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Mr. Cryer : I am grateful for your sense of fairness, Mr. Speaker. Is not the reality that this year bankruptcies among small firms have risen by 40 per cent.--a Tory Government record which was never equalled by the Labour Government, who gave a huge range of incentives to small firms, which appreciated and understood the concern that we felt for that sector?
Column 828VAT, and that is a net figure, not a gross figure. When the hon. Gentleman was responsible for these matters in the 1970s the net figure was a loss of 100 per week.
Mr. Hardy : Do not those figures illustrate our deplorable trading condition, and is not that condition the worst of all the world's industrial nations, at least those within the Organisation for Economic Co- operation and Development? Does the Minister deny that that is an illustration of the most appalling economic mismanagement throughout the past, oil-rich decade?
Mr. Lamont : It is not correct to say that our current account deficit is the largest as a proportion of GDP. There are countries with a larger deficit as a proportion of their GDP. I do not accept that the current account deficit is an accurate reflection of the competitiveness or health of a country's economy. The hon. Gentleman seems to be unaware that of the major industrial countries, only two are running a surplus. If he wishes to consider the health of Britain's balance sheet, let him look at our net overseas assets, which are the third largest of any country. That will be an enormous strength to us while we have a current account deficit.
Mr. Andrew Smith : Will the Chief Secretary give his view on whether the devaluation of the pound that has taken place since the Chancellor took office will help or harm our balance of payments? Given the Chancellor's wholly inadequate reply to the question asked by my hon. Friend the Member for Derby, South (Mrs. Beckett) will the Chief Secretary take this opportunity to make clear to the House precisely what is Government policy on exchange rates in relation to our balance of payments and inflation?
Mr. Lamont : My right hon. Friend the Chancellor made the Government's position in respect of exchange rates crystal clear. It is absurd and a little irresponsible of the hon. Member to press my right hon. Friend further on that subject. My right hon. Friend has gone as far as possible on a very sensitive subject, and the hon. Gentleman should not press him.
As to the balance of trade deficit and the effect of the movement of the pound on the volume of our exports, I have already said that our exports will perform better than imports over the next year. Recent import and export patterns indicate that the trend is good.
Mr. Higgins : In praising our balance of payments position, is it not important to note that last month imports fell, showing clearly that the measures by my right hon. Friend the Chancellor to curtail demand and to beat inflation are not only working at a domestic level but are improving our balance of payments? As to Britain's assets, perhaps my right hon. Friend the Chief Secretary will
Column 829commend an article by Samuel Brittan, in the Financial Times on 23 November, which brought out this country's very strong asset position--which compares favourably not only with the United States and Germany but with Japan.
Mr. Lamont : My right hon. Friend's remarks in respect of the current account are absolutely correct, for exports are rising faster than imports. As to the asset position of our overseas investments, we are far ahead of the United States. The two countries ahead of us are Germany and Japan. As a proportion of gross domestic product, our net overseas assets are the largest in the world.
Mr. Budgen : Will my right hon. Friend accept my congratulations on the Government's decision not to raise interest rates recently to counter the 4 per cent. devaluation that has occurred in the past month? Will he revert to the policy pursued during the Government's most successful economic period between 1979 and 1983, when they followed not an exchange rate target but a money supply target?
Mr. Lamont : I note my hon. Friend's comments. My right hon. Friend the Chancellor favours a firm exchange rate, and he continues to take account of the exchange rate alongside other monetary indicators when setting interest rates.
Mrs. Beckett : Does the Chief Secretary realise that these are the last Treasury questions of the decade? It has been an oil-rich decade during which the Government enjoyed the biggest oil revenues in history and took the credit for everything that has gone right. Now that Britain has the biggest balance of payments deficit in its history, can the Chief Secretary predict whether the Government will ever take the blame for anything that has gone wrong?
Mr. Lamont : As to the past oil-rich decade, we have allowed this country to accrue overseas assets, whereas the Labour party want to see oil revenues invested in an industrial strategy--which would mean supporting a lot of lame ducks and unprofitable investments for the taxpayer. Our policy has resulted in a stream of income and a stream of dividends that will benefit this country for years to come.
Mr. Hayward : I welcome that excellent news. Does not my hon. Friend find it amazing that whereas the Labour party complains about small numbers of job losses, when it comes to the creation of 2,500 jobs at Grangemouth or the announcement of new research and development jobs with Nissan, it fails to welcome that
news--especially when the hon. Members for Dagenham (Mr. Gould), for Norwich, South (Mr. Garrett) and for Bradford, South (Mr. Cryer) have previously complained that most of the jobs available in Japanese car manufacturing plants are screwdriver jobs?
