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A tax-cutting policy has been successful, but tax increases would have the opposite effect. It is strange that, even after all the international evidence, Opposition Members continue to believe that theirs is the right policy.

I believe that tax cuts are a moral imperative. We are talking about the earnings of individual people. The state does not own people's earnings. The Opposition believe that the public are only entitled to pocket money which can be taken away from them at the whim of the state. In 1947, Douglas Jay put it better than anybody else in the "Socialist Case" when he said that the men in Whitehall knew best. Some 40 years on, the Opposition still believe that, despite nationalisation and all the disasters of state control. They still believe that the Government can put their hands into people's pockets and control their money. It is no accident that it is in those countries where the state controls people's earnings, their jobs and their homes that political freedom is largely negated. Contrast this with countries where people keep their own money and they have democratic freedom as well.

We must remember that we have a problem with the balance of payments--2.75 per cent. of gross domestic product. But I remember that, under the Government led by my right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath) and the previous Labour Government, it was 3.8 per cent. of GDP in 1974. In fact, in four out of the five years of the previous Labour Government, there was a balance of payments deficit at a far higher percentage of GDP than there has ever been under this Government. Let us remember that. When we consider the Government's record, we should contrast it with the alternatives that have been put forward in the past few years and support the policy of my right hon. Friend the Chancellor. 9.11 pm

Mr. Frank Dobson (Holborn and St. Pancras) : This debate has now lasted for nearly 40 hours and no fewer than 137 right hon. and hon. Members have taken part. With due deference to the brilliant contribution of my hon. Friend the Member for Dunfermline, East (Mr. Brown), it is fair to say that no speech exceeded in wit and wisdom that of the hon. Member for Pudsey (Sir G. Shaw), at the beginning of the debate.

The debate has been long and, at times, interesting. It has been so long that when it began the words "last month's trade deficit" meant only £500 million and the Chancellor's pallid features were attributed to a night on the tiles which, by coincidence, was in my constituency. He did not tell me that he was visiting Camden Town, but I suppose that he can claim that a 1960s night at the Camden Palace scarcely counts as an official visit by the Chancellor of the Exchequer. Whatever the original causes of the Chancellor's pallor, we can be sure that when he heard the latest trade figures, in the words of Procul Harum's 1967 hit,

"His face at first just ghosty turned a whiter shade of pale." The Chancellor could scarcely listen to the other chart-topping hits of 1967 without an uncanny feeling that they were predicting what has happened to him this year, starting with "I'm a Believer", moving on to "Puppet on a

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String", then--I assume a reference to the tapes--"Silence is Golden" and ending the year with "Let the Heartaches Begin".

On the strength of the ministerial contributions to this debate--not many of the contributors are present--I have increasing sympathy with the Prime Minister's view--she is not present either--that no one in the Cabinet is fit to be Prime Minister. Unfortunately for the right hon. Lady, to judge by her speech, that goes for her as well. If we look at the Treasury Bench, which is finally adorned by the Chancellor, it is easy to discern--or would be if they were here--several examples of the saddest of all Cabinet creatures--former next leaders of the Tory party. It is hard to see who is still left in the race. If I were asked where the smart money should go, I would suggest that Catford dog track any Monday, Wednesday or Saturday was a better bet than any of the Tories present.

The Secretary of State for Social Security, who is a television voice-over made flesh, was tipped as a likely successor to the Prime Minister just 18 months ago. Now, ravaged by circumstance and by my hon. Friend the Member for Livingston (Mr. Cook), he seems only half the man he was and the Prime Minister has made certain that he is only half the Secretary of State he was.

Next, we should consider the new half of the Department of Health and Social Security job-share, the right hon. and learned Member for Rushcliffe (Mr. Clarke). As many hon. Members know, it is not difficult to be an unpopular Minister if one is strapped for cash, but it takes real genius to give the nurses what he claims is an almost £1,000 million pay increase and to be even more unpopular. One of his hon. Friends told me that he is being tough with the nurses to promote his chances of becoming Prime Minister. What an illustration of the state of mind of Tory Back Benchers!

We are told that the Secretary of State for Education and Science has ambitions in the direction of 10 Downing street. His friends told him that if he really wanted to get there, he would have to make the supreme sacrifice. Nothing daunted, he did. He sacrificed the education of a generation of children to the turmoil of competitive tests for seven-year- olds, open enrolment and opting out. To add insult to injury, he then asserts that progressive education authorities, such as the Inner London education authority, are spending too much money educating each secondary school child--that is despite spending at least twice as much himself on the education of each of his children.

