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Mr. Major : The right hon. Gentleman might find it wise to wait a minute.

Such controls would be even more ineffective in today's open and deregulated markets.

We are not alone in drawing that conclusion. The United States and Germany have rarely, if ever, relied on credit controls such as we have had. Italy and France have moved to eliminate their controls recently, and even Denmark and Sweden, which traditionally have highly regulated economies, are ridding themselves of credit controls.

Perhaps the most interesting case is that of Australia, which has a Labour Government. If they thought that credit controls could work, they would certainly have introduced them rather than face the present 20 per cent. interest rates. But as their Labour Finance Minister explained to me only last week, they have quite logically concluded that credit controls are a non-starter and they will have nothing to do with them. Only the British Labour party still lives in the 1960s and wants solutions that have been tried before, and have failed.

Mr. Spencer Batiste (Elmet) : Does my right hon. Friend agree that the only net beneficiaries in an attempt to introduce credit controls would be the European banks, which would take a significant market share away from British banks?

Mr. Major : My hon. Friend is entirely right. Perhaps that is part of the new-found Europeanism of the Leader of the Opposition. The simple fact is that we need to discourage borrowing and to encourage saving, and there is no ducking that. Nothing does that more effectively than interest rates. Our policies are right and, in my judgment, the only policies that we can pursue satisfactorily. There is no simple alternative. We need to be patient for a while, but there is no doubt that the policy is working. The evidence is mounting : retail sales have slowed considerably, the housing market has cooled down and the money supply, although just outside its target range, has slowed from earlier in the year. In short, there is comprehensive evidence that the policy is working, and I see no reason to change it.

Mr. Duffy : If, as the Chancellor has said, the policy is working, how does he explain the gloomy forecast of the Confederation of British Industry yesterday that, with investment slumping, the economy hovers on the brink of two years of recession? How does such a forecast encourage any of us to believe that the narrow manufacturing base, which was the burden of the concern of my right hon. and learned Friend the Member for Monklands, East (Mr. Smith), will be expanded? Unless that happens, we cannot narrow the trade gap.

Mr. Major : There are several points to make on that matter. First, I gave a perfectly clear-cut response in the Autumn Statement, and I advise the hon. Gentleman to read it. Secondly, the manufacturing base has flourished

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and will continue to do so, providing that we are able to achieve and maintain firm control of inflation, as we are determined to do.

Mr. Vaz : Will the Chancellor of the Exchequer give way?

Mr. Major : No. If the hon. Gentleman will forgive me, I have been over-generous in giving way.

I shall not set interest rates higher than necessary for longer than necessary, but nor do I intend to reduce them until that can be safely done without risk to inflation. To do so would simply lengthen the time before we can return to the steady and sustainable growth that we are determined to have in the 1990s.

Nor will there be any backsliding whatever from the sound fiscal policies which have been the characteristic of this Government, throughout its 10 years in office. In case anyone misinterprets, I say that not as a Budget hint but simply to reinforce the fact that, like both my predecessors, I favour a tight fiscal position, both as an essential buttress against inflation, and because of the innate desirability of reducing Government debt rather than adding to it and leaving the next generation to repay it. Our policies mean that, by the end of the current financial year, we shall have made debt repayments of £30 billion in the space of just three years. The advantages of our strong fiscal position are self-evident and important for the future. The latest public expenditure plans, which I presented to the House just two weeks ago, show debt interest payments running at £18 billion a year. Had we continued borrowing at the rate that we inherited in 1979, that annual burden would have been, not £18 billion but more like £30 billion a year, a saving of £12 billion. That is a conservative estimate of the saving that we have made. It may have been a great deal larger.

We have saved more than half the total amount that we spend on the Health Service every year--or, to put it another way, more than the combined budgets of the Department of Trade and Industry, the Department of Employment, the Ministry of Agriculture, and the Department of Transport. That is the scale of the improvement to our public finances of the policies that we have followed in the past 10 years.

