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Column 828economic miracle and we were all part of it. Judge from the daily experience of growing public squalor and growing private distress and--from that--can judge this Government and their "miracle" decade aright.
The Chief Secretary to the Treasury (Mr. Norman Lamont) : The debate has covered not only the Autumn Statement, but the report by the Select Committee on the Treasury and Civil Service to which, as my right hon. Friend the Chancellor said, the Government will in time reply.
I am sure that every hon. Member who has been present today will agree with the generous and well-deserved tribute of the hon. Member for Durham, North (Mr. Radice) to my right hon. Friend the Member for Worthing (Mr. Higgins) for his chairmanship of the Committee. My right hon. Friend made a notable speech today in which he touched on various aspects of funding policy and monetary policy, and those points will, of course, be covered in the Government's reply to the Select Committee's report. I am sure that my right hon. Friend will understand why I cannot go further than that today.
The right hon. and learned Member for Monklands, East (Mr. Smith) made much in his speech of the slower rate of growth of the economy which is outlined in the Autumn Statement and he thought that there was an extremely gloomy outlook. The reasons why it is necessary to have a period of slower growth have been spelt out before and I do not intend to go over them again, but it is worth remembering that when my right hon. Friend the Member for Blaby (Mr. Lawson) was Chancellor, in his Mansion house speech of 1988--as long ago as that--he said that he expected that the economy would face a year or two of slower growth before resuming its upward trend. The Government, as one hon. Member seems to have thought they should, cannot be said to have abolished the trade cycle even though they may have transformed the economy ; and just as Britain led the way into the upswing, so Germany is growing faster now, just as it was growing more slowly at the point when the British economy was booming. There is nothing very surprising about that.
Looking at the decade as a whole from 1979 or 1980, whichever base the right hon. and learned Member for Monklands, East wants to take, and even taking into account the lower level of growth expected this year, Britain will still over that decade have grown faster than the EC average and faster than either France or Germany.
Mr. Morgan : In spite of his boasting about this wonderful consumption fiesta that we have had, a repeat of the Barber boom of 1973- 74, in competitive terms with France and Germany, will the Chief Secretary not agree that the Government's stewardship of the British economy is very much like the Lawn Tennis Association running the Wimbledon championships : it is a wonderful fortnight of tennis but all the British players get knocked out in the first round?
Mr. Lamont : That stewardship has resulted in an unprecedented increase in living standards, a vastly greater increase than when the Labour party was in power. We have seen a strong growth throughout most of the 1980s, and that contrasts with our dismal performance for most of the 1970s. It also represents not just an absolute increase but an improvement in our performance relative to other
Column 829countries. In the United Kingdom, growth since 1980 has averaged a percentage point higher than in the 10 years 1970 -80. Most other major countries in the 1980s experienced lower growth than in the 1970s. That demonstrates how this country has improved its performance relative to others.
The right hon. and learned Member for Monklands, East made much of the comparison with the German economy. He said that the German economy had performed so much better than ours, and I asked him whether it was true that our growth rate in the 1980s had been higher than that of the German economy. Of course, it is true, and the right hon. and learned Gentleman ought to have acknowledged it because it is a significant change and a significant improvement in this country's relative position. I share with the right hon. and learned Gentleman an admiration for the German economy, but if he were being realistic and fair and looking at what has happened in the past decade he would acknowledge that there are areas where the British economy has performed better than the German economy, and growth is one of them.
In manufacturing output, in 1980-88, the UK annual average growth rate was 2.1 per cent. and in Germany 1.2 per cent. ; in total investment growth, 1980-88, the UK average was 4.5 per cent. per annum and in Germany it was 0.5 per cent. In productivity of the whole economy, the UK figure was 2.7 per cent. per annum and the German 1.2 per cent. ; in productivity in manufacturing, the UK figure was 5.3 per cent. per annum and the German figure 2.2 per cent. The facts speak for themselves : this country's position vis-a -vis the very strong and much to be envied German economy has got better. If the right hon. and learned Gentleman had been fair and impartial, which I am sure he really is, he would have admitted it.
