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Mr. Speaker : Order.

Mr. Ridley : The article said of the water authorities : "they will be bound hand and foot by regulations specifying standards of quality and service, some from the European Community and others from ministerial directives. They will be subject to a pricing regime which will limit their return on investment, and allow the new Director of Water Regulation to examine in detail the prudence and efficiency of their capital expenditure. They will also be under the supervision of a separate 6,000-strong National Rivers Authority, charged with the general management of river basins." The hon. Gentleman was talking absolute rubbish, and he knows it. I shall quote again from the Radio Cumbria interview. The hon. Gentleman said :

"Individuals or their local authorities or their health authorities will not be able to bring charges against people who actually supply water which is unfit for human consumption."

The hon. Gentleman has not done his homework, because he has not read the Bill. It will make it a criminal offence, for the first time, for a water undertaker to supply piped water that is unfit for human consumption. Under the present law, that is not a criminal offence. That change is one of the many ways in which the Bill brings an improvement in safeguards for the consumer and the environment. The hon. Gentleman talked rubbish on that matter as well.

Dr. Cunningham : I am grateful for the fact that the Secretary of State has given way, if only to allow me to put on record my appreciation of the new doctrine that people go into radio broadcasts so that they will not be overheard.

Will the Secretary of State confirm that, under the new provisions, he and the Director of Public Prosecutions will determine whether actions are taken, and that members of the public, local authorities and even district health authorities will not be able to do so?

Mr. Ridley : The hon. Gentleman knows that he is mixing up two different types of prosecution. When we come to detailed consideration of the Bill I shall be able to put him right on that as well.

I want to continue to take the hon. Gentleman to task for his broadcast. He said of me :

"Why should we believe him when his own pollution inspectors have made it clear that they don't believe what Ministers are saying, and that's why they are resigning from his Department."

The hon. Gentleman is not good at listening, but I hope that he will listen now.

Mr. Perriman and the Department have agreed that, because of speculation in the press--much of it misinformed--the reason for his resignation may be stated publicly. The reason was disagreement about some elements of the proposals for reorganising Her Majesty's inspectorate of pollution in the regions. Those proposals

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are still the subject of consultation with staff representatives. Under the proposals, specialist teams of inspectors in each region would be matched with a particular class of industry. Mr. Perriman originally supported that proposal, but later changed his mind in favour of teams of multi-purpose inspectors allocated on a geographical basis.

I am sad that Mr. Perriman feels it necessary to resign over this matter, and I am sad to see him go, but that actually is his reason for going. In no sense is his reason for going anything to do with disagreements over the Government's policies or about lack of resources for the inspectorate. Our first task since Her Majesty's inspectorate was formed in April 1987 was to fill vacancies. We have been successful. Vacancies have fallen from 66 then to 19 now--out of 200 posts. It remains our objective to provide Her Majesty's inspectorate with the resources that it needs to do the job we have given it.

Dr. Cunningham : That seemed a long, boring and convoluted way of agreeing that pollution inspectors are resigning because they have differences of opinion on policy with the Secretary of State.

Mr. Ridley : That is not so. The hon. Gentleman is wrong. He is talking rubbish once more. Indeed, he seldom talks anything but rubbish. As I have said, Mr. Perriman disagrees with his colleagues in the inspectorate about how best to organise the inspectorate regionally.

My final quotation from the hon. Member is this :

"The water authority managers are already talking about increases in costs to the consumer of between 50 and 80 per cent.--that's really a pretty clear signal to us that they are probably going to double in the short term and maybe in the longer term go up by two or three times."

That is what the hon. Gentleman said in that famous interview. Again, the hon. Gentleman's suggestion of doubling or trebling water charges is absolute rubbish. I have made it clear that, on the known programmes of environmental improvements so far--cleaner beaches, drinking water quality and improvement to sewage treatment works--the necessary investment might increase prices by between 7.5 and 12.5 per cent. in real terms by the end of the century. It could well be more if further environmental improvements are necessary. Of course, there are other factors, such as the higher cost of private sector capital, and so on, but the greater efficiency that we expect will work the other way. The increase in charges will be nowhere near the extravagant predictions of the hon. Gentleman. Doubling water charges would produce an extra £3 billion per annum : trebling them would produce £6 billion per annum. Those figures compare with an investment next year of £1.3 billion. His figures are miles wide of the mark and were produced with the deliberate intention of misleading and misinforming. Once more, I say that he was talking absolute rubbish.

