today's interest rate rise is the Chancellor's acknowledgement of problems ahead—of storm clouds on the horizon. However attractive the figures look on the surface, the Chancellor has acknowledged, in his decision today, the problems that lurk around the corner. What we need is a permanent higher level of investment in the British economy. That alone can move us forward, but, after 17 years, this Government have failed to deliver it. It is time for another Government to take their place.

9.11 pm

Mrs. Ann Taylor (Dewsbury)

Today's debate really started outside the House. It started this morning, on Radio 4, when the Chancellor demanded that the shadow Chancellor virtually make a full Budget statement today. Indeed, the Chancellor more or less repeated that request in his speech this afternoon.

I suppose that the Chancellor did that to deflect flak from the interest rate announcement that he made subsequently. Although he told the House—or tried to get the House to believe—that the fact that interest rates were going up was a sign of success, I feel that his statement to that effect carried little conviction.

Having heard the Chancellor's boast that the rise in interest rates was a sign of success, I looked up what he had said when they fell. Lo and behold, the Chancellor believes that when interest rates go down that, too, is a sign of success. He said then: Interest rates going down reflects our success in creating a prosperous economy. The Chancellor's attitude in the House today contrasts markedly with his attitude when interest rates have been cut. Certainly, his attitude in the House is not in line with comments that have been made outside the House, even today.

Interestingly, today's Evening Standard says that the rise in interest rates awoke Tory fears that it marked a critical upward turning point which could cost the Government dear in the run-up to the General Election. Of course we expect Tory Chancellors to tell us that all is well in the run-up to the general election. That is one regard in which they are consistent—telling us that all is well before an election. What the Chancellor said today, and what he will doubtless repeat on Budget day, exactly parallels what happened before the 1992 election.

I think that we all recall the last Budget before the 1992 election. In his Budget statement, the then Chancellor said: The Government know and have done what is required to build a strong economy."—[Official Report, 12 March 1992; Vol. 205, c. 1063] The Prime Minister said that the country had steady, sustainable growth.

We also remember the election campaign. We remember the daily press conferences, with the Deputy Prime Minister saying that the election was not about education, but about tax; that it was not about health, but about tax; and that it was not about crime, but about tax. In many ways, he was right. However, what he failed to mention was the list of 22 new taxes that the Government had in their back pocket, but which they simply failed to mention during the general election campaign. During those few days between the Tory election Budget and general election day, the economy boomed; afterwards. the country came back down to reality. Having listened to the Chancellor's equally complacent predictions today, I shudder to think what might be the 22 new taxes that the Tories might find, were they ever to be given the chance again.

I want to say a few words about one tax—value added tax. Before the last election, the Prime Minister said: I have made it clear we have no plans and no need to extend the scope of VAT. Yet the very year after the election, the Prime Minister and his Tory Government introduced VAT on domestic power and fuel. The Opposition take a wholly different approach from the Government on that issue. As my right hon. Friend the Member for Dunfermline, East (Mr. Brown) repeated this afternoon, Labour will reduce the rate of VAT on fuel to 5 per cent.—the minimum possible. In contrast, the Tory Government not only introduced that new tax, they tried to double it. Only the actions of the Opposition stopped that. We have been specific about our proposals. We will cut VAT on fuel.

Mr. David Shaw

Earlier today, I asked the right hon. Member for Dunfermline, East (Mr. Brown) to confirm that the price of Labour abolishing VAT on fuel is a windfall profits tax. A £3 billion windfall profits tax is equivalent to a 20 per cent. rate of VAT. Will the hon. Lady confirm that Labour wants to hit the pensioners of this country with a 20 per cent. tax where there is only an 8 per cent. tax now?

Mrs. Taylor

I wish that the hon. Gentleman had listened to what I have said or to what my right hon. Friend the Member for Dunfermline, East said earlier. We are not able to abolish VAT on fuel because of the way in which the Government introduced it and because of the European Union rules that apply. My right hon. Friend made it quite clear that we will introduce a windfall tax. The calculations that the hon. Gentleman has pretended to make are wholly irrelevant.

I want to stay with the issue of VAT on fuel. We have made it clear that we will cut the rate to 5 per cent. Will the Government say that they are willing to match that promise? Will the Chancellor do it in the Budget? Or are the Government still harbouring the intention of actually doubling VAT on fuel after the next election? The choice is clear. Labour wants to cut VAT on fuel; the Government want to double it. Ministers should make their position clear this evening.

I hope that the Leader of the House will cast light on some VAT issues. This afternoon, the Chancellor did not deny the quotation used by my right hon. Friend the Member for Dunfermline, East, showing that the right hon. and learned Gentleman wants to extend the range of goods on which VAT is imposed, including food and children's clothes. The right hon. and learned Gentleman said one significant thing this afternoon, that he wants common minimum rates of VAT throughout the EU. In effect, that would mean giving up zero rating. I hope that the Leader of the House will confirm that and tell us when the Chancellor intends to spell out the time scale.

Mr. Kenneth Clarke

Before any silly hares get running, I have always made it clear in all my discussions at the European Union and here that the right to retain the zero rates must remain a British option. I have always argued in Europe that we retain the right to decide whether or not we keep the zero option.

Hon. Members

Apologise.

Mrs. Taylor

We have got used to U-turns this week, and here is another one from the Chancellor—made between 4 o'clock this afternoon and now. If he agrees on the need to keep zero rating—[Interruption.]

Mr. Deputy Speaker

Order. While I have been in the Chair every other Member has had a reasonable hearing. I hope that Conservative Members, not least those on the Front Bench, will give the hon. Lady a fair hearing.

Mrs. Taylor

We welcome that U-turn as far as it goes, but we recall the Government's history on VAT. They denied that they would introduce VAT on fuel, but then did so, so I am not sure that the Chancellor's denial just now is worth a great deal.

Over the years, we have seen that the Government are willing to put up VAT for ordinary families and pensioners. We have also heard today, yet again, exactly what are the Government's priorities—the abolition of capital gains tax and inheritance tax, which will benefit a few. The abolition of capital gains tax will cost £3 billion a year and the abolition of inheritance tax will cost £1.5 billion a year, and yet half of the benefit of that £4.5 billion will go to just 5,000 people. That is an example of Tory priorities and I do not understand how the Chancellor can contemplate that and still refuse to cut VAT on fuel.

We have heard a great deal in this debate about the economy and no doubt it will dominate much of the political discussion in the next few weeks, but other important issues have been mentioned today. We have heard a number of well-informed contributions from Members on both sides of the House. For the most part this has been a serious debate, and for Tory Members an often sombre debate, perhaps because of the announcement of the increases in interest rates.

I should like to comment on many of the well-informed contributions that we have heard, but I will confine my remarks to a few of them. I welcomed very much the speech of the right hon. Member for Old Bexley and Sidcup (Sir E. Heath). In the past, his sentiments were often echoed on the Conservative Benches, but not in recent years. I welcomed in particular his clear statement and acknowledgement of the connection between unemployment and social unease. I thought that his contribution on that should have been listened to carefully by all hon. Members, especially those on the Conservative Benches.

