(By Order) Order read for consideration of Lords amendments.
To be considered on Thursday 26 October.
Orders read for consideration of Lords amendments.
To be considered on Tuesday 24 October.
(By Order) Order read for resuming adjourned debate on Question--[23 May]-- That the Bill be now read the Third time.
Debate to be resumed on Thursday 26 October.
(By Order) Order for further consideration, as amended, read.
To be further considered on Thursday 26 October.
(By Order) Orders for consideration, as amended, read.
To be considered on Thursday 26 October.
(By Order) Order for consideration, as amended, read.
To be considered on Tuesday 24 October.
(By Order) Order for Second Reading read.
To be read a Second time on Tuesday 24 October.
(By Order) Orders for Second Reading read.
To be read a Second time on Thursday 26 October.
Mr. Robinson : While thanking the Minister for that informative answer, may I put it to him that he should not seek this year or in any other year to effect a cut in the activities of the Export Credits Guarantee Department? He should take it from me that, given the staggering, disastrous balance of payments deficit run up because of the Chancellor's mismanagement of the economy, the last thing that we want is a cut in the activities of the ECGD. I make special reference to the London Project Group, which finances major capital projects in the Third world. Does the Minister agree that it would be not only absurd but perverse for the Secretary of State to curtail the activities of the ECGD at this time?
Mr. Norman Lamont : In the midst of the public expenditure round, I note the representations made by the hon. Gentleman. I am sure that they will also be noted by the Secretary of State for Trade and Industry. Subsidies for capital exports have been maintained in recent years. Nonetheless, it is extremely important that British exports are obtained on competitive grounds and not by subsidy from the taxpayer.
Mr. Smith : Given that the actual rate of inflation has so far so consistently exceeded the Chancellor's original estimate, will the Minister revise upwards the public expenditure planning total to compensate for that, or will he tell the House how extensive the cuts will otherwise be in essential public services?
Mr. Lamont : The policy of the Government is the same policy as that subscribed to by the Labour party--we should plan in cash terms. A cash planning system does not mean that we accommodate inflation. That is the essence of the system.
Column 249maintained on public spending? Will he compare his prudent fiscal policy with that of the Labour party and say what effect its spending plans might have on inflation?
Mr. Lamont : My hon. Friend is absolutely right ; the control of public spending lies at the heart of economic management. Furthermore, as my hon. Friend suggests, just to go in for huge surges in public spending, as the Labour party did when it was in power, does not serve the public services well. As we all know, what happened was that the Labour Government started off in years one and two trying to expand public spending regardless of the circumstances and, in the end, they had to cut it. They also had to cut capital programmes. Our record compares well with theirs. We believe that it is necessary to control public spending to get inflation down and that it is essential to do so for a sound economy.
Mr. Butterfill : Will my right hon. Friend confirm that the result of his prudent policies gives us, for the second year running, a budget surplus and the ability to repay debt? Will he compare that with the enormous increase in public sector debt which was incurred when the Labour party was in power?
Mr. Lamont : Our policy of having a budget surplus and repaying debt meant that last year we were able to find more room for priority programmes. If we had maintained the public sector borrowing requirement at the level with which the Labour party left us when we came to office in 1979 we should have a crippling burden of debt interest to pay.
Mr. Worthington : I am surprised at that because it is rare for people to write to the deaf and blind. In replying to the many people who have written to him about the catastrophe of mortgage rates, which means that the average householder taking out a mortgage will be more than £1,000 a year worse off, will the Chancellor explain that there is no external cause for this cut in their standard of living? Will he explain that the responsibility lies solely with his own mismanagement of the economy? Will he apologise to the British people for this?
Mr. Lawson : As to the hon. Gentleman's first point, I do not for a moment regard myself as being deaf--in fact, I heard his question very clearly. I am surprised that he suggests that it is unusual to write to the deaf because that is the most convenient method of communication. As for the question of interest rates, I have made it clear time and time again that it is necessary to keep interest rates as high as is needed for as long as is needed to get on top of inflation. Getting inflation out of control--getting it to the sort of levels it was under the last Labour Government--would be far more damaging for home owners. There is another thing on interest rates ; what we will not have is the
Column 250negative real interest rates that there were under the Labour Government which robbed pensioners of their lifetime savings.