What we have to contend with is that, when in government, the Labour party cut investment in the water services by a third, and, within that investment, in sewage treatment works by half. In our debate a fortnight ago the hon. Member for Bootle (Mr. Roberts) eventually got it right and had to admit that the Labour Government "had not wanted to" cut investment. We now have a strange new doctrine : "The Labour party wants to increase public investment, but has to cut it ; apparently, the Tories want

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to cut it, but actually increase it." On the hon. Gentleman's own admission, that is what is happening. In fact, we have increased investment to over £1.3 billion next year. Those damaging cuts under Labour are the main reasons for the defects that still exist in the water environment, and we do not need to be lectured by Labour Members about this matter.

There is an underlying truth in all this. It is that pollution control costs money. That is why Socialist economies, which are not as successful as market economies, do not make the necessary investments in pollution control. In a controlled economy the resources are just not available.

Mr. Jack Straw (Blackburn) rose --

Mr. Ridley : No, the hon. Gentleman must wait. He can make his speech later if he catches your eye, Mr. Speaker. It is worth telling him why Labour cut investment in water and sewerage. The International Monetary Fund told the Labour Government that they had to do so. The IMF came in because Government spending was way out of control. That is why there will never be the resources to make the necessary investment in the water industry if it remains in the public sector.

We now have a healthy economy that can afford to clean up the environment. The two go hand in hand. A strong and growing economy requires a good environment in which to flourish. Equally, environmental protection and improvement need the benefits of growth and a strong economy to meet the costs. The costs are high--amounting to several billions of pounds for our current environmental initiatives.

Mr. Tony Banks (Newham, North-West) : Will the Secretary of State tell us why, after 10 years, Britain has the reputation of being the dirtiest nation in Europe? Could that have something to do with the raw sewage that the Secretary of State is delivering as his speech this afternoon?

Mr. Ridley : That is not true--[ Hon. Members :-- "Absolute rubbish."] The only thing that the Labour party seeks to do is to damage the reputation of this country by talking rubbish, as the hon. Member for Newham, North-West (Mr. Banks) was doing.

The polluter will have to pay for the increased investments. As a result of the successful agreement last week on motor car emissions, the motorist will have to pay a further £850 million annually. There will be increases in water charges to improve, first, the quality of beaches through the provision of long sea outfalls ; secondly, quality water through the "Red List" controls over industrial discharges ; and thirdly, sewage treatment works through the massive investment programme of upgrading.

To reduce SO and NOx emissions substantially--one of which is the cause of acid rain--there will have to be an increase in the price of electricity. However, I want to make it clear that the price increases will be due not to privatisation, but to the improvements to the environment for which the Labour party has rightly asked. Labour Members will not be able to say later that the price increases are due to privatisation--[ Hon. Members : --"Absolute rubbish."] We will take no lectures from the Labour party.

I turn not to the other major issue of environmental clean-up. The House might be amused to remember a

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contribution on this subject from the hon. Member for Copeland. On the eve of the last election the Labour party said that it would ban fox hunting. However, the hon. Gentleman suddenly remembered his own constituency and said, "but not in national park areas." That is the level of consistency within the Labour party. That is the extent to whch the Labour party's views are based on science. That is the hon. Gentleman's commitment to the environment--[ Hon. Members :-- "Absolute rubbish."] It is absolute rubbish from the Labour party. I do not know why the hon. Gentleman left out areas of outstanding natural beauty.

The amendment refers to a mythical Bill which the hon. Member for Copeland would like to see enacted,

"to safeguard comprehensively the nation's environment and heritage".

No such Bill is needed. We will be presenting the House with a Bill as soon as possible, and certainly during this Parliament, to do the things that are not yet quite ready for introduction. They cover two significant but specific topics.