I turn now to the Secretary of State for the Environment, who is also not gracing us with his presence tonight. Even his best friend would not dream of suggesting him as a suitable leader for the Tory party--at least not since the passage of the Reform Act 1832. He is a man so arrogant that he was once accurately described by my hon. Friend the Member for Sheffield, Hillsborough (Mr. Flannery) as the only man in the world who can strut sitting down.

The right hon. Gentleman does not let his principles get in the way of his seat in the Cabinet. We remember him of yore as deregulator Ridley, the bonfire of controls, who said that everything should be left to market forces. He presents an unconvincing face as the Lord Protector of the Environment and purveyor of sweet water to the lower classes. He is the man who produced a White Paper on housing without mentioning the homeless--the people

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most in need of a home of their own. That may have been carelessness but his omission of another word is criminal negligence.

In 1985, the right hon. Gentleman set the priorities for London Transport in an 838-word letter. The one word that he never mentioned was safety. The fire at King's Cross killed 31 people because, like him, London Transport did not think that safety was important. Many more would have died but for the presence of mind of the station staff, police, fire fighters ambulance staff, doctors and nurses. Anyone who reads the Fennell report will know that deeds were done that night that went far beyond the call of duty.

Later, to their credit, the chairmen of London Regional Transport and of London Underground accepted their share of the blame and resigned. Why did the buck stop there? What about the man who set their priorities and fixed their budgets, and who told the House that he would be accountable to this House? If he has a shred of the honour that right hon. and hon. Members are supposed to have, he would join the other Ridley and resign.

Another who should resign, but will not, is the Chancellor. Virtually everybody would agree that his last Budget was unfair--rewarding the rich and penalising the poor. However, at the time, many people including those wonderful youthful experts in the City described it as brilliant. They proclaimed the Chancellor "Man of the Year" and "Chancellor of the Century". A century is a long time in politics. Just last year the Chancellor was chosen as "Parliamentarian of the Year" by the Spectator. This year, I believe that he was not even invited to the lunch-- [Interruption.] I had the pleasure of sitting next to the Chancellor's son and found him infinitely more charming than his father.

Last month's trade deficit of £2,400 million has been exceeded only twice in this country's history in a whole year. One of those years was last year, for which the Chancellor was also responsible. The only previous occasion was in 1974 as a result of the oil price increases and I shall return to the subject of oil in a minute. Why is our balance of trade so bad? It is partly because, for electoral reasons, the Chancellor created the biggest credit boom in history. On top of that, his tax changes poured money into the pockets of the best-off and increased their spending power. What has happened to all that credit and all that extra disposable income in handbags and pockets? Most of it has been spent on buying houses and goods. The record amount of credit combined with the low number of houses being built has led to record house prices.


The record amount of credit has also led to our shops being filled with goods from abroad. Why is that? The main answer is that a lot of the goods that people want to buy are not made in this country any more. That is because 2 million fewer people are now employed in manufacturing industry than when the Tories first came to office. There are now 2 million fewer people making things for others to wear or use. People ask why they cannot buy British any more. The answer is that the Government deliberately shut down large parts of British industry.

In Scotland, 200,000 fewer people are making things, and there are 150,000 fewer making things in the north. But it is not just there--500,000 manufacturing jobs in the midlands and another 500,000 here in the relatively prosperous south-east have gone.

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Labour warned what would happen. We said that a country with a large population cannot get by without a prosperous manufacturing base. We said that Britain could not prosper just by selling one another hamburgers, insurance policies and pension schemes.

Mr. Jack Straw (Blackburn) : No-tech.

Mr. Dobson : I have got that.

We said that the money spent had to be earned. We said that we should devote the one-off bonus of North sea oil to tooling up our industry and training our people. When we said that, we were laughed to scorn by people who should have known better, and by the Chancellor. In February 1984, he told the House that he was at a loss to understand the selective importance attached by Labour and, to be fair, by some Tories to the manufacturing sector. In Washington later that year, the Chancellor warned that the world should not "be seduced by the wonders of high-tech into overlooking the fact that many of the jobs of the future will be in labour-intensive service industries which are not so much low-tech as no-tech." With iron resolve hitherto unknown outside a nunnery, his Cabinet colleagues joined him in resisting the seductions of high technology. Not for them the primrose path of dalliance with high-tech investment, high-quality training and high quality research. No, they left that to Japan, Korea and Taiwan.

