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control by administrative means, price or quota, or deflation. In an arrogant fit of pique, the Chancellor has burnt all those books, so he need not admit that he has made a mistake. Those books are no longer on the library shelves. When I asked Sir Terence Burns about the textbooks, he did not know anything about them and said that they were no longer relevant.

On the subject of the consumer boom, the Chancellor is the only economist in history to say that the only way to cure it is to raise interest rates. The textbooks would tell another story, if they existed, and would suggest a whole battery of fiscal policies that could be used. They would say that monetary conditions can be altered by credit control, with or without exchange controls. They would say, even more importantly, that the propensity to imports can be changed either by switching from consumption to investment or by switching from consumption to public expenditure. That meets one of the sillier points made by the hon. Member for Croydon, South (Sir W. Clark). Having abandoned the sum total of human knowledge as set out by economists around the world throughout history, the Chancellor is surprised that he now begins to get everything wrong, that he is the laughing stock of G7 Ministers, that the people from the International Monetary Fund who have just come to this country are beginning to find him an object of scorn and that he is the butt of cartoonists in our national newspapers.

The underlying reason for all that is simple. The Chancellor is driven by one linked belief--a belief in markets, deregulation and the idea that monetary control is the only control of the economy. He has tried it nine times and has failed. He tried M3, and when that failed he tried MO ; when that failed he tried M1 and when that failed he tried M2 ; when that failed he tried M4 and when that failed he tried M5 ; when that failed he tried PSL1 and when that failed he tried PSL2--and when that failed he tried DCE.

We are coming up to Christmas and I am prepared to offer £10 to a charity chosen by any Conservative Back Bencher who can now interrupt me and give me a definition of each and every one of the Chancellor's monetary variables. Is it not extraordinary that not one Conservative Back Bencher knows what the Chancellor of the Exchequer has been talking about for the past five years? They go back to their constituencies every week and preach monetarist dogma, but they cannot define the basic definitions.

Then, as if all that is not enough--

Mrs. Teresa Gorman (Billericay) rose --

Mr. Sedgemore : I think I shall sit down.

Mrs. Gorman : Does the hon. Gentleman agree that his party's addiction to Keynesian economics is just as indecipherable, inscrutable and completely unintelligible to the man in the street?

Mr. Sedgemore : As I am never quite sure what my party is addicted to these days, the hon. Lady must forgive me if I do not respond. I like Keynes and think that he was a great person. Indeed, I believe that we want a combination of Keynes and Marx, and that is what I am working on. If the hon. Lady has a little faith, the right policies will come along.

The last curse of the Chancellor is that he is now coming here with the ultimate lunacy. He told us this afternoon that

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he can control each and every one of these economic variables all the time and at the same time, and that, although there is not a shred of empirical evidence that there is any relationship between one or all of the variables and the rate of inflation or the balance of payments, that will effect a magical economic cure. What is wrong with that is quite simple : it is economics by formulae, whereas we want economics by judgment. It is because the Chancellor of the Exchequer is wholly lacking in economic judgment that we shall oppose the Government tonight.

Several Hon. Members rose --

Mr. Speaker : Order. Before I call the next hon. Member, I should remind the House that we are now in the period of the 10-minute limit for speeches.

7.2 pm

Sir Peter Hordern (Horsham) : The hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore) told us that he very much admired his economics tutor, but he did not tell us what his economics teacher thought of him. I can only guess from his fluent command of German that his economics tutor shunted him off as soon as he possibly could.

Last October, most of us were concerned about the effect of the crash and what it might do to the world economy. Although there were signs of monetary overheating, the judgment of the House--this was certainly true of the Opposition at the time--was in favour of keeping the economy going, and that was the view of other countries also. I know that by the Budget earlier this year it was clear that the world economy had recovered and that all might be well, but there was nevertheless some doubt about that.

Therefore, it was perfectly proper for my right hon. Friend the Chancellor of the Exchequer to remind us earlier today that on balance he thought that reducing the rate of interest to 7.5 per cent. was the right thing to do. If he had reduced the rate of interest to 7.5 per cent. and combined that with an announcement that we were to join the European monetary system and have a close association with the deutschmark, that would have had a salutary effect on inflation prospects. Unfortunately, that was not done. In retrospect, it is easy to see that reducing the rate of interest at the time of the Budget without an accompanying commitment to the deutschmark or to joining the EMS was a mistake. Indeed, my right hon. Friend the Chancellor has cheerfully admitted that.