The first is the introduction of an integrated system to control industrial pollution, which will put Her Majesty's inspectors of pollution on a proper statutory footing and introduce a cross-media system of control that takes account of the unity of the natural environment. The second is the reform of waste disposal law to increase waste disposal authorities' powers to regulate waste disposal, to place a statutory duty of care on the producers and holders of waste and to control imports of wastes and fly tipping. Substantial changes to the legal infrastructure are needed before those measures can be brought forward. It is also necessary to have consultations with the authorities concerned and to get it right. I repeat, however, that that Bill will be introduced when we are ready, and during this Parliament. We do not need the mammoth declaratory Bill for which the Opposition are calling. We have a massive programme of environmental improvement which does not require legislation.

Mr. Allan Roberts (Bootle) : As the Secretary of State is so worried about the problems of toxic waste disposal, will he continue to allow large quantities of toxic waste to be imported? If the toxic waste on Karin B were repackaged, would he allow it into Britain?

Mr. Ridley : It may be right for it to come here because we have specialist facilities for dealing with such material. The arrangements are that if it is suggested that a consignment of toxic waste is to come to Britain, prior notification must be given, with a proper analysis of the contents. If the hon. Gentleman is an environmentalist, he might agree that it could be better for such toxic waste to be treated in plants capable of treating it properly than to have it dumped in the sea or in some underdeveloped country which does not have the necessary facilities.

I should like now to consider the important issues which do not require legislation. I shall take first the ozone layer and the damage caused to it by CFCs. It is one of the most serious problems that we face and the one to which we are devoting the highest priority. We took a leading part in the negotiations that led to the Montreal protocol last year. We have developed scientific understanding further, and we have taken the initiative by calling for a cut of 85 per cent. in CFCs worldwide as soon as possible and a speeding up of implementation of the Montreal protocol.

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I announced last Wednesday that, next March, the Government will host an international ministerial conference on ozone depletion, with the objective of giving a further political impetus to more worldwide reductions in CFCs and to demonstrate practical reductions of at least 85 per cent. as soon as possible. I believe that it will have a substantial impact on helping developing countries, which could make or break the strategy to reduce the global use of ozone depleting chemicals, to come on board on this most vital of environmental subjects.

Mr. Allan Rogers (Rhondda) : I applaud the fact that the Government have taken the initiative by calling a meeting so that the Montreal protocol can be developed, but will the Government put their money where their mouth is and be prepared to help Third world countries and those, such as India and China, which have said that they want to ensure that every household has a refrigerator by the end of the century, which would mean an enormous expansion in the use of CFCs? Will the Government allow aid and technology transfers to those countries so that they can implement some of the objectives of the Montreal protocol?

Mr. Ridley : I am grateful to the hon. Gentleman, who has got the point about the conference. That is exactly what the conference will have to discuss. The point of the conference is to analyse the problems and the shortages of knowledge and funds so that we can get underdeveloped countries to accept the need to reduce CFCs in the light of solutions to their problems, which we can then develop. The hon. Gentleman is right. We shall be there to help them.

The hon. Member for Copeland referred to acid rain. We have undertaken to make a 60 per cent. reduction in SO emissions from existing large power stations by the year 2003, and a 30 per cent. reduction in NOx emissions. That will involve further substantial expenditure, over and above the Central Electricity Generating Board's present £1 billion power station clean-up programme.

Dr. Cunningham : Like my hon. Friend the Member for Rhondda (Mr. Rogers), I welcome what the Secretary of State said about CFCs. Why have the Government discontinued funding of the pressurised fluidised bed combustion system at Grimethorpe, which was initiated by the Labour Government? It shows the way ahead in coal technology. It would deal with emissions of SO and the oxides of nitrogen. Is it not shortsighted to allow that project to fold up?

Mr. Ridley : The hon. Gentleman knows that the problem of high sulphur emissions arises because we have such high sulphur coal. We need the new technology, but the research to which he refers does not seem to be yielding the technology that we need, at least not in terms of SO .

Tighter vehicle emission standards which should halve emissions from cars have been brought in. Final agreement on a European Community package of measures was achieved by my noble Friend the Earl of Caithness in Brussels last week. The technology favoured by the Government for meeting the strict new Luxembourg standards is a lean-burn engine with an oxidation catalyst.

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This delivers the lower emissions demanded and promises fuel economy improvements that will be important as we tackle the greenhouse effect and try to minimise CO .