During the period of this Government, our imports from Japan have risen by 267 per cent., imports from Korea have risen by 247 per cent., and imports from Taiwan have risen by no less than 362 per cent., to replace the goods that 2 million British workers used to make. The goods that we are importing are not no-tech.

Mr. Tebbit : Will the hon. Gentleman give way?

Mr. Dobson : No, I shall not give way. The right hon. Gentleman can make a telephone call later. No doubt he will get it at a cheap rate from his employers.

Mr. Tebbit : On a point of order, Mr. Deputy Speaker. When an hon. Member makes an untrue assertion about the personal conduct of another hon. Member, that hon. Member is entitled to some redress. If the hon. Gentleman does not have the guts to allow me to intervene, he should at least have the guts to put things right when he says things that are untrue. The hon. Gentleman is gutless and he does not know what he is talking about.

Mr. Dobson : I am sorry. If British Telecom charges the right hon. Gentleman for his calls, he suffers as much as we do, no doubt. Mr. Tebbit rose --

Mr. Deputy Speaker (Mr. Harold Walker) : Is the right hon. Gentleman seeking to raise a point of order-- [Interruption.]

Mr. Tebbit : I cannot hear above the noise, Mr. Deputy Speaker.

Mr. Deputy Speaker : Is the right hon. Member for Chingford (Mr. Tebbit) seeking to raise a point of order?

Mr. Tebbit : Yes, Sir. Is it in order for an hon. Member to make an assertion that there is an improper financial

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motive in the conduct of another hon. Member? That was the burden of the hon. Gentleman's remarks, and they were made because he did not have the guts to give way.

Mr. Deputy Speaker : Order. It is contrary to our conventions for any right hon. or hon. Member to reflect adversely on the conduct, character or integrity of another hon. Member, but I did not hear any such remark.

Mr. Dobson : The goods that we are importing are not no-tech. Some are low-tech, but most are high-tech products produced on equipment more up -to-date than ours and by a work force increasingly better trained than ours. Those imports are the products of the deliberate policies of the Chancellor which he outlined so succinctly in Washington four years ago.

The next question that the Chancellor has to answer is : where would he be without North sea oil? If we discount oil exports from the trade figures of last month the deficit would be £2,800 million instead of the already record-breaking £2,400 million. If we make a proper comparison with the period before North sea oil and add our oil consumpution for last month to our import total, the total trade deficit for last month would be £3,200 million. That would give a January to October trade deficit, not of £12,000 million but of £21, 000 million and shows what a catastrophe the Government's policies have been for the non-oil economy.

To pay for this incompetence house buyers now face enormous increases in the costs of their mortgages. I heard that the Chancellor was "relaxed" about the impact of the interest rate increases on the cost of mortgages. Relaxed, is he? The real rate of interest, the difference between the inflation rate and interest rate, is now 6.5 per cent. If he is relaxed about that, he must have been delirious in 1965 when he obtained a famous mortgage. You may recall, Mr. Deputy Speaker, that the right hon. Gentleman got a £20,000 council mortgage from Kensington and Chelsea at 6.5 per cent. The rate of inflation then was 3.9 per cent., giving a real interest of 2.6 per cent. No wonder he went to the Camden Palace last week to celebrate the 1960s. Most young couples would celebrate with him if they could get a mortgage at a real interest of 2.6 per cent. I note in passing from an article that he penned with his own fair hand for The Spectator at the time that he justified his borrowing from the public sector because

"the private sector is failing the nation."

Times have changed almost as much as the views of the Chancellor. In London last year, before things got half as bad as they are now, no less than 54 per cent. of would-be first-time buyers could not afford what the Association of District Councils called the cheapest common type of house. In Surrey the figure was 64 per cent., in Essex 56 per cent. and in Hertfordshire 49 per cent.

Is it fair to blame the Chancellor or the rest of the Cabinet for all this? We all know who takes the decisions--the Prime Minister. Nobody writing a book these days on British Government would come up with the idea that the Prime Minister is primus inter pares or, for the non-classical scholars opposite, first among equals. No, she got rid of the equals and got in the yes men, giving our language a new collective noun--a cringe of Cabinet Ministers. These days she does not communicate through the House. We have heard from her only 13 speeches in

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five and a half years. She feeds out information through a Mr. Bernard Ingham, the Official Deceiver. This extra -parliamentary functionary is no longer content to authorise leaks of confidential legal advice from the Law Officers of the Crown. Apparently he now has the authority of his mistress at 10 Downing street to embarrass the Queen, announcing off the record that the Queen would not be allowed to visit the Soviet Union. It is about time that the Prime Minister remembered that she swears an oath of allegiance to the Queen. It is not yet the other way round.

