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Mr. Boswell : Does my hon. Friend accept that spending and income must be considered together? Will he remind the House by how much the starting figure at which a comparable family pays income tax has increased in the same period?
Mr. Lilley : My hon. Friend is absolutely right and makes a valid point. We have increased the threshold by about a quarter in real terms, thus taking a considerable number of lower paid people out of the income tax regime altogether.
Dr. Marek : The Economic Secretary will have heard the Financial Secretary say a few moments ago that the burden of taxation as a proportion of gross domestic product has increased under this Government. Will he take the next step and admit that that means that the British people have been taxed more heavily in the past 10 years under this Government than they were taxed under the previous Labour Administration?
Mr. Lilley : We inherited public finances that were largely financed by borrowing. Initially, we had to finance part of that by increased taxation but more recently the burden of taxation as a proportion of GDP has been coming down. My right hon. Friend the Chancellor has made it absolutely clear that if ever a Government were
Column 462elected--which they will not be--with the policies that appeared in the recent Labour policy review, taxes would go up and up and up.
Ms. Quin : Have the Government studied the recent survey by the Forum of Private Business, which shows that small firms are rapidly becoming the victims of high interest rate policies? Are the Government aware of the CBI's industrial survey showing the weakness of small firms' export orders? What advice are the Government now giving to small firms?
Mr. Major : I have seen those reports. There is no doubt that interest rates are uncomfortable. But inflation would be more uncomfortable, would last longer and would be far more damaging. Monetary policy is specifically geared to bear down on inflation and so bring it down. That is in the interests of all business, particularly small business.
Mr. Gow : Is it not the case that excessive monetary growth caused, and diminished monetary growth will cure, the monetary evil of inflation? Will my right hon. Friend confirm that he will maintain interest rates at such a level as to persevere in the abatement of inflation until we achieve his declared target of stable prices?
Mr. Haynes : When the Prime Minister comes in to the Chamber in a moment or two, will Treasury Ministers have a word with her and tell her to get rid of the Chancellor and farm him off back to the beautiful green fields of Blaby, because he has been a complete failure? He promised that the Government would help small businesses because that was where the jobs would come from and said that that would sort out the problems of the economy.
Mr. Bellingham : Is the Chief Secretary aware that in west Norfolk unemployment has come down from a peak of 18 per cent. to less than 6 per cent.? The main reason for that is the success of the small firms sector, which has prospered under the Chancellor's policies. However, is my right hon. Friend aware that that sector is worried about the increase in inflation and supports policies that will bring inflation down?
Mr. Major : I entirely agree. Unemployment has fallen in each and every region of the United Kingdom--without exception--and that has been happening for a considerable period of time. That is a direct result of the policies that my right hon. Friend has been following.
Column 463and the south-east have risen by 28 per cent. in the past year, as a direct result of the Government's high interest rate policy? Does he show no concern for the small businesses throughout the country that are being forced to abandon re-equipping and investment decisions and, in many cases, being forced to lay off staff? Has he heard the verdict of the small business man in Gosport, who said that high interest rates were squeezing his business to choking point? Why does he not change his policy before it is too late?
Mr. Major : The hon. Gentleman can rattle his chains all he likes, but the creation of new businesses is now running at an unprecedented rate of 1,300 new businesses every week. The hon. Gentleman can never tell us when that happened under any Labour Government.
Mr. Oppenheim : Does my right hon. Friend agree that the effect of high interest rates on business is substantially mitigated because long- term rates are several points below the level of short-term rates? In addition, does he agree that the long-term interests of all business, the economy and the people of Britain are best served by having high interest rates now, rather than allowing problems to build up for the future, as other Governments would have allowed?
Mr. Major : That is right. It is also pertinent that the profitability of small businesses is at the highest level for 20 years. That means that firms are much less reliant on borrowing and therefore much less sensitive to short-term interest rate changes.
Mr. Wall : Have the Chancellor's economic advisers concluded whether Sir Alan Walters, the Prime Minister's economic adviser, is correct in saying that the current high and rising rate of inflation is due to the Chancellor's decision to peg the pound to the deutschmark?
Mr. Wardell : Have the Chancellor's advisers yet reached the conclusion that his over-reliance on the rate of interest as an instrument of economic policy is the key to understanding his current mismanagement of the British economy?
Column 464time before we take any other action that may or may not be necessary? It is essential that the economy is given proper time in which to respond to current levels.
Mr. Batiste : Does my right hon. Friend agree that a sensible person should take advice from as many sources as possible, and that he will be judged not by the noises that come from his advisers but by the quality of the judgments that he makes based upon that advice?
Mr. Major : My hon Friend makes an extremely good point. It is not that long ago that we had some advice from 364 distinguished economists who were entirely wrong. I can certainly offer my hon. Friend the assurance that none of them work for the Treasury.
Mr. John Smith : Is it not clear that the Chancellor is in need of some good advice, in particular not to make foolish interventions in rail disputes and not to threaten even further cuts in investment in our railway system, which is already inadequate because of years of underinvestment by the Government?