Mr. John Smith : I was fair enough to take the Tory claims as they put them themselves, namely, that there was a British economic miracle which had eclipsed the Germans. I simply asked, if that was the case, why the Germans had a £50 billion trade surplus and we had a £20 billion trade deficit. All the weasel statistics in the world will not get away from that. Why does not the right hon. Gentleman the Chief Secretary admit that it was a ridiculous exaggeration which has been blown apart by economic experience?
Mr. Lamont : The only claim that was made by my right hon. Friend and the only claim that I make is that our economy has improved its relative position very much compared with the German economy. The right hon. and learned Gentleman may call it a miracle ; it would be a miracle if it ever happened under the Labour party in government. The right hon. and learned Gentleman also went on at some length, as he always does, about the current account deficit. We know that he is an old-fashioned mercantilist. He believes that trade is a continuation of war by other means. I noticed that in his Daily Telegraph interview at the beginning of the year he did not talk about getting the current account back into surplus ; he just talked about possibly getting it into reasonable equilibrium.
Mr. Lamont : He says that that is more than we have done. Basically only two major countries have been consistently in surplus in the last few years. Every other country has been consistently in deficit or in and out of deficit. I am sure that the right hon. and learned Gentleman would not argue that the United States, France and Canada are unsuccessful countries or countries that have not achieved a high growth rate and standards of living that we would seek to emulate. My right hon. Friend the Chancellor has made it clear that we regard it as prudent that the current account deficit should be reduced. As my right hon. Friend the Member for Worthing said, there are positive signs that the measures we have taken are already moving the current account deficit in that direction.
Mr. John Garrett rose --
There are two reasons why the current account deficit has appeared. It is not because of a lack of competitiveness but rather because of excess demand and an investment boom that has exceeded domestic savings. I am sure Opposition Members know that by definition the current account is the difference between domestic savings and investment. If a nation invests more than it saves, the current account will be in deficit ; if it saves more than it invests, the current account will be in surplus.
There has been a fall in personal savings to which my right hon. Friend the Member for Worthing and my hon. Friend the Member for Croydon, South (Sir W. Clark) referred, although that so-called fall in personal savings has to some extent just been the product of mortgage borrowing ; the rise in home ownership has increased personal borrowing and reduced the net figure of personal savings. Although there has been some fall in personal savings, it has been offset by company saving and by the large surplus that the Government have run in their finances. The point is that by far the larger part of the current account deficit has come not from the fall in savings, which has been relatively small, but from higher investment. That is what the current account deficit reflects--an investment boom, not a savings slump.
My hon. Friend the Member for Horsham (Sir P. Hordern) pointed out that we are extremely fortunate in the overseas investment that we have built up over the years. Of course, we did not have and could not create such overseas investment when the Labour party was in power. That is the real strength of the balance sheet of Britain plc. It shows that Britain is in a very strong position because we have overseas assets that are the third largest in the world after Japan and Germany, and, as a proportion of GDP, the biggest in the world. Even in 1988, when we had a large current account deficit, those overseas assets increased in value, which is evidence that the oil surpluses about which Opposition Members are so concerned were wisely invested and are bringing benefit to the people over the years. The right hon. and learned Member for Monklands, East castigated the Government over their inflation record when he claimed to be reviewing the economic progress of the decade. As my hon. Friend the Member for Suffolk, South (Mr. Yeo) pointed out, if he wanted to compare inflation in the 1980s with inflation in the 1970s, he might at least have admitted that inflation under this Government has never exceeded the heights that it reached
Column 831under Labour. He cited the underlying rate of inflation. Our 6.1 per cent. highest rate of underlying inflation since 1983 is lower than it ever was under the Labour Government. That is the reality of the difference between our inflation record and Labour's. The right hon. and learned Gentleman has an excuse for this difference. He always said that inflation under the Labour Government was due to oil. He says that everything that went wrong under the Labour Government was because of an oil crisis, while everything good that has happened under this Government has also been due to oil, never to anything that the Government have done.
