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banks of substantial proportions of such debt. The present law is uncertain. To allow banks to claim relief on the full amount written off in any one year could have a significant adverse impact on tax revenues. The proposed clause will allow banks to continue to offset their losses fully against tax, but the losses will have to be phased over a period of some years. The exact phasing permissible will be broadly based on the Bank of England's matrix. If a debt is sold to a third party, the tax relief will be similarly phased. If the debt is sold back to the debtor, however, relief will be immediately available.

Mr. Peter Viggers (Gosport) : An important point of principle is involved here. The directors of a company and its auditors should be responsible for assessing the profits of a company, and that company should be taxed accordingly. Clause 66 will, in effect, deprive a company of sovereign debt write-offs to which it would otherwise be entitled. Does my right hon. Friend agree that this is a windfall profits tax and that it would be quite right for the Committee to look carefully at it?

Mr. Lamont : That issue can be debated further, but the present system is extremely uncertain. As I said, the effect of the measure is to phase relief. Relief is obtained in the end, but enormous sums of money are at stake. The measure smoothes out the sudden increases in cost to the Exchequer. In the end, no one is denied relief. To that extent, I do not entirely go along with my hon. Friend's intervention, but the issue can be returned to in Committee.

Sir William Clark (Croydon, South) : Surely, although relief will be given eventually, the cash flow of a business is affected. If the relief is confined to banks, why should it not be extended to international companies which also have overseas debts?

Mr. Lamont : We are dealing with sovereign debt. That is the key difference. The existing law provides relief for debt to the extent that the principal is estimated to be irrecoverable. It is very hard to make an estimate for sovereign debt, and it seems reasonable to prescribe the detailed method and to provide a smoother profile. The principles on which tax relief is given remain the same, but the legislation is not restricted only to banks. I do not accept that this measure will have any adverse or significant effect on the standing or position of banks.

Sir Peter Hordern : Will my right hon. Friend give an assurance that no bank will be unable to reduce its liability to sovereign debt to keep up its capital adequacy ratios simply to conform with the best position that it should have to get the maximum tax advantage?

Mr. Lamont : I cannot give that assurance. I shall look at what my hon. Friend has said. If the situation is otherwise, I shall certainly indicate it to him.

If the House will allow me, I now move from sovereign debt and the banks to the slightly more popular subject of football. Few of the measures in the Bill have met with such unqualified approval on both sides of the House as the reduction in pools betting duty, made under the condition that the pools promoters pass on the full amount to the Football Trust, to be used to implement the recommendations made by Lord Justice Taylor. A new clause will be introduced to implement that reduction, which will result in an increase of about £100 million in the


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amount that the Football Trust will be able to make available towards improving comfort and safety at football grounds. I am sure that this measure will go a long way towards making football more attractive and restore its image and its rightful place as our national game and a safe game.

One of the results of lower tax rates and higher take home pay is that people have more disposable income to give to charity. The Government have consistently encouraged that, and since 1979 charitable giving has more than doubled in real terms. This year's Budget continues that approach. In 1987, my right hon. Friend the Member for Blaby introduced the payroll giving scheme.

[Interruption.] More than 175,000 people are now participating, and donations are now running at more than £7 million a year. Clause 22 will encourage the further expansion of such schemes by raising the annual limit by 25 per cent., from £480 to £600. Opposition Members are obviously unimpressed by that progress but, of course, charities are much more enthusiastic than Opposition Members. I sometimes suspect that the real reason for Opposition Members' scepticism is their basic hostility to private giving rather than any doubts about the mechanics of the scheme.

For the first time, we intend also to allow relief on one-off donations. The gift aid scheme, which was announced in the Budget, will give relief on gifts of between £600--the annual upper limit for the payroll giving scheme so it dovetails well with the payroll giving scheme--and £5 million. Organisations that benefit from large one-off donations--for instance, museums launching appeals for new galleries or major works of art --will be particularly advantaged by gift aid. The Government will be bringing forward a new clause in Committee to give effect to this proposal. The combined effect of the two measures should be a further substantial increase in charitable giving. Opposition Members are sceptical, but the Charities Aid Foundation has estimated that charities might take in an extra £50 million as a result of the measures in the Bill.

