House of Commons Hansard Debates for 15 Oct 1990

Column 925

Business of the House

3.30 pm

The Lord President of the Council and Leader of the House of Commons (Sir Geoffrey Howe) : With permission, Mr. Speaker, I shouldlike to make a short business statement about the business of the House on Friday. The business for Friday 19 October will be as follows :

A debate on the transitional measures relating to the EC consequences of German unification on a take-note motion. Relevant documents will be shown in the Official Report. [See Written Answers to Questions tomorrow.]

Mr. Derek Foster (Bishop Auckland) : I thank the Leader of the House for the business statement and also for arranging for the Chancellor to make a statement this afternoon on the exchange rate mechanism.

Since the decision to enter was clearly taken for political reasons, will the right hon. and learned Gentleman use his full authority to drag the Prime Minister to the Dispatch Box in a full debate next week to explain her Government's deep divisions over Europe? Will he arrange for the Foreign Secretary to make a full statement on his return on the latest developments in the Gulf crisis and on his consultations about the United Nations' resolutions on the shootings?

Sir Geoffrey Howe : I shall leave the hon. Gentleman's first point to be dealt with on its merits through the usual channels. I appreciate his gratitude for the fact that the Chancellor of the Exchequer will make a statement about the exchange rate mechanism immediately following this one. The House will know that my right hon. Friend the Secretary of State for Foreign and Commonwealth Affairs is currently in the middle east. I shall bring to his attention the points raised by the hon. Gentleman. The question of a statement or a possible statement can most usefully be considered when my right hon. Friend returns to Britain.

Several Hon. Members rose --

Mr. Speaker : Order. I remind the House that questions on this statement should be confined to the business on Friday.

Mr. Alan Williams (Swansea, West) : Does not the Leader of the House realise that his statement is totally inadequate? My hon. Friend the Member for Bishop Auckland (Mr. Foster) is absolutely right. During the recess, we had one of the most important economic statements in recent years and as this is a quiet week, Friday should have been used for a debate, led by the Prime Minister, in which she could have explained this extremely important decision. More importantly, she could have explained the differences between herself and the Chancellor and the Foreign Secretary in their perceptions of the long-term significance of ERM membership. Perhaps, in winding up, the Leader of the House could have explained the difference between himself and all three of them on the long-term implications.

Sir Geoffrey Howe : The right hon. Gentleman has got it completely wrong. The less questioning that takes place now about the statement that I have just made, the more quickly the House can get on to discuss with the Chancellor of the Exchequer the statement that he will make on the point raised by the right hon. Gentleman. It is idle to pretend that the subject that I have announced for

Column 926

debate on Friday is unimportant. We shall debate transitional measures following the conclusion of the conflict with Germany and German unification. These are important matters and it is right to discuss them on Friday.

Mr. Peter Bottomley (Eltham) : If my right hon. and learned Friend rejects the blandishments of the hon. Member for Bishop Auckland (Mr. Foster) and our right hon. Friend the Prime Minister does not speak, does that mean that we would not have to listen to the Leader of the Opposition? Many of us would be happy with that. If there is an additional gap on Friday and I were to table an early-day motion in support of my right hon. Friend the Prime Minister's expressed views in 1981 to 1983 on child benefit, would there be time to discuss that? It would be a useful debate.

Sir Geoffrey Howe : My hon. Friend's enthusiasms are well known, but they do not relate directly to the business of the House on Friday.

Mr. Nigel Spearing (Newham, South) : Will the Leader of the House confirm that the documents that he mentioned relating to Friday's debate constitute some 23 individual proposals, for each of which the Government have provided an explanatory memorandum? Will he further confirm that, if the Select Committee on European Legislation believes that any one of those documents should be considered on its own, those documents will not be deemed to have been dealt with in one debate on Friday?

Sir Geoffrey Howe : I understand the hon. Gentleman's close, serious and professional interest in these matters. The documents are summarised in paragraphs 6 and 7 of Cmnd. 1246--the Government's observations on the report of the Foreign Affairs Committee on German unification. I know that the Scrutiny Committee will be considering these matters tomorrow, and the precise shape of next Friday's debate may take account of the hon. Gentleman's recommendations, although I cannot promise to meet him in precisely the way that he suggested.

Mr. Tony Banks (Newham, North-West) : Which Ministers will be involved in the debate? Will the Leader of the House use his good offices with Mr. Speaker to ensure that the right hon. Member for Cirencester and Tewksbury (Mr. Ridley) can play a full part in the debate?