Mr. Major : Even by the standards of the Opposition Front Bench, that is a remarkably misguided statement. The growth in investment in British Rail has been 75 per cent., and we now have the largest investment programme in British Rail since the advent of steam. That is a reality that the right hon. and learned Gentleman and his hon. Friends might do well to understand.
The following is the information :
1 Chief Economic Adviser at Grade 1A
1 Deputy Chief Economic Adviser at Grade 2
4 Grade 3 (Under Secretary) Economists
12 Grade 5 (Senior Economic Advisers)
31 Grade 7 (Economic Advisers)
27 Economic/Senior Economic Assistants
12. Mr. Curry : To ask the Chancellor of the Exchequer what was the percentage increase in the real take-home pay of a married man on male average earnings with two children between 1978-79 and 1989-90
Mr. Curry : Is it not clear that the ordinary working family has benefited most from a policy of high economic growth and a reduction in taxation? Therefore, are not the Government acting in the interests of the ordinary working family in making their counter-inflation strategy the centrepiece of their economic policy, even when it involves difficult decisions such as keeping down pay in the public sector?
Mr. Lamont : My hon. Friend is right. The increase in earnings in real terms, after prices and after VAT, to the average person is worth about £53 a week more at today's prices than in 1978-79. The same is true also for the person on half average earnings. His real earnings are now about 25 per cent. higher. That is an increase in the past seven
Column 465years of 3.2 per cent. per annum, which compares with a total increase of about 4 per cent. during the period when the Labour party was in office.
13. Mr. Malcolm Bruce : To ask the Chancellor of the Exchequer if he will make a statement on what deutschmark/sterling exchange rate he would treat as appropriate to join the exchange rate mechanism of the European monetary system and as to what other considerations would affect his decision.
Mr. Bruce : That statement showed that the Prime Minister took the view that we should not join the exchange rate mechanism until the completion of the single market, which is likely to be well after 1992. Does that mean that business and industry must wait another 10 years before the time is right?
Mr. Lawson : The hon. Gentleman will have to wait and see. My right hon. Friend reaffirmed our commitment to join the exchange rate mechanism of the EMS but said that first inflation would have to come down and that there would have to be satisfactory progress on other measures involved in stage one of the Delors programme, including in particular the abolition of exchange controls. We in this country have been working for that for a long time, and got an agreed directive last year.
The Prime Minister (Mrs. Margaret Thatcher) : This morning I presided at a meeting of the Cabinet and had meetings with ministerial colleagues and others. In addition to my duties in the House, I shall be having further meetings later today.
Mr. Walker : Has my right hon. Friend read the report in the Scottish Sunday Express about the crisis of confidence throughout Scottish business--[ Hon. Members-- : "Reading."] and the risk of job losses and a reduction of investment in Scotland--[ Hon. Members-- : "Reading."]--which is the direct result of the Opposition and the Scottish media supporting the--[ Hon. Members-- : "Reading."]-- flawed, fraudulent and unworkable proposals for an assembly or parliament in Scotland, leading to--[ Hon. Members-- : "Reading."]--increased risk of separation of the kind that we expect from the Socialists-- [Interruption.]
Mr. Walker : Has my right hon. Friend realised that the benefits of the best financial climate that Scotland has enjoyed since 1945, due to her policies and leadership, is now at risk? What can she do to help the Scots?
The Prime Minister : I saw the report to which my hon. Friend refers, which said that half the Scottish companies interviewed would either cut local investment or move their headquarters south if devolution or independence came to pass. Scotland has done well on inward investment and during the period of Conservative Government, more jobs have been created and it has the second highest rate of earnings in the whole of the United Kingdom. I hope that Scotland will see fit to keep this prosperity and good prospects for the future.
[Interruption.] --and the unions. As he knows, the national tribunal is meeting today to hear and consider the matter referred to it by the Transport Salaried Staffs Association. Alas, it is not also considering the NUR and ASLEF issues because they have not referred their matter to that arbitration panel.
Mr. Kinnock : I think that the words the Prime Minister was searching for when answering my question were, "None, Sir." If the Prime Minister ever used the railways or the tubes, she would know that travellers constantly suffer dirt, delays and discomfort because of under- investment. How does she think that yesterday's threat to cut investment will help to resolve the current dispute or help to improve services for those travellers?
The Prime Minister : Has not the right hon. Gentleman forgotten one fundamental thing, which is that the unions are driving the customers away- - [Interruption.] --because they are not operating the railways? The right hon. Gentleman will have heard the Chief Secretary in Treasury questions pointing out that investment in British Rail has increased under Conservative rule, particularly in the
electrification of lines--the investment of the last two years is the biggest programme we have ever had and the prospects for the next four years are good. It is the unions which are driving their customers away, both passengers and freight. It is a tragedy that railway men will lose their jobs if they go on like this.
Mr. Kinnock : Will the Prime Minister confirm, for the sake of honesty, that under her Government investment in railways has been 25 per cent. lower in real terms than under the last Labour Government, that the best level of investment ever achieved by her Government was lower than the worst level of investment ever achieved in real terms under a Labour Government, and that the claims made yesterday by the Chancellor of a 50 per cent. increase is an increase from the lowest level of investment in railways in post-war history?