There is one notable and unusual feature in this year's Finance Bill. Clause 16 leaves the main rates of income tax unchanged. It is a measure of our success in cutting taxes that this is the first Budget and Finance Bill not to cut taxes or national insurance contributions since 1981. We may not be cutting income taxes this year, but we certainly have done so over the past 10 years. If the bands and allowances that we inherited in 1979 had merely been indexed to inflation and we had maintained the same rates, a married man on average earnings would today be paying more than £1,000 per year more in income tax.

It remains the Government's intention to cut taxes further and to move towards a basic rate of income tax of 20p. Our strategy, policy and commitment are clear. I only wish that the Opposition would be as forthcoming about their intentions on taxation, which remain shrouded in mystery. I always wondered what the Leader of the Opposition meant when, after their election defeat in 1987, he said that what Labour needed was a "relatively blank sheet". That blank sheet is the Opposition's taxation policy--even if it is not quite a blank sheet, the key details are certainly missing. It has been a remarkable achievement by the right hon. and learned Member for


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Monklands, East that he has made a brilliant success of saying nothing. He has become a leading expert on the content- free review. As Hugo Young put it, he is

"the chief exponent of minimalism."

But the electorate is entitled to more than minimalism and will demand to know the details of Labour's tax proposals--the rates and bands of the new complicated graduated system that the Opposition intend to introduce.

Opposition Members did not like it when Mr. Keating of Credit Suisse First Boston estimated that as a result of their policy many couples without children and on below average earnings would be substantially worse off. He estimated that those earning only one and a half to two and a half times average earnings could, over time, find themselves paying up to £4,000 extra in tax-- [Interruption.] Opposition Members cry out at that. If those figures are not correct, let them tell us what the correct figures are. They will not say, but some of their colleagues have. Last year, the hon. Member for Kingston upon Hull, East (Mr. Prescott) gave us a snippet when he was reported in Tribune as saying :

"It is not credible for Labour to suggest that our policies for full employment or our policies for investing in the Health Service, funded by taxation, free at the point of use, can be financed on a programme of low taxation. It can't and the electorate knows it can't."

We believe in low taxes. The Labour party believes in high taxes. Another difference is that we are prepared to say what our policy is, whereas the Opposition are not. Our policies are clear and unambiguous. The Bill consolidates the progress made in the last decade, and I commend it to the House.

6.31 pm

Mrs. Margaret Beckett (Derby, South) : Some aspects of the Bill we undoubtedly welcome because we have pressed for such changes over successive Finance Bills. I pick out in particular the concessions on workplace nurseries and on pools duty, for which my hon. Friends and I have called for many a long year, and we are pleased to see them delivered at last.

We are happy to welcome other proposals, such as the increased differential on unleaded petrol and the assistance for small companies which, as the Chief Secretary said, we shall debate later. There are other proposals that we observe with interest and without hostility, although perhaps with a degree of scepticism from time to time. I pick out, for example, the Chancellor's new savings scheme, TESSA. We are not hostile to that in any way, but whether it will increase savings or merely divert those that are already being made remains to be seen.

It seemed to me--it was also evident from the Chief Secretary's speech-- that the most striking aspect of the Budget and of the debates that followed it was not the advent of TESSA, intended apparently to be the key feature of the Budget, but the return in all her glory of TINA, who was even more evident in the Chief Secretary's speech today. Hon. Members on both sides will remember TINA, the figure who highlighted the Prime Minister's first few years in office--"There is no alternative."

No great shifts in policy are reflected in the Bill. Indeed, there is precious little in it. Nor was there much in the Chief Secretary's speech to reflect or address the huge and growing problems of the economy. One would not think, from the Bill or from the right hon. Gentleman's speech, that a week ago the second worst trade figures in our history were announced. One would certainly not think


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that that trade deficit included record imports of over £10 billion. Equally, one would not think that as we debate this measure we are awaiting what Samuel Brittan in the Financial Times last week called "black Friday"--the arrival of the next set of inflation figures next week, safely of course after the local government elections.

Mr. Hanley rose --

Mrs. Beckett : No, I will not give way.

Not only does the Bill tell us little about those problems, but Ministers tell us little about the state of the economy.

Mr. Hanley rose --

Mrs. Beckett : I told the hon. Gentleman clearly that I would not give way. I will do so later.