Sir Anthony Grant : While recognising the overriding importance of the control of inflation, may I ask my right hon. Friend, with his fertile and imaginative mind, not to give up the quest for alternative methods to the crude one of interest rates? Does he recognise that interest rates are all very well for the haves but bear very cruelly on the have-nots, particularly the groups which he and I have always supported : small businesses and home owners?
Mr. Lawson : Of course, my hon. Friend is right, and I have acknowledged on a number of occasions that higher rates do impose a burden on many home owners, particularly those with large mortgages and, indeed, on many small businesses. However, I have to tell him that there is no alternative and he would be deluding the House to suggest that there is an alternative to high interest rates if one is serious about getting inflation down. The plain fact is that it would be very much worse for all those concerned if inflation were to go up again.
Mr. Beith : With so many people facing this crippling burden of high interest rates and with the Chancellor apparently unable to take up the option of an early exchange rate mechanism, can we get it clear : are the interest rate increases dictated by a fear that the money supply is growing too fast or a feeling that the pound has been falling too far?
Mr. Lawson : The interest rate increases are clearly designed to deal with the problem of inflation--to get on top of inflation and to bear down on inflation. Inflation is affected both by the exchange rate and by domestic factors--every schoolboy should know that, even the hon. Gentleman.
I must say, too, that this is not peculiar to this country. As the hon. Gentleman and my hon. Friend the Member for Cambridgeshire, South-West (Sir A. Grant) will be aware, earlier this month, in order to deal with an inflationary problem which varies from country to country but which each country is concerned about, there was a rise in interest rates throughout most of Europe.
Mr. Arbuthnot : Will my right hon. Friend confirm that some people spend all their time complaining about the cost of high interest rates to borrowers without at the same time recognising that those same interest rates bring high rewards to savers, thus encouraging what we want to encourage and discouraging what we want to discourage?
Mr. Lawson : My hon. Friend is absolutely right : this does bring considerable benefit to savers. I can tell the hon. Member for Clydebank and Milngavie (Mr. Worthington) that I have a large number of letters from savers--perhaps not quite as many--and from pensioners saying how pleased they are with the higher return on their savings. So I receive those sorts of letters, too.
We know what the Labour party will do because the gaff was blown by the hon. Member for Dagenham (Mr. Gould) last Sunday, when he said : "What we're saying, is that if there is a problem in terms of managing the degree of credit growth in this economy it has to be at the margin when new mortgages are being granted."
Column 251In other words, Labour policy will be to stop new mortgages being granted to everyone except new home buyers, causing a total seize-up in the housing market, with disastrous effects.
Mr. Gordon Brown : When will the Chancellor issue a word of regret, apology or sympathy for the problems that he has caused millions of homeowners in the form of the £10 billion extra that they will have paid in mortgage payments by the end of the year and the £1,000 on average that the typical homeowner is having to pay? Does he still repeat the advice that he gave a year ago to home owners--that they should cut back on something else--or does he accept that thousands of home owners have nothing else to cut back on?
Mr. Lawson : Home owners are in many cases cutting back on something else and deferring other purchases--that is part of the process by which the necessary slowdown in the economy is occurring. What is happening now will be nothing like as bad for the cause of home ownership and the housing market generally as the Labour party policy of putting a complete block on new mortgages.
Mr. Moss : I warmly welcome those excellent figures for 1988, but does my right hon. Friend agree that they serve to underline the basic strength of the economy? Can he give the House the latest investment projections, particularly for manufacturing industry, for 1989?
Mr. Lawson : I can tell my hon. Friend the latest figures that we have for manufacturing industry investment. They were for the second quarter of 1989 and were 7.8 per cent. above those of a year ago. Of course, the figure for the second quarter of 1988 was particularly high, so manufacturing industry investment is still forging ahead, and that is very important in ensuring that we have good prospects of continuing growth in the future and continuing export growth in the future after the current slowdown is over.