[Interruption.] --when the railways are on strike. Of course they cannot. Railway men are depriving themselves of jobs.
Column 467On the question of investment, the Government have spent in real terms half as much again each year on rail electrification as the Labour Government. With regard to overall investment, in terms of 1989-90 prices, the greatest years for investment in British Rail were 1987-88 at £594 million, 1988-89 at £629 million, and 1989-90 at £781 million.
Mr. Barry Field : Does my right hon. Friend agree that even the average reader of "Thomas the Tank Engine" understands that it is not possible, on the one hand, to call on the Government to defeat inflation and, on the other to call on the Government to give in to the rail strikers' pay demands without stoking up inflation? Will my right hon. Friend recommend a serious economic policy to the Leader of the Opposition or send Mr. Controller to have a word with him?
Mr. Kirkwood : Has the Prime Minister yet had time to study the findings of the British Medical Association-commissioned Gallup poll on the National Health Service which shows that the vast majority of the British public, including many members of the Conservative party, are opposed to and will not accept the far-reaching structural changes to the NHS that the Prime Minister is suggesting in "Working for Patients" and in the new general practitioners' contract? Would it not be wiser to stand back and abandon the big bang approach to changing the NHS in favour of a much more considered evolutionary process which seeks to build on the very many strengths of the existing National Health Service?
The Prime Minister : No. I never know whether we are being accused of not running a good enough Health Service so that it needs reform or whether we are being accused of running such a good Health Service that no reform is needed. Hon. Members ask for one course of action one day and ask a different question on another. We are running a very good Health Service- -the best that we have ever had. We are hoping to improve it still further. Many of the improvements that we have introduced have been opposed at the time, but they have resulted in releasing increased resources for the patient and better patient care. This reform will be no exception. It will result in great improvements for the patient.
Mrs. Peacock : Has my right hon. Friend had an opportunity today to read the report in The Daily Telegraph which says that the Governor of the Bank of England feels very uncomfortable with the aggressive advertising techniques of the financial institutions? Does she agree that the use of aggressive advertising to persuade people to borrow money to spend is of grave concern?
The Prime Minister : I am grateful to my hon. Friend. I tend to share the governor's concern and I dislike seeing so many temptations for people to spend more than they can really afford. I hope that they will resist such temptations. It is not wise to spend more than one can really afford.
Mr. Foot : Can the right hon. Lady give us any explanation--maybe it must be a psychoanalytical one--of why she should always be at her most dogmatic or strident on subjects such as the railways, football or the National Health Service about which she knows least?
Mr. French : Will my right hon. Friend find time to consider the merits of the rents into mortgages scheme recently propounded by the Scottish Minister responsible for housing? Does she agree that such a scheme would find a welcome in other parts of the United Kingdom, including the south-west?
The Prime Minister : Yes. I greatly welcome the rents into mortgages trial scheme that is being run in Scotland because there are a number of houses there where the Government are the landlord and we thought that it was a good way in which to try out such a scheme. I hope that many people will take advantage of it to purchase their houses and that the percentage of owner-occupation in that country will go up. Credit on housing is a very good investment indeed.
Rev. Martin Smyth : Is the Prime Minister aware of the growing concern in Fermanagh about the recent decision to open the Lackie bridge, which has been closed for some time to protect the citizens there? At a time of growing bombing in the Province, will she provide the security that the people need?
The Prime Minister : As the hon. Gentleman knows, there was a decision some time ago to close certain checkpoints because we thought that the soldiers involved at those checkpoints could be better deployed in the area to give greater protection to the people. That decision has now been implemented because we believe that it represents a better use of the armed forces for the protection of the people.
Dr. Goodson-Wickes : Does my right hon. Friend agree that the recent accord between the MPLA and UNITA in Angola is a most welcome step towards peace in that country after a civil war that has lasted 14 years? Will she assure the House of the Government's persisting aim to achieve stability and prosperity in that region, not least by holding the next South African President to his pledge to hold to sensible progress towards democracy in his country?
The Prime Minister : I join with my hon. Friend in hoping very much that the recent accord in Angola will be implemented and that it will lead to free elections. That will be the crucial test of whether it is working. If it is, that, together with independence for Namibia, will augur very well for the future of southern Africa. We have yet to see if that particular accord will result in free elections.
Mr. Wardell : What advice could the Prime Minister give to my constituents and hon. Members about elderly people who, without asessment of any kind, enter private nursing homes and then find that their families cannot afford to pick up the bill for the difference between what the DSS pays for keeping that person in the home and the price charged by the home?
The Prime Minister : As the hon. Gentleman is aware, under the income support scheme, there is provision for people to enter private nursing homes. A maximum amount is payable and homes are available which fall within that amount so that people may enjoy those facilities. Of course, people should inquire about the price before they go in, and it is impossible for the DSS to pick up every single bill for every residential home, no matter
Column 470how expensive. That could not be done under any Government. There are more people in residential homes now than there have been for a long time. Therefore, more people are enjoying a standard of comfort which was previously not available to them.