The Finance Bill tells us that the economy is in a mess and that the Government do not know what to do about it, except to reiterate that there is no alternative to the policies that they are following. Worst of all perhaps is not what the Bill fails to say about the problems that we are experiencing, but what it fails to say about the problems of the economy of tomorrow and of all our tomorrows. It addresses in no way the shape of the economy in 1992, let alone in 1993, 1994, 1995 or at any time in the future not bounded by the next general election.

We said when the Budget was launched that it was a Budget for the next 10 days rather than for the next 10 years. It is an increasingly moot point which of its forecasts and prescriptions will survive the next 10 weeks. When Ministers talk about the problems of the economy, as was evident from the Chief Secretary's speech, as opposed to their paeans of selective self- praise, they do so only to assert that those problems are purely temporary.

Ministers seem to have stopped--the Chief Secretary did not use the word once in his speech--using the word "miracle", or perhaps even that is temporary. Even so, the rest of the rhetoric is still there. They continue to talk about greater growth and about a new indicator for inflation. The Chief Secretary used that phrase, and I shall study it with interest to see whether it stands up any better than some of the other phrases that they have used. We have had a new description of levels of employment or unemployment. There has not been much about investment, except for misleading statistics on business investment, and nothing about research and development. In common with most of the statistics that Ministers use about their record, they are highly questionable at best, particularly when we examine the whole period for which the Conservatives have been in office. The Chief Secretary said, unusually for a Minister, that it was right to look over their whole period in office. I shall remind the right hon. Gentleman of that when, in other debates, he quotes--as he no doubt will again as he has in the past--a set of statistics from 1981, another from 1983 and yet another from 1985, depending on the best and most selective period to choose. The Conservatives' record over their whole period in office looks nothing like as flattering as Ministers normally describe it.

Particularly worrying is the theme of the Chief Secretary's speech, which is that our problems are temporary and soon will be resolved. He was scathing about people who do not believe that there has been a


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miracle--although he did not use that word today--and who do not believe that there has been an enormous underlying improvement in the economy.

I refer the right hon. Gentleman to the observations of Mr. Martin, the adviser to the Select Committee, who referred to the optimism that the Treasury and the previous Chancellor enjoyed for so long. Perhaps at this stage I should set the record straight by telling the Chief Secretary that my hon. Friends and I were not amused or critical of the Government's proposals on charities, although no doubt we shall debate them. We were amused that the Chief Secretary had dared to mention the name of the departed figure, the man who is not to be referred to except to be blamed for all the mistakes--the right hon. Member for Blaby (Mr. Lawson). [Hon. Members :-- "Where is he?"]

Although the Chief Secretary may have omitted that, he referred to the claim relating to the background to the former Chancellor's remarks. So I direct him to Mr. Martin's observations about the special circumstances that the Government enjoyed in the late 1980s which created the appearance of greater strength than was there in the economy and which fed the optimism of which the Government have for so long been guilty.

When interviewed by the Select Committee, the Chancellor said that he did not know why the CBI had suggested, for example, that any improvement in the trade deficit might be temporary and that after improving it might deteriorate again. That was not quite the picture that was painted by the Chief Secretary, and was perhaps less than honest, if one dare say so, of the Chancellor.

Mr. Ward, another adviser to the Select Committee, is one of many commentators and forecasters, most of them using the Treasury model, to point out that, sadly, the most likely scenario is that, although the squeeze on inflation that the Government are presently undertaking might succeed in bringing down the balance of trade deficit, as soon as that squeeze is lifted, it is likely to deteriorate because of our propensity to import.

Mr. Hanley : How would the Labour party turn round the trade deficit? What import controls would be introduced?

Mrs. Beckett : The hon. Gentleman must have been reading some of the more hysterical contributions from the Paymaster General. We have made it crystal clear over and over again until we are bored with making it clear that we do not have the slightest intention of introducing import controls and--to save the hon. Gentleman from asking--we have no intention of introducing exchange controls either. We recognise the Chancellor's problem and that he does not want to refer to the likely improvement in the trade deficit--if it improves, which we certainly hope that it will. The last thing that the right hon. Gentleman wants is for the public--he is not worried about the Select Committee or about hon. Members of whatever party- -to realise that if his inflation squeeze works at all, the improvement may be short-lived. It is within that window of opportunity that the Government are hoping to call the next general election. I repeat that it is less than honest

Mr. Neil Hamilton (Tatton) rose --


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Mrs. Beckett : It is less than honest for the Chancellor not to acknowledge the danger that the Treasury--and everyone else--has seen, no matter how ropey the statistics

Mr. Quentin Davies (Stamford and Spalding) rose

Mrs. Beckett : The hon. Member for Tatton (Mr. Hamilton) was first.