Before the right hon. Lady became Prime Minister and could use public officials for party purposes, the Tory party put out a press release in April 1979 giving her attitude to manufacturing industry. I hope that Conservative Members will listen to her pearls of wisdom. She said :

"We are going to do it by creating the conditions for real jobs, not artificial ones, so that once again the products stream from our factories and workshops while the customers of the world scramble over each other to buy them."

That was what she said when she was Leader of the Opposition. A likely trade deficit of more than £15,000 million suggests to me that few customers of the world are getting killed in the scramble to buy British. No wonder, with all the obstacles that her Government have put in the way of exporters--British exporters.

Much attention has been paid to the Prime Minister's trips abroad. Her favourite venue seems to be Washington. She is very popular there. It would be the grossest ingratitude on the part of the United States Government if she was not popular there. It is not just that she will go along with any aspect of American foreign policy as long as they promise her Trident. Like her, the American Government have a balance of trade problem. The Prime Minister has been very generous to President Reagan. She had done more to solve his trade problems than she has done to solve ours. During the period of her Government, United States exports to Britain have almost doubled. By those standards, she should be even more welcome in West Germany, whose exports to Britain have increased by 172 per cent., or in Italy and France, whose exports to us have more than doubled. There is a rumour that the Prime Minister will be offered the post of honorary president of the Japanese chamber of trade for services to exports--Japanese exports.

We are told that when the Prime Minister goes abroad she is batting for Britain--Mr. Bernard Ingham again, I believe. But a glance at the scoreboard shows that the bowling is usually too good for her. She may sneak a few export orders, but the people whom she meets end up exporting far more to us. To take Turkey as an example, the Prime Minister said that she visited that country to build bridges. Since she came to office, Turkey's exports to Britain have increased by 767 per cent. Other countries to benefit from such visits are China, at 187 per cent., Singapore at 155 per cent. and Hong Kong at 122 per cent. It appears from the figures that one visit from our Prime Minister and their goods come flooding into Britain. Under her Government, whatever else we have done, we have become brilliant at--how did she put it?--"scrambling over each other" to buy foreign people's goods.

All that was predictable, and it was predicted not just by the Labour party but in 1985 by the House of Lords Select Committee on Overseas Trade. It feared a current

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account deficit of £13,000 million a year by 1990. It said that the position was not self-correcting and would not come right on its own. It called for the manufacturing base to be enlarged, import penetration to be combated and manufacturing exports to be stimulated. Like us, the Committee was derided and ignored. The Prime Minister ignored all that, preferring the seductive attractions of guards of honour mounted by foreign Heads of Government who know that Britain is becoming the export pushover of the world. They are happy to nod when she tells them that our economy is strong. But what else does she tell them about our country? More important, what does she leave out of all those speeches spattered with the royal "we"? I have not heard it reported that she has told any Heads of Government that within two miles of her official residence whole families of her fellow citizens made homeless by her housing policies live, eat, drink, wash and sleep in single, squalid, insanitary rooms in rundown bed-and-breakfast hotels. She does not tell them that those hotel children, who cannot sleep at night, cannot get exercise, cannot relax and cannot develop must attend schools where the Government have cut funds to help those children, and whose teachers are accused of incompetence and worse by her Secretary of State for Education and Science, who paid to make damn sure that his children did not share their classrooms with the children of the homeless.

It is not just that recent events have shown the shortsighted incompetence of the Government. They also show the Government's arrogant unconcern for the unemployed and the underpaid.

Recent events have also shown the eroding of ancient rights and liberties and the concentration of power in the hands of Government and, within the Government, the concentration of power in the hands of the Prime Minister. As far as I can see--and this is to the Prime Minister's credit--she displays little personal vanity, certainly less than many of her predecessors. But she is puffed up with political vanity. She has laid claim to credit for anything in our country that seemed worthwhile or that appeared to be doing well. There is no point in her pretending when things are going wrong that it is not her fault. The responsibility is hers. The Gracious Speech is hers. If put into practice it will hurt the weak, punish the caring and reward the rich and selfish. It truly epitomises all that the Prime Minister stands for. Both she and it are a national disgrace. 9.35 pm

The Lord President of the Council and Leader of the House of Commons (Mr. John Wakeham) : I shall begin by reminding the House ofthe way in which this debate started last Tuesday with excellent speeches from my hon. Friends the Members for Pudsey (Sir G. Shaw) and for Lewisham, West (Mr. Maples). It is not their fault if the debate did not always live up to the start that they gave to it. They both spoke with humour and insight about their constituencies. Their speeches will have enhanced the already high regard in which they are held in all parts of the House.