Mr. Lilley : My hon. Friend is absolutely correct. One of the Opposition's most distasteful characteristics was the ghoulish pleasure that they used to derive from rising unemployment. Now that it is falling, they are totally silent. Of all the questions on the Order Paper put down by the Opposition, there is not one that deals with the excellent fall in unemployment in this country.
Mr. Win Griffiths : Can the Financial Secretary confirm that-- despite the sudden rise in employment that has occurred in the past couple of years--Wales, the west midlands, the north-west, Yorkshire and Humberside, the north and Northern Ireland still have fewer people in employment than they did in 1979, and that almost 1 million men are unemployed?
Sir Peter Tapsell : In view of the Government's great success in guiding the British people back towards conditions approaching full employment over the past two years, may I express the hope that my right hon. Friend the Chancellor will resist the continuing requests from teenage City scribblers for ever higher interest rates, which would provide the country with only a short-term currency advantage and would put the real economy and employment prospects at risk?
Mr. Lilley : My right hon. Friend has made very clear which factors he will take into account in determining interest rates. I am happy to say that they do not include teenage scribblers--although I was once one myself.
9. Mr. Geraint Howells : To ask the Chancellor of the Exchequer what progress has been made as regards the conditions that must be met before the United Kingdom enters the exchange rate mechanism of the European monetary system ; and if he will make a statement.
Mr. Howells : Does the Chancellor agree that British farmers have no opportunity to compete on equal terms with their European counterparts because we are not full members of the European monetary system? What plans has he to help small farmers to overcome the problem of the high interest rates that now prevail?
Mr. Major : Small farmers face the same difficulties with interest rates as other business men. I entirely understand the hon. Gentleman's point, but I am bound to say that I think that the principal competitive problem that affects small farmers is caused by the unfair subsidies often received by their counterparts elsewhere in the Community.
Miss Emma Nicholson : May I support the plea by the hon. Member for Ceredigion and Pembroke North (Mr. Howells) for help for farmers, and draw my right hon. Friend's attention particularly to the extensification part of the common agricultural policy? The CAP is badly in need of modernisation, but surely extensification is the true new social way of helping farmers to retain their rural economy.
Column 831Mr. Major : Whether or not that is correct-- and I suspect that it is--it is probably only tangential to the exchange rate mechanism.
Mr. Chris Smith : The Chancellor said on 2 November, and has said subsequently, that inflation must come down before Britain can join the exchange rate mechanism. He has also forecast that, at the end of next year, inflation will be running at 5 per cent. Will that figure be low enough, or is the inflation criterion simply another way of saying that he has no intention of taking Britain into the ERM in the foreseeable future?
Mr. Major : As the hon. Gentleman's hon. Friend the Member for Dunfermline, East (Mr. Brown) pointed out in a recent debate, I indicated my support for the exchange rate mechanism as long ago as 1981. The Government have set out four conditions that must be met before we can join the ERM ; they were made entirely clear at Madrid, and they remain the same today.
Mr. Butterfill : Does my right hon. Friend agree that we cannot make progress on an exchange rate mechanism while restrictions on capital movement between member countries remain? Those restrictions include not only exchange rate control, but restrictions on the activities of banks in various countries in raising foreign currency debt.
Mr. Major : My hon. Friend is entirely right. He has touched on the other conditions that need to be met. We certainly need to see capital liberalisation, freedom of financial services and, of course, strengthened competition quality. Those matters are well understood by our European partners, who must deliver accordingly before we are in a position to join the ERM.
Mr. Townend : Does my hon. Friend agree that over the past 18 months the increase in the rate of inflation was due principally to the increase in broad money? Can he assure the House that in future the Chancellor will take more notice of broad money than his predecessor did?
Mr. Lilley : It would probably be more accurate to retrace the resurgence of inflation to the relaxation of monetary policy at the time of the collapse of world stock markets in October 1987. It is significant that we rarely relax monetary policy in response to non-inflationary matters to keep growth going. That is always the intention of the Opposition. They would have continuously rising inflation but we are determined to get inflation down.
Mr. Rowlands : If the Minister monitors exchange rates, will he tell us the exchange rate between the pound and the deutschmark on the day of the speech by the right hon. Member for Blaby (Mr. Lawson) at the Conservative party conference when he said that his was not a party for devaluation, and what the figure is now?
Mr. Lilley : The current exchange rate is much where it was at the beginning of 1987, let alone then. The policy consistently advocated by the Opposition would destroy the value of the pound internally and externally.