Mr. Pike : Why does not the Chancellor recognise that those figures are only part of the story? Is it not a fact that in a key manufacturing region such as the north-west investment in manufacturing is still 36 per cent. below its level of 1979 in real terms? Is it not true that until the Government put that right we shall continue to import more than we export, with a resulting massive deficit?
Mr. Anthony Coombs : Total investment in Britain over the past 10 years has risen by nearly 40 per cent. in real terms. Is my right hon. Friend aware that only this morning the biggest carpet manufacturing company in my
Column 252constituency, Brintons, announced a £50 million five-year investment programme in its manufacturing capability? Is that not the clearest possible evidence of the strength of the real manufacturing economy and does it not show the confidence of manufacturers in the prospects brought about by the Government's policies?
Mr. Lawson : I am glad to learn what my hon. Friend said and I wholly endorse the conclusion which he drew from it. The plain fact is that manufacturing industry is more efficient, more competitive, more productive and more profitable than it has been for a very long time. That is why it has the confidence to go on investing and that is what it is doing, and this investment augurs well for our future. Also, of course, we have to bear in mind the quality of investment. Not only is the quantity of business investment as a percentage of GDP higher than since recorded figures began, but the quality of investment is very much higher, too, and that is equally important.
Mr. Gordon Brown : On business investment and the impact on it of high interest rates and exchange rate stability, Sir Alan Walters has said that the European monetary system is half-baked. He said in an article that the arguments for it have never even attained a minimum level of plausibility and that the Prime Minister concurs with his view. In the light of that, will the Chancellor tell us who is now in charge of economic policy in the Government? Is it the Chancellor or Professor Walters who should be giving the Mansion House speech this evening?
Mr. Lawson : I am not sure, Mr. Speaker, what that has to do with the question, but I will gladly answer it. The views which the hon. Gentleman quoted on the EMS from Sir Alan Walters are clearly not the views of the Government. The Government have made their views clear and the Prime Minister has made them clear : we are committed fully to joining the EMS as part of stage one of economic and monetary union. As for investment, which actually is the subject of the question, I am not surprised that the hon. Gentleman shied away from it because, unlike the sharp growth in investment that we have had during the period of this Government, during the period of the Labour Government investment did not grow at all.
Mr. David Davis : I should like to return to investment. My right hon. Friend has given us the latest new figures in a long series of investment figures for Britain. Can he tell us how those compare with the growth of consumption in the United Kingdom over the same period?
Mr. Lawson : Yes, I can. For the past seven years investment had grown twice as fast as consumption in this country, and for the whole of our period of office it has grown by getting on for twice as fast as consumption. That compares with the Labour Government where there was a small growth in consumption and no growth in investment whatever. Also, of course, the international comparisons are not without interest. I am sure they will be of interest to my hon. Friend even though they may not be to hon. Members opposite. During the period of the last Labour Government our investment growth was one of the lowest in the European Community. During the period of this Government our growth in investment has been the highest in the whole of the European Community.
4. Mr. Bernie Grant : To ask the Chancellor of the Exchequer what has been the negative transfer of financial resources from the 17 most heavily indebted countries since 1983 to the latest available year.
The Economic Secretary to the Treasury (Mr. Richard Ryder) : Over the period 1983 to 1988 the 17 heavily indebted countries received a positive net transfer of $5.7 billion from the international financial institutions, including the IMF. In addition, they have benefited from generous treatment provided by Paris Club official reschedulings.
Mr. Grant : What is the Government's position on the rescheduling of debts for black and Third world countries? Will the Minister also tell us how that compares with the Government's position on the rescheduling of debts to racist South Africa? Does he agree with President Kaunda who said at the Heads of Government conference in Kuala Lumpur that the banks that have thrown a lifeline to the racist South African regime are nothing but blood-suckers?
Mr. Ryder : The arrangements that have been made between the commercial banks and South Africa are a matter for them. They are not the direct business of Government. The hon. Gentleman asked about the assistance that the Government have provided to Third world countries. It was my right hon. Friend the Chancellor who initiated the Toronto terms which led to so many countries in sub-Saharan Africa being assisted.