Sir Geoffrey Howe : The hon. Gentleman, as always, has more than one objective in mind. The appropriate Ministers will speak in the debate, no doubt including at the outset a Foreign Office Minister. The question of who else will speak in the debate is entirely a matter for Mr. Speaker.

Mr. Bob Cryer (Bradford, South) : May we have a statement on Friday, or earlier if possible, on the substance of the Central Television programme on Cambodia, which demonstrated beyond challenge that the Government are giving aid and comfort to the Khmer Rouge, including the Pol Pot faction? Is not that small, impoverished country, which threatens nobody, being virtually squeezed out of existence? Is there not the possibility of mass annihilation if Pol Pot and his faction reach the capital, which they are likely to do within the next few months?

Column 927

Sir Geoffrey Howe : The hon. Gentleman is tenacious, but absurd in his continued tenacity. The Government have many times denied the allegations to which he referred, and there is no substance to them. Several Hon. Members rose --

Mr. Speaker : Order. I shall call the two hon. Members who are standing, but I ask them to confine their questions to what is likely to happen on Friday, and not to discuss more general issues.

Dr. Norman A. Godman (Greenock and Port Glasgow) : It is right and proper that on Friday we should debate the unification of Germany. However, at the risk of sounding excessively parochial, I must stress that the unification of Germany has profound implications for, among others, those who live in our maritime communities. I hope that, on Friday, the appropriate Minister will offer a comment or two on the role that will be played by a grossly enlarged German fishing fleet and the consequences for the interests of our fishing communities.

Sir Geoffrey Howe : Certainly, in so far as that issue may emerge from the documents to which I have referred, it will be an appropriate subject for the hon. Gentleman to raise in the debate on Friday.

Mr. Dennis Skinner (Bolsover) : Why does not the Leader of the House admit that the real reason why the Prime Minister will not reply to the debate on Friday, or on any other day, is because the right hon. and learned Gentleman cannot guarantee a 10-minute standing ovation before she begins?

Sir Geoffrey Howe : I suspect that, if challenged, I could.

Column 928

Exchange Rate Mechanism

3.38 pm

The Chancellor of the Exchequer (Mr. John Major) : I should like to make a statement about sterling's entry to the exchange rate mechanism of the European monetary system, which took effect on Monday, 8 October.

Sterling now has a fixed central rate against each of the other currencies in the ERM. The entry rate is set against the ecu and translates to a central rate against the deutschmark of DM 2.95. That was marginally above the market level when the decision to enter was announced on Friday, 5 October and is a little below the current market rate.

Sterling is able to move by a maximum of 6 per cent. above or below the central rates. Our choice of the wider 6 per cent. margins is intended to allow sterling to settle into the system, and follows recent precedent. In due course, we will move to the narrow band of 2 per cent. margins. The terms of entry we have agreed with our partners are those that we sought.

The Government have long made it clear that sterling would enter the exchange rate mechanism during stage 1 of economic and monetary union, which began in July. It has now done do, at the earliest appropriate time. I would like to explain how our decision fits into the Government's wider economic strategy.

It has become abundantly clear that policy is now reducing inflationary pressures in the economy. Monetary growth on all measures has fallen sharply, and the growth of narrow money is within its target range. The growth of demand has slowed. Although the rise in oil prices will continue to feed through for a while, the prospect is for a substantial reduction in inflation over the coming year. That will be so both in absolute terms and in relation to inflation in other European countries. It was for those reasons that we felt able to reduce interest rates by1 per cent.

A firm exchange rate is a vital part of our policy to maintain tight monetary conditions in order to reduce inflation. As I have repeatedly made clear, membership of the exchange rate machanism will be an additional discipline for the United Kingdom economy. In no sense is it a soft option. Monetary policy will remain tight. I must emphasise that I will not make a further reduction in interest rates until I am sure that it is safe and prudent to do so.

Membership has important implications for British companies and their employees. They must contain their costs. If they fail to do so, they will not be bailed out by a devaluation of the currency. That is the key message for those engaged in pay bargaining this autumn and subsequently.

But in addition to acting as a discipline on costs, membership of the exchange rate mechanism offers significant benefits for British industry. It will help to provide greater stability of exchange rates with our main trading partners and thus the certainty that business needs to plan for the future. It will also make Britain even more attractive for inward investment.