Looking at this crisis--as the Opposition call it--and comparing it with others--many right hon. and hon. Members present can remember former crises --the question that arises is how serious a crisis is it. The one thing that distinguishes former crises from the present situation is that in each and every one of those crises there was a large public sector deficit and a significant public sector borrowing requirement.

Those deficits drew the attention of the International Monetary Fund and created real problems for the Governments of the time. My right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath) reminded me of that, but did not say that the distinction between the current position and that in 1973-74 is that out of our total

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revenue in 1973 of £24 billion, our PSBR was £2.2 billion--nearly 10 per cent. In 1974, the PSBR was £3.5 billion out of a total revenue of £29 billion--well over 10 per cent. If that did not set the alarm bells ringing, I do not know what should have set them ringing. It certainly alarmed me and some of my hon. Friends.

If one contrasts the position of the early 1970s with the later 1970s when we saw the large PSBR difficulties and the deficit of the Labour Government with our position today, one must admit that there has been a most remarkable transformation. I did not think that we would see the day when we would be repaying our public sector debt at the level that we are. I believe that it is £10 billion this year--and not all of that is money drawn from the sale of nationalised assets. Even if we do not take those into consideration, I believe that we are repaying about £4 billion.

It is not possible to minimise the importance of the public sector surplus and the way in which it is being treated. My right hon. Friend the Chancellor is perfectly justified in taking credit for that. If that large sector of the economy--the public sector--is in surplus, where do we look for the trouble spots in other parts of the economy? Companies are a very important part of our economy and it is clear that we are in substantial surplus in that area also. In 1983, company savings amounted to £25.9 billion, less capital investment of £15.8 billion. Last year, company savings were nearly £46 billion--by far the largest ever--and our capital investment was £30.7 billion--again by far the largest ever. In the second quarter of this year, both savings and capital investments in the company sector have been higher. Therefore, we are in an extremely strong position in both the public sector and the corporate sector. Indeed, I do not believe that the corporate sector has ever been as healthy as it is today.

One can draw a sharp distinction between today's position and what used to happen in the 1970s. That distinction is important and significant. However, we have a particular problem with the personal sector and I do not think that it is right to minimise that. In 1983, personal sector savings were £21.3 billion, but last year they had fallen to £14.8 billion. However, the figures for borrowing for house purchases were £14.5 billion in 1983 and they have risen to £29.6 billion. Therefore, not only had savings in the private sector reduced significantly, but borrowing for house purchase and other activities had increased markedly. In fact, borrowing for house purchase was twice the level of private sector saving. The Government must take account of that fact.

We need to address the matter of borrowing for consumption. In 1987, such borrowing totalled £8.7 billion and in the first three quarters of this year it was £9.3 billion. That shows an extraordinary increase which far exceeds the rate of saving. Therefore, if we have to distinguish the parts of the economy that are doing pretty well and are comfortably well off, they would be the public and corporate sectors.

When Opposition Members talk about the damage caused by higher interest rates, they should bear in mind the level of corporate sector savings. I do not think that they have ever been quite so healthy. It is quite clear that corporations are increasingly financing themselves not through borrowing but through retaining cash. Contrary to what Opposition Members say, the corporate sector will

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not find much of a squeeze for the moment. Smaller companies and individuals may do so, but, in the sector as a whole, companies will not find all that much difficulty.

What is to be done in the private sector? My right hon. Friend the Member for Worthing (Mr. Higgins) and other hon. Members touched on this matter. We need a two-pronged attack to increase the level of private sector savings and to diminish private sector expenditure. If we can improve the rate of savings by a significant amount, the consumer boom will diminish, and if we can discourage people from spending as much as they do at present we shall enlarge the effect. Let us examine the prospects. With interest rates as high as they are now, they must be an attractive proposition for private savers. We should not forget that there are rather more private sector savers than borrowers, and I expect them to increase thir savings. The private sector is quite well off at the moment, with wage increases going on as fast as they are. That is another point that we must have in mind. It is right to use interest rates to discourage expenditure.

My right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath) thought that the Chancellor was using only one golf club. I inform my right hon. Friend, who used all kinds of devices, including prices and incomes policies and other things that did not work, that it is much better to go around a golf course with one club--I speak with my enormous handicap as the parliamentary golf champion--than it is to go around with a sand bag and axe in one's golf bag, which is what my right hon. Friend the Member for Old Bexley and Sidcup did. I conclude my remarks. I had no idea that I had taken so long, and I apologise for doing so. I have made the important points that I wished to make.

