HC Deb 12 March 1998 vol 308 cc733-5
3. Mr. Boswell

When he last met the Governor of the Bank of England to discuss the interaction of monetary and economic policy. [32495]

Mr. Darling

My right hon. Friend the Chancellor has many meetings with the Governor to discuss a range of matters.

Mr. Boswell

Now that the minutes of the Monetary Policy Committee have revealed that its members are split equally between the inflation nutters and the doves and that we might as well have stayed with the Gordon and Eddie show, will the Minister tell the House whether his sympathies would have been with them if they had increased interest rates for the sixth time since the general election, thereby paving the way for tax reductions in the Budget, or whether he is relieved that they have kept rates as they are to give him a measure of cover for the tax increases that we expect?

Mr. Darling

First, the fact that the Monetary Policy Committee's proceedings are open and published shows the value of allowing a range of people to consider the inflationary pressures on the economy and to come to a considered view. Secondly, long-term interest rates are now the lowest they have been for 33 years. The last time they were this low, I was in primary school and Harold Wilson was in No. 10.

Mr. Sheldon

rose—

Hon. Members

And where was the right hon. Gentleman?

Mr. Nicholas Winterton

He was there, on the Treasury Bench.

Mr. Sheldon

I am looking forward.

As the euro is to be widely used by companies in this country, not least those in the retail trade, will my right hon. Friend consider whether it would be advantageous to shadow it at some stage? If he agrees that we should, how would he suggest doing it?

Mr. Darling

I do not think that it would be appropriate to do that, but my right hon. Friend is right in the sense that this country has to prepare for the introduction of economic and monetary union in Europe. It also has to prepare itself for the possibility that we shall join that currency at some point, perhaps at the beginning of the next Parliament. He will know that the Government are putting in hand the necessary preparations so that this country can make that choice—preparations that were never made by the previous Government, because they were so hopelessly split on the issue.

Mr. Wigley

The Minister will have noticed that as, in the past two days, there was further talk of a higher interest rate, the pound strengthened again against other currencies. Does he accept that the pound is far too strong, causing chaos for manufacturing industry and for agriculture? Is it an objective of the Government to get the pound down to a saner parity?

Mr. Darling

The latest predictions are that exports are expected to continue to rise, but let me make an important point. Industry—even people who are worried about what is happening to the exchange rate—accepts the fact that it is necessary for the Government to ensure that we get long-term stability. The last thing anyone wants is a return to the boom and bust or the high levels of inflation that we experienced in the past.

I believe that the right hon. Gentleman is aware that other factors, apart from interest rate rises, have led to the appreciation of sterling. I repeat that it was necessary for the Bank of England to take the appropriate steps to counter inflationary pressures because the previous Government had ignored the warning signals in the months leading to the general election. That will not—indeed, cannot—happen under the new, more open and transparent procedures that we have set up, which will benefit industry and the whole country.

Mr. MacShane

I invite my right hon. Friend to cast his mind back to 12 months ago, when interest rates, inflation and sterling were bobbing up and down like a yo-yo, as they had done in the previous five years. No business man could plan more than six months ahead because of the Tories' irresponsible stewardship of the economy. May I invite my right hon. Friend, despite the difficulties that the level of sterling is causing exporters, to maintain the new policy of having a Monetary Policy Committee and to take every measure to ensure stability? Every business leader I meet welcomes the new policy, and wants no return to the instability of the Tory years.

Mr. Darling

My hon. Friend is right, in that every business wants stability more than anything else. Many business leaders said to us when we were in opposition—and say to us now that we are in government—that if the Government do nothing else but deliver stability and low inflation, that will benefit their business. Of course, we have also done other things to help business. For example, we introduced the current rate of corporation tax—the lowest ever.

Mr. Lilley

In their pre-Budget discussions with the Governor of the Bank of England, have the Chief Secretary or the Chancellor discussed any plans to raise taxes that were not included in the Labour party manifesto before the most recent general election? Does the Chief Secretary recall the speech made by the Chancellor before the election, in which he said: At the general election we will spell out clearly our tax plans so that the British people know what we intend to do"— no confusion, no deceits—and that Apart from the windfall tax our plans do not require any extra taxes"? Has he honoured those pledges?

Mr. Darling

The right hon. Gentleman is ill placed to criticise us on the subject of election promises, because people will remember very well that the prospectus on which the Conservatives fought the 1992 general election was abandoned in every subsequent year. [HON. MEMBERS: "Answer."] The answer is that we made an explicit promise not to increase the top and basic rates of income tax, that we kept that promise in my right hon. Friend's first Budget last year, and that we shall keep that promise for the rest of this Parliament—as we told the British people.

Mr. Lilley

Does the right hon. Gentleman realise that his answer tacitly recognised that he betrayed the pledges that he made to the British people? When did he, or the Chancellor, spell out clearly to people with pensions that they proposed a £5 billion tax on their pension funds? When did he spell out to students that they planned a tax on higher education? When did he spell out to rural motorists that they planned three increases in motor taxation in 16 months? And when did he plan to spell out clearly to home owners that they intended to impose the biggest ever council tax increases?

Mr. Darling

The right hon. Gentleman should be a little more careful, because the Government in which he served introduced the fuel escalator and cut mortgage tax relief when they said they would not. The right hon. Gentleman will also remember that, just before the general election, he proposed pension changes that would have resulted in a huge increase in expenditure for ordinary people. We have kept every promise that we made in our election manifesto. That is the clear difference between the Labour party and the Conservative Opposition.