Although entry to the narrow band of the exchange rate mechanism will fulfil our obligations under stage 1 of economic and monetary union, it does not imply any change in our opposition to the imposition of a single currency. In the intergovernmental conference in

Column 929

December, we shall continue to argue against that plan and for the proposals that I first set out in June. As the House knows, they propose an evolutionary and market-based approach, based on the creation of a new European monetary fund and a common currency--the hard ecu.

In summary, the mechanism has a proven record of success over recent years in producing greater stability of exchange rates and lower inflation. The Government believe that Britain too will benefit from membership. The exchange rate mechanism will reinforce our counter-inflationary policies, help to provide the stability and certainty that industry needs, and set the right framework for a resumption of soundlybased and non-inflationary growth. I commend entry to the House.

Mr. John Smith (Monklands, East) : As the Chancellor is aware, the Labour party welcomes the decision that sterling should join the exchange rate mechanism, not least because of the potential benefit that a more stable exchange rate could bring to the process of Britain's much-needed economic recovery. However, it will not of itself lead Britain out of the economic cul-de-sac of high and rising inflation, recession, increasing unemployment and serious balance of payments deficits to which the Government's policies have led. I want to ask the Chancellor first about the celebrated Madrid conditions into which the Prime Minister entered in June 1989, and which she reported to the House formally on 29 June last year. At that time, the Prime Minister was in no doubt that the rate of inflation was too high for Britain to enter the exchange rate mechanism. In a reply to a question from my right hon. Friend the Leader of the Opposition, she said :

"On the exchange rate mechanism, our promise has been that we would go in when the time was right. I"--

note, "I"--

"put conditions on that and made it much clearer that when those conditions were met we should be able to go in. One condition depends on us, which is that we get inflation well down".

Earlier, she said :

"we must first get our inflation down."--[ Official Report, 29 June 1989 ; Vol. 155, c. 1111, 1110.]

Every time that she has been asked since then, the Prime Minister has repeated the condition. In July 1989, inflation was to be "significantly lower". The Chancellor said on 26 March this year : "we wish to see inflation fall before we enter the mechanism."--[ Official Report, 26 March 1990 ; Vol. 170, c. 117.]

Only two weeks ago, the Prime Minister was reported as saying in Switzerland :

"The Madrid conditions won't be changed and they include getting inflation nearer the European average."

The Prime Minister's role is crucial--she invented the Madrid conditions. They were not imposed on her by other members of the European Community. The present Chancellor was not in Madrid when these conditions were suggested by the Prime Minister, and neither was his predecessor, the former Chancellor. It was the Prime Minister herself, assisted by the then Foreign Secretary, who is now Leader of the House, and who accompanied her to the Madrid summit. Sadly, his views do not seem to coincide with those of the Prime Minister or of the present Chancellor.

Column 930

But if the condition is clear--and it could hardly be made more clear--that inflation had to be reduced before we entered the exchange rate mechanism, it is equally clear that it has not been fulfilled. Headline inflation in June 1989 was 8.3 per cent. and is now 10.9 per cent. If we take inflation on the basis that the Chancellor likes to take it--by excluding completely mortgage rates and the poll tax, which is a favourable estimate from the Government's point of view--then, it was 5.8 per cent. and now, it is 7.9 per cent. I ask the Chancellor to explain why there has been such a humiliating U-turn by the Prime Minister who was the inventor of the Madrid conditions and is now their arch- destroyer. Is it not simply because the Government, due to their appalling mismanagement of our economy, have been forced to concede that they could not achieve the inflation target which they had set for themselves?

Why does not the Chancellor admit this in his statement to the House, on television and elsewhere? Why does not the Prime Minister--whose role is so crucial in this affair that she must take part in the debate which we hope to have in the House--admit it? If our parliamentary accountability is as important as she frequently claims in this context, why is she reluctant to take part in the debate? Is it not because she would find it impossible to justify the abandonment of a commitment that she made to the House on 29 June last year?

Would not the Chancellor have been wiser to admit that our economy is in dire trouble, rather than to pretend, as he did once again today, that all would soon be well and to claim, as he did on Channel 4 television on the day of his announcement, that at that time there was

"an ideal conjunction of events"

Ideal, when inflation was twice as high as that in the rest of the countries in the exchange rate mechanism? Ideal, when the economic consequences of the Gulf crisis are quite unknown? If these conditions were ideal, what were the Government waiting for during all the years when inflation was low and during all the years when there was no Gulf crisis?