We believe that it is a superior option to the bolt-on approach of three- way catalytic converters, not least because of its robustness. Lean-burn engines reliably and permanently reduce emissions at source. Catalysts have to be expensively and regularly maintained. They can, and do, go wrong, and when that happens there is no reduction in emissions at all. Nor do they reduce CO .

Earlier this month the United Kingdom signed the NOx protocol at Sofia. It commits us to halt the hitherto inexorable rise in NOx emissions, to apply the best available technologies which are economically feasible to abate NOx emissions from the major sources, and by 1996 to have adopted policies based on the scientifically evaluated "critical loads" which the environment can tolerate. Achieving international agreement to base policy on scientific knowledge is a major breakthrough. I am confident that the measures we are taking to reduce emissions for power stations and vehicles will result in a substantial decrease in United Kingdom NOx emissions.

Despite what the hon. Member for Copeland said, last year we achieved all our goals with regard to the North sea conference, and we can implement them without further legislation. I shall remind the House of what they are : an end to marine incineration by the end of 1994, the stopping of dumping of harmful industrial wastes into the North sea by the end of 1989 and a reduction in inputs of more damaging substances into rivers by 50 per cent. by 1995. All those measures are now being applied to all our seas.

The hon. Member for Copeland mentioned repairs to the housing stock. The English house condition survey, which is carried out every five years, provides the best indication of our progress towards securing better housing conditions. The 1986 survey is published today, and the results are encouraging. The report shows that the overall condition of the stock has improved since the previous survey in 1981. That reflects substantial private spending on the maintenance and renovation of the stock, which increased by 30 per cent. in real terms between 1981 and 1986. Public sector spending on improvement grants for private owners more than doubled, and spending on the renovation of council houses increased by 60 per cent. over the same period. The new policies that we are introducing will lead to even more rapid progress in the improvement of the housing stock. Finally, the hon. Gentleman referred to mortgage interest. I have the building societies' press release here, which states that, far from there being a great increase in arrears and repossessions by building societies,

"In the first six months of 1988 building societies took possession of 2,100, or 19 per cent., fewer properties compared with the previous six month period The number of building society loans in arrears for six months or over is also down. At the end of June 1988 the number of loans in arrears for six months or more was 2,000 lower than at the end of 1987 and around 4,000 lower than a year earlier. The decline in the number of possessions and arrears is consistent with the improvement in the performance of the economy in recent years and, in particular, the sharp fall in unemployment which began in the middle of 1986."

Therefore, the hon. Gentleman's fears about mortgages are not so far borne out.

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Mr. Allen McKay (Barnsley, West and Penistone) : Those figures come from building societies. Would the Secretary of State care to look at loans and repossessions by local authorities?

Mr. Ridley : I am happy to look at that, but I am quoting from the building societies, which are the main lenders.

Yesterday I heard the Leader of the Opposition on the radio, and for the sake of greater accuracy I obtained a copy of what he said. He said of the Chancellor of the Exchequer :

"He won't even think of the possibility of trying to control new requirements for borrowing. Not harming the current industrial borrowing, not harming the current consumer borrowing but actually gradually getting demand squeezed in this economy which, because of the explosion, it has to be, doing it in such a way as not to hit those people who borrowed in good faith either for current purchase of houses or for the financing of industrial development." If one can disentangle that, the right hon. Gentleman seems to be suggesting a system whereby interest rates will increase for new borrowing, but not for existing borrowing. That is what it means. If it does not mean that, perhaps the right hon. Gentleman can tell us what it does mean, because he suggested that as a great solution to our economic problems. As I am anxious about the mortgage scene, I should like to know what it means. [ Hon. Members :-- "Give way."] I am asking the right hon. Gentleman, but he is not prepared to rise. If he is not prepared to deny that that is what his statement means, I shall put it again. The Chancellor should control new borrowing "in such a way as not to hit those people who borrowed in good faith either for current purchase of houses or for the financing of industrial development."

What is the right hon. Gentleman going to do? He knows full well that we cannot increase interest rates for new borrowings only. He knows that that is rubbish. He is talking just as much rubbish as his hon. Friends on the Front Bench.

