(No. 2) Bill--
Order for Third Reading read.
To be read the Third time on Thursday 15 June.
Orders for Third Reading read.
To be read the Third time on Thursday 15 June at Seven o'clock.
[Lords] Orders for Consideration read.
To be considered on Thursday 15 June.
Order for Consideration read.
To be considered on Thursday 15 June at Seven o'clock.
Orders for Second Reading read.
To be read a Second time on Thursday 15 June.
1. Mr. Cohen : To ask the Chancellor of the Exchequer what information he has on the pay rises awarded to directors in the last period for which figures are available, if he will indicate the economic effect of all workers having a similar pay rise this year ; and if he will make a statement.
Mr. Cohen : What a cop-out answer! How does the Chancellor justify an average increase of 23 per cent. for top directors when inflation is 8 per cent. and workers are having to accept much less than that? How does the Chief Secretary justify a 20 per cent. increase for ICI bosses, 34 per cent. for Unilever's boss, 43 per cent. for Barclay's boss, 47 per cent. for Cadbury's boss, 48 per cent. for BP's bosses, 58 per cent. for Sun Alliance bosses, 100 per cent. for Legal and General's bosses and 100 per cent. for P and O's? Is not the reason that the Conservatives and those directors have the same incestuous class interest? Regardless of the economic effect, there is Government condemnation for workers' pay rises and a free-for-all for top directors.
Mr. Major : I am bound to say that I think that the hon. Gentleman has a rather limited view of directors. Contrary to his vivid expression, the vast majority are able, efficient and effective, and we need the best management. Notwithstanding that, I have never justified wage or salary increases that are unjustifiable, and I do not do so now. It is not, however, for me to determine what is or is not justifiable in that respect.
Mr. Bill Walker : Does my right hon. Friend agree that there are only two resources in any company--money and people--and that it is the way in which those resources are managed and deployed that results in profitability or loss in operation? It is only right that those who create the profits should, as a result of the shareholders' wishes, be properly remunerated.
Mr. Major : My hon. Friend makes his point extremely clearly, but I repeat that I am not directly responsible for or concerned with the matter. Pay is a matter for those who negotiate and determine it, and it is not for the Government to intervene.
Column 353income has risen by about one third, partly as a result of the Government's tax-cutting policies, and has he any calculation of the effect on real disposable personal income if Labour's policies were put into effect?
Mr. Brooke : My hon. Friend's first point is correct, in the context of the real take-home pay of a married man with two children who is on male average earnings. As for the second point, we know so little about Labour's policies that any observation of mine would be purely speculative--which strikes me as an appropriate adjective to apply to the policies.
Ms. Short : Does the Minister agree that not everyone has received a 5 per cent. increase as there has been enormous inequality in its distribution? Is he aware that the worst-paid 20 per cent. in society are increasingly worse off and we are becoming a more unequal society? Does that not concern him? Does he not think that the Government ought to look at the provisions made right across Europe for some national minimum wage rather than allowing inequality to grow in Britain?
Mr. Brooke : The hon. Lady is not well informed in the first part of her question. Perhaps she should put in a little more research in future. As to the second part of her question, that proposal is contained in the social charter, on which the Conservative party looks forward to vigorous debate.
Mr. John Marshall : Does my right hon. Friend agree that minimum wage legislation would create unemployment in this country? Does he further agree that the percentage of gross domestic product being spent on the elderly is higher in Britain than in 10 of the other Community countries?
Dr. Marek : The Paymaster General will know that in calculating real personal disposable income, interest paid to savers is offset by mortgage interest paid to building societies. Does he accept that generally speaking the saver with £30,000 in a building society is not the same person who has to borrow £30,000 to finance the purchase of a house? Will he now admit how much real personal disposable income has been lost in the past year by the man or woman with an average mortgage?
Mr. Brooke : The hon. Member for Wrexham (Dr. Marek) is broadly speaking correct in his surmise about the unlikelihood of coincidence. As to the second part of his question, he knows very well that the policy pursued by my right hon. Friend the Chancellor to bring down inflation is directed specifically to that aim and my right hon. Friend has said that when inflation visibly comes down, interest rates will follow.
