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Mr. Batiste : My right hon. Friend will be aware of the scepticism with which the statistics on which the balance of payments figures are calculated are treated in many quarters. Is he satisfied with the accuracy of those statistics? If not, what action will he take to improve them?
Mr. Lawson : My hon. Friend is right ; the statistics are almost certainly inaccurate, as is indicated by, for example, the fact that for 1988 there was in the balance of payments a balancing item of £15 billion, greater indeed than the recorded deficit--and a balancing item is just a polite name for errors and omissions. We are concerned to improve the quality of Government economic statistics, and that is why the measures were announced yesterday involving a substantial reorganisation and enlargement of the Central Statistical Office and a number of other measures which, over time, will lead, I believe, to an improvement in the quality of statistics.
Having said that, it is a balance that has to be drawn between the burdens on business--the burdens that are put on business through the collection of statistics--and getting the full amount of statistics ; and also, now that the economy is a much more complex, more service-based economy, it is genuinely harder to get statistics of the quality that we had in the past. Clearly, we have got to do better, and the announcement yesterday is designed to do just that.
Sir Richard Body : Will my right hon. Friend explain how there can be both a balance and a deficit? Surely the balance of payments deficit on current account is matched exactly by a capital account surplus, which may well be to our advantage?
Mr. Lawson : My hon. Friend is absolutely right. Part of the point that I was making was that if my hon. Friend looks at the officially recorded figures he will see that there is a substantial deficit on the current account in 1988 but equally there is a recorded capital outflow, which clearly cannot be the case. The two things must match and counteract. Of course, my hon. Friend is also right that the overseas savings which are coming to the United Kingdom to finance investment here--because they feel that this is a very good place to invest--are extremely welcome and will strengthen the British economy.
Column 330payments, are not the Chancellor's remarks quite unconvincing on how he expects to improve the balance of payments so long as these factors remain?
Mr. Lawson : I disagree with the right hon. Gentleman, even though he has at one time been a Treasury Minister. What has been happening is that domestic demand in this country has been running at an unsustainably high level, and one of the things that will happen is that the rate of growth of domestic demand will slow down and, as it slows down, import growth will slow down. That is one of the mechanisms by which there will be an improvement in the current account.
What the right hon. Gentleman is proposing, however, which is lower interest rates and a lower exchange rate, would probably have very little benefit, if any, to the current account. What they would do is ensure that inflation took off in a major way, as it did during the period when he was a Treasury Minister.
Mr. John Smith : Will the Chancellor tell us whether the IMF is wrong in predicting a £17 billion balance of payments deficit? Why should his prediction for 1989 be treated with any more credibility than his prediction for 1988?
Mr. Lawson : My right hon. Friend the Chief Secretary answered that point earlier, when he pointed out that the IMF frequently gets its forecasts wrong. Indeed, it got its forecasts hopelessly wrong last year, just as all other forecasters did. If I may give advice to the right hon. and learned Gentleman, who is an up-and-coming politician, I suggest that, if he were to concern himself less with forecasts and more with what is actually happening in the British economy, he would do a great deal better.
Mr. Redwood : Will the Chancellor confirm that the £15 billion unidentified item may include substantial under-recording of exports? Is that not very likely given the completely out-of-date basis for the survey of the service sector which is now such an important component in our overseas earning capacity?
Mr. Lawson : My hon. Friend is absolutely right and that is why one of the recommendations of the scrutiny report that came out yesterday, which he will have read, is to try to improve just that sector. It would certainly strain credulity to believe that the entire £15 billion balancing item is accounted for by unidentifed capital flows and none of it by unidentified flows on the current account.
Mr. McFall : Does the Minister realise that over the past 10 years the VAT paid by average families with two children and average male earnings had risen from £2 million to over £22 million in real terms, which represents a doubling of the VAT that people paid under Labour? Does the Minister not agree that this regressive tax hits the poorest people in society? When will he stop fooling the British people and his Back Benchers by chattering on about income tax cuts, when he is using the VAT sledgehammer to clobber the British people?
Mr. Lilley : The hon. Gentleman does not appear to realise that since 1978-79, the take-home pay of a man on average earnings with one child has risen in real terms by 29 per cent., which takes account of all taxes. Under Labour that family saw an increase of less than 1 per cent. in its real take-home pay. The tax is not regressive, as the hon. Gentleman suggests.
Mr. McKay : Does the Minister not agree that the £6.60 by which the average family would be better off if VAT represented a proportion of gross income, as it did under Labour, would be helpful to the average family? It would help to pay the mortgage interest that Government policies have increased.
Mr. Lilley : As I have just pointed out, if the average family had to go back to the level of income that it possessed under the last Labour Government, it would be in dire straits. One of the benefits of VAT is that families at least have some choice about whether they pay it. A high proportion of spending goes on zero-rated items, such as food and housing.