7.12 pm

Mr. Tony Worthington (Clydebank and Milngavie) : I start by referring to a couple of points that affect my constituency and Scotland, and use them to instance where things are going wrong in the economy. One matter about which people have not talked much, but which I find disturbing, is the of takeover mania that has been going on. I refer to a quite small takeover, whereby the French firm Kelt has been trying to take over the British oil firm Carless. In Old Kilpatrick, in my constituency, there is a small oil refinery that Kelt has never heard of. One of those high leverage bids is in progress. A bid of £206 million has been put in, and, to finance it, Kelt must borrow £191 million, which must be paid back in total within 12 months. It is quite staggering. There is only one way in which that can be done, and that is by selling the assets of the company that is being bought. It means that, in a sense, Kelt has quite honestly declared that it has no interest in downstream activities--oil refineries, oil products and so on. It is interested only in drilling rights. My constituents, along with those of many other hon. Members, have found that a firm is being sold off. What are the prospects for that firm? Carless behaved in an exemplary way. It had taken over an oil refinery that was going nowhere. It invested heavily in it, and saw that there could be a long-term market--already employing 100 people in my constituency--in producing specialist oils, napthenic oils, and transformer oils, for which it had

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a market lead. It is clear that if the bid goes through the company will be sold, either at a cheap rate--in which case, it will eventually close--or to a foreign competitor.

What is the relevance of that kind of takeover to the future prosperity of the country? Who benefits from that kind of takeover? The Chancellor is turning a blind eye. That is one illustration of how the economy is working.

Another illustration has an insidious effect on the social fabric of the country. We heard the right hon. Member for Worthing (Mr. Higgins) and other hon. Members refer to wage rises and how they are pushing up inflation. I refer to the behaviour of the directors of Scottish and Newcastle Breweries. As it happens, the great mass of Scottish Members support Scottish and Newcastle in its resistance to Elders bid. But what have the directors of Scottish and Newcastle done to command support?

A group of people were already in a position to set their own salaries and to say what they were worth. How lovely it must be for one to say how much one is worth and how much one can be paid. Then along came the Chancellor who said, "You are not worth as much as you once said you were ; you are worth more." Then along came Elders. This year we have been inundated with rumours about the takeover of Scottish and Newcastle by Elders or others. The directors of Scottish and Newcastle were issued with privileged shares. What did they do? They sold them at a profit of £560,000, individually making £80,000 profit.

On 17 December, the chief executive of Scottish and Newcastle, Mr. Rankin, exercised his right to buy 100,000 shares at 110p. He sold them the same day for 214p, netting £104,000 profit. On 22 March, the managing director exercised an option over 80,000 Scottish and Newcastle shares at 110p, and sold them the same day at 280p a share--a profit of £136,000 on one day.

In that sort of climate, in which the force of Thatcherism has been set loose, it ill-behoves Conservative Members to talk about holding back wage demands.

Let us examine another way in which the events of that crisis are bothering my constituency and many other Scottish constituencies. It means that, perhaps, we are heading not only for a slow down in the economy but for a full stop as the forces of higher interest rates operate. There will be considerable difficulty for areas that have not yet benefited from any northward spread or ripple in the economy. I am particularly keen to change the Government's belief that urban regeneration in the north and in Scotland and Wales can be private sector-led.

The chairman of the Scottish CBI, Mr. William Hughes, pointed out that Glasgow was the best example of what public and private partnership could achieve. He acknowledged that the Scottish Development Agency, Strathclyde region and Glasgow district had been the prime movers in starting Glasgow's remarkable investment programme. He stated :

"Business contributed its energy, enterprise and capability. It is not necessary that we bring cash to the partnership."

It is essential that someone brings cash to the partnership, that we stop the abuse of local government which Mr. Hughes recognised was causing the turnround in Glasgow, and that this regeneration is not stopped because the south-east starts to overheat. We shall look for a change of policy by the Government in that respect.

We have heard about economic miracles, but what economic miracle do we have? No other advanced country has neglected manufacturing industry as we have, and we claim an economic miracle when the British public cannot

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or will not buy British goods. We have heard about increases in productivity but, as John Banham said, our productivity is still 10 years behind French and West German levels and 20 years behind the Japanese level. Our productivity has increased but from a low level. We hear about 1992 which holds considerable dangers as well as opportunities. Banham says that German social costs and legislation, together with United Kingdom productivity, would be a lethal combination. Is it any wonder that the Chancellor is worried about 1992?

7.22 pm

Mr. David Howell (Guildford) : I think that my right hon. Friends the Chancellor of the Exchequer and the Member for Chingford (Mr. Tebbit) were a bit rough with the hon. Member for Dunfermline, East (Mr. Brown) in saying that he did not produce any policy. The fellow was doing his best and he produced a policy in the middle of his speech as the answer to our immediate problems. It was one that he had inherited from previous Labour Governments : to increase taxes and reverse tax cuts. We have heard that before.