I also welcome some, although not all, of the comments of the right hon. Member for Worthing (Sir T. Higgins). I cannot say that I agreed with his economic analysis, but I appreciate what he said about the difficulties that business managers may have in the future because the Budget debate and the debate on the Queen's Speech are often so close together and cause significant congestion to parliamentary business. He made a measured contribution, as he often does on such occasions. We shall miss him in future debates, and we shall particularly miss his contributions on House of Commons matters, which have been greatly valued. [HON. MEMBERS: "Hear, hear."]

The contribution of my hon. Friend the Member for Dudley, West (Mr. Pearson) revealed how difficult it is and how long it takes to get the Government to close even glaring tax loopholes. I thought his example was pertinent and useful to all of us. My hon. Friends the Members for Dundee, East (Mr. McAllion), for South-East Staffordshire (Mr. Jenkins) and for Renfrew, West and Inverclyde (Mr. Graham) made much of a basic fact which cannot be denied: after 17 years in government this Government are running out of excuses. They highlighted extremely well the legacy of a fractured society that will be our inheritance from the Government when the election comes.

I wish that Conservative Members had taken up that theme of the Father of the House. While so many of them ignore it we shall not make real progress in mending some of the fractures and resolving the difficulties that have been caused by those who believe that there is no such thing as society. Over the past few days there have been salutary warnings that every hon. Member should bear in mind.

Many hon. Members may feel, as I do, that it is difficult to believe that this Session is only a week old. We used to be told that a week is a long time in politics. On Wednesday four hours was a long time—long enough for what the Daily Mail called a precipitate U-turn. As The Times put it, four hours after the Queen outlined the final pre-election parliamentary programme of 13 Bills the Prime Minister, at a stroke, increased it to 15. Since then. the week has hardly got better for the Prime Minister. Following his concessions on the stalking Bill and the paedophile register, concessions and U-turns have come thick and fast.

At the end of the week, the Home Secretary consented to look at the banning of combat knives—a measure that we have been demanding for some years. The Home Secretary was still using the excuse that there were problems of definition. I have a suggestion for the Home Secretary and it is appropriate that the Chancellor is still in his place. If the Home Secretary has a problem trying to define combat knives, he should go to the Chancellor and suggest a tax on them. The Treasury will quickly come up with a definition which could be used to ban the sale of such knives.

Yesterday's U-turn was quicker than the one on Wednesday. On the issue of caning in schools, the Secretary of State for Education and Employment proved that that right hon. Lady was for turning—or perhaps spinning, if the speed of the change is anything to go by. With apologies to some of my hon. Friends and to rugby league supporters, I have to say that in the past week the Government have let in as many goals as Manchester United, although I suspect that the recovery of Ministers will not be so rapid as that of Manchester United. I have heard the bad news this evening and as a Bolton Wanderers supporter I keep a close watch on Manchester United.

The difference between the Government and Manchester United is that the football club's European record is somewhat better than that of the Government. The problems that the Government face over Europe have added to their confusion and difficulties. Last week the Prime Minister showed that he has so little confidence in the Minister of Agriculture that he sent four other Ministers to Europe as minders. One can picture the Minister going into the negotiations complete with his "I am a tough guy" hat and flanked by his four minders. Those minders were there not just as Ministers offering support, but to keep an eye on the Minister of Agriculture and probably also on one another.

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

I hesitate to interrupt the hon. Lady, but her remarks are over the top. She must be aware that the United Kingdom has four Ministers with responsibility for agriculture. It is reasonable that each part of the UK should be represented.

Mrs. Taylor

During the whole fiasco throughout the summer, it has not been Government practice to send five Ministers to all these meetings. Nor has it been practice on all occasions for each of those Ministers to come back and spin a slightly different story. With all that happening, it is perhaps no wonder that no progress is being made in Brussels.

While those Ministers were keeping an eye on one another and trying to outdo one another, in Luxembourg on this occasion, the Chancellor of the Duchy of Lancaster was saying on the radio in London that the Government may have to implement the Florence agreement". That is a long way from the Prime Minister's statement: We aim to be in a position to tell the Commission by October that we have met the necessary conditions for decisions to lift the ban on two of the five stages".—[Official Report, 24 June 1996; Vol. 280, c. 21.] He also said that he expected the ban on the fourth stage to be lifted by November—within two days from now. No progress has been made on that, although we are nearly at the point by which the Prime Minister said that the ban would be lifted.

Confusion still exists in the Government. Consumers lack confidence and farmers face more hardship than ever. What has happened on bovine spongiform encephalopathy is typical of what happens when there is weak leadership and a Government with no sense of direction.

This Queen's Speech was never going to be ordinary, not just because it is the last one before the general election, but because this will be nowhere near a full Session of Parliament. The Prime Minister has gone on record as saying that the election will take place no later than I May, which would mean that Parliament would be dissolved close to Easter. Of course, it could be earlier. That means that the Government had to select issues that they felt should be a priority or that were not controversial.

I do not deny that some of the issues chosen should be given priority. I think that virtually all hon. Members agree, although I know that some Conservative Members do not, that there should be stricter controls on guns and that it is right that that should be in the Queen's Speech, but our constituents have many other concerns which have been totally ignored in the Queen's Speech that we have been debating for the past week.

For a start, job insecurity has not been touched on. We should all remember that since the Prime Minister took over—

The Parliamentary Under-Secretary of State for Scotland (Mr. Raymond S. Robertson)

Hear, hear.

Mrs. Taylor

The hon. Gentleman says, "Hear, hear," but he may not like it if I tell him that in Britain there are 1 million fewer jobs than when the Prime Minister took over.

Much needs to be done. Last week, on the first day of the debate, my right hon. Friend the leader of the Labour party gave a list of issues on which the Government should have been taking action. They included a ban on the sale of combat knives, ensuring that we halve the time that it takes for persistent young offenders to come to court, ensuring that we have statutory crime prevention bodies and introducing a statutory minimum wage to tackle the worst abuses of poverty pay and the abuse of taxpayers subsidising poor employers. He said that we should have a Bill to allow capital receipts held by local authorities to be used to build new homes and that we should have a windfall tax. He explained that devolution should be a priority. The Government have had a week to consider those measures, but we still await answers—to discover whether they will make further U-turns.

The simple fact is that 17 years should have been long enough to get more decisions right. The Queen's Speech contained yet another education Bill, correcting some of the mistakes of the past. The Government have produced 19 education Bills. The Queen's Speech contained another criminal justice Bill, correcting some of the mistakes of the past. The Government have produced 33 criminal justice measures. The Government simply will not listen. That is why they get so much of their legislation wrong.

Enough is enough. The Government are drifting, and they are dangerous. They are drifting in a manner that is damaging the country. Thank goodness this is the last Queen's Speech from the Conservative Government.

9.35 pm

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

There is something slightly curious about the hon. Member for Dewsbury (Mrs. Taylor) placing such emphasis on legislation correcting the mistakes of the past, in circumstances in which much of the legislation that she and other Opposition Front Benchers now support was vigorously opposed by them when it was introduced. Each successive piece of legislation was accepted by them only when it had been proved that it was what the public wanted and that it was the right thing to do.

Mrs. Ann Taylor

Does the Leader of the House acknowledge that that is not quite correct, and that it is certainly not correct on all occasions? Does he recall that, in June 1988, I moved an amendment banning the sale of knives to juveniles, and that it took some years for the Government to come round and agree that that was the right decision?