I should also like to mention the nearest thing that we had to a maiden speech in the debate, the retread speech by the hon. Member for Glasgow, Govan (Mr. Sillars). His speech was characteristic and Conservative Members look forward to hearing from him again even if Labour Members are not so keen to do so.

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Today's debate on the economy has been much heralded, but very little in the way of constructive alternative policies emerged from the Opposition Front-Bench spokesmen. The right hon. Members for Ashton-under-Lyne (Mr. Sheldon) and for Bethnal Green and Stepney (Mr. Shore) showed the whizz kids on the Opposition Front Bench what opposition should be about. They made constructive speeches, although I disagreed with most of what they said.

I intend to devote the second half of my speech to dealing with economic questions. As Leader of the House winding up this six-day debate, there are three things that I should like to mention first. The House may wish to reflect on the fact that we are completing what may be the last untelevised debate on the Loyal Address. The Select Committee on the Televising of Proceedings of the House is making progress as fast as it reasonably can, but the House will appreciate that there are complex issues with wide- ranging implications to be addressed. In this context, I note the report from the Procedure Committee on the implications for procedure of televising the House. That report will, no doubt, be relevant to tomorrow's debate, but I shall just say that I am sure that the Committee is right not to suggest any premature changes, and that any changes that may be made should be for the convenience of the House rather than the convenience of the broadcasters.

Secondly, my right hon. Friend the Member for Worthing (Mr. Higgins) raised the question of the organisation and functions of Select Committees as a result of the splitting of the old DHSS into the Department of Health and the Department of Social Security, and the increasing effect of Europe on the work of our Select Committees. I agree with my right hon. Friend's logic about the split into two Select Committees--one to deal with health and one to deal with social security. We have to consider the timing of such a change, and that needs to be discussed.

My right hon. Friend was right to raise the issue of the best way to deal with European questions, but that is something that I should like to discuss with him, as Chairman of the Liaison Committee, after I have heard the views of the House in tomorrow's procedure debate. I must now say something about the forthcoming legislative programme in this Session, which will occupy most of our time until next summer. The programme for this Session is deliberately a balanced one. It contains measures and policies covering four areas of concern both to the House and to the general public. The first theme is that of continued economic progress through the pursuit of policies to control inflation, foster enterprise and promote employment. In that connection, I would mention the Bills relating to the employment of women and young people and to training, the Social Security Bill, the Bill relating to company law and the law on mergers. Above all, there are three privatisation measures. Secondly, there are measures that concern the application of the criminal law to maintain security and order while protecting individual liberty. In that context, let me mention our plans to replace section 2 of the Official Secrets Act 1911 with provisions which prohibit only those disclosures of information that would be harmful to the public interest. It is a civil liberties measure which greatly limits the present scope of the criminal law and is also--and unashamedly--a measure which protects the vital interests of a democratic Government in a free society.

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There are also measures relating to terrorism : the replacement with permanent arrangements of the Prevention of Terrorism (Temporary Provisions) Act, which has saved so many lives and which--to its shame--the Labour party has consistently refused to support. I draw the House's attention, in particular, to the provisions aimed at intercepting the flow of funds to terrorist organisations. The courts will have the power to order forfeiture of money or property. Similar provisions have been applied to the funds of drug traffickers and--in the Criminal Justice Act--to the loot from other crimes. The level of remission for terrorist offences is also being reduced. We are introducing other measures, too, relating to Northern Ireland to secure fair employment there and to require from local government candidates declarations against terrorism.

Another important measure is designed to deal with football hooligans. We are proposing a national membership scheme of clubs to control admission to football matches. The scheme will deter troublemakers, both inside and outside the grounds. That will release police manpower and effort to deal with other offences.

The third theme of our proposals is the care of those in need. That applies particularly to the protection of children and the rights of parents. The present child care law both inadequately safeguards the welfare of children at risk and is unfair to parents. The widespread concern at the handling of the Cleveland child abuse cases, shared on both sides of the House, should make these proposals particularly welcome. My right hon. Friend the Lord Chancellor has also issued a consultation document on the proposal for an office of child protection to be established within the courts system.