Mr. Dennis Skinner (Bolsover) : If the economy is going so well, why did the spokesman for the Building Societies Association say on the 9 o'clock news that, as a result of the Chancellor of the Exchequer's speech in the House of Commons today--in which he said that interest rates would have to stay high for much longer--there could well be an increase in mortgage interest rates? If the economy is strong, why are the news media running stories like that? The truth is that we have never had interest rates so high for so long even in the seventies, on which the right hon. Gentleman keeps harping.
Mr. Lamont : I have not heard the news, but I understand that the chairman of the Building Societies Association did not say precisely what the hon. Gentleman said. He said that if interest rates were to remain at their present level right up to the summer, it might be necessary to have a 0.5 per cent. increase in mortgage rates. The hon. Gentleman knows that I cannot speculate about what will happen, but interest rates at a proper level are necessary to bear down on inflation. The cure of inflation matters more for everyone in this country, whether wage earner or home owner.
The Labour party has criticised the Government's spending record because it thinks that we have not spent sufficient amounts on priority services. However, my right hon. Friend the Chancellor was able to demonstrate that we have spent considerable extra sums on health and transport while--as my hon. Friend the Member for Bridlington (Mr. Townend) said--maintaining tight control over total spending. We have done that by making the nationalised industries more efficient, cutting debt interest payments and using the advantages of falling unemployment.
It is because our finances are in order that we have been able to do three things simultaneously : control spending, reduce taxes, and give much- needed funds to priority sectors. That was rightly praised by my hon. Friend the Member for Richmond and Barnes (Mr. Hanley). The real question in this debate is whether there has been an underlying improvement in the performance of the British economy--whether the problems of the current account and inflation are temporary or whether there is a permanent improvement in our competitiveness. The facts speak for themselves. There is the profitability of British industry. There has been a reallocation of a decent proportion of GDP to profits after decades of decline. We know that Opposition Members are not interested. They think it is a crime to make profits. We think it is a crime to make losses. Productivity in this country has risen faster than in any other country, including even Japan. There has been a revolution in industrial relations. The
Column 832other day the Confederation of British Industry said that the number of working days lost is about 12 times lower than it was in 1979 when the Labour party was in power. It said that industrial action occurs today in only 1 per cent. of pay negotiations and the threat of action in only 2 per cent. of pay negotiations. So much for the argument that nothing has changed and we are getting back to the industrial relations of the sixties and seventies.
If there had not been a real change in the competitiveness of the British economy, we would not have the considerable and remarkable rise in British exports that we have had in the past year since economic growth began to slow down. In the three months to November 1989, export volumes were up 13 per cent. by comparison with the same period in the previous year. Within that total, car exports were up 29 per cent. and those of intermediate manufactures were up 17 per cent. In the same period, imports increased by only 6 per cent. Opposition Members who asked about imports may be interested to know that, in the three months to November 1989, imports fell. My hon. Friend the Member for Croydon, South and others of my hon. Friends mentioned the remarkable transformation in the British motor industry and the substantial foreign investment that has been made in it, which will add to British capacity by about half a million cars. That will be in place for the next decade. What a contrast with the motor industry when Labour was in power, when production fell by about one third and imports increased threefold. Today imports have stabilised and the industry is strongly placed to recover and expand its market.
When the right hon. and learned Member for Monklands, East presented his case, he said that the 1980s were a wasted decade. He claimed to speak for the whole nation, saying that his view was widely shared. He thought that the beginning of the 1990s would be the time to make a reappraisal. I agree that there could not be a better time to look back on what people thought about the 1980s. Perhaps the right hon. and learned Gentleman noticed that on 2 January a number of newspapers published surveys of the views of British business men in which they reviewed the progress that Britain made in the 1980s. As the right hon. and learned Gentleman raised that matter, and as he has been around a long time and has a good memory, he may recall that similar articles published at the beginning of the 1980s were full of real gloom, real hesitation and real doubt.
By comparison, in an article that was published on 2 January this year, the chairmen of leading British companies gave their view of the 1980s. The chairman of ICI spoke of a decade of unparalleled growth and of increased sales and profits. I dare say that the Opposition would not like me to cite the chairman of British Airways, but his phrase deserves to be remembered. Lord King of Wartnaby said :
"We should be grateful to the 1980s for helping us to forget the 1960s and 1970s."