The Labour party has been through a good many rethinks recently, some of which are rather heartening. For example, I like the way that it is beginning to take Europe seriously, even if it is attracted by some aspects which do not attract me. But it has not yet grasped the central point about taxation policy, which my party and the Government have grasped, and that is that if one reduces the rates, one raises the yield. The Labour party should grasp that point by studying the facts of recent developments here, in the United States, West Germany, France and Japan. Again and again low- tax societies are seeing an acceleration in revenue, and until the Labour party grasps that, it will be in a constant muddle.

Mr. Dobson : Will the right hon. Gentleman give way?

Mr. Howell : I cannot because we are in the sprint section of the debate and we have to scramble on. I do not like it, but that is how the debate is organised.

We face ferociously unstable world conditions. Ours is a medium-sized economy in a big sea and the high ambitions of any economic task today must be to keep the boat afloat rather than to be precise about where we can land it.

There runs through these debates nowadays a grossly exaggerated view of what national economic managers can achieve either by manipulating Keynesian or monetary aggregates. The hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore) treated us to an endearing and entertaining speech which we enjoyed but which was riddled with that concept which Marx to some extent entertained. Equally, Keynes saw, because that was the world in which he lived, that each economy was an autonomous unit which could be managed and turned up and down by pressing the appropriate monetary or Keynesian levers. That age has completely disappeared.

We are now in an enormous and uncertain global environment in which appalling crises come along, forecasting is virtually impossible and statistics are wildly wrong. I believe that the Central Statistical Office is still revising the figures of 10 years ago and finding them wrong. We face great uncertainties, not least across the

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Atlantic with the new President shaping up to his huge budget deficit, the continuing imbalances of both Japan and the United States, the looming crisis over leverage buy-outs--another big crisis involving billions of the American thrift institutions which have all been taken for a ride--and plenty more crises beyond that, all occasionally erupting into financial instability.

The Chancellor had to make his judgment a year ago in the context of black Monday and everyone, but everyone, was saying that we must avoid a repeat of 1929. There was universal acclaim for the skill with which he and other G7 Ministers organised finances to prevent economic slump following financial slump. It is no good today saying that we have forgotten all that and we shall judge him on different criteria. A year ago everyone--not least the Labour party and many of my hon. Friends--was full of wisdom that that was the line that he had to take. Now the pattern has changed and expansion has been far more vigorous than anyone predicted. We face overheating which has given rise partly to the trade deficit and to the theme of this debate. Interest rates of 13 per cent. are probably the top and high enough to satisfy the international holders of sterling and to cool the economy. Although my hon. Friend the Member for Horsham (Sir P. Hordern) is a great expert on these matters, I do not think that that rate provides much of a savings incentive. An individual would receive 8.5 or 9 per cent. interest from a building society or high interest bank account, but when one knocks off 25 or 40 per cent. income tax it hardly leaves a real return, so that will not help the drive for savings.

What then do we do? All hon. Members have rightly said that this is not 1974 or 1981 but an entirely new situation both globally and locally. It is new because we have some of the strongest public-sector finances in the world with a colossal surplus. The public sector is saving and is not in debt and the corporate sector is saving massively and is not in debt. Some experts say that that is an inevitable reflection of the fact that the private sector and consumers are not saving.

The corporate sector is sitting on billions of retained profits. Mr. Tim Congdon, in an interesting article in The Times, pointed out that perhaps all our views of the low personal savings ratio here and in the United States are badly wrong. Bearing in mind his warning that the situation may not be as bad as we think, the next move in the evolution of Government strategy, having so far rightly put all the emphasis on interest rates, should be to give some indication of thinking about how to raise personal savings. In short--and my Conservative colleagues should be particularly enthused with this thought--we should consider how to get savings out of the state sector and into private hands without it leading to more consumption. There are ways of doing that and they should be discussed in preparation for policy makers to develop them in time for the Budget. In particular, we should think of ways of encouraging savings in shares, unit trusts and various assets, as they have gone into housing. I should like to see a levelling up rather than a levelling down of tax reliefs. As others have suggested, I should like to see limited front-end tax relief for savings for millions of people similar to the system introduced in France in the early 1980s, which was called the loi monory.