Mr. Vaz rose--

Mr. Graham Allen (Nottingham, North) rose--

Mr. Dennis Skinner (Bolsover) rose--

Mr. Major : With the possible exception of Japan, no large nation in the world can match the current strength of our public finances.

Mr. Allen : The Chancellor of the Exchequer talks as if he has just assumed his responsibilities, as indeed he has. Is he aware that there has been a Conservative Government for 10 years, at the end of which we have the highest inflation rate in industrialised Europe, rising interest rates, which will probably rise further in the near future, the largest trade deficit of any industrialised country and the highest inflation of any G7 country? Does he agree with the right hon. Member for Blaby (Mr. Lawson), who is no longer with us, that inflation should be the judge and jury of this Conservative Government?

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Mr. Major : The hon. Gentleman left out many items from his catalogue. We have had the highest growth of investment, the highest growth of debt repayment, the highest rate of growth in the European Community and much else besides. He should not join his right hon. and hon. Friends in playing down what industry and commerce have achieved.

Mr. Vaz : Will the Chancellor give way?

Mr. Major : No, I shall not give way.

The fact that so much has been achieved and that we have such a strong fiscal position explains precisely why we could increase by £2.6 billion the resources of the National Health Service for the coming year, why we shall double spending on national roads by 1992-93, why we can afford an extra £250 million for a new initiative to tackle homelessness, and why we can spend a further £500 million on resources for higher education, not to mention the £1.5 billion extra for capital spending by central Government and public corporations--a remarkable increase in real terms of 10 per cent. on the current year.

Mr. Winnick rose --

Mr. Major : As a result, it is now clear for all to see that the services that people want and the investment that builds for the future are safe with this Government as they never were under Labour in the 1970s.

Mr. D. N. Campbell-Savours (Workington) rose --

Madam Deputy Speaker (Miss Betty Boothroyd) : Order. The Chancellor of the Exchequer has said that he is not prepared to give way.

Mr. Major : With his usual fairness, the hon. Gentleman will appreciate that I have given way generously in the past few minutes. Equally importantly, we have been able to increase spending on priority areas, while sticking absolutely to the ratio of public expenditure planned and determined over a year ago. Public expenditure control is firm and will remain so, now and in future. But impressive as our public-sector record is, it is not the whole story of the economy. Not only is the public sector preparing for the future, the private sector is doing so, too. In the past decade, total investment has grown much faster than previously. In the 1960s and 1970s, we were at the bottom of the growth league. In the 1980s we have been at the top of the European investment league. Business investment has also grown more than twice as fast in the 1980s as it did in the 1970s. Last year it stood at £58 billion--a record level of 14.75 per cent. of national income--and it has risen further this year.

There is yet a further point. There is no point in investing in plant and machinery to produce goods that nobody wants to buy. We learned that in the past. In the 1970s, much of the investment that actually took place was driven not by genuine commercial considerations but by tax avoidance. But since the changes in corporation tax in 1984, that has ceased and investment has increased, not to exploit tax breaks but to reap genuine commercial opportunities and to earn real profits.

If anyone doubts the importance of considering the quality of investment as well as the quantity they should reassure themselves by examining investment in eastern Europe. In countries such as Poland, Bulgaria, Romania and the Soviet Union, investment accounts for around a

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quarter or more of national income, significantly more than in this country or other advanced industrial countries. But has it been successful? Has it made a real contribution to the welfare and success of these economies? The lesson is--the Labour party should learn it--that inefficient investment for its own sake gets one nowhere ; that is why the quality of our investment is so important to our success.

Business today is in far better shape than it was ten years ago. It is far better able to tackle-- [Interruption.] Opposition Members do not like it, but they know that it is much better. After a decade of rising productivity and rising profitability, industry is far more able to handle a tougher year in 1990, and, beyond that, to face the next decade with confidence.