Mr. Newton

Given that the hon. Lady had been the shadow education spokesperson for some time, and one of those who had persistently opposed the education measures that the Opposition now squirm and wriggle to accept, her point does not make her case. Moreover, in preparing for the final Queen's Speech of this Parliament, the hon. Lady has not taken the precaution of reading the speech of her predecessor, the right hon. Member for Copeland (Dr. Cunningham), after the final Queen's Speech of the previous Parliament. I read it, however, because I had much fun with him in the year after the 1992 general election, after I had become the Leader of the House. Like the hon. Member for Dewsbury, he said: We look forward to the next Gracious Speech, because we shall write it."—[Official Report, 7 November 1991: Vol. 198, c. 662] I think that she will find that she is as wrong as her predecessor was five years ago.

As the hon. Member for Dewsbury rightly said—it is one matter that I do not dispute with her—we have had a debate in which many thoughtful and thought-provoking speeches have been made. I have not heard them all, but I heard, in particular, the speech early in today's debate by the right hon. Member for Manchester, Gorton (Mr. Kaufman), who very courteously apologised to me for the fact that he would not be able to be in the Chamber for the reply to the debate. I am sure that his speech, weighty as it was, will be carefully studied by my right hon. Friends the President of the Board of Trade and the Secretary of State for National Heritage.

We also heard a thought-provoking—I suppose that that is the right expression—speech from my right hon. Friend the Member for Old Bexley and Sidcup (Sir E. Heath), which I am sure will be widely studied.

I hope that I may be forgiven for adverting, as the hon. Member for Dewsbury did, to one other speech in the debate—that of my right hon. Friend the Member for Worthing (Sir T. Higgins), which he prefaced by saying that it was his last speech on a Queen's Speech. He will be very much missed for the contributions that he has made on this and other occasions. His remarks, and his references to issues that are of concern to me as Leader of the House, lead me into observing a tradition for the Leader of the House on such occasions—saying something on matters of interest to the House. It may be of interest not only to the House, however, as the workings and procedures of the House—although they can hardly yet be described as a daily talking point wherever people gather—undoubtedly have attracted growing public interest in recent years.

This is, of course, the last such debate in the present Parliament, so it is perhaps worth spending a moment or two on the very substantial changes that we have seen since it was elected in April 1992—changes which I think have contributed significantly to the further evolution of what, because of its capacity to evolve, is probably the most enduring political institution of its kind in the world.

Although the Jopling report goes back to the previous Parliament—and, as ever, I pay tribute to my right hon. Friend the Member for Westmorland and Lonsdale (Mr. Jopling) and to my predecessor, my right hon. Friend the Member for South Norfolk (Mr. MacGregor), for the groundwork that they did—it is in this Parliament that we have carried through what I believe has proved a radical improvement in the way in which we conduct our parliamentary business.

There are, I know—there are one or two in sight at the moment—those who hanker for what they regard as the good old days when Members, especially Back-Bench Members, were hardly ever away before midnight and rarely before the small hours. I must frankly say that I do not, and I think that the great majority of Members share my view that the House has gained from more sensible and predictable sitting hours; from the better balance between what we do in the Chamber and what we do in Committee; from the development of voluntary agreements—I pay tribute to the hon. Member for Dewsbury and her colleagues for this—between the parties about how business is to be handled; from the greatly increased number of opportunities for individual Members to raise topics of their choice; and from the arrangements for Thursdays and Fridays, which have made it easier for Members to combine their parliamentary duties with their duties elsewhere. I once again express my gratitude to the hon. Member for Dewsbury for her part in that and to my right hon. Friend the Member for Honiton (Sir P. Emery), the Chairman of the Procedure Committee, for the part that he, too, has played.

If I can claim particular credit for anything, it is for the associated move—not carried out without difficulty—to give the House greater notice of forthcoming business and of recesses. I hope that that is now firmly established, and I am glad to confirm tonight that I shall continue to do everything I can to consolidate that. In saying that, I am conscious that in the equivalent debate last year, I was able to announce dates for the Christmas and Easter recesses. The House will realise that our debate this year is taking a place a month earlier than its equivalent last year. It would be a little premature, especially when we have so recently returned from the recess, to attempt to predict those dates with exact precision. There are also, of course, a number of other uncertainties about the position next spring, which will have to be taken into account. However, I assure the House that as soon as I sensibly can, I shall give it details of the proposals for the Christmas recess although they will, of course, have to be subject to the progress of business.

Alongside the Jopling reforms there have been a number of other changes, which deserve at least a mention. Prominent among them is the enhanced role that we have given, or are seeking to give, to the Scottish, Welsh and Northern Ireland Grand Committees.

The Scottish Grand Committee has met regularly in Scotland, not just in Glasgow and Edinburgh, but in a range of other locations, from Inverness to Dumfries. My right hon. Friend the Prime Minister and my right hon. and learned Friend the Chancellor have taken part in the Committee's proceedings and have vigorously defended and explained the Government's policies to Scottish Members before a Scottish audience. That has been widely welcomed.

We have also made it possible for the Second and Third Readings of Scottish Bills to be debated in the Scottish Grand Committee, which in turn, as I hope will be demonstrated again within the next couple of days, makes it easier to find room in the legislative programme for worthwhile but non-contentious Scottish Bills. We have improved the procedures in a number of other ways as well.

We have also introduced improved procedures for the Welsh Grand Committee, with the additional ingredient that Welsh Members will be able to conduct parliamentary proceedings in Wales in the Welsh language. My right hon. Friend the Secretary of Stale for Wales is anxious to hold Welsh Grand Committee meetings under the Standing Orders agreed in the House earlier this year. Without entering the controversy between the Government and Opposition Front-Bench Members, I can say only that I hope that it will not be too long before it proves possible to secure an agreement that enables that to happen. It is very much what my right hon. Friend wants.

In addition, as my right hon. Friend the Prime Minister told the House at the start of the debate—I look to the Benches towards the back—the Government are consulting on developing the role of the Northern Ireland Grand Committee so as to give Northern Ireland Members better opportunities to scrutinise Government policy and draft legislation and to call Ministers to account, and that, too, will be welcomed.

On another front altogether, on which I touch only briefly for reasons that are perhaps obvious, as the result of the work of the Nolan committee, the Select Committee on Standards in Public Life and now the Select Committee on Standards and Privileges, we have put in place in the course of this Parliament a much clearer and stronger framework of rules in relation to Members' interests and to what can properly be expected of those of us elected to serve here.

The matters on which I have touched so far have been primarily for the House itself. But if I might put on what I sometimes think of as the other half of my hat, more strictly in my role as a Minister, the Government, too, can claim credit for a number of steps that they have taken to assist the House in various ways.

For example, five years ago, the document known as "Questions of Procedure for Ministers" and the existence, membership and terms of reference of Cabinet Committees, were either secret or supposed to be secret. Now they are all in the public domain and very much part of the landscape of our debates and of political discussion generally.

Similarly, the "Code of Practice on Access to Government Information", introduced in April 1994—I realise that there are always people who want to go further in those areas—set out for the first time clear and detailed commitments to provide information to the public and the House. That has been welcomed by the Select Committee on the Parliamentary Commissioner for Administration, chaired by my hon. Friend the Member for Rugby and Kenilworth (Mr. Pawsey), who concluded that the code has been an important and valuable contribution to more open Government. It has certainly been helpful to the House. My right hon. Friend the Chancellor of the Duchy of Lancaster will shortly be submitting a second report to the Committee.