We should encourage a much greater expansion of personal pension schemes-- the self-employed pension

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schemes that involve putting money aside to add to one's own pension. The trouble is that the fiscal structure is geared away from encouraging personal savings and towards institutional savings. Again, there should be a levelling up rather than a levelling down. Unless we change that pattern, far from wider share ownership there will be narrower share ownership. That is happening already, with 80 per cent. of equity being held by institutions. That is much higher than even five years ago, and the pace in that direction is increasing. If my right hon. and hon. Friends on the Front Bench wish to maintain steam in the direction towards wider personal share ownership, they will have to have some new thoughts about personal savings incentives to make them at least as good as the incentives to save through institutions. The latter increasingly dominate our economy--much more so than many other economies.

I have talked about savings for people who pay tax, but we must not forget that many millions of people do not pay tax. The social security system is geared to discourage them from saving and to push them into a poverty and savings trap. That is highly undesirable and should worry the Conservative party more than it does. If we wish to extend the philosophy of more personal savings and wider share ownership to all levels of society, we must reform the tax system and the social security benefits system together, which at present are too discouraging to those who save a little. Their savings deny them a range of benefits.

That poverty trap is much too deep in our society, and it is made deeper by too much targeting. I am all for targeting the elderly, but if we target too much those of working age we shall create an even bigger poverty trap and greater discouragement for millions of people to save money and join in the ownership economy that we wish to create.

7.32 pm

Mr. Win Griffiths (Bridgend) : In the Gracious Speech the Government said that they would bear down on inflation and foster conditions for sustained growth. But we are in the midst of a crisis of inflation. Barely a week ago, we were told that everything was fine and that we need only keep our current policies on course to reach a point where inflation would be much lower than it is now. We were told that unemployment would continue to fall and that, perhaps before the next election, it might be as low as it was when the Labour Government were in power. But the balance of payments deficit and the 1 per cent. increase in interest rates, which is likely to lead to an increase in the mortgage rate of 0.5 or 0.75 per cent. next year, following more than half a dozen increases since May, mean that we are in the middle of a crisis. But the Government pooh pooh that notion and try to push it to one side.

Suddenly it has become wrong to include mortgage interest increases in the cost of living index. Tell that to home owners who must dig deeper into their pockets to pay increased mortgage charges. Of course, the mortgage rate is part of their cost of living. Any attempt to take it out of the retail prices index would echo the tricks used by the Government to reduce the real rate of unemployment. They are merely shuffling the figures. Let us not push aside the increase in mortgage rates as being of no importance. What price does the Chancellor put on the property-owning democracy that he is so keen to encourage?

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The Chancellor's policies are in shreds. He cannot admit it, but almost every forecast that he made in the Autumn Statement has already gone hopelessly wrong. He says that he has never laid importance on forecasting, but as Chancellor of the Exchequer he must develop policies based on forecasts of what he believes may happen. At one time, the Chancellor hoped that inflation would be zero, and later he thought that it might be about 4 to 5 per cent. It is now nearly 6.5 per cent. and is likely to go much higher during the year. Unemployment, which was showing a downward trend, is likely to increase again. Perhaps when the Leader of the House replies to the debate he will forecast what will happen to unemployment. Dare we ask for a forecast of the trade deficit? Will the Government give us any idea of what they believe will happen? If the policy of increasing interest rates is the only one that the Government have, what effect will it have on the British economy? What effect will it have on inflation and on unemployment during the next three months, six months or the coming year?

It is especially important for the regions of the United Kingdom to know what those forecasts are. Most jobs have been created in the south-east. Outside the south-east, there are far fewer jobs than there were in 1979. Despite an expansion in part-time jobs, in Wales there are 130,000 fewer jobs than there were in 1979. In Scotland, the comparable figure is 173,000. In almost every standard planning region in England, above the line drawn from the Severn to the Wash, there are fewer jobs than there were in 1979. Will the Chancellor's policy of a 1 per cent. increase in interest rates now, perhaps with later increases, do anything to create jobs, especially north of that line from the Severn to the Wash? I want to hear answers to those questions tonight.

What will the increase in interest rates do to Government revenue? Although it may be the most fiendishly difficult area in which to make forecasts, it is thought that if domestic demand is reduced--that is what the Government hope will happen--by about 2 or 2.5 per cent., it could reduce Government revenue by almost £2 billion. We have many questions to ask the Government about how their current policy will affect the economy, especially the economy of the regions. The Government's regional policy has resulted in real-terms spending on the regions being cut by two thirds since they came to power. What are the alternative policies? Virtually everybody outside the Tory party and its running dog economists forecast that the cuts in tax rates would lead to a consumer boom and to pressure on the balance of payments. An even more conservative body than the Tory party is the House of Lords, and its Select Committee on Trade and Industry said in 1985 that under the Government's current policies there was bound to be a problem in sustaining exports and controlling imports.