Improvements to housing, new housing, repairs to housing, and investment in water, sewerage and the environment, let alone all the other matters that command the interest and attention of this House, cost a great deal of money. Yet I believe that we can have both the necessary economic growth, without which the resources to pay for these improvements will not be possible, and the measures to clean up the environment. Most of what needs to be done does not require legislation, but where legislation is required, as in the Water Bill, we shall not hesitate to act. My commitment to safeguarding the environment and the heritage and to the future of the planet is no less real, because it is founded on careful research and science. Unlike the Labour Government, this party has made available in government the resources to deliver all those commitments. 4.55 pm

Mr. Denzil Davies (Llanelli) : If I had the command of the English language which the Secretary of State has, I would describe his speech as absolute rubbish, but I do not need to comment on it because the face of the Patronage Secretary, which the Secretary of State could not see, told all. I noticed that he left the Chamber the moment that the right hon. Gentleman sat down. The Secretary of State spoke about the environment, but I intend to speak about

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a subject which used to be fairly close to the right hon. Gentleman's heart--the economy and trade. I understand that the Minister for Trade may reply to the debate.

There are about 25 paragraphs in the Gracious Speech, of which only two relate to the economy, which may present a more serious problem than the environment. After 10 years of Conservative party rule Britain has by far the worst inflation rate of all our major industrial competitors and it is getting worse. It will probably be 8 per cent. next year and who knows what it will be the following year. Our level of unemployment, despite recent falls, is still higher than that of many of our competitors. We have the highest level of real interest rates in the whole of the Western world and our balance of payments deficit is horrendous. Apart from the United States, whose deficits are also horrendous, we have the worst balance of payments deficit of all Western industrial countries. Practically all our competitors are either in considerable surplus or have small, manageable deficits. That is the position to which the Prime Minister's policies have brought our economy.

In 1979 the Government were elected on their main promise to defeat inflation--not just to control or reduce it, but to slay the dragon itself. Now, 10 years later, we read in the Gracious Speech on the subject of inflation the words :

"My Government will bear down on inflation"

--a phrase of mandarin blandness which reflects the Government's uncertainty and lack of confidence in being able to do so. I shall deal briefly, not with inflation, but with another indicator of the health of a country's economy and in particular of its productive capacity, which is the balance of payments. The Chancellor of the Exchequer has repeatedly told us that he is not worried about the balance of payments. The balance of payments, we are blandly told, always balances and that is that. But I think that privately the Chancellor does worry and if he does not, I am sure that his officials worry. If the Chancellor were able to announce a balance of payments surplus which was merely 10 per cent. of that achieved by the West Germans, he would put on his velvet suit and his gold medallion and dance in the streets.

Of course the balance of payments must balance. A balance has to balance. Every balance sheet has to balance. The Barlow Clowes balance sheet balanced, but it did not do the investors much good. The real question is not whether the balance of payments balances, but how it balances. Does it balance with a plus as it does in Germany and Japan, or does it balance with a minus as it does in Britain? Is it above the line, or below the line? As we all know, the Government, who pride themselves on their financial rectitude, balance with a minus--£15 billion below the line this year, probably another £15 billion below the line next year and who knows what will happen in the following year? All one can say with confidence is that it will be a minus, and substantially below the line.

The greatest deterioration in our trade balance has been with the rest of the EEC--our main trading partners and the countries with which we have more than 50 per cent. of our trade. That deterioration did not take place overnight, last month or the month before. It started just after 1981. In 1981 we had a current account surplus--that is a visible trade surplus-- with the countries of the EEC of £973 million. By 1984, three years later, that surplus had become a deficit of £2.3 billion. By 1986, the deficit had

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grown to £8.8 billion. Last year, in 1987, the deficit was £13 billion. Perhaps the Minister of Trade and Industry can tell us what it will be this year and next year, because the Treasury will not. When questions are tabled asking the Treasury to forecast this year's and next year's visible trade deficit with the EEC, apparently it does not know or does not want to tell.

In 1981 the manufactures trade deficit was £3.4 billion and last year it was almost £11 billion--an increase of almost 350 per cent. That is a deficit not with countries such as Taiwan or South Korea or with countries which pay low wages or use sweated labour, but with countries with a higher standard of living, higher wages and better public and welfare services than we have in Britain. By and large, they are countries that have not followed the fashion of radical Right ideology that has been embraced by Britain and the United States during the past 10 years. All the countries in Europe that have not done so seem to have a surplus while Britain and the United States have a deficit. Perhaps that is a coincidence which we can debate on another occasion.