In the 1990s, the economic environment will be very different from that of the 1960s, 1970s and 1980s. We should see the completion of a single market in Europe. Demand from eastern Europe--for so long suppressed--should increase dramatically. They will need modern machinery and consumer goods. All those developments represent genuine opportunities for British industry and commerce. I have no doubt whatever that the revival in British enterprise puts us in an ideal position to exploit future challenges, but our objectives will remain the same : sustainable growth, stable prices, lower taxes and better public services. I have no doubt that these are achievable and deliverable in the 1990s.

I do not believe for a second that the enterprise that has been revived under this Government will evaporate just because interest rates are high for the time being. What would destroy enterprise would be a return to the policies that failed so dismally when the Labour party introduced them.

Mr. Campbell-Savours rose --

Madam Deputy Speaker : Order. The Chancellor has made his position clear, and it must be respected.

Mr. Major : A return to the past is precisely what the Labour party is offering in its policy document, "Meet the Challenge, Make the Change". It is subtitled : "A New Agenda for Britain", although the introduction by the Leader of the Opposition rather spoils that. He admits that, far from a new agenda,

"we have looked back to gain inspiration from the great accomplishments of the past."

Mercifully, he does not tell us which accomplishments, but he is accurate to say that his party has looked back--straight back to the policies of the Wilson Government.

The right hon. and learned Member for Monklands, East is shy about his policy document. He rarely mentions it--very wisely. I have read it and know why he rarely mentions it. It promises a "power house" designed to

"develop a new proactive role providing continuity, consistency and commitment."

Would the right hon. and learned Gentleman care to tell us what that gobbledegook means?

Mr. Campbell-Savours rose--

Mr. Allen rose--

Mr. Major : No, I will not give way.

Mr. Campbell-Savours rose--

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Madam Deputy Speaker : Order. The hon. Gentleman should not persist when the Chancellor has made his position known.

Mr. Major rose--

Mr. Campbell-Savours rose--

Madam Deputy Speaker : Order. I am requiring hon. Gentlemen to resume their seats.

Mr. Major : I am sorry that the hon. Gentleman is so upset, but if he listens he may learn something.

All hon. Members will be reassured when they learn that this brand new policy document says that its--

Mr. Andrew Faulds (Warley, East) : Tell us about the pound.

Mr. Major : Good gracious : fresh from his triumph as Carver Doone, the hon. Gentleman interrupts us again, having woken from his slumbers.

The policy document says--

Mr. Faulds : Tell us about the pound.

Mr. Major : I think that the hon. Gentleman's mechanism has got stuck. Perhaps the hon. Member for Hackney, North and Stoke Newington (Ms. Abbott), who is sitting beside him, could rewind him and he would move on.

The policy document states--

Mr. Faulds : Tell us about the pound.

Mr. Major : That was one of the worst auditions that I have ever heard.

The document tells us that its

"task will not be to pick winners."

Losers, perhaps, as before. Instead of a Department of Economic Affairs, Labour now promises

"A new Department of Trade and Industry, which will have an equal, if not superior, status to that of the Treasury."

Instead of a national plan, Labour will now treat us to a "medium term industrial strategy". Instead of George Brown, we shall have Gordon Brown ; otherwise, it is all the same.

Mr. Bell : On a point of order, Madam Deputy Speaker. We are considering the Queen's Speech and this is the Government's defence of their record. Could you direct the Chancellor of the Exchequer to defend the Government's record?

Madam Deputy Speaker : That has nothing to do with the Chair.

Mr. Major : A few minutes ago, the right hon. and learned Gentleman told us--

Mr. Harry Ewing : On a point of order, Madam Deputy Speaker. This is a serious matter. Millions of people are worrying how they can meet the expenditure of Christmas as well as their mortgage payments and every other item of expenditure in their household budget, yet the Chancellor is--

Madam Deputy Speaker : Order. The hon. Gentleman is a considerable parliamentarian, and he knows that that is not a point of order for me.