The chickens are coming home to roost and there is no point in the Government saying that their interest rate policy is the only one that they have. There is no point in Conservative Members and the Chancellor saying that the mortgage interest rate should be taken out of the retail price index because it does not really count and that things will be better if it is removed. The high mortgage interest rate means that it is costing people more to live in Britain and it is resulting in higher unemployment outside the south-east. Because of dramatically overheating pressures in the south- east, people from Wales, Scotland and the north cannot afford to go south to take up jobs.

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Some of my constituents have written to me asking if I can find them a home that they can afford in London. They say that they have jobs here, but cannot bring their families to live in London. That will remain a constant problem for the Government. I hope that the Chancellor will have some humility and will realise that what he has done so far is wrong. I hope that he will adjust his course so that we can get more public investment because that will create more jobs and will not lead to a vast increase in imports. I hope that the Chancellor is listening.

7.42 pm

Mr. Quentin Davies (Stamford and Spalding) : I should like to speak about competition policy and ought therefore to declare an interest, albeit a rather indirect one. For some years I was a director of Morgan Grenfell, the merchant bankers. I resigned from the board a few months after being elected to the House last year, but I am still a consultant to my former firm. I am also a director of Dewe Rogerson International which has advised many major companies on the communication aspects of bids and mergers. I emphasise that neither of those companies had the faintest idea that I would seek to speak in the debate and neither knows what I am about to say, except in so far as my former colleagues may know my general ideas on the subject.

I congratulate the Government on what appears to have been a robust response to the nervous bleatings that we heard the other day from some members of the Confederation of British Industry who appear to be afraid of being taken over. The existence of a public market in mergers and acquisitions is an important element in the motivation of top management. I can think of few better ways of blunting the cutting edge of management aggressiveness than sending out a clear signal to top managers that they are secure in their jobs indefinitely and can sit back comfortably until the end of their careers.

Mergers and acquisitions are also an important element in the essential process of readaption and renovation of industry. Traditionally we used to think of mergers and acquisitions as leading to the concentration of industry. Of course that is the Marxist tradition in which some Opposition Members were brought up. We now see increasingly--and the examples in the United States are particularly encouraging--that mergers and acquisitions can just as readily be about the disaggregation as about the concentration of industry. Sometimes they are the only effective way of breaking up conglomerates that have lost their rationale or perhaps never had a great rationale. They can release the component businesses to develop their own focus without the encumbrance of the constraints and the avoidable overheads from which they previously suffered.

Where mergers or acquisitions involve management buy-outs, whether because management instigates the bid or because a successful bid clears the way for a management buy-out, a most interesting and encouraging phenomenon occurs. The businesses concerned are returned to the entrepreneurial model of business leadership that was the basis of our industrial revolution and the model within which most firms have known their fastest periods of growth.

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Mergers and acquisitions are thus an important and useful engine of economic progress and it is important that competition policy should not act as an undue brake on that engine.

Against that background I should like to draw the attention of the House to a major qualitative change in this area which we are now forced to recognise. It is the international dimension to competition policy. Global markets--financial, industrial and commercial--appear to be here to stay and I thank God for it. We no longer therefore have the luxury of conducting a pure competition policy within national boundaries.

I draw to the attention of the House two aspects of this internationalisation. One is the impact of the choice of a geographical perimeter or horizon for competition policy on industrial structure. I shall quote one brief example. At the time of the Nestle bid for Rowntree it was widely theorised that an alternative might have been a merger between Cadbury Schweppes and Rowntree. I have no idea how seriously that possibility was examined by those firms. However, it had been considered axiomatic in the City for a long time that such a merger would have been excluded by competition policy because in Britain those two firms combined would have had a dominant market share, or would have been considered to have such a share.

In the international context or in the context of the European Community, however, a merger between Cadbury Schweppes and Rowntree would have had less of an impact on competition than the merger between Nestle and Rowntree which took place. I pass no judgment on the merits of that merger, but draw to the attention of Ministers whose responsibilities lie in this direction that competition policy, as it is presently structured, effectively excluded the option of the emergence in Britain of a major international confectionery grouping, a British Nestle or a British Jacobs Suchard. I regret that, and in that context I am delighted to see that the Government are taking part in discussions with our Community partners with a view to producing a regime under which major mergers with sales of more than 1 billion ecus and considerable transnational business will in future be examined on a Communitywide basis. I am convinced that that is in the interests of British industry.