This Session will also see decisions announced following the Government's Health Service review.

The final theme is the continuation of our policies for progress on arms control achieved from a position of strength and for continued good relations with both the super powers. My right hon. Friend the Prime Minister has already met President-elect Bush and reaffirmed our strong commitment to NATO and our American partners. Relations with the Soviet Union will, we hope, be further enhanced by the visit of Mr. Gorbachev.

Mr. Rhodri Morgan (Cardiff, West) : Which of her two personalities will the Prime Minister adopt when President Gorbachev comes here? Will she be the person who says, "We can do business with this man" or will she show the other side of her personality when she starts making up fanciful and ridiculous demands--for example, when, as the Queen's minder, she is liable to say that the Queen cannot go to Moscow unless President Gorbachev reinstates a Cossack regiment in the Red Army? Is she going to be Mrs. Nice or Mrs. Nasty?

Mr. Wakeham : My right hon. Friend will do what she has done all the while she has been Prime Minister. She will negotiate on behalf of Britain and will produce for this country the best agreements available which will be substantially better than anything that the Labour party could dream of producing.

I turn now to the three privatisation measures in this Session's programme. The House well knows that privatisation is a key element in our economic strategy.

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Industry operates better if it is freed from political interference and is subject to the competitive pressures of the market. Eighteen major companies have now been privatised. Almost 40 per cent. of the state sector that we inherited has been returned to private ownership.

In 1979, state-owned industries accounted for 11.5 per cent. of Britain's GDP and employed some 7 per cent. of the total work force. Many of those industries were grossly inefficient and losing vast sums of taxpayers' money. In 1979, the nationalised industries were costing taxpayers £4.5 billion a year at today's prices.

Since privatisation, industries which drained the public purse are now filling it by making large contributions to the Exchequer through taxation. British Telecom, for example, is now contributing far more to the Government through corporation tax than it ever did when it was state-run. Since 1979, the Exchequer has benefited by more than £22 billion from privatisation.

However, the case for privatisation is emphatically not about raising money but about making industry work better. The balance of reasons may be different for complete or near monopolies from what it is for businesses which operate in a free market. That applies to the three industries mentioned in the Queen's Speech.

Mr. Dave Nellist (Coventry, South-East) : If, among a list of past and projected privatisation issues, Jaguar is still considered the paradigm by the Government, will the right hon. Gentleman explain the benefits of private ownership which have now led to 1,200 workers at that company being declared surplus to requirements in the next two and a half years and, in a six-week period before Christmas last year, to 17 shop-floor workers at Jaguar dying of strokes and stress-induced illnesses because of the speed- ups of the track? Where are the benefits of privatisation in car industries such as Jaguar?

Mr. Wakeham : One of the major problems of British industry over many years has been the car industry, but, since privatisation, Jaguar has at least shown a lead on how a car company can operate in this country, and it should have the full support of all hon. Members.

The Scottish Bus Group should never have been publicly owned to begin with. The 10 private companies that will be formed from the Scottish Bus Group will improve still further the competition which has already come from deregulation.

The case for privatising the water industry is different. It is not mainly based on competition, as the water authorities are natural monopolies. Instead, the case for privatisation is based on the need to free the industry from political control. The water industry has a turnover of £3 billion a year. There is no reason for this huge undertaking to be Government owned. Above all, the industry should be able to make its own decisions and set its own priorities as regards investment and borrowing. Privatisation will allow it to do so. The Water Bill is not just about privatisation. It is also a major environmental measure. Privatisation of natural monopolies can be combined with tough regulation to protect consumers and improve the quality of life.

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

Mr. Wakeham : I have given way rather more than Opposition Front- Bench Members did and I ought to get on.

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The Bill to privatise the electricity supply industry will bring about the largest privatisation ever. The principles behind the Government's proposals were set out by my right hon. Friend the Secretary of State for Energy in February and are contained in the White Paper. The case for privatising electricity is based fundamentally on the arguments for competition. The distribution and transmission of electricity are largely natural monopolies, but there is no such monopoly in electricity generation. And so the CEGB, under our proposals, will be split into two competing generating companies.

All three privatisations will make the industries work better. All three-- but especially those of the water and electricity industries--will spread share ownership, the wider ownership of property, shares, pensions and savings. In short, the creation of a property-owning and capital-owning democracy is not merely an economic but a social policy of immense benefit to the British people.