In that context, I should also mention the equally thorough report from the new Select Committee on Public Service, on the subject of ministerial accountability and responsibility. Again, my right hon. Friend the Chancellor of the Duchy of Lancaster will be submitting the Government's response to that report shortly. I am obviously not in a position to pre-empt his response today, but I can say that much common ground has been established between the Committee and the Government on those important issues and I hope that the Select Committee will find the response positive.

Of no less importance in strengthening the work of the Executive and the legislature are the steps that we have taken to improve the planning of the legislative programme and the opportunities for scrutiny in the House and among those who will be affected by the measures that we pass.

During the past three years, we have steadily developed the practice of publishing Bills in draft in advance of bringing them before the House, and I think that it is generally accepted that that has contributed materially to the quality of our legislation. In this Queen's Speech, we have carried that a further step forward by including in it not only the Bills that we intend to bring forward in this Session, but a number of those that we intend to publish in draft.

Although it is a matter for them rather than for me—I pick up a point made by my right hon. Friend the Member for Worthing in his characteristically thoughtful way—I would welcome it if departmental Select Committees decided to contribute to that process by taking evidence on draft Bills within their field of interest, and reporting on them before the policy is set in concrete.

I have no doubt that by exposing draft texts to the widest public consultation in that way, we shall ensure that Bills are in an improved state of readiness when they are eventually introduced and that the legislation that Parliament carries through will, as a result, be of a higher quality.

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

On that principle, what has happened to the adoption Bill?

Mr. Newton

There can be no complete commitment to the effect that Bills published in draft in one Session. will automatically qualify for inclusion in the next. There has to be some flexibility to take account of developments affecting the content of the legislative programme. In this legislative programme, a number of Bills—including those on firearms and compensation recovery and one or two others—have rightly been brought into a Session that is inescapably shorter than a normal one. They have made it necessary to take a judgment on what other legislation we include in the programme. That embraces the point about the adoption Bill. I hope that the right hon. Gentleman will think it reasonable—I certainly do.

Mr. Robin Corbett (Birmingham, Erdington)

Talking of orphans, can the right hon. Gentleman confirm that the Prime Minister has made an orphan of the Minister of Agriculture, Fisheries and Food, the right hon. and learned Member for Grantham (Mr. Hogg), who has returned to the Back Benches?

Mr. Newton

I have already commented on work that the Minister of Agriculture, Fisheries and Food has been doing in Brussels. [Interruption.] I see that he is having an earnest conversation—I do not know whether he has picked up on what has just been said—with my right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler). I have no doubt that it is a most congenial exchange for them both.

As the Prime Minister told the House last week, in the longer term, we want to move towards a two-year legislative programme, consisting of Bills to be enacted in the course of a Session and draft Bills to be published for consultation with a view to their introduction in a later Session. I hope that we shall be able to carry that development forward systematically.

Although I had not intended to originally, I should like to refer to a point raised by my right hon. Friend the Member for Worthing about the pattern of the parliamentary year. As he rightly said, although it is generally acknowledged that there have been great advantages in bringing public expenditure and taxation decisions together in a unified Budget in the autumn, the combination of that with a long spill-over and a late Queen's Speech in recent years has created additional problems—I am very conscious of them—for the business managers in handling the legislative programme. I think, however, that we have done rather more to tackle that problem this year than my right hon. Friend acknowledged; we had a very short spill-over, creating a space of about a month between the Queen's Speech debate and the Budget. That has eased, if not eliminated, the problem. So I do not think that that in itself would be a cause for a radical change of the kind to which my right hon. Friend referred and to which the Prime Minister referred in a speech earlier this year. I, too, referred to it in a debate on parliamentary procedure in July.

I nevertheless believe that there is a case for looking at the pattern of the parliamentary year and at the possibility of the State Opening being held in the spring rather than the autumn. That is the suggestion that the Prime Minister floated earlier this year, and I am currently examining it on his behalf. We think that it could give the Session a better balance and improve the ability of the House to scrutinise the Finance Bill and other legislation without losing any of the advantages of the unified Budget. I am interested to hear that my right hon. Friend the Member for Worthing, with his long experience of those matters, sees considerable attraction in the idea.

I come now to the subject of today's debate and, in particular, to the usual litany of gloom from the right hon. Member for Dunfermline, East (Mr. Brown). Like my right hon. and learned Friend the Chancellor, I had a feeling this afternoon that I had heard exactly the same speech last year, the year before that and the year before that. I was reminded that, at about the time the right hon. Gentleman started making these speeches, he made one of his immortal forecasts. He said: I make one Budget forecast—that, after the Budget, unemployment will rise this month, next month and for months afterwards."—[Official Report, 17 March 1993; Vol. 221, c. 289.] Since then, unemployment has fallen steadily in virtually every month.

Having heard the right hon. Gentleman's speech on a number of occasions, this year it finally passed its sell-by date. I got the impression that even his hon. Friends did not really buy it and, certainly, no one else will, because his picture of decay and decline does not correspond with reality.

Let me remind the right hon. Gentleman and the House of some of the straightforward facts. The economy is now in its fifth year of sustained growth, with exports, investment and consumer expenditure all growing. Since 1992, we have had the longest, strongest and steadiest recovery of any major EU economy. As for the gloomy unemployment forecasts, since its December 1992 peak, claimant unemployment has fallen by over 900,000 to its lowest level for over five and a half years and it is still falling. What is more, employment has risen by over 750,000 since the recovery began.

We heard some reference this afternoon to exports, as if that was somehow a story of failure. The volume of exported goods has risen by 7 per cent. over the past year, by 17.5 per cent. over the past two years and by 30 per cent. over the past three years. The current account in the latest quarter was the best for nine years.

We heard a lot about investment, but the climate for investment has seldom been better. As my right hon. and learned Friend the Chancellor said this afternoon, business investment is up 7.2 per cent. on a year ago and whole economy investment is up 3.2 per cent. We all know, although Opposition Members rarely refer to it, that the United Kingdom remains the No. 1 destination for inward investment into the European Union. Underlying inflation is 2.9 per cent. and has been below 4 per cent. for four years, the longest for almost half a century. As my right hon. and learned Friend said, we are achieving growth without the rapid overheating that has characterised earlier recoveries.

If the right hon. Member for Dunfermline, East does not want to listen to those of us on the Treasury Bench, he might at least acknowledge the views of those who comment on these matters from an international perspective. I am surprised that he did not mention what the International Monetary Fund said earlier this year and what the Organisation for Economic Co-operation and Development said about the strengthening of the economy, the good performance, the good prospects and the extent to which the structural reforms had improved the outlook for the British economy.

It may be that that last point is the clue. Of course, the structural reforms that are praised so widely internationally are exactly the changes that the Labour party has fought step by step and to which it remains inherently hostile. There can be no clearer illustration of that than the windfall tax, the detail of which is no less elusive than it was before the right hon. Gentleman's speech. Once again, the right hon. Gentleman declined to answer any of the questions that my right hon. and learned Friend the Chancellor put to him, but it is clear that the beneficiary will not be the consumer and that the most likely casualty will be the very investment that the right hon. Gentleman claims that he wishes to promote.