Mr. Marland : While thanking my right hon. Friend for that encouraging answer, does he remember the late 1970s when Britain was branded the poor man of Europe? Does his answer not underline the vigour of our economy and give the lie to so much that Opposition Members say about the economy?
Mr. Lamont : My hon. Friend draws attention to the fact that during the 1960s and 1970s Britain was bottom of the growth league, but during the 1980s our growth rate has out-performed that of all other EC countries. That is certainly something of which we should be proud.
Mr. Heffer : Is the right hon. Gentleman aware that the last Labour Government inherited the economy from the Conservative Government and that private industry was collapsing on a massive scale? The Tory Government had to take over Rolls-Royce and we had to take over British Leyland and British Steel because they had collapsed. In addition, we had to take over the shipbuilding industry because it had collapsed. There would have been no industry had it not been for the Labour Government-- [Interruption.] Oh yes. We have now had a Tory Government for 10 years and industry is collapsing on a bigger scale than ever before.
Mr. Lamont : The trouble with the hon. Gentleman's argument is that the failures of the Labour party in Government did not apply just to the last Labour Government but to the Labour Government before that, the one before that and to all Labour Governments.
13. Mr. Robert B. Jones : To ask the Chancellor of the Exchequer whether he will estimate the annual cost to British industry of (a) a rise of 1 per cent. in interest rates and (b) a rise of 1 per cent. in payroll costs.
Mr. Jones : I thank my hon. Friend for that interesting answer. Since rising interest rates are a phenomenon of most industrialised countries, why does the CBI bleat about them? Higher wage rates are not a phenomenon of many industrialised countries, but the CBI leaves them entirely alone instead of concentrating on trying to keep wage costs under control.
Column 833months. Obviously, it is in the power of industrialists to keep their total costs down if they keep firm control of their payroll costs.
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. This evening, I shall be attending a dinner given by the 4th Battalion of the Royal Green Jackets to mark the retirement of my right hon. Friend the noble Lord Holderness as its honorary colonel.
Mr. Orme : Does the Prime Minister agree that in the weeks coming up to Christmas the ambulance service will be under increasing pressure, and that the walkout in London yesterday only underlines the seriousness of the situation? Will she now instruct the Secretary of State for Health to refer the matter immediately to arbitration?
The Prime Minister : I understand that the accident and emergency service is being provided by National Health Service ambulance crews over most of the country. They are answering 999 calls, and dealing with urgent admissions, transfers of very sick patients and journeys for patients who need various treatments. In London, Bedfordshire, Hertfordshire, Derbyshire and Lincolnshire, the emergency service is being supplemented by vehicles and crews provided by the armed forces and the police. With regard to the last part of the right hon. Gentleman's
Column 834question, he is aware that these negotisations are conducted in the Whitley councils, which make no provision for arbitration.
Sir William Clark : Has my right hon. Friend noted that Toyota, Nissan and the German firm Reinshagen have announced substantial investment in the British car industry? Is this not proof positive that the overseas investor has complete confidence in the British economy? It is a far cry from the days when the British taxpayer had to pay £3,500 million of taxpayers' money to British Leyland.
The Prime Minister : I agree with my hon. Friend. We welcome this manifestation of confidence in British industry today. It will enable us to bring the car industry back to its former glories. When all that investment is on stream, we shall be producing some 2 million cars a year in this country, whereas we were producing only 1.1 million in 1979. It is also a tribute to the change in trade union law in this country, which eliminated some of the previous difficulties, restrictive practices and continuous strikes that nearly destroyed the car industry 10 years ago.
Mr. Kinnock : When the Prime Minister responded to my question on Tuesday, did she know that the sale of Rover had been assisted by £38 million worth of under-the-counter handouts, and that on the best estimates available Rover was looking forward to three years of significant profitability?
The Prime Minister : I answered the right hon. Gentleman as I shall answer him again today--the Government struck the best deal that they believed they could in all the circumstances of the sale. The circumstances of the sale were that the extra cash injection at the time of final privatisation brought the total funds injected by the taxpayer into British Leyland up to £3,457 million since 1975. I understand that the forward forecasts of profits were before interest had been paid on capital. That is hardly a profit.
Mr. Kinnock : I rather felt on Tuesday that we had not had the truth, the whole truth and nothing but the truth and I feel that now. Is it not clear from what we now know in detail, that the Government were less than honest with the European Community, deceived Parliament, and sold the British taxpayers short, and that the whole affair has been a rip-off? What will the Prime Minister do to get the British people's money back? Is not this the time for her to give the public apology for which I asked on Tuesday?