Most of the debate today has been focused on the economy. Since the beginning of the previous Session, Britain's dynamic economy has produced more jobs-- [Interruption.] Opposition Members may not like this, but they will get it. It has produced more jobs, more investment and more growth. Prudent financial policies have allowed us to cut tax rates, repay debt and increase spending on priority programmes.

The Opposition parties spend a great deal of time talking about inflation and the balance of payments deficit. So let me deal with those issues.

Mr. Kinnock : Do.

Mr. Wakeham : Yes. I hope that the right hon. Gentleman will listen.

Inflation has risen and we need to reduce it. My right hon. Friend the Chancellor of the Exchequer has raised interest rates to do just that. It should fall again in the fourth quarter of next year. Let there be no doubt that the control of inflation remains the Government's top priority. That is why we have brought it down to less than one quarter of the peak that it reached under the irresponsible policies of the Labour Government. That is why, even though it is still too high, it is lower now than at any time during the term of the Labour Government.

My hon. Friend the Member for Croydon, South (Sir W. Clark) was right to bring some balance into our discussions. Unlike the Labour party, the Conservative party carries credibility when it pledges lower inflation. In 1985, inflation rose a little and we took swift action. It touched 7 per cent. before falling back to just over 2 per cent. We tackled inflationary pressures then and we shall tackle them now with the same instrument-- interest rates. We stuck to our policies then and we shall stick to them now. They are policies that have brought success that the Labour party can only envy.

My right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath) and others have called for what might be referred to as the golf club solution. That is for some instruments to be used, as well as interest rates, to slow down the economy and to reduce inflation. As my right hon. Friend the Chancellor of the Exchequer made clear on several occasions, no such instruments exist. Credit controls, for instance, would create inefficiencies and distortions in the market while acting as a disincentive to borrowers and savers alike. They did not work properly even in the 1970s, when we had a battery of restrictions to

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back them up, and they would be still less effective today. To the extent that they did work, they would be unfair. Respectable lenders would charge cheaper credit to the safest borrowers while less well-placed borrowers would have to pay more, and would be driven to the loan sharks.

Some hon. Members have suggested the use of fiscal policy. The proper role of that policy is to create a stable medium-term framework for business. It is not a short-term measure to fight inflation. During the 1960s and 1970s Governments tried to use fiscal policy for short-term demand management, and the lesson to be drawn from the failures of that period is clear. Moreover, fiscal policy is already tight. My right hon. Friend the Chancellor budgets for a surplus £3.25 billion and that is now expected to turn out at some £10 billion.

I reiterate what my right hon. Friend the Chancellor has said. The control of inflation is a job for monetary policy, which means interest rates. Eighty per cent. of all household borrowing is on mortgages and my right hon. Friend the Member for Chingford (Mr. Tebbit) was right : credit cards represent only 5 per cent. of total credit. The hon. Member for Berwick- upon-Tweed (Mr. Beith) was also correct to state that many people, including himself, do not pay interest on their credit cards because they pay on time. I agree with that view.

We are told that the balance of payments deficit is too big. Again, that is rich coming from the Labour party. Labour Governments usually had deficits which rocked the markets. Furthermore, their trade deficits were fuelled by a huge budget deficit which reached 9.25 per cent. of GDP. There could not be a bigger contrast now. Public finances are stronger now than at any time in living memory. The standard of living of our people has continued to rise. The real take-home pay of the average family with two children has risen by well over a quarter since we took office. A similar family on half -average income has seen it rise by 23 per cent.

Those are the facts, and the achievements reflect the sound economic policies which we shall continue. Ten years of hard work have brought those rewards. The last five years have seen some of the most astonishing successes and achievements for the British economy in living memory, but it has not been easy.

We have faced a miners' strike aimed at nothing less than the overthrow of the elected Government. We have also seen the turbulence in the world's currency markets, with first a surge and then a collapse in the dollar. Only a year ago we faced a spectacular stock market crash which many thought was the prelude to a return to the depression of the 1930s.

None the less, the past five years have brought record increases in productivity ; record falls in the level of unemployment ; record growth ; record levels of investment ; and record increases in living standards. As my right hon. Friend the Chancellor of the Exchequer passes his 2,000th day in office this week, he is the longest serving post-war Chancellor. He has a brilliant record of achievement which few Chancellors could match and which no Labour Chancellor could more than dream about.