Another aspect of this international dimension is the whole issue of reciprocity. At the time of the Nestle bid, general attention was focused on the fact that many Swiss and Scandinavian companies have articles of association or foreign exchange regulations that prevent foreigners from buying certain classes of their shares. It is much less well known that even within the European Community many public companies, and the majority of such companies in Holland and Germany, have provisions that prevent any shareholder holding more than 3 or 5 per cent. of their stock. Effectively that means that those companies are proof against takeovers. That presents a dangerous and unfair constraint on British industry. It means that the acquisition and merger flows can go in only one direction. It also means that if major international industrial groupings are to be formed by means of acquisition in the European Community, they will be based on the continent and not here.

I ask for no privileges for British industry but only that it should not be asked to play on a field where the other side plays in front of a closed goal. I beg Ministers who have these

responsibilities to consider with some urgency, whether in the context of a new European company law or

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otherwise, how we can get back to having Queensberry rules in this area. That would be in the interests of the whole of the European Community.

7.50 pm

Mr. Chris Mullin (Sunderland, South) : The silence which greeted the Chancellor's speech from those on the Benches behind him was eloquent testimony of the scale of the difficulties that he now faces. This is a cruel place, and those who cheered his tax cuts to the roof last April were noticeably silent as he dug the pit deeper today. Perhaps they got a glimpse of the future, and did not like what they saw.

I shall forgo the temptation to sympathise with the Chancellor of the Exchequer. He is in the process of getting his come-uppance. It is long overdue and it could not have happened to a nicer fellow. However, no one should suffer from the delusion that the scale of the difficulties that we now face is down to him alone. He is only the most conspicuous representative of an immoral philosophy shared by at least two thirds of Tory Members, which has at its core the remorseless pursuit of the fast buck in the shortest possible time without regard to the social consequences.

Whatever his fate, the Chancellor will not be the one to pay the price for the folly that he has pursued. That fate will be suffered by the millions of shattered lives that are a consequence of his economic policy. It will be left to others to clear up the mess. It cannot be said too often, and it has been said today, that the alleged economic miracle is based on a number of unique factors that have given the Chancellor resources that no other Chancellor before has had, and that no Chancellor after him will have, at his disposal. He has had from oil revenue at least £65 billion, and, taking account of savings as a result of not having to import oil, the figure amounts, as my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) said, to £120 billion.

The revenue from privatisation--there is no better example of the short- term folly that he has pursued than the sale of public assets--amounts to about £25 billion. Some £7.7 billion of it came from the sale of British Gas, £3.6 billion from the sale of British Telecom and at least £1 billion from the sale of Britoil. The Gracious Speech refers to the privatisation of water and electricity, and no doubt that will accrue other enormous short-term revenues, which will be squandered in the same fashion as the revenue so far accumulated.

In addition, the Chancellor has had at his disposal £31,000 million arising from the cuts that he has made in the rate support grant over the past few years, the results and the social consequences of which are clear to all, particularly to those of us who represent poorer and less prosperous areas. The provision of public housing is grinding to a halt, our inner cities are decaying, our social services are unable to cope with the casualties. Many Labour Members have been reduced to being well-paid social workers clearing up the mess created by the Chancellor and his colleagues.

All these revenues provided the Chancellor with an unprecedented opportunity and one that has never been enjoyed by any other Chancellor before him. It could have been invested in creating a sound infrastructure for future generations, in creating a strong economy able to compete with the rigours of 1992, about which we hear so much, or

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in providing decent living standards for all our people. What has happened? It has been used to purchase the votes of the southern middle classes with tax cuts and windfall dividends. The idea is widely abroad that one can get something for nothing--something that the Prime Minister used to deprecate. That idea will shortly be punctured, but many people have already gained something for nothing as a result of the reckless folly of selling off public assets. At the core of what the Chancellor and his colleagues have done, which perhaps sums up the entire philosophy of the Prime Minister's Government, is that they have ruthlessly and cynically mobilised the fortunate against the unfortunate. Since, for the time being and for some years in the past, the fortunate have been in the majority, it was always inevitable that they could be mobilised by a sufficiently cynical Government. They have unleashed on our economy every species of spiv and conman known to civilisation, and created an ideology not of the wealth producer but of the looter. They have resolved the historic conflict within the Conservative party, and in the country, between the industrialists and the bankers, finally and conclusively in favour of the bankers at the expense of those who produce. If one seeks evidence for what has happened to our country over the past nine or 10 years, one of the better illustrations is to be found in the magazine section of a W. H. Smith bookshop. There was a time when one could find many magazines devoted to the pursuit of ideas, both Left and Right. They have nearly all disappeared and they have been replaced by consumer magazines-- What Car?, What Computer?, What This? and What That? I saw one the other day entitled simply More. I can think of no better epitaph for the economic policies of this Government.