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Mr. Major : A few minutes ago, as the House will recollect, the right hon. and learned Gentleman said that the country needed a Labour Government.

Mr. Skinner : Hear, hear.

Mr. Major : Perhaps I should say that again, to see if there is more support on the Labour Benches next time.

It is entirely reasonable to examine the policies of this putative Opposition. If they will not tell us about those policies, we must tell people what their policies are, whether they like it or not. There are further nostalgic references to Wilsonian policies. There will be an investment bank.

Mr. Faulds : What is the right hon. Gentleman's next job?

Mr. Major : I promise I shall not understudy anything that the hon. Gentleman has in mind.

Mr. Ted Rowlands (Merthyr Tydfil and Rhymney) : On a point of order, Madam Deputy Speaker. I wish to raise with you what is clearly emerging as a hat trick post-television. That is that Ministers endeavour to speak until live television finishes. In the light of that--

Madam Deputy Speaker : Order.

Mr. Rowlands : In the light of that--

Madam Deputy Speaker : Order. I am on my feet. I am prepared to deal with the point of order, which I am sure I have understood. The length of the Chancellor's speech has nothing to do with the Chair. He should be allowed to make progress. If there were fewer interruptions, he could do so.

Mr. Rowlands : Further to that point of order, Madam Deputy Speaker. This is a procedural point. In the light of that evidence, is it not time for the Procedure Select Committee to look at the length of ministerial speeches?

Madam Deputy Speaker : If the hon. Gentleman feels that this matter should be raised with the Select Committee on Procedure, he has the answer in his own hands. I suggest that he raises the matter with that Committee.

Mr. Major : Perhaps the Procedure Committee could look at organised disruption while it is about it. In the last film in which I saw the hon. Member for Warley, East (Mr. Faulds), he played the part of a mounted Boer, and he played it well.

Mr. Campbell-Savours : Will the Chancellor give way?

Mr. Major : I have given way frequently, and I shall not give way to the hon. Gentleman.

We are offered "new investment products", but what will they be? If they are any good, why do they need an investment bank? Labour does not tell us. Anyway, I thought from the policy document that Labour was not going to pick winners. Apart from the policy being nonsense, it is nostalgia in a big way--nostalgia for the National Enterprise Board and the Industrial Reorganisation Corporation, both of which made a distinguished contribution to the near-fatal collapse of the British motor car industry. The whole policy echoes the past--the Meriden co-operative, Messrs. Solemn and Binding and the social contract. No wonder Labour

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members are trying to disrupt these proceedings. They do not like this. It is no wonder that the Leader of the Opposition wrote : "We have looked back to gain inspiration from the great accomplishments of the past."

Back is certainly true, inspiration I am not sure about, and accomplishments is surely wrong by any reasonable judgment. We have a decade of solid, clear-cut achievement behind us. By contrast, Labour holds the record of failure--whether it is failure to make British industry successful, failure to bring prosperity to the regions, failure to reduce unemployment or failure to control inflation. We on this side of the House have policies that will work for the future. Labour has policies that failed in the past. Between them, there is only one choice to be made, and I invite the House to make it.

Madam Deputy Speaker : I call Mr. Beith.

4.59 pm

Mr. A. J. Beith (Berwick-upon-Tweed) rose--

Mr. Harry Ewing : On a point of order, Madam Deputy Speaker. I apologise to the hon. Member for Berwick-upon-Tweed (Mr. Beith), but I must stress that this afternoon we have seen an absolute abuse of the House of Commons. I am telling you frankly, Madam Deputy Speaker, that there are enough of us in the House with sufficient experience to deal with such tactics should they be repeated. I am warning the occupants of the Chair, in the kindest possible way, that unless they take control, or the Select Committee on Procedure takes control, we will take control.