Mr. Baldry : Does my right hon. Friend agree that the welcome boost to personal equity plans in this year's Budget will increase the number of people who have a personal stake in the success of British business and encourage businesses to invest further because their ability to raise equity will thus be enhanced? Given all those advantages, does my right hon. Friend not think it somewhat sad that the Labour party should oppose this year's Budget proposals to expand personal equity plans? Does that not reflect the Labour party's inherent opposition to the spread of wider share ownership and a property-owning democracy?
Mr. Lawson : Yes, indeed. My hon. Friend is quite right. The Labour party is wholly opposed to share-owning democracy and they were opposed to property-owning democracy. Indeed, for years and years they opposed the sale of council houses to their tenants until eventually public feeling was so strong that they had to change their ways. The measure in this year's Budget will give personal equity plans a new boost. One of them--permitting new issue shares to go into personal equity plans instead of, as previously, purely cash--is an important change. I can announce today that this facility will be extended to shares issued by building societies when converting to plc status, and this includes the Abbey National.
Mr. Cryer : If the Chancellor of the Exchequer is so committed to a share-owning democracy, will he introduce legislation to allow shareholders to determine whether a small clique of Tory sycophants in the boardroom hand over shareholders' money to the Tory party, or is he stopping short of spreading democracy to shareholders so long as the Tory party coffers are substantially swollen, like himself?
Mr. Lawson : The hon. Member's paranoia becomes increasingly tedious. Company shareholders can, if they are dissatisfied with the management of any company, vote that management and vote those directors out of office--and that is democracy.
Mr. Brazier : Does my right hon. Friend agree that unemployment has fallen in every region, especially among the long-term unemployed? In the past 10 years, we have moved from above the EEC average to well below it. Does he agree that there can be no greater testimony to the performance of the Government on unemployment than the silence of the Opposition on the subject yesterday?
Mr. Major : There was certainly a deafening silence on the Opposition Front Bench yesterday. My hon. Friend is entirely correct. The fast falls in the west midlands, Wales and Yorkshire are especially welcome. There have been remarkable reductions in long-term unemployment in every region.
Column 355not clear that despite the falls in unemployment, which I do not deny for one moment, under the capitalist system unemployment comes down just as it goes up, but the Government have not achieved the lower levels of unemployment which existed under Labour? The levels are still far higher than they were when the Government took office.
Mr. Major : The hon. Gentleman overlooks a point which is material to his concern--that there are more people in work today than there have ever been. The dramatic falls in unemployment have exceeded even the most optimistic forecasts two years ago--certainly those of the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), who forecast at the general election that unemployment would increase, since when it has fallen by over 1 million.
Mr. Waller : My right hon. Friend said that unemployment had fallen especially fast in areas previously regarded as the more deprived parts of the country. Does he agree that this shows that those who talked in the past of the inevitability of the north-south divide were somewhat misguided and that the north has qualities and reservoirs of skill which should attract many people to the north?
Mr. Major : I agree with my hon. Friend. On the many visits that I have made to the north in recent months, I have been extremely impressed by the way in which the economy is growing and by the confidence and investment in industry. It is clear that the best regional policy is the sustained economic growth that we have experienced in the past few years.
Mr. Major : We never make predictions about unemployment. We declined to do so last year, since when it has continued to fall dramatically. As I reminded the House a moment ago when quoting the right hon. Member for Sparkbrook, predictions about unemployment are unwise.
Mr. Andrew MacKay : As the spectre of unemployment fades as a result of the Government's economic policies, does my right hon. Friend agree that industry faces a new problem--skill shortages? Are Ministers addressing the problem to ensure that more skills are developed and fresh people brought into the labour force, including women?
Mr. Major : That is an important point. As my hon. Friend will know from the public expenditure round last year, substantial additional resources have been made available for skill training. I hope that as industry is increasingly profitable it will devote more of its resources to training present and future workers.
Column 356have drawn on IMF facilities within the past three years. Indonesia has not applied for IMF assistance in that period.
Mr. Dalyell : What measures will the Paymaster General promote in the World Bank and the IMF to ensure that the IMF's structural readjustment programmes do not accelerate the destruction of the rain forests?
Mr. Brooke : IMF programmes are macro-economic and do not relate directly to issues such as the environment. The environment is a matter for the World Bank. IMF programmes create conditions for economic growth which, by leading to the alleviation of poverty, would tend to reduce pressure on the environment.