Does the Chancellor not understand that nonsense like this not only fuels scepticism in the markets and elsewhere, but fosters downright incredulity about statements by Ministers? Is is not clear that the Government, baulked and cornered by their economic failure, have joined the exchange rate mechanism as a last resort?

Now that Britain has joined, will the Chancellor give us his estimate of the consequences for our economy? I hope that he will answer these questions directly. Given our serious balance of payments problems, is it his judgment that the rate at which we agreed to join is sustainable? What is his estimate of the effect on the balance of payments over the period ahead? Will the balance of payments deficit be progressively reduced? Is he satisfied that the arrangements through the central banks under the Basle- Nyborg agreements will be adequate to sustain the management of a currency as widely traded as sterling? Why did he not seek a strengthening of regional policy in the Community as one means of helping to bridge the gap between countries with more successful economies and countries, such as Britain, which are in difficulties?

Finally, I wish to ask the Chancellor-- [Interruption.]

Mr. Speaker : Order.

Mr. Smith : This is an extremely important matter of economic and political policy, and the Government should

Column 931

not complain when they are asked questions by an Opposition whose function it is to do precisely that. The questions that I want to ask the Chancellor flow from how economic policy is to be directed now that we are subject to the disciplines of the ERM.

First, is it not clear that, between now and the next election, responsible economic management will not permit cuts both in interest rates and in personal income tax? To build confidence over the period ahead, will the Chancellor today rule out the possibility of personal income tax cuts before the general election as too wildly irresponsible to be seriously contemplated by any sensible Government? Does he not yet understand that, in the new situation, the supply side policies advocated by this side of the House are even more crucial? Unless we end the debilitating neglect of trading, the collapse of regional policy and the failure to advance new technology--in short, unless we adopt an industrial strategy--is it not clear that we shall not succeed within the ERM, just as we have failed outside it?

Mr. Major : I am grateful to the right hon. and learned Member for Monklands, East (Mr. Smith) for his initial welcome for our decision. We both agree that it is the right decision for the British economy. He spent so much time on the Madrid conditions because he knows that we are right to enter the mechanism. As recently as a few weeks ago, he said :

"We believe that we should enter the ERM at an early date." The Government agree with him, and we have done so.

Several conditions were set out in Madrid. The first concerned the abolition of exchange controls, which is substantially completed. The second related to the single market, and the majority of the measures are now concluded and more are in hand. The third related to progress on financial services, which is also nearly concluded. The fourth was progress on competition policy, on which the Commission, on this at least is acting firmly. The only remaining condition was the need for inflation convergence, and it is now clear that we are moving away from divergence in inflation to convergence in inflation. [Interruption.] If the hon. Gentlemen listen longer, they will learn a little more.

The right hon. and learned Gentleman then asked why we were waiting for a conjunction of events and what they might be. We were waiting essentially for three events : first, the right market conditions and the right market rate, and that we had ; secondly, a clear indication that monetary aggregates were coming into line, and that they have ; thirdly, signs in the real economy of close and certain disinflation, and that we had. The combination of those factors made this the right time to enter the mechanism.

The right hon. and learned Gentleman asked about the consequences for the economy. The first and most certain consequence is that entry of the ERM will reinforce monetary policy and help us push inflation lower, which is our central policy aim. He asked whether the rate was sustainable, and I share his view that that is an important question. I am confident that a central rate of DM2.95 is sustainable, for a series of reasons which I will set out now, if the House will do me the courtesy of listening.

First, DM2.95 is the average inflation-adjusted real rate of the past decade. It is the recent market rate and, as a number of analysts have pointed out, the pound's purchasing power parity--in essence, the rate at which the

Column 932

prices of our goods would be equal to the prices of German goods--is above DM2.95. Three analysts have calculated it specially : one at DM3.30, one at DM3.19 and one at DM2.95. Similarly, as the right hon. and learned Gentleman may know, the International Monetary Fund has released figures that suggest that industry will be competitive at DM2.95.

Mr. Ron Leighton (Newham, North-East) : When has it ever been right?

Mr. Major : When has the hon. Gentleman ever been right? I understand the concern that underlies the question. The truth is that the trade gap is the result of domestic demand outstripping supply and not an uncompetitive exchange rate. That is the reality of what has happened.

The right hon. and learned Gentleman's next question concerned the central banks. I am content that the central bank agreement is satisfactory and I think that the right hon. and learned Gentleman is aware of that. I did not regard stronger regional policies as necessary or negotiable in my discussions with my partners in Europe.

