Economic Cycle (Hansard, 10 July 1997)

§ 3. Dr. Kumar
To ask the Chancellor of the Exchequer what plans he has to end the cycle of boom and bust. [6179]

§ Mr. Gordon Brown
The Budget set out a framework for monetary and fiscal stability to achieve our objective of high and stable levels of employment and growth. Today, the Bank of England has agreed with me that, if we are to prevent the cycle of boom and bust, inflationary pressures in the economy, which the previous Government negligently failed to tackle, must be brought under control. By taking tough action now to bring both the deficit and inflation down, the Government and the Bank of England are determined to ensure that this country does not return to the instability and negative equity of the Conservative years.

§ Dr. Kumar
I am grateful for that answer. Does my right hon. Friend agree that it is absolutely essential for home owners and businesses—[HON. MEMBERS: "Reading."]—that there is no return to the boom and bust economy of the 1980s—[HON. MEMBERS: "Reading."]—as we experienced under the Tory Government? Does he also agree that—[HON. MEMBERS: "Reading."]—it is regrettable that the Tories abdicated all responsibility for tackling inflation? Does he agree that they failed to tackle it?

§ Mr. Brown
I am grateful to my hon. Friend. I welcome him back to the House after his distinguished election victory. The Conservatives would be better advised to behave themselves in this Parliament in a way that they did not in the last.
We are determined that this country does not return to the conditions that we saw in the late 1980s and early 1990s, when a Conservative Government allowed inflation to get out of control and damage businesses and the ability of thousands—indeed, hundreds of thousands—of people to own their own homes. I remind my hon. Friend that, every month from December—December, January, February, March and April—the Governor of the Bank of England advised the then Chancellor that, if he did not raise interest rates, inflation would be in danger of getting out of control. We took the decision to raise interest rates and to give the Bank of England operational independence. It is now up to the Conservative party to tell us whether it would raise interest rates, faced with such inflationary pressures.

§ Mr. Malcolm Bruce
Does the Chancellor recognise that today's decision to raise interest rates by the Bank of England represents a thumbs down to two people? As he rightly said, the former Chancellor pursued an irresponsible monetary policy in advance of the general election and did not take the Bank of England's advice when he should have done to take the heat out of the economy. The decision is also a thumbs down for the present Chancellor for not delivering a Budget that lived up to his own billing that it would rebalance the 1057 economy and help to keep interest rates down. Does the Chancellor accept that his Budget failed to live up to that billing?

§ Mr. Brown
The hon. Gentleman says that the Bank of England has criticised me today—it is quite the opposite. The Bank has acknowledged the effects of my Budget in slowing down the economy. We have to take a long-term view of the balance between monetary and fiscal policy. I believe that people will judge that my deficit reduction plan over five years brings the necessary stability in fiscal policy. We will not have the Liberal Democrats' policies, which are quite irresponsible.
The hon. Gentleman, who criticised us last week for not spending enough on the health service and education, should look at the press release that he issued before. He said that £500 million should be spent on the backlog of repairs and maintenance.

§ Mr. Bruce
This year.

§ Mr. Brown
May I just read the press release? It refers to a school building programme with a 5 year investment programme of £500m". We put in £1.3 billion.
On the health service, the hon. Gentleman referred to an immediate injection of £300m into the NHS plus A £600m increase in next year's NHS Budget". That is £900 million in total. We put in £1.2 billion. Instead of criticising us, the Liberal Democrats should he congratulating us.

§ Mr. Skinner
To ensure that we do not go back to the years of boom and bust, does my right hon. Friend agree that people who work for a living should be treated properly? Does he really think that he can stand aside, like Pontius Pilate, with the rest of the people on the Front Bench, ignoring the people down at Heathrow, those stewardesses out on strike who are hounded and intimidated by this evil man Ayling just because they are fighting not only to keep their trade union intact but for proper wages and conditions? Surely it is time that our people on the Front Bench understood that those people at Heathrow, many of whom voted Labour at the election, ought to be treated properly and that anybody in the management of British Airways should be told by the Government that it is time that they started treating their people properly?

§ Mr. Brown
I repeat to my hon. Friend what my right hon. Friend the Prime Minister said yesterday. It is a matter for management and trade unions to sort out, and the sooner it is sorted out the better.

§ Mr. Woodward
Given that the Chancellor justified his breathtaking 17 tax rises on the need to curb the consumer boom, will he explain why £5 billion of his £6 billion tax rises were taken from the corporate sector?

§ Mr. Brown
The hon. Gentleman should do some research on the Budget. He would find that I cut mortgage 1058 interest tax relief and raised stamp duty and excise duties on cigarettes and petrol. A considerable sum of money will be taken out of the consumer sector of the economy.
What I will not do is pursue the irresponsible policy pursued by the previous Government, who knew that there were inflationary pressures in the economy and refused to take action. We have still to have an answer from the shadow Chancellor who, on the television at lunchtime, refused to answer the question whether he supported the rise in interest rates. Does he support me and the Bank of England, or is he not prepared to do so? Does he support the former Chancellor or the present Chancellor? It is time that we had some coherency from the Opposition.

§ Mr. Stringer
Does my right hon. Friend agree that we must not return to the experience of the late 1980s, when millions of households suffered from negative equity, which damaged the social fabric and the economic well-being of our society? Does he agree that the best way to ensure that we do not return to that situation is to control inflation?

§ Mr. Brown
I am grateful to my hon. Friend for making that point. In every constituency, men and women still suffer the effects of the stop-go economics practised by the Conservative Government. Home owners still have negative equity because of the failed policies of the Conservative Government. I assure the House that I will not make the mistakes that the previous Government made of allowing inflation to get out of control and causing instability, volatility and negative equity. The measures that I have taken and those taken by the Bank of England are necessary to restore balance to an economy that was in danger of becoming seriously out of balance because of the mistakes of the previous Government, who failed to take the necessary action.