Mr. Hamilton : The hon. Lady is advancing a partially attractive argument because she appears to be saying that the Government are not squeezing the economy hard enough. In the absence of exchange controls or import controls, to what extent would her proposals involve either an increase in taxation or an increase in interest rates at this moment?

Mrs. Beckett : The hon. Gentleman seems to be suffering from a pre- speech brief saying, "For heaven's sake, ask this question irrespective of whether it is relevant or follows on from what has just been said." [ Hon. Members-- : "No."] Well, I do not know how the hon. Member for Tatton read into my remarks that I do not think that the Chancellor is squeezing the economy sufficiently. I shall repeat what I said in case the hon. Gentleman did not catch it the first time. I said that if the squeeze that the Chancellor is applying works--we all hope that it succeeds in reducing the trade deficit--allowing for a time lag, the minute that the squeeze is lifted, the balance of trade deficit will deteriorate again. My point, which I am happy to repeat for the hon. Gentleman's benefit, is that that is the time scale within which the Government are hoping to hold the next election, pretending all the time that the improvement that they have created is long-lasting and that the balance of payments will not deteriorate again, although they must know perfectly well from their Treasury model that that is exactly what is predicted. As I have said, that is less than honest. Mr. Quentin Davies rose --

Mrs. Beckett : If the hon. Gentleman is seeking to intervene on the same point, I am not sure that it will be worth giving way to him-- Mr. Davies rose --

Mrs. Beckett : All right, I shall give the hon. Gentleman the chance.

Mr. Davies : I am grateful to the hon. Lady for giving way. As she now seems to have accepted that the major economic problem that we face is that of inflation, will she take this opportunity formally to repent of the consistent errors of the Labour party throughout 1987 and 1988, when Opposition Members continually told the Government that interest rates were too high and should be brought down and that the fiscal surplus was too high and should be lowered? If those policies had been pursued, they would have exacerbated inflation.

Mrs. Beckett : I shall come to the point about 1987 a little later, and I hope that the hon. Gentleman will rest content until I get there. However, the Dispatch Box is not quite the place for the repentence of one's sins.

If we are to judge from what the Government say now and from what they are likely to say if and when the trade deficit improves--the point at which the Government


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hope to have that window of opportunity--it would be wise for us to take a look at the Government's record on predictions and at how much reliance one can place on their word. I believe that it was Nye Bevan who said, "Why look into the crystal ball when you can read the book?", and I have been reading the book.

I do not want to be unfair to Conservative Members or to go back over their long period in government, so I shall go back no further than the last general election campaign. That must be fair. After all, in 1987 the Government had had two terms in office and that was the very point at which we were told that the economic miracle was in full swing and that we were ahead of West Germany and Japan. Therefore, it can only be fair to the Government to go back that far.

I shall take first the Government's statistics on inflation, which is one of the two most difficult problems that we are facing at the moment, and is what the right hon. Member for Blaby called the "judge and jury" of the Government's record. It makes interesting reading. During the election campaign and in their manifesto, the Government talked about pursuing the "conquest of inflation" and stated : "We will not be content until we have stable prices, with inflation eradicated altogether."

No wonder the Government look miserable at the moment.

By November 1987, five months after the election, the prediction for inflation in the fourth quarter of 1988, the following year, was 4.5 per cent. By March 1988, three or four months later, that forecast had improved and the forecast for the end of 1988 was 4 per cent. By November a little more realism had crept in and inflation for that same fourth quarter of 1988 was predicted at

"a little over 6 per cent."

Mr. Norman Lamont : What does the hon. Lady think about the right hon. and learned Member for Monklands, East (Mr. Smith) who, at exactly the time to which she has referred, November 1987, said : "Now is the time for cuts in interest rates to stimulate the economy Now is the time for a programme of well planned public investment to mobilise the unused capacity",

and called for a further stimulus and boost to the economy? Mrs. Beckett rose--

Hon. Members : Answer.