As has been widely remarked, all this has given rise to a new breed of Conservative Members of Parliament. The gentlemen of the old school, while they still exist, have been replaced by philistines and barbarians who do not believe in treating people decently. I concede that many Tory Members believe in treating people decently, but they are a dying breed.

Where will it all end when there is nothing left to privatise, when the oil revenue is gone and when every conceivable asset has been stripped? It is no good replying, as the Chancellor sometimes does, that we have sold the assets abroad and can live on the dividends. What makes him think that the dividends will be repatriated to an economy that is on its knees?

When the time comes to clear up this mess, those who pay the price must be those who benefited. The burden must not fall, as I suspect that it may, on those who have already suffered so grevously from the Government's policy. If I seek a lasting image for the Government of the past 10 years and the economic policy that they have pursued, it is of a young couple whom I saw last week when I drove to my home in Sunderland, who were picking rubbish out of the litter bags left out in the back alleyway behind my house. They were not old; they were young.

My wife comes from Vietnam, one of the poorest countries in the world. She has lived in this country for only 18 months. The other day we saw a man picking food out of a litter bin in Hyde park and she asked me, "How is it possible in a country as rich as this for that to happen?" I had no satisfactory answer to that question. I

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do not understand, and it is symptomatic of the economic policy pursued by the Government that some people have to eat by taking the leftovers from litter bins.

7.59 pm

Sir David Price (Eastleigh) : At this late hour I shall deal only with one point that has been raised by a number of hon. Members--concern about the overall competitiveness of our economy and especially of our manufacturing industry. I have shared that concern for many years.

There has been a great improvement since 1979, but it is not enough because our competitors have not been resting on their laurels for the past nine years and we still have not caught up with our leading competitors, the Germans, the Americans and the Japanese. I shall not detain the House by quoting figures in support of that contention, but those of us who are close to manufacturing industry are aware of them.

The abiding doubts about our economic performance as measured against those leading competitors arise as much from cultural as from economic reasons. The problem lies in our national attitude to business and especially to manufacturing industry. As a nation, we do not admire business ; at best, we tolerate it and at worst we scorn it.

I have in the past drawn the House's attention to the curious alliance between the aristocratic Right and the intellectual Left, which acknowledges rationally the necessity for business, but rejects it emotionally. We see the same attitude reflected in the media which treat business with lofty and unconcealed disdain as a sort of lumpen proleteriat of our society.

I came to the House from industrial management and I have retained some contact with it. As a general rule in industry, we still require no proper management qualifications from those whom we appoint as managers. I declare an interest here as a vice-president of the Institution of Industrial Managers. We at least try to get more professionalism into industrial management, but we are by no means supported by everyone. We must beef up the professionalism of our management in industry and do more to attract a higher percentage of the brightest of our people into engineering and industrial management. We underpay our engineers and overpay our accountants. Who are accountants anyway? They are only bookkeepers with social aspirations. Until we demand higher standards of industrial management and pay for them, we shall not be truly competitive with the Americans, the Germans and the Japanese.

Those important matters are largely beyond the remedial grasp of any Chancellor of the Exchequer. They probably lie closer to that of the Secretary of State for Education and Science because their origins lie deep in our culture, in our schools and universities. Those cultural problems affect adversely our economic performance and they are further reasons for doubting whether it is given to any Government to fine-tune the economy. I do not believe that Governments have either sufficiently accurate or up-to- date information or sufficiently sensitive regulators at their disposal to fine-tune it. It is an illusion. In all my years here I have never seen a Government be successful in fine-tuning the economy. At best, they have crude instruments to work upon.

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Lewis Carroll put the case graphically, as he put many other truths so graphically. When describing the little croquet match, he said : "The chief difficulty which Alice found first was her flamingo generally, just as she had got its neck straightened out, and was going to give the hedgehog a blow with its head, it would twist round and look up in her face."

That has been the experience of many Chancellors of the Exchequer. The flamingo looks up in the Chancellor's face just when he thinks that his policies will work. We must therefore accept the Government's inability to fine-tune the economy and accept that the best that they can do is something relatively crude because so much of the action is outside their scope.

The problem of the cultural attitude to business and, above all, to manufacturing industry is one that we must solve. It will be solved not by the Chancellor of the Exchequer, but by political leaders in this House showing more interest in industry and business and not making the contemptuous remarks that we so often make about those who are successful in both those endeavours.

8.5 pm

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