Do the Government really believe that their present policies of merely raising the interest rates will dent, let alone substantially reduce, that massive deficit with EEC countries, especially with 1992 approaching and all the other trade barriers within the EEC being brought down? I read all the sophisticated comments in the press about interest rates, but as far as I can see, by putting up interest rates the Chancellor makes the deficit worse, as the CBI pointed out today.

A German manufacturer is very fortunate in that he can borrow at about 5 per cent. A British manufacturer now has to pay at least 13 per cent. A small manufacturer here probably has to pay 15 or 16 per cent. while his German competitor has to pay 5 per cent. Of course, the 13 per cent. British interest rate puts up the value of the pound against the deutschmark. At lunchtime today there were 3.19 deutschmarks to the pound. Therefore, German imports become even cheaper, British exports become even more expensive and the trade gap worsens. The same consequences apply with most of the countries of the EEC, although on a smaller scale. After 10 years of the Government's policies Britain is ceasing to be a major producer country that can compete effectively with its EEC partners in a whole range of goods. I concede that during that 10-year period there has been some improvement in productivity in some industries. I believe that most of that improvement is the result of high unemployment. However, despite the improvement, there is not enough industry left in Britain and the skills are not available to enable us to compete on a large scale with our EEC partners.

The Chancellor says that it does not matter and that nobody will worry about the deficit so long as it can be financed. Wise men nod at that, go away and do not think about it, but how is it being financed? Some of it--I do not know how much as we cannot get the figures these days but perhaps about 20 per cent.--is being financed out of what used to be called direct investment from abroad through purchases of land, bricks and mortar and factories. At least such investment is fairly stable. The bricks and mortar, the factories and the land cannot leave overnight. When Nestle bought Rowntrees for about £2

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billion, the Chancellor must have been delighted. He must have been dancing with joy because at that time--not very long ago--£2 billion in Swiss francs would have financed his deficit for about four months. Now it would finance his deficit for only one month, or perhaps even less than that, on the basis of last week's figures. The Chancellor now needs to sell practically every month to finance the deficit. Just as internally the Government are selling off public assets to help finance and reduce their borrowing requirement--we heard today about the water and electricity industries--to finance their own public expenditure and bring down the percentage total of GDP, they are happy and delighted to sell British industry to overseas buyers to finance their external deficit.

Direct investments finance only a small part of the deficit. The rest is being financed by what used to be described as "hot money"--money that now can leave the country at the touch of a button. That money can go into stocks and shares, but no one is buying stocks and shares at the moment because of the lack of confidence in the Government's economic policies. In theory, it could be invested in Government stock, but there is not much of that around, because, as the Chancellor boasts at the Dispatch Box, the Government are repaying the national debt and are not issuing stock. It is curious that the yield on longer-term Government stock is less than what it would earn in the bank.

Why should a foreign investor buy medium-term gilts when he can get far more by putting the money on bank deposit? Of course, that is what is happening. The Chancellor does not worry about the deficit. He does not care about it, he just wants to finance it. Frankly, it is being financed by the hottest of hot money--that is, bank deposits. It is no wonder that at 3.30 pm last Friday the Chancellor rushed to put up interest rates to 13 per cent. If he had not, by this afternoon half those deposits would have left the country and sterling would have been under pressure.

The Chancellor is now a prisoner of external events which are completely outside his control. If, for example, the new American President were forced to put up American base rates by 2 per cent. to protect the dollar, the Chancellor would have to put up the British interest rates by 2 per cent. immediately because he would have to stop the flight of money out of London and into New York and so maintain the exchange rate differential. Paradoxically and ironically, if the dollar recovered, the Chancellor would have problems again as there would be a flight of money from London to New York and the pound would be under pressure.