Mrs. Beckett : I am quite content to answer and have already told the Chief Secretary to the Treasury, who was in such a hurry with his quote, that I shall return to the question about what happened at that stage in 1987 and to the question about interest rates a little later. I am talking now about inflation in 1987 and about the record--

Mr. Stephen Dorell (Loughborough) : But 1987 is relevant.

Mrs. Beckett : There is no need for the hon. Gentleman to try to conduct a dialogue from a sedentary position. If he wants to come to the Dispatch Box, let him do so, otherwise he should keep quiet. I assure the Chief Secretary that I shall refer to the point that he made. That is the assurance that I gave to the hon. Member for Stamford and Spalding (Mr. Davies), and the right hon. Gentleman knows that I always keep my assurances.


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As I was saying, by November 1988 inflation was being predicted at "a little over 6 per cent."

for the fourth quarter of that year, although in the event it was 6.5 per cent. and, instead of the predicted 4 per cent. by the end of the year, it was 6.8 per cent. The forecast for 1989 that was given in the 1988 autumn statement was that inflation would peak at some point "in the middle" of 1989 before

"falling back again to 5 per cent. by the fourth quarter."-- [Official Report, 1 November 1988 ; Vol. 139, c. 824-5.] That was in November 1988.

By March 1989 and the Budget, the Chancellor was saying that the outlook was for inflation to rise a little further over the next few months--not from 4 per cent. or 6 per cent., but from 7.5 per cent.--to 8 per cent. before falling back in the second half of the year to 5 per cent. in the fourth quarter and to perhaps 4.5 per cent. in the second quarter of 1990. I repeat, that was the prediction in March 1989.

I concede at once that the prediction was half right. Inflation did rise a little and then fall back a little, but what about the prediction that was made just over a year ago of 4.5 per cent. inflation in the second quarter of 1990? I know that you, Mr. Deputy Speaker, will readily recognise that the second quarter of 1990 is the quarter that we are now entering, when predictions are just a little different.

Mr. Tim Yeo (Suffolk, South) : Will the hon. Lady give way?

Mrs. Beckett : No, not to the hon. Gentleman.

That brings me to the autumn statement of 1989--

Mr. Yeo rose --

Mrs. Beckett : I am not giving way to the hon. Gentleman--as he knows.

In the autumn statement of November 1989, the Chancellor--by this time, we are talking about the present Chancellor--predicted a further reduction in inflation. The forecast last November was for 5.75 per cent. inflation by the fourth quarter of 1990. Alas, by March this year--only a month ago--the forecast had been revised again, to the following :

"A significant fall is still some months away. The position will worsen noticeably before it improves--though I now expect that it may be a little over 7 per cent. by the fourth quarter of this year compared to the 5.75 per cent. that I had previously expected"-- only the previous November--

"but I expect inflation to fall below 5 per cent. during 1991." It is far from clear to me how any judge or jury could be expected to reach a verdict when the evidence changes with such rapidity. It is no wonder that Mr. Martin, who advises the Select Committee, stated that the Government have "nil credibility" on inflation.

Sir Peter Hordern : The hon. Lady started her speech, by saying that she would concern herself with the future--and she is now talking about forecasts. I am somewhat confused as I thought that she had ruled out any question of import controls and exchange controls. However, so far as we have been able to establish, the Labour party is in favour of lower interest rates and more public expenditure. The latest assurance from the right hon. and learned Member for Monklands, East (Mr. Smith) is of a


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guaranteed minimum wage. Will the hon. Lady tell the House by how much she expects wages and salaries to increase to keep that pledge?

Mrs. Beckett : I am sorry to tell the hon. Gentleman that there is nothing new in what my right hon. and learned Friend said--it was in the recent policy review. As I recall, the effect of that policy will be an increase in wage rates of about 1 per cent. The answers to the hon. Gentleman's other questions--if they were questions and not assertions-- have been given repeatedly from the Labour Front Bench, and will be the subject of my later remarks.

The Government's balance of payments record is another area of considerable difficulty at present. In 1987, the deficit was £1.5 billion. We were told then that that was of no consequence because it would be covered by our earnings on invisibles. We have not heard so much about invisibles of late. In the Budget of March 1988, the then Chancellor forecast an end-of- year deficit of £4 billion. By November 1988--about five months later- -the forecast was not a £4 billion deficit, but £13 billion, although falling slightly in 1989 to £11 billion.