The measures this Session will carry forward our radical programme for change. They will improve our economic performance and widen ownership. They will protect the environment and improve the quality of life. They will be underpinned by a vibrant, strong, sound

Column 669

economy which will pay for pensions and benefits and a more efficient Health Service. There are measures to combat violence, particularly the scourge of terrorism.

That is a programme which bears the mark of a Government who retain the confidence of the people and the respect of our neighbours. It is a businesslike programme for a Government who mean business and are know to do so, and as such I commend it to the House.

Question put, That the amendment be made :--

The House divided : Ayes 247, Noes 352.

Division No. 3] [10.00 pm


Abbott, Ms Diane

Adams, Allen (Paisley N)

Allen, Graham

Alton, David

Anderson, Donald

Archer, Rt Hon Peter

Armstrong, Hilary

Ashdown, Paddy

Ashley, Rt Hon Jack

Ashton, Joe

Banks, Tony (Newham NW)

Barnes, Harry (Derbyshire NE)

Barnes, Mrs Rosie (Greenwich)

Barron, Kevin

Battle, John

Beckett, Margaret

Beggs, Roy

Beith, A. J.

Benn, Rt Hon Tony

Bennett, A. F. (D'nt'n & R'dish)

Bermingham, Gerald

Bidwell, Sydney

Blair, Tony

Blunkett, David

Boateng, Paul

Boyes, Roland

Bradley, Keith

Bray, Dr Jeremy

Brown, Gordon (D'mline E)

Brown, Nicholas (Newcastle E)

Brown, Ron (Edinburgh Leith)

Bruce, Malcolm (Gordon)

Buchan, Norman

Buckley, George J.

Caborn, Richard

Callaghan, Jim

Campbell, Menzies (Fife NE)

Campbell, Ron (Blyth Valley)

Campbell-Savours, D. N.

Canavan, Dennis

Carlile, Alex (Mont'g)

Cartwright, John

Clark, Dr David (S Shields)

Clarke, Tom (Monklands W)

Clay, Bob

Clelland, David

Clwyd, Mrs Ann

Cohen, Harry

Coleman, Donald

Cook, Frank (Stockton N)

Cook, Robin (Livingston)

Corbett, Robin

Corbyn, Jeremy

Cousins, Jim

Crowther, Stan

Cryer, Bob

Cummings, John

Cunliffe, Lawrence

Cunningham, Dr John

Dalyell, Tam

Darling, Alistair

Davies, Rt Hon Denzil (Llanelli)

Davies, Ron (Caerphilly)

Davis, Terry (B'ham Hodge H'l)

Dewar, Donald

Dixon, Don

Dobson, Frank

Doran, Frank

Douglas, Dick

Duffy, A. E. P.

Dunnachie, Jimmy

Dunwoody, Hon Mrs Gwyneth

Eadie, Alexander

Eastham, Ken

Evans, John (St Helens N)

Ewing, Harry (Falkirk E)

Fatchett, Derek

Faulds, Andrew

Fearn, Ronald

Field, Frank (Birkenhead)

Fields, Terry (L'pool B G'n)

Fisher, Mark

Flannery, Martin

Flynn, Paul

Foot, Rt Hon Michael

Forsythe, Clifford (Antrim S)

Foster, Derek

Foulkes, George

Fraser, John

Fyfe, Maria

Galbraith, Sam

Galloway, George

Garrett, John (Norwich South)

Garrett, Ted (Wallsend)

George, Bruce

Gilbert, Rt Hon Dr John

Godman, Dr Norman A.

Gordon, Mildred

Gould, Bryan

Graham, Thomas

Grant, Bernie (Tottenham)

Griffiths, Nigel (Edinburgh S)

Griffiths, Win (Bridgend)

Grocott, Bruce

Hardy, Peter

Healey, Rt Hon Denis

Heffer, Eric S.

Henderson, Doug

Hinchliffe, David

Hogg, N. (C'nauld & Kilsyth)

Holland, Stuart

Home Robertson, John

Hood, Jimmy

Howarth, George (Knowsley N)

Howell, Rt Hon D. (S'heath)

Howells, Geraint

Hoyle, Doug

Hughes, John (Coventry NE)

Hughes, Robert (Aberdeen N)

Hughes, Roy (Newport E)

Hughes, Sean (Knowsley S)

Hughes, Simon (Southwark)

Illsley, Eric

Ingram, Adam

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