The same is true of the Labour party's policies as a whole. We heard all the same windy talk today, but we heard nothing about the policies that will really make a difference. We heard nothing about the new social chapter policy or the minimum wage policy that will raise business costs, undermine competitiveness, reduce the attractions to foreign investment and make it more difficult to sustain the fall in unemployment over which we have been presiding.

The Queen's Speech, on which we are concluding our debate today, makes it clear that we shall not join new Labour in its new policies, because they are no less dangerous than the old ones. We shall continue with the policies that my right hon. and learned Friend set out once again in his speech today—policies to sustain the strongest and longest economic recovery in Europe and to do so without inflation and overheating. Our programme corresponds to the needs of the country and deserves the support of the House.

Question put, That the amendment be made:—

The House divided: Ayes 283, Noes 305.

Division No. 3]	[9.59 pm
AYES
Abbott, Ms Diane	Campbell-Savours, D N
Adams, Mrs Irene	Canavan, Dennis
Ainger, Nick	Cann, Jamie
Ainsworth, Robert (Cov'try NE)	Carlile, Alex (Montgomery)
Allen, Graham	Chidgey, David
Alton, David	Chisholm, Malcolm
Anderson, Donald (Swansea E)	Church, Ms Judith
Anderson, Ms Janet (Ros'dale)	Clapham, Michael
Armstrong, Ms Hilary	Clark, Dr David (S Shields)
Ashdown, Paddy	Clarke, Eric (Midlothian)
Ashton, Joseph	Clarke, Tom (Monklands W)
Austin-Walker, John	Clelland, David
Banks, Tony (Newham NW)	Clwyd, Mrs Ann
Barnes, Harry	Coffey, Ms Ann
Barron, Kevin	Cohen, Harry
Battle, John	Cook, Frank (Stockton N)
Bayley, Hugh	Corbett, Robin
Beckett, Mrs Margaret	Corbyn, Jeremy
Beith, A J	Corston, Ms Jean
Bell, Stuart	Cousins, Jim
Benn, Tony	Cox, Tom
Bennett, Andrew F	Cummings, John
Benton, Joe	Cunliffe, Lawrence
Bermingham, Gerald	Cunningham, Jim (Cov'try SE)
Berry, Roger	Cunningham, Dr John
Betts, Clive	Dafis, Cynog
Blunkett, David	Davidson, Ian
Boateng, Paul	Davies, Bryan (Oldham C)
Bradley, Keith	Davies, Chris (Littleborough)
Bray, Dr Jeremy	Davies, Denzil (Llanelli)
Brown, Gordon (Dunfermline E)	Davies, Ron (Caerphilly)
Brown, Nicholas (Newcastle E)	Davis, Terry (B'ham Hodge H)
Bruce, Malcolm (Gordon)	Denham, John
Burden, Richard	Dewar, Donald
Byers, Stephen	Dixon, Don
Caborn, Richard	Dobson, Frank
Callaghan, Jim	Donohoe, Brian H
Campbell, Mrs Anne (C'bridge)	Dowd, Jim
Campbell, Menzies (Fife NE)	Dunwoody, Mrs Gwyneth
Campbell, Ronnie (Blyth V)	Eastham, Ken

Etherington, Bill	Llwyd, Elfyn
Evans, John (St Helens N)	Loyden, Eddie
Ewing, Mrs Margaret	Lynne, Ms Liz
Fatchett, Derek	McAllion, John
Faulds, Andrew	McAvoy, Thomas
Field, Frank (Birkenhead)	McCartney, Ian (Makerf'ld)
Flynn, Paul	Macdonald, Calum
Foster, Derek	McFall, John
Foster, Don (Bath)	McKelvey, William
Foulkes, George	Mackinlay, Andrew
Fraser, John	McLeish, Henry
Fyfe, Mrs Maria	Maclennan, Robert
Galbraith, Sam	McMaster, Gordon
Galloway, George	McNamara, Kevin
Gapes, Mike	MacShane, Denis
Garrett, John	Madden, Max
Gerrard, Neil	Maddock, Mrs Diana
Gilbert, Dr John	Mahon, Mrs Alice
Godman, Dr Norman A	Mandelson, Peter
Godsiff, Roger	Marek, Dr John
Golding, Mrs Llin	Marshall, David (Shettleston)
Gordon, Ms Mildred	Marshall, Jim (Leicester S)
Graham, Thomas	Martin, Michael J (Springburn)
Grant, Bernie (Tottenham)	Martlew, Eric
Griffiths, Win (Bridgend)	Maxton, John
Grocott, Bruce	Meacher, Michael
Gunnell, John	Meale, Alan
Hain, Peter	Michael, Alun
Hanson, David	Michie, Bill (Shef'ld Heeley)
Hardy, Peter	Michie, Mrs Ray (Argyll Bute)
Harman, Ms Harriet	Milburn, Alan
Harvey, Nick	Miller, Andrew
Henderson, Doug	Mitchell, Austin (Gt Grimsby)
Hendron, Dr Joe	Moonie, Dr Lewis
Heppell, John	Morgan, Rhodri
Hill, Keith (Streatham)	Morley, Elliot
Hinchliffe, David	Morris, Alfred (Wy'nshawe)
Hodge, Ms Margaret	Morris, Ms Estelle (B'ham Yardley)
Hoey, Miss Kate	Morris, John (Aberavon)
Hogg, Norman (Cumbernauld)	Mowlam, Ms Marjorie
Hood, Jimmy	Mudie, George
Hoon, Geoffrey	Mullin, Chris
Howarth, Alan (Stratf'd-on-A)	Murphy, Paul
Howarth, George (Knowsley N)	Nicholson, Miss Emma (W Devon)
Howells, Dr Kim	Oakes, Gordon
Hoyle, Doug	O'Brien, Mike (N Warks)
Hughes, Kevin (Doncaster N)	O'Brien, William (Normanton)
Hughes, Robert (Ab'd'n N)	Olner, Bill
Hughes, Roy (Newport E)	O'Neill, Martin
Hughes, Simon (Southwark)	Parry, Robert
Hutton, John	Pearson, Ian
Illsley, Eric	Pendry, Tom
Ingram, Adam	Pickthall, Colin
Jackson, Ms Glenda (Hampst'd)	Pike, Peter L
Jackson, Mrs Helen (Hillsborough)	Pope, Greg
Jamieson, David	Powell, Sir Raymond (Ogmore)
Jenkins, Brian D (SE Staffs)	Prentice, Mrs B (Lewisham E)
Johnston, Sir Russell	Prentice, Gordon (Pendle)
Jones, Barry (Alyn & D'side)	Prescott, John
Jones, Ieuan Wyn (Ynys Môn)	Primarolo, Ms Dawn
Jones, Dr L (B'ham Selly Oak)	Purchase, Ken
Jones, Martyn (Clwyd SW)	Quin, Ms Joyce
Jones, Nigel (Cheltenham)	Radice, Giles
Jowell, Ms Tessa	Randall, Stuart
Kaufman, Gerald	Raynsford, Nick
Keen, Alan	Reid, Dr John
Kennedy, Charles (Ross C & S)	Rendel, David
Kennedy, Mrs Jane (Broadgreen)	Robertson, George (Hamilton)
Kilfoyle, Peter	Robinson, Geoffrey (Cov'try NW)
Kirkwood, Archy	Roche, Mrs Barbara
Lestor, Miss Joan (Eccles)	Rogers, Allan
Lewis, Terry	Rooker, Jeff
Liddell, Mrs Helen	Rooney, Terry
Litherland, Robert	Ross, Ernie (Dundee W)
Livingstone, Ken	Rowlands, Ted
Lloyd, Tony (Stretf'd)	Ruddock, Ms Joan