On the responsibility for future economic management, the right hon. and learned Gentleman referred to the possibility of interest rate cuts and tax cuts. I made clear a few moments ago the position on interest rate cuts. Tax cuts are a matter for the Budget and not before.

Mr. Terence Higgins (Worthing) : My right hon. Friend the Chancellor is reported to have said that a remark by Mr. Delors that we joined the ERM in order to slow down EMU is "rather rum". Is that not a good description of Mr. Delors's position, given that we have been in the lead in implementing the single market and that my right hon. Friend's proposals for a hard ecu are a far more practical, effective and better way forward than Mr. Delors's proposals for stages 2 and 3?

Mr. Major : I am grateful to my right hon. Friend for those remarks. I agree entirely. The hard ecu moves us in the direction of a market-led approach, which I believe is the only sustainable way forward.

Mr. James Molyneaux (Lagan Valley) : As Parliament--both sides of the House of Commons--has rendered itself impotent on these matters, is it not imperative that there should be no further erosion of Britain's position until the electorate have been consulted at a general election?

Mr. Major : With respect to the right hon. Gentleman, I do not agree with his underlying premise.

Sir William Clark (Croydon, South) : Now that the euphoria of the markets has subsided, will my right hon. Friend re-emphasise that joining the ERM is not a soft option, and that it is essential for us to keep tight monetary control? Does he agree that there has been a wide welcome for the fact that we do not agree with a single currency and that at the new meetings the hard ecu suggestion will be put forward?

Mr. Major : I certainly agree with my right hon. Friend's final point, and I confirm it. I think that the euphoria of the markets was overdone both before and immediately after entry and, in some cases, the gloom is

Column 933

now being overdone. Entry into the exchange rate mechanism is an additional discipline to underpin monetary policy. It is that and no more.

Mr. Peter Shore (Bethnal Green and Stepney) : The Chancellor will be aware that this is one of the most serious decisions affecting the jobs and livelihoods of millions of people in this country. He maintains that he has got the right exchange rate. That view is not shared by the vast majority of experts, academics and others in this country.

I shall ask two questions. First, if it turns out that the right hon. Gentleman is wrong on this vital matter, what powers does he have left to change the exchange rate now that it has been agreed with the ERM? Secondly, now that we are part of the ERM, taking account of all he said about tighter discipline, will he spell out what average increase in earnings in the United Kingdom is compatible with retaining what competitiveness we have already?

Mr. Major : On the final point, it depends on the individual company and the individual company's productivity. On the substantive-- [Interruption.] It is the question of averages that has got this country into so much trouble over the past 20 years. On the right hon. Gentleman's central point of jobs and livelihoods, the most important thing for jobs and livelihoods in the future is, first, to obtain a firm downward pressure on inflation and, secondly, to keep it. That is the central reason for entering the exchange rate mechanism.

On whether the rate is sustainable, I set out in some detail the arguments in favour of that a few moments ago. As to what opportunities will arise in the unlikely event of the right hon. Gentleman's next premise being correct, we intend to stay within the bands to which we have committed ourselves. That was the purpose of setting the bands in the first place.

Mr. William Cash (Stafford) : Does my right hon. Friend agree that the acid test is to ensure that the British economy is as competitive as possible, and in doing so to remind the right hon. and learned Member for Monklands, East (Mr. Smith) that the views and expressions of Mr. Tuffin, in repudiating any attempt to hold down wages, are a prescription for our not being competitive? Furthermore, does he agree that the views of Mr. Sam Brittan in the Financial Times that he hopes that British monetary policy will be made in Berlin must be repudiated?

Mr. Major : As my hon. Friend says, the wages round is important. Wage settlements above that which is affordable would have a short-term effect on inflation but a far more fundamental effect on the number of jobs in the economy. That, essentially, is the message that employers and employees must grasp when deciding what increases should be. As my hon. Friends know, we have committed ourselves to stay within the bands that we have set and we shall use monetary policy for that purpose.

Mr. Alan Beith (Berwick-upon-Tweed) : Does the Chancellor recognise that inflation and interest rates would have been lower in this country in the past year if we had been in the exchange rate mechanism a year or more earlier, when Labour opposed it as strongly as the Prime Minister? Will he explain how he and the Prime

Column 934

Minister can continue to talk about tax cuts when the fiscal policy that may need to operate inside the exchange rate mechanism could require him to increase taxes in some circumstances? Does he rule that out? As the Prime Minister's objections to joining the exchange rate mechanism before inflation was down to the level of our partners have been blown away like confetti in a gale, may we hope that her objections to a single currency and a more independent European central bank will go the same way?