Mr. McKelvey : Does the Minister not realise that only an economic illiterate would argue that VAT is anything other than a regressive tax? Does he not understand the effect that it has on poor people, especially those in Scotland who have also been hit by that most obnoxious and regressive tax of all--the poll tax?
Mr. Lilley : The hon. Gentleman is simply wrong. People on three quarters of average income pay less than 4 per cent. of their income in VAT ; someone on average income pays about 4.7 per cent. and someone on one and a half times average income pays 5.1 per cent. Therefore VAT is clearly a progressive and not a regressive tax. That is manifestly obvious and were the hon. Gentleman in contact with his constituents he would realise that the less well off spend a much higher proportion of their incomes on zero- rated items.
Mr. Lilley : My hon. Friend is absolutely right. Under a Labour Government they would of course, be able to afford far less. It is sheer hypocrisy for the Labour party to show any concern about any tax because it is, after all, the party of high spending and high taxation.
Mr. Holt : My hon. Friend will be aware that in the calculations of VAT in 1978-79 one major difference for many people was that the whip-round for the drinks and refreshments of one's opponents at sporting events were not VAT rated. That was brought in by the Government in 1982 and will be thrown out as a result of harmonisation. Why not do it in advance of that date?
Mr. Lilley : I know my hon. Friend's strong feelings about the impact that VAT has had upon Beaconsfield rugby club. I have dealt with the matter as best I can. I think that my hon. Friend has a strong case about the treatment that he has received and I apologise to him and his son.
The Lord President of the Council and Leader of the House of Commons (Mr. John Wakeham) rose--
This morning my right hon. Friend the Prime Minister presided at a meeting of the Cabinet. In the course of the day she will be having meetings with President Gorbachev. This evening she will give a dinner for him.
Mr. Alton : While the House will want to give a generous welcome to the remarkable improvement in the human rights record of the Soviet Union, will the Leader of the House take this opportunity to underline the Government's continuing commitment to the 400,000 Jewish refuseniks seeking exit visas and to the 4 million Ukrainian Catholics who have been outlawed since 1946? Will he make it clear that conditional on our attendance at the 1991 human rights conference is the Soviet Union's pursuance of a zero option to end human rights abuses and the renouncement of the sale of weapons to regimes that are opposed to this country's interests and the interests of other Western democracies?
Mr. Wakeham : I recognise the hon. Gentleman's long-standing concern with those matters. The Prime Minister will, of course, be raising the whole question of Soviet human rights with Mr. Gorbachev and will underline the need for fundamental reform. The Foreign Secretary will be pressing the Soviet Foreign Secretary on a range of specific questions, including those raised by the hon. Gentleman.
I refer my hon. Friend to the reply that I gave some moments ago.
Mr. Marshall : Will my right hon. Friend give an assurance that when the Prime Minister is discussing human rights with the Russians she will raise with Mr. Gorbachev the case of Mr. and Mrs. Zolotarevsky [Hon. Members :-- "Reading."] It is not the easiest name to remember. Does my right hon. Friend agree that the only wish of that pensioner couple is to be reunited with their daughter and granddaughter in Israel? Does he agree that it is wrong for the Soviet Government forcibly to divide grandparents from a granddaughter? Will the strongest possible representations be made?
Mr. Wakeham : My right hon. Friend the Prime Minister will be writing to my hon. Friend about this case. Although she will probably not have time to discuss individual human rights cases with Mr. Gorbachev, she has asked my right hon. and learned Friend the Foreign Secretary to raise that case with the Soviet Foreign Secretary.
Mr. Kinnock : Will the Leader of the House tell us whether, when the person who leaked the inspectors' report on the House of Fraser is discovered, the culprit will be prosecuted, like Miss Tisdall and Mr. Ponting, or protected, like Mr. Ingham and Mr. Powell?
Mr. Cormack : When my right hon. Friend the Prime Minister is discussing human rights with Mr. Gorbachev, will she make it plain that we recognise that there has been a significant improvement in that sphere in the Soviet Union? While we expect intentions to be honoured and lived up to, we recognise that progress has been made.
Mr. Robertson : The Prime Minister was absent yesterday as well and she sent the Leader of the House to apologise to the House for the unavailability in the Library of promised documents on Namibia. Is the right hon. Gentleman aware that the key document, the report of the secretary general of the United Nations to the Security Council, on which the Prime Minister based her blame on SWAPO alone for the continuing violence in Namibia, is still not in the Library, and will not be in the Library because it has now been classified as confidential? As the Prime Minister specifically and categorically said on Tuesday that hon. Members could read that report, will the Leader of the House again apologise to the House and ensure that the report is put in the Library today?