The Prime Minister : No, Mr. Speaker. If there was a rip-off, it was the almost £3 billion which the British taxpayer had paid since 1975 to keep British Leyland-Rover going. The amount was growing because of the Varley-Marshall assurances and already in March 1988 it had reached £1.6 billion. Perhaps the right hon. Gentleman remembers that when we attempted to sell British Leyland-Rover in 1986, our efforts were frustrated by the hysteria with which the sale was greeted by the Opposition. The right hon. and learned Member for
Column 835Monklands, East (Mr. Smith) called our efforts "anti-British in effect" and did infinite damage to the prospect of a successful sale to other buyers who may have been interested. He went on : "Can we now be assured that there will be no question, during the lifetime of the Government, of Land Rover or any other part of the British Leyland Group passing out of British control?"--[ Official Report, 25 March 1986 ; Vol. 94, c. 787-88.]
That prevented many other prospective buyers from coming forward, so much damage had been done by the Opposition's strictures on overseas car companies.
The Prime Minister : My right hon. Friend the Secretary of State for Trade and Industry will make a full statement later this afternoon. The Leader of the Opposition should be perturbed that the car industry could not succeed without enormous cash injections from the British taxpayer-- [Hon. Members :-- "Answer the question."] That company constantly put its hands into the taxpayers' pocket-- [Interruption.]
The Prime Minister : We had the irony that among companies producing cars in Britain some, such as Ford, paid money into the British Treasury while others, such as British Leyland, took rather larger sums out of it. [Interruption.]
Mr. Tebbit : Will my right hon. Friend reconsider her reply to the Leader of the Opposition? Does she agree that there has been a rip-off--the rip-off of the billions of pounds that were swallowed up by Leyland over many years?
Mr. Tebbit : I have no interest to declare. Does my right hon. Friend further agree that the Leader of the Opposition would benefit from some instruction about the cost of a contingent liability of £1.6 billion and the value to the taxpayer of getting rid of it?
The Prime Minister : I entirely agree with my right hon. Friend. Had British Leyland-Rover not been privatised, it would have continued putting its hands in the pockets of the British taxpayer indefinitely. Then we should soon have been in difficulties with the Commission because of heavy subsidies to British industry.
Mr. Mallon : I am sure that the Prime Minister and the House will join me in condemning the horrific, sectarian murders last night in Northern Ireland. In view of the continuing loss of life, hope and quality of life in the north of Ireland, will the Prime Minister please take the Northern Ireland problem off the backburner and, along with the Northern Irish political parties and the Irish Government, as specified in the Anglo -Irish Agreement
Column 836and again in the Queen's Speech, set about taking the problem by the scruff of the neck and solve it once and for all?
The Prime Minister : First, I gladly join the hon. Gentleman in expressing our horror at the murders and our sympathy for the victims' relatives. Although the hon. Gentleman cannot respond immediately, I ask him to bear in mind that it is easier to say what he said towards the end of his question than to put it into practice. I pay tribute to the work of the security forces, whether the police or armed forces. We shall never be able to solve the problem entirely until we have the full co-operation of all people in providing evidence to bring the criminals to justice from whatever side of the sectarian boundary they come.
Mr. Shepherd : Does my right hon. Friend agree that those who favour the European social charter must also favour her Government's abolition of the closed shop? Is there not a lesson in that for the Leader of the Opposition?
The Prime Minister : Yes, Mr. Speaker. One of the good aspects of the social charter--we disagree with many ; most in fact--is that it would require the abolition of the closed shop--a measure which this Government will introduce in the trade union Bill which will be presented to the House later. If the Opposition are in favour of the social charter, I hope that they will support fully our trade union measures.
Mr. James Lamond : Is the Prime Minister aware that in answering my right hon. Friend the Member for Salford, East (Mr. Orme) everything she said showed how conscientious ambulance men and women were in answering emergency calls? Is she aware that at the end of her answer when she sought refuge by saying that the matter was for the Whitley councils, she showed that she was not prepared to treat the dispute as the emergency that it is? Is it not high time that she stepped in to ensure that the dispute goes to arbitration?
The Prime Minister : I described where the ambulance service was honouring its undertaking as an accident and emergency service and carrying out its duties in that respect. As the hon. Gentleman knows, nine tenths of the work of the ambulance service in the miles of calls it answers do not involve accidents or emergencies, but bringing in-patients and out-patients to hospitals. Naturally, we wish that service to be restored. The hon. Gentleman already knows that a fresh offer which will last for 18 months has been made to ambulance crews. We hope that they will accept it.