In the March 1989 Budget--again three or four months after the autumn statement--there was no change in the prediction for 1989, although the outturn for 1988 had been £15 billion rather than the £13 billion that was initially predicted. However, by November 1989 the result for that year was not after all the £11 billion that had been predicted six months before, but £20 billion, although--of course--that figure was predicted to fall to £15 billion in 1990. That was the Budget forecast in March this year.

Although, of course, Opposition Members hope that those predictions, for once, have some accuracy, and that that deficit will fall, I am bound to observe that far from suggesting a fall from £15 billion, the annualised rate for the first quarter of 1990 suggests a further rise in our trade deficit to more than £22 billion. The Treasury and Civil Service Select Committee drew attention in its report to the Government's observations that they would expect to see the balance of payments gradually moving back towards balance. It said : "This explanation and forecast is similar to that given at the time of our inquiry into the 1989 Autumn Statement."

In other words, the Select Committee and the House have heard it all before.

The Government say that the present difficulties do not alter the sweeping claims that they have previously made for their economic success. I recognise that the Government now admit to making a mistake, although apparently only one little mistake, made in 1987. Here I come to the point of the Chief Secretary to the Treasury and of the hon. Member for Horsham (Sir P. Hordern). Following the stock market crash, the Government lowered interest rates. I am sure that it is pure coincidence that the one mistake to which the Government are prepared to admit is one that was generally accepted as a wise move, and one that was supported by the Labour party. I concede that we agreed with the Government at the time that it seemed wise for interest rates to be lowered temporarily because of the possibility of a slump. What we have never agreed with or accepted is the path that the Government continued to follow which led directly to the 1988 Budget and the tax cuts that were made in it. There is no doubt that if that is the only mistake that the Government have made--and I do not notice them


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admitting to any more--it must have been a beauty as we are still feeling the effects and paying for it now. That will continue to the middle of 1990 at the best.

What is worrying is that sometimes Opposition Members have the impression that the Government really believe that that is the only mistake they have ever made. The Opposition argue that there have been others, the biggest being not the fact that the Government lowered interest rates in the autumn of 1987, but that they went on to add to demand by the huge tax cuts of 1988. They added to those tax cuts the grossly inflated rhetoric of the economic miracle--the stuff about Germany and Japan bringing up the rear. Those tax cuts were not only unjust, but a profound misjudgment of what our economy needed

Mr. Quentin Davies rose --

Mr. Neil Hamilton rose --

Mr. Ian Taylor rose --

Mrs. Beckett : I take the point raised by the Chief Secretary to the Treasury. We believe that those resources should have gone into a planned programme of investment in our economy. That is the choice that the Labour party would have made. Those resources were available to the Government. Sadly, they are not available now because the Government have used that money for tax cuts that have fuelled demand and the growth of credit in the economy.

Mr. Quentin Davies rose --

Mr. Ian Taylor rose --

Mrs. Beckett : I shall not give way again to the hon. Member for Stamford and Spalding (Mr. Davies). I have been speaking for 25 minutes and I am barely halfway into my speech. I may not give way for some time.

Apart from the Government's constitutional dislike of admitting that they have ever made a mistake, they have another important reason for refusing to accept the part that they played in causing our problems by the tax cuts of 1988. They do not want to admit that those tax cuts fuelled the explosion of spending and the demand for credit because they want to do it again. That is how they are hoping to win the next election--by either the promise or the performance of further income tax cuts.

Mr. Ian Taylor rose --

Hon. Members : Give way.

Mrs. Beckett : I have given way on a number of occasions and I shall not do so again--if I do at all--until I have made substantially more progress.

The Government have tried to claim credit for trying to teach the British people that there is no such thing as a free lunch, but they are incredibly reluctant to apply that lesson to Government policy. The harsh reality is that we are paying now for the profligacy of 1988 with increases in mortgage rates, rents, the price of electricity, gas and water, prescription charges and bankruptcies, a collapse in the construction industry and, as sure as night follows day, inevitable increases in unemployment.

One of the shabbiest tricks that the Government have recently employed is that they have sought to pretend--as


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