Salmond, Alex	Tipping, Paddy
Sedgemore, Brian	Touhig, Don
Sheerman, Barry	Trickett, Jon
Sheldon, Robert	Turner, Dennis
Shore, Peter	Tyler, Paul
Short, Ms Clare	Vaz, Keith
Simpson, Alan	Walker, Sir Harold
Skinner, Dennis	Wallace, James
Smith, Andrew (Oxford E)	Walley, Ms Joan
Smith, Chris (Islington S)	Wardell, Gareth (Gower)
Smith, Llew (Blaenau Gwent)	Wareing, Robert N
Snape, Peter	Watson, Mike
Soley, Give	Welsh, Andrew
Spearing, Nigel	Wicks, Malcolm
Squire Ms R (Dunfermline W)	Wigley, Dafydd
	Williams, Alan (Swansea W)
Steel, Sir David	Williams, Alan W (Carmarthen)
Steinberg, Gerry	Wilson, Brian
Stevenson, George	Winnick, David
Stott, Roger	Wise, Mrs Audrey
Strang, Dr Gavin	Worthington, Tony
Straw, Jack	Wray, Jimmy
Sutcliffe, Gerry	Wright, Dr Tony
Taylor, Mrs Ann (Dewsbury)	Young, David (Bolton SE)
Taylor, Matthew (Truro)
Thompson, Jack (Wansbeck)	Tellers for the Ayes:
Thurnham, Peter	Ms Angela Eagle and Mr. Jon Owen Jones.
Timms, Stephen

NOES
Ainsworth, Peter (E Surrey)	Carrington, Matthew
Aitken, Jonathan	Carttiss, Michael
Alexander, Richard	Cash, William
Alison, Michael (Selby)	Channon, Paul
Allason, Rupert (Torbay)	Chapman, Sir Sydney
Amess, David	Churchill, Mr
Ancram, Michael	Clappison, James
Arbuthnot, James	Clark, Dr Michael (Rochf'd)
Arnold, Jacques (Gravesham)	Clarke, Kenneth (Rushcliffe)
Ashby, David	Clifton-Brown, Geoffrey
Atkinson, David (Bour'mth E)	Congdon, David
Atkinson, Peter (Hexham)	Conway, Derek
Baker, Kenneth (Mole V)	Coombs, Anthony (Wyre F)
Baker, Nicholas (N Dorset)	Coombs, Simon (Swindon)
Baldry, Tony	Cope, Sir John
Banks, Matthew (Southport)	Cormack, Sir Patrick
Banks, Robert (Harrogate)	Couchman, James
Bates, Michael	Cran, James
Batiste, Spencer	Currie, Mrs Edwina
Bellingham, Henry	Curry, David
Bendall, Vivian	Davies, Quentin (Stamf'd)
Beresford, Sir Paul	Davis, David (Boothferry)
Biffen, John	Day, Stephen
Body, Sir Richard	Devlin, Tim
Bonsor, Sir Nicholas	Dicks, Terry
Booth, Hartley	Dorrell, Stephen
Boswell, Tim	Douglas-Hamilton, Lord James
Bottomley, Peter (Eltham)	Dover, Den
Bottomley, Mrs Virginia	Duncan, Alan
Bowden, Sir Andrew	Duncan Smith, Iain
Bowis, John	Dunn, Bob
Boyson, Sir Rhodes	Durant, Sir Anthony
Brandreth, Gyles	Dykes, Hugh
Brazier, Julian	Eggar, Tim
Bright, Sir Graham	Elletson, Harold
Brooke, Peter	Emery, Sir Peter
Brown, Michael (Brigg Cl'thorpes)	Evans, David (Welwyn Hatf'ld)
Browning, Mrs Angela	Evans, Jonathan (Brecon)
Bruce, Ian (S Dorset)	Evans, Nigel (Ribble V)
Budgen, Nicholas	Evans, Roger (Monmouth)
Burns, Simon	Evennett, David
Burt, Alistair	Faber, David
Butcher, John	Fabricant, Michael
Butler, Peter	Fenner, Dame Peggy
Butterfill, John	Field, Barry (Isle of Wight)
Carlisle, Sir Kenneth (Linc'n)	Fishburn, Dudley

Forman, Nigel	Lawrence, Sir Ivan
Forsyth, Michael (Stirling)	Legg, Barry
Forsythe, Clifford (S Antrim)	Leigh, Edward
Forth, Eric	Lennox-Boyd, Sir Mark
Fowler, Sir Norman	Lester, Sir Jim (Broxtowe)
Fox, Dr Liam (Woodspring)	Lidington, David
Fox, Sir Marcus (Shipley)	Lilley, Peter
Freeman, Roger	Lloyd, Sir Peter (Fareham)
French, Douglas	Lord, Michael
Fry, Sir Peter	Luff, Peter
Gale, Roger	Lyell, Sir Nicholas
Gallie, Phil	McCrea, Rev William
Gardiner, Sir George	MacGregor, John
Garel-Jones, Tristan	MacKay, Andrew
Garnier, Edward	Maclean, David
Gill, Christopher	McLoughlin, Patrick
Gillan, Mrs Cheryl	McNair-Wilson, Sir Patrick
Goodlad, Alastair	Madel, Sir David
Goodson-Wickes, Dr Charles	Maitland, Lady Olga
Gorman, Mrs Teresa	Major, John
Gorst, Sir John	Malone, Gerald
Grant, Sir Anthony (SW Cambs)	Mans, Keith
Greenway, Harry (Ealing N)	Marland, Paul
Greenway, John (Ryedale)	Marlow, Tony
Griffiths, Peter (Portsmouth N)	Marshall, John (Hendon S)
Grylls, Sir Michael	Marshall, Sir Michael (Arundel)
Gummer, John	Martin, David (Portsmouth S)
Hague, William	Mates, Michael
Hamilton, Sir Archibald	Mawhinney, Dr Brian
Hamilton, Neil (Tatton)	Merchant, Piers
Hampson, Dr Keith	Mills, Iain
Hanley, Jeremy	Mitchell, Andrew (Gedling)
Hannam, Sir John	Mitchell, Sir David (NW Hants)
Hargreaves, Andrew	Moate, Sir Roger
Harris, David	Molyneaux, Sir James
Haselhurst, Sir Alan	Monro, Sir Hector
Hawkins, Nick	Montgomery, Sir Fergus
Hawksley, Warren	Needham, Richard
Heald, Oliver	Nelson, Anthony
Heath, Sir Edward	Neubert, Sir Michael
Heathcoat-Amory, David	Newton, Tony
Heseltine, Michael	Nicholson, David (Taunton)
Hicks, Sir Robert	Norris, Steve
Higgins, Sir Terence	Onslow, Sir Cranley
Hill, Sir James (Southampton Test)	Oppenheim, Phillip
Hogg, Douglas (Grantham)	Page, Richard
Horam, John	Paice, James
Hordern, Sir Peter	Patnick, Sir Irvine
Howard, Michael	Patten, John
Howell, David (Guildf'd)	Pawsey, James
Howell, Sir Ralph (N Norfolk)	Peacock, Mrs Elizabeth
Hughes, Robert G (Harrow W)	Pickles, Eric
Hunt, David (Wirral W)	Porter, David (Waveney)
Hunt, Sir John (Ravensb'ne)	Portillo, Michael
Hunter, Andrew	Powell, William (Corby)
Hurd, Douglas	Rathbone, Tim
Jack, Michael	Redwood, John
Jackson, Robert (Wantage)	Renton, Tim
Jenkin, Bernard (Colchester N)	Richards, Rod
Jessel, Toby	Riddick, Graham
Johnson Smith, Sir Geoffrey	Robathan, Andrew
Jones, Gwilym (Cardiff N)	Roberts, Sir Wyn
Jones, Robert B (W Herts)	Robertson, Raymond S (Ab'd'n S)
Jopling, Michael	Robinson, Mark (Somerton)
Kellett-Bowman, Dame Elaine	Robinson, Peter (Belfast E)
King, Tom	Roe, Mrs Marion
Kirkhope, Timothy	Rowe, Andrew
Knapman, Roger	Rumbold, Dame Angela
Knight, Mrs Angela (Erewash)	Sackville, Tom
Knight, Greg (Derby N)	Sainsbury, Sir Timothy
Knight, Dame Jill (Edgbaston)	Scott, Sir Nicholas
Knox, Sir David	Shaw, David (Dover)
Kynoch, George	Shaw, Sir Giles (Pudsey)
Lait, Mrs Jacqui	Shephard, Mrs Gillian
Lamont, Norman	Shepherd, Sir Colin (Heref'd)
Lang, Ian	Shepherd, Richard (Aldridge)