Mr. Key : My right hon. Friend the Chancellor is to be congratulated on achieving leadership in the rescheduling of debt, particularly in sub- Saharan Africa. Does my hon. Friend agree that if only countries such as Zambia would follow the lead taken by exemplary countries such as Ghana in reforming their economies and not seeking to stifle the market, their economies would not be in the mess that they are now?
Mr. Ryder : Three weeks ago I attended the Commonwealth Finance Ministers' meeting in Jamaica. It was apparent from that meeting that many countries in the Commonwealth were embarking on market-oriented policies of the type espoused by the Government but not yet by the Leader of the Opposition. Those countries include Ghana, Gambia, Kenya, India, Jamaica, Trinidad and many more.
Mr. Robert Hughes : The Minister is seeking to slide out of his responsibility for the rescheduling of debt in South Africa. Will he at least accept responsibility for the access of the South African Government to credit, borrowing and new capital? Will he give an undertaking that the Government will reject any approaches by the South African Government, especially as Mr. Walter Sisulu and the others who have been recently released have made it clear that they believe that external pressure assisted their release?
Mr. Ryder : That is exactly the same question as the one asked earlier by the hon. Member for Tottenham (Mr. Grant), and I will give it precisely the same answer. This is not a matter of direct concern to the Government ; it is a matter for the commercial banks to work out with the South African Government.
Mr. Jacques Arnold : Is it not the case that the weight on the least -developed countries has been reduced by the sub-Saharan debt initiative taken by my right hon. Friend the Chancellor, and that that initiative is being followed by an increasing number of developing countries, thus assisting the Third world?
10. Mr. Win Griffiths : To ask the Chancellor of the Exchequer when he last met the managing director of the International Monetary Fund and the president of the World Bank to discuss Third world debt.
Mrs. Taylor : Does the Chancellor accept that high interest rates impose bigger burdens not only on home owners and others in this country but on Third world debtor nations, because of the high levels of repayment? In view of that, will the right hon. Gentleman stop lecturing those countries about putting their economies in order? Will he acknowledge that he has not been able to put his own house in order, and that his policies are making it much more difficult for them to do the same?
Mr. Lawson : I have to say first that it is necessary for those countries to put their own houses in order, and they know that very well ; that is agreed, I think, by all those who have considered the matter seriously.
As for the effect of interest rates, for the vast majority of these countries it is of course the dollar interest rate which is far more important to them than the sterling or any other interest rate. As for the question of helping these countries, as the hon. Lady will no doubt know, we have all agreed on a strengthened debt strategy involving a significant element of debt reduction for the middle and low-income development countries. That is of course over and above the help for the very poorest of the sub-Saharan indebted countries, which was secured in the way that my hon. Friend the Economic Secretary to the Treasury recently said.
Mr. Griffiths : Did the Chancellor find that the president of the World Bank and the manager of the International Monetary Fund expressed any surprise at the fact that Japan is now offering money out of its Third world budget to Britain to save a major food research institute, which the Government want to close to save £1 million? Is that part of the economic miracle of 10 years of Tory rule?
Mr. Lawson : Without accepting the terms in which the hon. Member put the question to me, I have to tell him--even though it is not connected with this question--that this country is receiving Japanese inward investment on a very large scale, far larger than any other European country. This is because they recognise this country as a country with excellent prospects, and that is why they want to come here.
Mr. Page : Is not my right hon. Friend to be congratulated on giving the lead in transmitting debt to write-offs for countries stricken by disease and plague? Is he not absolutely right in giving the lead to the rest of the world? Is he not also right to say that Third world countries have been correctly forced into the reconstruction of their debts so that they can succeed economically and take on commitments from the rest of the world, so that in future they do not rely upon handouts but stand up as fully independent members of society?
Mr. Lawson : I am grateful for what my hon. Friend says about the initiative that I took over two and a half years ago now which eventually led to the international agreement on the so-called Toronto terms to help with the indebtedness of the very poorest countries of sub-Saharan Africa. As for what countries are doing with their economies and what economic policies they are pursuing around the world, I found it very striking at the annual meeting of the Bank and fund this year to see more than ever before, all round the table, country after country was determined to turn its economy from a Socialist economy into a market economy because it saw that as the way forward. Incidentally, no one put this more clearly than the new Polish finance Minister Mr. Balcerowicz who wants a fully capitalist market economy organised in Poland. It will be very difficult, but I think we should give them all the help we can.