Mr. Brooke : That is a slightly larger question than that asked by the hon. Member for Linlithgow (Mr. Dalyell), but there is never any harm in my hon. Friend reminding the House of conditions 12 or 13 years ago.
Mr. Chris Smith : So far, the Government have been lukewarm, at best, in their efforts to alleviate the massive debt problems of many of the developing countries, and their reluctance to associate that with environmental concern, as shown by the answer that the right hon. Gentleman has just given, makes the position even more worrying. Can the right hon. Gentleman not see the common sense in securing environmental gains for the safety of the planet as a whole while at the same time lightening some of the crippling debt burdens of countries such as Brazil?
Mr. Brooke : Taking the hon. Gentleman's question at face value, the Government fully support the World Bank. As to the enhanced structure adjustment facility, the United Kingdom has led the way in supporting the efforts of the poorest countries to adjust their economies. The IMF pays its way through ESAF, to which the United Kingdom has made one of the largest contributions, providing a subsidy on up to £1 billion special drawing rights of ESAF lending.
Mr. Clarke : Given those appalling comparisons, is the Chancellor aware that the Small Business Research Trust recently conducted a survey which showed that a quarter of its members were deeply worried about the impact of interest rates on their businesses? What steps does the right hon. Gentleman intend taking to allay their fears, or can they expect things to become even worse?
Mr. Lawson : Let me say two things in reply to the hon. Gentleman's question. First, on the fact of short-term interest rates in the United Kingdom being above the average for the rest of the G7, there is nothing new about
Column 357that--nothing new at all. They have been consistently higher over the past five years. During those five years, there has been a massive increase in investment of all kinds. There has been a record growth of new businesses--indeed, business and industry generally have done better than they have ever done before--so I think that the hon. Gentleman is wholly mistaken in drawing the conclusions that he does.
On the second point, I would say to the hon. Gentleman that of course what would be far, far worse for small businesses would be to see the sort of levels of inflation that we saw under the last Labour Government, and we are determined that we shall never go back to that.
Mr. Ian Taylor : Does my right hon. Friend agree that the speech yesterday by the right hon. and learned Member for Monklands, East (Mr. Smith) undermining the interest rate policy would have the effect of undermining the exchange rate, which would import inflation into this country? Does my right hon. Friend agree that the right hon. and learned Gentleman's policies would therefore be more inflationary?
Mr. Lawson : Yes, indeed. It was quite clear from the debate that we had yesterday that the Labour party has no policy at all to fight inflation. The only policy it has is one to put inflation up, through massive increases in public expenditure, through increased taxes on savings, through devaluation and through lower interest rates.
Mr. Robert Sheldon : As the Chancellor has ruled out credit controls, even of a limited kind, is it not clear that his only weapon has been ludicrously high interest rates? As this has been fed directly into the RPI, is it not also clear that wage claims are higher than they would otherwise have been, producing a further level of inflation for which the right hon. Gentleman is responsible?
Mr. Lawson : I entirely agree with the implication in the right hon. Gentleman's question that it is absurd that we have mortgage interest payments in the RPI, unlike most other countries. The right hon. Gentleman is perfectly right about that. But as for ludicrous interest rates, the only ludicrous interest rates were the interest rates during the last Labour Government when he was a Treasury Minister, which were negative in real terms. Negative real interest rates rob the saver and do great damage to the economy. That is what we had under Labour.
Mr. Gill : Will my right hon. Friend take this opportunity to remind the House that one cannot establish sound security on borrowed money? Will he exhort the nation to follow the Government's example in repaying debt, thereby reducing the burden of interest?
Mr. Lawson : My hon. Friend is right. It would, indeed, be very much better in many ways if the appetite for borrowing was somewhat moderated. This is a free country--a free country--and people and companies are entitled to borrow what they wish to borrow and what they feel is prudent to borrow and I do not wish any change in that. Nevertheless, I do feel that the higher interest rates we have now might be to some extent a discouragement to borrow and an encouragement to save and, indeed, that is what we see happening at the present time.