Mr. Major : On the last point, I think the hon. Gentleman is unlikely to see that, and I think that he is unlikely to see that among my right hon. and hon. Friends either. On his first proposition, that inflation would have been lower if we had been in the exchange rate mechanism, if the conditions had been there for us to have been in the exchange rate mechanism, the hon. Gentleman might have been right, because the inflationary record of countries within the exchange rate mechanism is better than those not in it. The conditions for entry were not present. A year or so ago, monetary aggregates were not falling and the real economy was not slowing. We were heading for a position where inflation was going up, not down. Clearly, one could not have entered then.

Mr. Teddy Taylor (Southend, East) : Does the Chancellor recall that, when his predecessor joined informally, we had significant reductions in interest rates and inflation for several months, but a period of regular increases in interest rates to the present savage levels after that period of joy? That was apparently because Britain is almost unique in Europe in having a chronic balance of trade deficit with the EEC. Was not this confirmed by Hoare Govett, which has just published a splendid paper suggesting of the initial good news :

"As with all magic, it is hocus pocus--and would be unlikely to last for more than a year."

If by any chance my right hon. Friend, who has our great respect, and the Government are wrong and such critics are right, what powers are available to the Government to do anything? Can we withdraw from the ERM? Can we realign the currency ourselves ; or will we be stuck with a situation in which interest rates go up and down all the time depending on our relationship with the deutschmark?

Mr. Major : With great respect to my hon. Friend, the concerns that he expressed were expressed in a number of countries when they entered the exchange rate mechanism in earlier years, and subsequent events have shown that those concerns were not justified. I reiterate : those countries that have been within the exchange rate mechanism and have kept to the admittedly difficult disciplines of the exchange rate mechanism have had a better inflation record over a period than we have. I wish this country to have that better inflation record--for British industry, British commerce and the British consumer. That is why I believe that it is right for us to enter and why I believe that the move will be successful.

Mr. Robert Sheldon (Ashton-under-Lyne) : I accept the need for entry, so that we are not excluded from influencing developments within the Community, but is the Chancellor aware that, of itself, entry at an over- valuation will do nothing for our balance of payments, nothing for manufacturing industry, nothing to

Column 935

help us to get more skills in our enterprises and nothing for investment? Is he aware that what he has produced is just a panacea--a panacea of hope and nothing else?

Mr. Major : The right hon. Gentleman's question is based entirely on a false premise. I am the last person who needs telling that entry into the ERM is not a panacea, because it was I who coined that phrase a year ago.

Mr. David Howell : Will my right hon. Friend accept that he took the decision that the pound should enter the ERM with considerable skill, and that he deserves warm congratulations on that, even though we shall have a tough struggle to keep the pound where it is? Entry into the ERM ends a long period during which the pound has been kicked around the exchange rate market like a football, and we should be thankful for that.

Does my right hon. Friend recognise that, if the ERM discipline is to work, we shall require much stronger monetary methods and techniques than we have had in the past--techniques of the kind that he and his colleagues were considering back in January? Will he undertake to pursue methods of strengthening our monetary control in this country--including reviewing, and possibly strengthening, the status of our own central monetary authority, the Bank of England?

Mr. Major : I am grateful to my right hon. Friend for his remarks about our entry into the exchange rate mechanism. We are certainly clear in our minds that we need to ensure that monetary policy is a safe and secure discipline, and I shall certainly continue to do whatever I can to ensure that it is.

Mr. Nigel Spearing (Newham, South) : Does the Chancellor agree that when he uses the word "discipline" he means "decisions taken elsewhere"? And is it not a fact that a nation entering a fixed or near-rigid exchange rate mechanism with a heavy and persistent balance of trade deficit ceases to be a nation of that characteristic and, in the end, becomes a depressed area of a new economic nation?

Mr. Major : When I use the term "discipline" I mean no devaluation and no constant descent into the easy option. In the 1990s, we cannot afford the easy option and, we are determined not to have it.

Sir Peter Hordern (Horsham) : May I congratulate my right hon. Friend on providing a much-needed extra discipline for the control of inflation, and on putting an end to the widespread perception that wage costs could continue to increase for ever and that we could continue to be bailed out by a declining currency? I also congratulate my right hon. Friend on climbing into the driver's cab of that notorious gravy train, the European Commission, with the prospect of putting an end to Mr. Delors's ambitions.

Next Section

Home Page