Shersby, Sir Michael	Tracey, Richard
Sims, Sir Roger	Tredinnifck, David
Skeet, Sir Trevor	Trend, Michael
Smith, Sir Dudley (Warwick)	Trotter, Neville
Smith, Tim (Beaconsf'ld)	Twinn, Dr Ian
Soames, Nicholas	Vaughan, Sir Gerard
Speed, Sir Keith	Waldegrave, William
Spencer, Sir Derek	Walden, George
Spicer, Sir Jim (W Dorset)	Walker, Bill (N Tayside)
Spicer, Sir Michael (S Worcs)	Waller, Gary
Spring, Richard	Ward, John
Sproat, Iain	Wardle, Charles (Bexhill)
Squire, Robin (Hornchurch)	Waterson, Nigel
Stanley, Sir John	Watts, John
Steen, Anthony	Wells, Bowen
Stephen, Michael	Wheeler, Sir John
Stern, Michael	Whitney, Ray
Streeter, Gary	Whittingdale, John
	Widdecombe, Miss Ann
Sumberg, David	Wiggin, Sir Jerry
Sweeney, Walter	Wilkinson, John
Sykes, John	Willetts, David
Tapsell, Sir Peter	Wilshire, David
Taylor, Ian (Esher)	Winterton, Mrs Ann (Congleton)
Taylor, John D (Strangf'd)	Winterton, Nicholas (Macclesf'ld)
Taylor, John M (Solihull)	Wolfson, Mark
Taylor, Sir Teddy	Wood, Timothy
Temple-Morris, Peter	Yeo, Tim
Thomason, Roy	Young, Sir George
Thompson, Sir Donald (Calder V)
Thompson, Patrick (Norwich N)	Tellers for the Noes:
Townend, John (Bridlington)	Mr. Richard Ottaway and Mr. Sebastian Coe.
Townsend, Cyril D (Bexl'yh'th)

Question accordingly negatived.

Amendment proposed, at the end of the Question, to add, but humbly regret that the Gracious Speech fails to set out adequate proposals to create an excellent education system for all pupils, to reform Britain's discredited system of government or to make the necessary improvements to the NHS to restore it as a first class provider of care; and further regret that measures outlined in the Gracious Speech on crime are designed for political effect rather than practical effectiveness and will do little to strengthen the police and prevent crime."—[Mr. Beith.]

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

The House divided: Ayes 38, Noes 300.

Division No. 4]	[10.15 pm
AYES
Alton, David	Maclennan, Robert
Ashdown, Paddy	Maddock, Mrs Diana
Beith, A J	Marek, Dr John
Bruce, Malcolm (Gordon)	Michie, Mrs Ray (Argyll Bute)
Campbell, Menzies (File NE)	Molyneaux, Sir James
Canavan, Dennis	Nicholson, Miss Emma (W Devon)
Carlile, Alex (Montgomery)	Rendel, David
Chidgey, David	Robinson, Peter (Belfast E)
Dafis, Cynog	Salmond, Alex
Davies, Chris (Littleborough)	Steel, Sir David
Ewing, Mrs Margaret	Taylor, John D (Strangf'd)
Forsytne, Clifford (S Antrim)	Taylor, Matthew (Truro)
Harvey, Nick	Thurnham, Peter
Hughes, Simon (Southwark)	Tyler, Paul
Johnston, Sir Russell	Wallace, James
Jones, Ieuan Wyn (Ynys Môn)	Welsh, Andrew
Jones, Nigel (Cheltenham)	Wigley, Dafydd
Kennedy, Charles (Ross C & S)
Llwyd, Elfyn	Tellers for the Ayes:
Lynne, Ms Liz	Mr. Archy Kirk wood and Mr. Don Foster.
McCrea, Rev William