What do the Opposition make of the comments of Sir Ernest Harrison, chairman of Racal Electronics? He said :
"The 1980s were a period of strong economic growth because we enjoyed a decade of stable government."
What do the Opposition make of the remarks of Sir Trevor Holdsworth, former chairman of GKN and president of the Confederation of British Industry? He said :
"The 1980s have been the best decade I have known--after 40 years in industry--for managing business."
Column 833Mr. John Smith : Will the right hon. Gentleman give way?
Mr. Lamont : I will, in a minute. Those are the views of practical business men who are responsible for the performance of our economy. I am sure that the British people prefer their views, as I do, to the distorted views of the right hon. and learned Member for Monklands, East, in his speech on behalf of the Opposition.
Mr. Smith : Does the right hon. Gentleman seriously expect us to take as unbiased commentators on the British economy top British industrialists who have given themselves huge salary increases over the last 12 months? Was it a sense of discretion that stopped the right hon. Gentleman from quoting Lord King? Does the Chief Secretary think that Lord King's huge salary increase, which he awarded to himself, is a good example to set the working people of this country?
Mr. Lamont : The right hon. and learned Gentleman's intervention is ludicrous and irrelevant. He claimed in his speech to speak for manufacturing industry and to represent its views and prospects, but his remarks are totally contradicted by the views of British business men themselves.
The right hon. and learned Gentleman has a point when he says that not everything is perfect, and I admit that some of his criticisms were very telling. I know that we have not lived up to the high standards that we set ourselves. My right hon. Friend the Prime Minister once said that our ambition was to make the British economy so strong that not even the Labour party could wreck it. Manifestly, we have failed because we have not educated or converted the Opposition and, although the economy is strong, it is not strong enough to withstand their onslaught.
Conveniently, that brings me to the subject of the Opposition. Old- fashioned interventionism of the type proposed in Labour's policy review will undermine the health of British industry. We are told that the Department of Trade and Industry under Labour will "make strategic interventions into key sectors".
What are they? What are the key technologies that the Labour party says that it will encourage? How do we know that it will be different from the conspicous failures of their last period in office? The Labour party's document gives one example to help us make up our minds. That example is not encouraging. It says that it will bring about the installation of a national broadband fibre optic network from John o'Groats to Land's End. What is that network? The policy document paints a terrifying picture, and if it gets out the Labour party will have lost all its chances in the next election--although it did not have much chance anyway.
It is suggesting a state-sponsored communication network which "will bring great rivers of information, sight and sound in and out of every living room, classroom and work place."
The mind boggles. What else will it bring--martial music, computer dating or speeches by the right hon. Member for Islwyn (Mr. Kinnock) telling us that the situation on the streets is normal? What is even more alarming, I am told that the cost is estimated at a modest £20 billion. That is a precise example of what the Government ought not to do--try to spot winners in an extremely complex industry. There is nothing more disastrous than a crash programme
Column 834of Government investment in a high-risk industry that will almost certainly be overtaken by technological change. It is better to have the evolutionary, market-led development of a communications network, as we have at present.
I can think of nothing more likely to lead to a gigantic misallocation of resources. One must be grateful to the authors of the document for giving us such a vivid example of the Opposition's industrial policy.
We were pleased when the hon. Member for Derby, South (Mrs. Beckett) was appointed to her post, and we congratulate her again, because we thought that when she was shadow Chief Secretary we might get answers to questions about Labour policy. We did not get any answers from her predecessor. My right hon. Friend the Chancellor of the Duchy of Lancaster put some 52 questions to the Leader of the Opposition and received no replies. I am more modest, and I shall ask only two questions : what are the costs of Labour's programme, and by how much will taxes go up as a result? I am not optimistic that we shall get an answer.