Column 358larger businesses, which borrow mainly in the long term? Unless the Chancellor has some change of policy, will the position not be that smaller business will take more and more of the medicine that is not working on the system as a whole?
difference--between the effect of long-term interest rates--which, the hon Gentleman is quite right, are well below short-term interest rates tend to bear more heavily on consumer spending because consumer borrowing is linked to short-term interest rates whereas, as he pointed out, a great deal of investment is linked to longer-term interest rates and, therefore, the only sense of what he is saying is that the depression of the growth of demand which is necessary in his judgment should be more directed towards investment and less towards consumption. That is not something with which I agree.
Mr. Gordon Brown : Now that mortgage rates have been 10 per cent. or above for almost all the past 10 years, now that borrowing costs are just about the highest in Europe and now, as the Chancellor confirmed yesterday, that home owners face a summer of high mortgages and rising prices, does the right hon. Gentleman still dismiss the anxieties of home owners throughout the country? Does he still repeat the advice he gave earlier that they should cut back on something else?
Mr. Jones : Is the Minister aware that only this Monday the Engineering Employers Federation predicted that in 1989 the only industry in Britain which will be in surplus with the rest of the world and which is a major metal user will be the aerospace industry?
Mr. Lamont : It is not necessary for the current account to be in surplus in every sector. I regard projections for individual sectors as insignificant. It does not matter if we are in deficit in one sector, such as engineering. As a result of the measures that my right hon. Friend the Chancellor has taken, demand in the economy will slow down and the position on the current account will improve.
Mr. Boswell : Has my right hon. Friend noticed that the balance of payments includes an unusually high proportion of imports of investment goods? Will they not contribute to a more efficient industrial structure in the future?
Mr. Lamont : My hon. Friend is right. About one quarter of the value of manufactured imports between 1987 and 1988 was accounted for by consumer goods, including cars, with the remainder--fully three quarters-- made up of goods for production and investment. That illustrates that, as my hon. Friend says, part of the current account deficit has been accounted for by firms tooling up for investment and higher production.
Mr. Kirkhope : Does my right hon. Friend agree that the high levels of investment in manufacturing industry and the recent high level of inward investment as a result of the attraction of the Government's economic policies will result in a much better balance of payments as we progress into the 1990s?
Mr. Lamont : It is not just the high level of investment in manufacturing that matters but investment in the whole economy, and I am sure that the record level of investment in the whole economy is a very good thing for the long-term benefit of the economy. In that respect, my hon. Friend is right.
Mr. Lamont : As the right hon. and learned Gentleman knows, the Government's forecasts are updated in the Autumn Statement. We still stick to the view that the current account deficit in the second half of the year will be lower than it was in the first, as was said in the Red Book, and, indeed, the figures and trends are there to show that. Export volumes in the past three months are up 1 per cent. on the previous three and the trend is upwards, while imports are beginning to stabilise in response to the slowing down of consumer demand, which is exactly what the policies of my right hon. Friend the Chancellor were designed to achieve.
Mr. Battle : Will the Chancellor tell the House how much of the burden of taxation has shifted to indirect taxes such as VAT? How much will indirect taxation increase as he proceeds with his policy of reducing direct taxation?
Mr. Lawson : The increases in direct taxation that have occurred during the time that I have been Chancellor of the Exchequer have been negligible--in fact, very small indeed. Nor during my time as Chancellor of the Exchequer have I increased the national insurance rates, so let us get that straight. What I will say to the hon. Gentleman is that if the policies which have been proposed by the Labour party were ever put in practice, we would see a very substantial increase in income tax at almost all levels.
Sir William Clark : Does my right hon. Friend agree that Conservative Governments reduce income tax because they always control public expenditure wisely, whereas Labour Governments invariably increase income tax because they are profligate in their public spending?
Mr. Lawson : My hon. Friend is right, and that is how we have been able to get income tax down and that is how we will be able to get income tax down still further in the years that lie ahead, to the great benefit of the economy as a whole and also giving individuals a wider choice of how they spend the money that they earn. As for the Labour party and their spending plans, they have yet so far still failed to answer the question put to them by the right hon. Member who was formerly running the GLC--I cannot remember his constituency at the present time-- [Interruption.] --Brent, East (Mr.
Livingstone)--who said very pointedly that they have not said where they are going to find the money to spend on all those programmes.