What is to be done about the enormous balance of payments deficit, especially--this is the heart of the problem--the deficit with the rest of Western Europe? In the end the Government will be forced--it gives me no pleasure to say this--either by market forces or by a sense of economic reality, to try to negotiate Britain into full membership of the European monetary system. That would involve a substantial reduction in the value of the pound against the deutschmark and the realignment of other currencies in the EMS. The Chancellor wanted to do that at the beginning of the year. He, or his officials, spotted what was likely to happen, and tried gradually to bring down interest rates, and in doing so, to bring down the value of the pound against the deutschmark without anybody--perhaps not even those at No. 10--noticing that we were slowly slithering into the EMS.

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As 1992 approaches, and further trade barriers come down, Britain's economy will, unfortunately, have to be submerged and pulled into the stronger economies of Western Europe. The Prime Minister will not like it--indeed, most of us in the House will not like it. However, if that comes about--as I believe it will--it will be as a result of the Government's mismanagement of the economy over the past 10 years and it will signal an ironic and ignominious end to what has been described as Thatcherism and to the Thatcherite economic revolution.

5.11 pm

Mr. Michael Heseltine (Henley) : I shall return to the speech made by my right hon. Friend the Secretary of State and the references that he made to water privatisation. I strongly support the inclusion of that proposal in the Gracious Speech. I say that as a former Secretary of State for the Environment who went through the annual expenditure round. Year after year, I saw the processes of attrition whereby the demand-led, index- linked, and consumption programmes of Government pre-empted ever larger claims on national resources. At the end of the day, when the spending departments are up against the wall and the Star Chamber meets, it is the capital programmes that go. The capital programmes went out under the previous Labour Government and in part, though not on the same scale, it was the capital programmes that suffered in the early years of this Government. The hon. Member for Copeland (Dr. Cunningham) referred to cuts in council house sales as if they started under this Government. However, we all know that they started in 1976 when the International Monetary Fund came in and precisely the same happened to the investment in the water industries.

The essential strength of my right hon. Friend's case is that he is separating the regulatory and unavoidable responsibilities of the Government from the management and provision of infrastructure, which can be handled by private sector endeavour. What will then happen--I hope that my right hon. Friend has given sufficient determination to this aspect of his policy--is that my noble Friend Lord Crickhowell will be in the driving seat to improve the standards because he will not be preoccupied with the public expenditure consequences of what he is trying to do.

The issue is simple. Do we want to move faster towards higher environmental standards in water provision and sewage disposal? I believe that the Government and my right hon. Friend the Secretary of State are right to say that we do and it cannot be denied that a major way of achieving that is to privatise the water industry and allow the Government to do what Government are unavoidably responsible for doing, which is to enhance the standards of environmental protection. In the last resort it is that by which the measure stands or fails. It is a measure for environmental protection and is to be welcomed in that context.

I understand the Labour party's resentment of the statements that we are making. However, in 1979 we inherited a programme of reduced capital expenditure. The Opposition did not see the consequences of the cuts that they were making. I say at once that they did not make the cuts of their own volition but were forced to do so by the random and reckless economic policies that they pursued. If we want to escape from that, the essential first

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step is to separate the regulatory processes from the investment processes. I strongly support that process and I hope that my noble Friend Lord Crickhowell will take the high environmental road available to him.

I want to make three points about the Government's environmental policies and get them in a context which is wider than national policy. First, without a doubt, the environment has now become a big responsibility of the Government and I believe that that responsibility will grow. Secondly, the little perceived but important commercial and entrepreneurial opportunities of rising environmental standards are already large and, if carefully administered, they can become dramatically more important to Britain. I am glad that my right hon. Friend the Minister of Trade and Industry is present to hear the debate.

Thirdly, because the responsibilities have become increasingly significant for the Government and because the commercial opportunities for enhanced environmental standards are so exciting, it would be less than surprising if there were not geo-political controversies on the horizon. I believe that in the environmental debate we will shortly see a re-run of the unilateral peace arguments of the 1960s and 1980s.

Let us have no repetition of the nonsense of Opposition Members when they suggest that it is not the duty or the wish of the Conservative party to achieve higher environmental standards. It is the responsibility of the Government to do that. There will always be somebody in an unfettered market place who pressures the standards at the lower end and thus destroys the environmental standards that it is the Government's responsibility to uphold. The only way in which that can be prevented is by environmental regulation by the Government. The Government, like all preceding Governments, have been deeply immersed in that process.