Mr. Conway : Is my right hon. Friend aware that while there will be support from all sides of the House for easing the debt burden of Third world countries, there is concern in some of those countries that have made attempts to honour their debts that they should not be penalised by those who follow a Socialist spendthrift economy?
Mr. Lawson : My hon. Friend has a very good point. Certainly that is something which we need to take into account as the debt strategy evolves. That is a further reason why I believe that it is better to leave that, so far as possible, to the commercial banks--when it is commercial debt bank debts we are talking about, which it largely is--to negotiate with the individual debtor nations without the Government seeking to twist their arms.
Mr. Chris Smith : Does the Chancellor of the Exchequer accept that contrary to the impression that he attempted to give my hon. Friend the Member for Dewsbury (Mrs. Taylor), the sterling interest rate is relevant to Third world debt and affects very large amounts of debt held by the United Kingdom financial institutions and banks? Does not a high interest rate policy in the developed world intensify the flow of funds from poor to rich countries? Does it not increase the crippling debt burden that the Third world faces, or is the Chancellor ignoring the need of the poor around the world as he is the needs of home owners in Britain?
Mr. John Greenway : When my right hon. Friend next meets Finance Ministers in the G7 group, will he take time to consider with them the world development movement's current resolution on world poverty? Does he agree that it would be far better if help given to the Third world, whether in debt reduction, debt alleviation or generous assistance, were measured in its effect on relieving poverty and not in promoting political propaganda?
Mr. Lawson : It certainly should not be directed to enabling Governments of those countries to make political propaganda. I agree with my hon. Friend. Of course it is aid that we use to relieve poverty and that is very important. Development assistance is designed to help those countries to have more successful economies and to develop their economic policies, but of course at the end of the day the measures that they take to put their own houses in order--and this goes back to the question that the hon. Member for Dewsbury (Mrs. Taylor) originally put--are all important.
Mr. McFall : Will the Chancellor confirm that since the sale of the electricity and water industries, Government expenditure on adverting will now exceed £2,000 million? Bearing in mind that more than 75 per cent. of the population are against such proposals, when will this Government get off the backs of the people and save money instead of wasting taxpayers' money so profligately?
Mr. Lilley : The figure given by the hon. Gentleman is complete bunkum. Advertising expenditure on the privatisation programme since British Telecom has amounted to less than 0.4 per cent. of the revenues raised, has undoubtedly enabled millions of people to participate in those privatisations and has thereby enabled us to obtain a better price when we have privatised. It would have been irresponsible not to have advertised and not to have let people know that we are carrying out these privatisations.
Mr. Jack : Can my hon. Friend confirm that the receipts from privatisation have helped to strengthen our public finances, repay the national debt and increase funds available for private sector investment?
Column 257the main point of privatisation. The main point is to improve the strength of the economy, which it has undoubtedly done. That is why every economy from Warsaw to Tokyo is following our advice and only Opposition Members are against it.
Mr. Ryder : My right hon. Friend the Chancellor has made it perfectly clear on several occasions--just as my right hon. and learned Friend the Lord President did in questions here on Tuesday--that we shall enter the exchange rate mechanism when the conditions that my right hon. Friend the Prime Minister set out at the Madrid summit have been met.
Sir Peter Tapsell : In view of the impact that changes in short-term interest rates can have on stock markets, do the Government have any plans to emulate the example of the United States and Japan by introducing circuit breakers in our domestic equity market, bearing in mind that if the American circuit breakers came into operation during one of their morning sessions, our market could be very vulnerable?
Mr. Robert Sheldon : Has the Economic Secretary read the comments of Mr. Henning Christophersen, who has responsibility within the Commission for economic matters, that reliance on interest rates can be counter- productive in so far as it leads to wage rate rises? Does he agree that if he looks back over the past 13 months of the efforts of this Chancellor, the reliance solely on interest rates has been a grievous error?