Madam Deputy Speaker : I am sure that the hon. Gentleman means his remarks most kindly. As he knows, he has the solution in his hands and I am sure that hon. Members who feel strongly about this matter will raise it in the appropriate quarter. Mr. Alan Beith.

Mr. Beith : It seems quite clear that if the Government cannot use up every moment until 5 pm, the baying hordes on the Labour Benches will succeed in doing so. Labour Members are trying to shout loud enough to ensure that the Liberal Democrats are not heard at all. No doubt they will continue to do so, just as I shall continue to try to ensure that all points of view can reasonably be heard in the House. I am sure that you, Madam Deputy Speaker, feel that it is your job to do likewise. [Interruption.]

Madam Deputy Speaker : Order. I should be obliged if the House would now settle down so that the hon. Member for Berwick-upon-Tweed (Mr. Beith) may be heard.

Mr. Beith : Thank you, Madam Deputy Speaker.

We have experienced a great deal of political knockabout this afternoon but little about what either the Conservative or the Labour party intends to do about the economy. It was always a possibility that when the new Chancellor took up his responsibilities we might have a little more realism and honesty than hitherto about our economic prospects. There was at least some sign of that in the Chancellor's economic forecast. The right hon. Gentleman forecast a £20 billion trade deficit, which he hoped would fall to £15 billion, and more than 7 per cent. inflation. Today, however, he again allowed himself to give some very rosy forecasts. The real situation is a great deal more serious. The right hon. and learned Member for

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Monklands, East (Mr. Smith) gave us another denunciation of Government policies but little suggestion of what the Opposition would do about the economy.

The Gracious Speech tells us little about some of the most important aspects of the economy. It does not say whether the Government intend to make further tax cuts. The Chancellor had to appear on Channel 4 to say that they intended to do so, but probably only just in time for the general election. The Gracious Speech does not mention the Government's earlier objective of zero inflation. It refers to economic and monetary co- operation in Europe but abandons the Government's treaty commitment to European monetary union, which was the subject of the previous Chancellor's recent paper. There is confusion in the Gracious Speech about the Government's European objectives.

The Prime Minister has said that "uncertainty about anything connected with the Government is not good". We all know what she was referring to, but the assertion extends beyond that matter. We now have uncertainty about the Government's policy on Europe and uncertainty about their exchange rate and monetary policies. Are the present high interest rates determined by pressure on sterling or by domestic monetary conditions? Will they increase if sterling falls? We still do not know, and there remains confusion at the heart of Government policy.

The Government's anti-inflation strategy has been mistaken at crucial moments. When inflation was led by demand--by too much money chasing too few goods--the Government were boosting demand by tax cuts and the promise of tax cuts and by their changes in the mortgage tax relief system. Now that inflation is led by wage pressures, the Government are pushing up interest and mortgage rates, leaving wage negotiators fighting for a better deal and for cost-of-living increases because the people whom they represent have had to face large increases in their mortgage repayments. That is especially significant now that home ownership is so much more widespread because, quite rightly, many more people are now buying their own homes. High interest rates mean high inflation because wage bids are forced up by the severe pressure on people's finances.

Clearly, we need action to make lower interest rates possible. That requires an external framework, and the European monetary system makes just such a framework available. The Government must also halt the privatisation price increases, which will feed through and have a massive affect on inflation. Water and electricity prices are to rise steeply as a direct result of the privatisation measures that the Government are implementing this very day. There ought also to be measures to boost saving. We save less than our competitors, and the Government have at their disposal the means of increasing tax incentives designed to attract more people into saving--not to give more tax relief to existing forms of saving, but to attract new savers.

What prospect will industry have of tackling the balance of payment problem if the Government do not invest to help it? Industry's export record is good. In that respect, the Government's forecast, which I doubted, proved reasonably accurate. They forecast substantial increases in exports because of a switch in capacity from the home market. There has been an increase in exports in the past year, and industry is to be congratulated on it. But what is the other side of the coin? The Government expected imports to decrease and that has not happened.

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