It is increasingly clear that environmental regulation is not sufficient, even in the hands of the largest and richest country, to achieve protection of the environment in the areas of world concern. It is relatively easy for Governments to agree about the rhetoric, the phrases and the grand objectives, but it will be difficult for Governments with different backgrounds, attitudes and practices and at different stages of development to accept the environmental standards that will add up to a global protection of the environment.

The Government are courageously and rightly setting out in a series of speeches their views about the broad issues. However, a growing number of people are advancing arguments against aspects of the Government's policies, attacking one place here and another place there. That is a perfectly legitimate feature of a democratic process and none should gainsay it. I hope that the Government will see the need to produce an omnibus response to their environmental policies. An environment White Paper would draw together the general objectives. It should set out the targets the Government have in mind, the agencies, most of which will be international, with which they see the targets being achieved and some idea of the cost and the pace at which all that could be made possible. It is of paramount importance to Conservative Members to be able to advance behind the Government's environmental case with the legitimate pride that comes with being able to show a coherent approach to the issue. I believe that an environment White Paper would be a significant contribution to the debate.

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My second point concerns the commercial opportunities. It is easy for critics of the Government to see them as always interfering or involving themselves in some aspect of commercial activity and, indeed, to view the regulatory responsibilities of Government as being in some way the intrusions of over-anxious or energetic civil servants. That is one way to look at it.

There will be those in the commercial world--usually those enthusiastic about the lowest standards--who will use just such arguments. I very much hope that my right hon. Friend the Minister of Trade and Industry will perceive a quite different set of opportunities. I remind him--although he needs no reminding--of what happened when the Conservative party introduced health and safety at work legislation in the early 1970s. Some criticised us for intervening, but once we had made such a major step forward to improve the environment of the British people at work a whole range of industries emerged to meet the new standards that the Government had imposed by regulation.

It is quite apparent that this market place of a one nation state is not large enough to have a world impact on the standards of industry. If Europe, as a group of nation states, adopts one standard for each country, it will be the Americans and the Japanese who, through the protection of their market by regulatory processes, will set the world standards. If Britain, through the British Government operating in Europe, wants to influence the world market place and world standards, it must be done in concert with the European single market, which will come into existence in 1992. Our national market will be subsumed in that market place.

The responsibility of Government must be to be sure that, in Britain's self -interest, we seek to influence the standards of the European market place- -not only because we want to impact upon the world environmental condition, but because if the British Government do that we shall make the best deal that we can for British industry, commerce and manufacturing interests. There is a fundamental interest in ensuring that within the cohesion of Europe we influence what is happening both for environmental purposes and to secure the job and investment opportunities that a properly regulated environmental process can achieve.

My third and final point is more controversial, but I do not hesitate to make it. Those of us who are veterans of the debate about the modernisation of NATO's intermediate nuclear systems in the early 1980s, which led to the deployment of cruise and Pershing 2s in Europe, were familiar with the many different groups arguing the unilateral cause. I would be the last to suggest that all those groups were supportive of or sympathetic to the Soviet cause, but a significant number of them were. The more that that link between Soviet interests and the unilateral cause became clear, the more discredited became the unilateral cause in this country.

It was something of a nostalgic trip down memory lane for me to read Mr. Shevardnadze's speech in September--incidentally, on the same day that an excellent speech on the same subject was made by the British Prime Minister --in which he referred-- [Interruption.] The Prime Minister's speech was intellectually of a very high standard, so Opposition Members probably would not

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have understood it even if they could have read it. Mr. Shevardnadze's speech referred to green peace. However, he was referring not to the organisation that leads so many environmental protection causes, but to a link between the old concepts of nuclear disarmament and the environmental interests not only of enhanced standards in the Soviet Union, but of other Soviet interests. It is important that we in the western world understand the linkage that the Soviets now perceive in the new concept of green peace. Mr. Allan Roberts rose --

Mr. Heseltine : I shall not give way because I have been asked to be as brief as possible.

Mr. Roberts rose --

Madam Deputy Speaker (Miss Betty Boothroyd) : Order. The right hon. Gentleman is not giving way.

Mr. Roberts : Well, the right hon. Gentleman intervened.

Madam Deputy Speaker : Order. The right hon. Gentleman is not giving way.

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