NOES
Ainsworth, Peter (E Surrey)	Douglas-Hamilton, Lord James
Aitken, Jonathan	Dover, Den
Alexander, Richard	Duncan, Alan
Alison, Michael (Selby)	Duncan Smith, Iain
Allason, Rupert (Torbay)	Dunn, Bob
Amess, David	Durant, Sir Anthony
Ancram, Michael	Dykes, Hugh
Arbuthnot, James	Eggar, Tim
Arnold, Jacques (Gravesham)	Elletson, Harold
Ashby, David	Emery, Sir Peter
Atkinson, David (Bour'mth E)	Evans, David (Welwyn Hatf'ld)
Atkinson, Peter (Hexham)	Evans, Jonathan (Brecon)
Baker, Kenneth (Mole V)	Evans, Nigel (Ribble V)
Baker, Nicholas (N Dorset)	Evans, Roger (Monmouth)
Baldry, Tony	Evennett, David
Banks, Matthew (Southport)	Faber, David
Banks, Robert (Harrogate)	Fabricant, Michael
Bates, Michael	Fenner, Dame Peggy
Batiste, Spencer	Field, Barry (Isle of Wight)
Bellingham, Henry	Fishburn, Dudley
Bendall, Vivian	Forman, Nigel
Beresford, Sir Paul	Forsyth, Michael (Stirling)
Biffen, John	Forth, Eric
Body, Sir Richard	Fowler, Sir Norman
Bonsor, Sir Nicholas	Fox, Dr Liam (Woodspring)
Booth, Hartley	Fox, Sir Marcus (Shipley)
Boswell, Tim	Freeman, Roger
Bottomley, Peter (Eltham)	French, Douglas
Bottomley, Mrs Virginia	Fry, Sir Peter
Bowden, Sir Andrew	Gale, Roger
Bowis, John	Gallie, Phil
Boyson, Sir Rhodes	Gardiner, Sir George
Brandreth, Gyles	Garel-Jones, Tristan
Brazier, Julian	Garnier, Edward
Bright, Sir Graham	Gill, Christopher
Brooke, Peter	Gillan, Mrs Cheryl
Brown, Michael (Brigg Cl'thorpes)	Goodlad, Alastair
Browning, Mrs Angela	Goodson-Wickes, Dr Charles
Bruce, Ian (S Dorset)	Gorman, Mrs Teresa
Budgen, Nicholas	Gorst, Sir John
Burns, Simon	Grant Sir Anthony (SW Cambs)
Burt, Alistair	Greenway, Harry (Ealing N)
Butcher, John	Greenway, John (Ryedale)
Butler, Peter	Griffiths, Peter (Portsmouth N)
Butterfill, John	Grylls, Sir Michael
Carlisle, John (Luton N)	Gummer, John
Carlisle, Sir Kenneth (Linc'n)	Hague, William
Canington, Matthew	Hamilton, Sir Archibald
Carttiss, Michael	Hamilton, Neil (Tatton)
Cash, William	Hampson, Dr Keith
Channon, Paul	Hanley, Jeremy
Chapman, Sir Sydney	Hannam, Sir John
Churchill, Mr	Hargreaves, Andrew
Clappison, James	Harris, David
Clark, Dr Michael (Rochf'd)	Haselhurst, Sir Alan
Clarke, Kenneth (Rushcliffe)	Hawkins, Nick
Clifton-Brown, Geoffrey	Hawksley, Warren
Coe, Sebastian	Heald, Oliver
Congdon, David	Heath, Sir Edward
Conway, Derek	Heathcoat-Amory, David
Coombs, Anthony (Wyre F)	Heseltine, Michael
Coombs, Simon (Swindon)	Hicks, Sir Robert
Cope, Sir John	Higgins, Sir Terence
Cormack, Sir Patrick	Hill, Sir James (Southampton Test)
Couchman, James	Hogg, Douglas (Grantham)
Cran, James	Horam, John
Currie, Mrs Edwina	Hordern, Sir Peter
Curry, David	Howard, Michael
Davies, Quentin (Stamf'd)	Howell, David (Guildf'd)
Davis, David (Boothferry)	Howell, Sir Ralph (N Norfolk)
Day, Stephen	Hughes, Robert G (Harrow W)
Devlin, Tim	Hunt, David (Wirral W)
Dicks, Terry	Hunt, Sir John (Ravensb'ne)
Dorrell, Stephen	Hunter, Andrew

Hurd, Douglas	Merchant Piers
Jack, Michael	Mills, Iain
Jackson, Robert (Wantage)	Mitchell, Andrew (Gedling)
Jenkin, Bernard (Colchester N)	Mitchell, Sir David (NW Hants)
Jessel, Toby	Moate, Sir Roger
Johnson Smith, Sir Geoffrey	Monro, Sir Hector
Jones, Gwilym (Cardiff N)	Montgomery, Sir Fergus
Jones, Robert B (W Herts)	Needham, Richard
Kellett-Bowman, Dame Elaine	Nelson, Anthony
King, Tom	Neubert, Sir Michael
Kirkhope, Timothy	Newton, Tony
Knight Mrs Angela (Erewash)	Nicholson, David (Taunton)
Knight Greg (Derby N)	Norris, Steve
Knight Dame Jill (Edgbaston)	Onslow, Sir Cranley
Knox, Sir David	Oppenheim, Phillip
Kynoch, George	Page, Richard
Lait, Mrs Jacqui	Paice, James
Lamorrt, Norman	Patrick, Sir Irvine
Lang, Ian	Patten, John
Lawrence, Sir Ivan	Pawsey, James
Legg, Barry	Peacock, Mrs Elizabeth
Leigh, Edward	Pickles, Eric
Lennox-Boyd, Sir Mark	Porter, David (Waveney)
Lester, Sir Jim (Broxtowe)	Portillo, Michael
Lidington, David	Powell, William (Corby)
Lilley, Peter	Rathbone, Tim
Lloyd, Sir Peter (Fareham)	Redwood, John
Lord, Michael	Renton, Tim
Luff, Peter	Richards, Rod
Lyell, Sir Nicholas	Riddick, Graham
MacGregor, John	Robathan, Andrew
MacKay, Andrew	Roberts, Sir Wyn
Maclean, David	Robertson, Raymond S (Ab'd'n S)
McLoughlin, Patrick	Robinson, Mark (Somerton)
McNair-Wilson, Sir Patrick	Roe, Mrs Marion
Madel, Sir David	Rowe, Andrew
Maitland, Lady Olga	Rumbold, Dame Angela
Major, John	Sackville, Tom
Malone, Gerald	Sainsbury, Sir Timothy
Mans, Keith	Scott Sir Nicholas
Marland, Paul	Shaw, David (Dover)
Martow, Tony	Shaw, Sir Giles (Pudsey)
Marshall, John (Hendon S)	Shephard, Mrs Gillian
Marshall, Sir Michael (Arundel)	Shepherd, Sir Colin (Heref'd)
Martin, David (Portsmouth S)	Shepherd, Richard (Aldridge)
Mates, Michael	Shersby, Sir Michael
Mawhinney, Dr Brian	Sims, Sir Roger

Skeet, Sir Trevor	Trend, Michael
Smith, Sir Dudley (Warwick)	Trotter, Neville
Smith, Tim (Beaconsf'ld)	Twinn, Dr Ian
Soames, Nicholas	Vaughan, Sir Gerard
Speed, Sir Keith	Waldegrave, William
Spencer, Sir Derek	Walden, George
Spicer, Sir Jim (W Dorset)	Walker, Bill (N Tayside)
Spicer, Sir Michael (S Worcs)	Waller, Gary
Spring, Richard	Ward, John
Sproat, Iain	Wardle, Charles (Bexhill)
Squire, Robin (Hornchurch)	Waterson, Nigel
Stanley, Sir John	Watts, John
Steen, Anthony	Wells, Bowen
Stephen, Michael	Wheeler, Sir John
Stern, Michael	Whitney, Ray
Streeter, Gary	Whittingdale, John
Sumberg, David	Widdecombe, Miss Ann
Sweeney, Walter	Wiggin, Sir Jerry
Sykes, John	Wilkinson, John
Tapsell, Sir Peter	Willetts, David
Taylor, Ian (Esher)	Wilshire, David
Taylor, John M (Solihull)	Winterton, Mrs Ann (Congleton)
Taylor, Sir Teddy	Winterton, Nicholas (Macclesf'ld)
Temple-Morris, Peter	Wolfson, Mark
Thomason, Roy	Wood, Timothy
Thompson, Sir Donald (Calder V)	Yeo, Tim
Thompson, Patrick (Norwich N)	Young, Sir George
Townend, John (Bridlington)
Townsend, Cyril D (Bexl'yh'th)	Tellers for the Noes:
Tracey, Richard	Mr. Richard Ottaway and Mr. Roger Knapman.
Tredinnick, David

Question accordingly negatived.

Main Question put and agreed to.

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

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