HC Deb 12 February 1998 vol 306 cc541-2
7. Mr. Swinney

What analysis he has undertaken of the impact of the current level of interest rates on the Scottish economy. [27207]

Mr. Darling

Scottish business, as well as businesses in the whole of the United Kingdom, want stability and an end to boom and bust. Low inflation is an essential precondition for long-term sustainable growth.

Mr. Swinney

The Minister referred to boom and bust. Another Scottish company went bust this morning in the constituency of my hon. Friend the Member for Galloway and Upper Nithsdale (Mr. Morgan). Many Scottish companies, exporters, manufacturers and people in the agricultural industry are being crippled by the Government's interest rate policy. When will they deliver an interest rate policy that is appropriate to Scotland and not just to the south-east of England?

Mr. Darling

The hon. Gentleman belongs to a party that wants independence in Europe, which would mean Europewide interest rates, never mind just for the United Kingdom. The important point is that, unless we get stability and an end to the boom and bust that has so characterised the British economy, difficulties will continue to face businesses in Scotland and elsewhere. The Government are determined to get inflation out of the system and to create a stable platform on which businesses can build. Unless we take that long-term view, we shall return to the days—not so very long ago—of high inflation, which destroys businesses and badly affects mortgage payers and savers. We are not prepared to do that. We are taking the necessary action to ensure that the capacity of the economy expands and that there is a platform on which businesses and individuals can prosper.

Mr. Chisholm

Has my right hon. Friend analysed what effect the high borrowing policies of the Scottish National party would have on interest rates? Is not the best way to achieve sustainable low interest rates by the supply-side and European policies of the Government?

Mr. Darling

I am grateful to my hon. Friend for his support on those matters. He is right; it is not only a question of the nationalists' policy on taxation, spending and everything else. Nationalists will remember that their parliamentary leader, at the end of the last Parliament, said that an independent Scottish currency would shadow the pound sterling, which makes nonsense of the question asked by the hon. Member for North Tayside (Mr. Swinney). The Government are committed to economic stability and providing the stable platform that is essential if we are to break away from the cycle that has been so destructive in the past.

Mr. Green

Given that the Chief Secretary is speaking the day after Scottish unemployment started rising again, he can congratulate himself on ending the boom phase of the boom and bust to which he objects. Does he agree with the TUC, which says that the main priority for the Government in the Budget should be to start a managed depreciation of sterling to help manufacturing industry in Scotland and elsewhere?

Mr. Darling

Stability is essential for the long-term good of this country. As the hon. Gentleman mentioned unemployment, I should point out that the Government's welfare-to-work programme is one of the many ways in which we can help give people who have been put out of work the skills and opportunities to get back into work. It is also a way of increasing the country's skills level because some parts of the country have low skills levels. The Government's overall strategy, which is long term, unlike that of the previous Government, is the key to getting the economic stability and expansion that we all want.

Mr. Blizzard

Will my right hon. Friend confirm that interest rates are not the only factor affecting the value of the pound, and that the current exchange rate against the deutschmark is not greatly different from the rate at which the previous Government thought fit to take Britain into the exchange rate mechanism, and from which the right hon. Member for Huntingdon (Mr. Major) said it would be fool's gold to devalue?

Mr. Darling

Of course, the exchange rate policy of the last Government has now been renounced by all those who took that decision. In contrast, our policy is to ensure that we have a low-inflation economy and conditions where we have a skilled and educated work force that will expand the capacity of our economy. Ours is a long-term policy designed to end the violent swings seen in the past, and ours is the only way to provide the stable platforms for businesses and individuals that everyone in the country wants.