As I told the House yesterday, relevant documents have been placed in the House of Commons Library. They include the Geneva protocol which has been made public by the South African Government. A further set of documents, which together comprise the United Nations plan, will be placed in the Library today. The secretary general has asked that the report on the recent fighting be kept confidential for the time being.
Mr. Moate : Is my right hon. Friend aware of the widespread concern about the internationally and nationally important national fruit collections in my constituency-- [Interruption.] --which, despite the reaction of the Opposition, are of considerable importance to the country, and which were supported so vigorously recently by His Royal Highness the Prince of Wales? Is my right hon. Friend aware that the collections are threatened by the Government announcement of the closure of that fruit centre? Will he please ask the Minister of Agriculture to take no further steps until there has been proper consultation, including--if it is not too much trouble--consultation with the local Member of Parliament?
Mr. Wakeham : I am aware of the position in my hon. Friend's constituency. Final decisions on the closure of the Brogdale research station will not be taken until consultations with the industry are concluded. I shall see to it that my hon. Friend is included in the consultations. If research at Brogdale ceases, suitable arrangements will be made to continue the necessary work on the collection either at Brogdale or at another suitable site.
I refer the hon. Gentleman to the reply that I gave some moments ago.
Mr. Eastham : Now that the Prime Minister has returned from her tour of central Africa and is able to apply herself to some of the problems at home, will the Leader of the House draw to her attention the homelessness crisis in Britain and the recent statements by Shelter pointing out that thousands of teenagers, who have nowhere to sleep at night and are staying under arches and in doorways, are turning to crime, prostitution and drugs? What will the Government do about it?
Mr. Wakeham : The hon. Gentleman must recognise that housing in this country is of a much higher standard than it ever was under a Labour Government. The Government have taken particular steps to help those who are worse off.
Column 335My right hon. Friend receives a wide variety of representations.
Mr. Goodlad : Will my right hon. Friend confirm that, as a result of the Government's management of the economy, the number of jobs in this country has increased since 1983 by 2.75 million--which is the biggest increase of any comparable period since the war--employment is now at its highest-ever level and that those trends are particularly reflected in the north-west of England and are set fair to continue?
Mr. Wakeham : My hon. Friend is absolutely right. The number of people in employment is at a record level--nearly 1 million higher than in 1979. Unemployment has been falling steeply and the figure is now more than 1 million lower than at the time of the last election campaign. The fall has been achieved in less time than the Labour party claimed that it would be able to achieve it--not that the British people remotely believed that claim any more than they believed the forecast of the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) that unemployment would rise after the Conservative victory.
Mr. Malins : Bearing in mind the importance of small businesses to our economy, does my right hon. Friend agree that we should take yet further steps to minimise the impact of the uniform business rate on smaller businesses, many of which--especially in areas such as Croydon, which has a good record on rates--face swingeing rises under the present proposals?
Mr. Wakeham : I am sure that my hon. Friend will agree that the new arrangements will produce a much fairer distribution of rate burdens on commerce and industry. However, the changes are to be phased in gradually and my right hon. Friend the Secretary of State for the Environment has proposed a generous level of protection for small businesses to give them plenty of time to adjust to the new uniform business rate.
"I have been asked to reply."
When the Leader of the House uses those words does he not worry greatly? Is he aware that, since 1979, all his right hon. Friends who have been "asked to reply" are either in the other place or have returned to the Back Benches? Where does the Leader of the House expect to be by October this year?
Column 336Friend told the Leader of the Opposition that she would not be able to be here this afternoon because she has made herself available to President Gorbachev-- [Interruption.]
Mr. Campbell-Savours : Is it not strangely incongruous that, while the Prime Minister warmly embraces Mr. Gorbachev in London and the chemistry is good, she is perfectly willing to build Trident missiles and point them towards the Soviet Union? Will the Leader of the House
Mr. Wakeham : If, on the 40th anniversary of NATO, the hon. Gentleman has not yet realised that over those 40 years a great part of the West's strength has been our defence, he has a great deal more to learn than even I thought.
I refer my hon. Friend to the reply that I gave some moments ago.
Sir Richard Body : If, as a result of Mr. Gorbachev's visit, my right hon. Friend believes that there may be more opportunities for expanding trade between East and West, would it not be advisable for Britain to play a more lively part in the affairs of the Economic Commission for Europe, which has been responsible for several hundred agreements and conventions with the object of bringing down trade barriers?
Mr. Wakeham : My hon. Friend is right, but I think that he will also agree that my right hon. Friend the Prime Minister has played a most important part in just those discussions, and I am sure that all my right hon. and hon. Friends will join me in congratulating her on her achievements.
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