The Sunday Times on 17 September last year disclosed : "Labour leaders have decided not to work out the costs of implementing the policy review in case the figures leak out." So that is the real position of the Opposition. Is that how they regard their trust with the British electorate and the accountability that they think they should have to the British people? They want the City and the Government to give more information and to be more accountable, but they apply other standards to themselves. If that is their prospectus, it is the most fraudulent that has been put to the British people since 1710--the time of the South Sea Bubble--when a prospectus was issued to investors which invited them to
"subscribe for an undertaking, the nature of which shall in due time be revealed to them."
It was disastrous in 1710, and it would be disastrous now. It is no use for the Labour party to say that what is in the policy review will not be in the manifesto, and that what is in the manifesto will not happen in a single Parliament. That is dishonest politics, and the British people know it. My right hon. Friend has presented the House with an honest appraisal of the British economy, and I invite my right hon. and hon. Friends to back it in the Lobby tonight.
Mr. Allen rose--
The House divided : Ayes 219, Noes 282.
Division No. 42] [10 pm
Abbott, Ms Diane
Archer, Rt Hon Peter
Ashley, Rt Hon Jack
Barnes, Harry (Derbyshire NE)
Barnes, Mrs Rosie (Greenwich)
Beith, A. J.
Benn, Rt Hon Tony
Bennett, A. F. (D'nt'n & R'dish)
Bray, Dr Jeremy
Brown, Gordon (D'mline E)
Brown, Nicholas (Newcastle E)
Brown, Ron (Edinburgh Leith)
Bruce, Malcolm (Gordon)
Buckley, George J.
Column 835Campbell, Ron (Blyth Valley)
Campbell-Savours, D. N.
Clarke, Tom (Monklands W)
Clwyd, Mrs Ann
Cook, Robin (Livingston)
Cunningham, Dr John
Davies, Ron (Caerphilly)
Davis, Terry (B'ham Hodge H'l)
Dunwoody, Hon Mrs Gwyneth
Evans, John (St Helens N)
Ewing, Harry (Falkirk E)
Ewing, Mrs Margaret (Moray)
Field, Frank (Birkenhead)
Fields, Terry (L'pool B G'n)
Foot, Rt Hon Michael
Garrett, John (Norwich South)
Garrett, Ted (Wallsend)
Gilbert, Rt Hon Dr John
Godman, Dr Norman A.
Golding, Mrs Llin
Grant, Bernie (Tottenham)
Griffiths, Nigel (Edinburgh S)
Griffiths, Win (Bridgend)
Harman, Ms Harriet
Healey, Rt Hon Denis
Heffer, Eric S.
Hoey, Ms Kate (Vauxhall)
Hogg, N. (C'nauld & Kilsyth)
Home Robertson, John
Howell, Rt Hon D. (S'heath)
Howells, Dr. Kim (Pontypridd)
Hughes, John (Coventry NE)
Hughes, Robert (Aberdeen N)
Hughes, Roy (Newport E)
Hughes, Sean (Knowsley S)
Hughes, Simon (Southwark)
Jones, Barry (Alyn & Deeside)
Jones, Ieuan (Ynys Mo n)
Kaufman, Rt Hon Gerald
Kinnock, Rt Hon Neil
Lestor, Joan (Eccles)
Lloyd, Tony (Stretford)
Macdonald, Calum A.
McKay, Allen (Barnsley West)
Mahon, Mrs Alice
Marek, Dr John
Marshall, David (Shettleston)
Marshall, Jim (Leicester S)
Martin, Michael J. (Springburn)
Michie, Bill (Sheffield Heeley)
Michie, Mrs Ray (Arg'l & Bute)
Mitchell, Austin (G't Grimsby)
Morris, Rt Hon A. (W'shawe)
Morris, Rt Hon J. (Aberavon)
Oakes, Rt Hon Gordon
Orme, Rt Hon Stanley
Owen, Rt Hon Dr David
Pike, Peter L.
Powell, Ray (Ogmore)
Quin, Ms Joyce
Rees, Rt Hon Merlyn
Reid, Dr John
Ross, Ernie (Dundee W)
Sheldon, Rt Hon Robert
Smith, Andrew (Oxford E)
Smith, C. (Isl'ton & F'bury)
Smith, Rt Hon J. (Monk'ds E)
Smith, J. P. (Vale of Glam)