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House of Commons
Thursday 25 October 1990
The House met at half-past Two o'clock
PRAYERS
[Mr. Speaker-- in the Chair ]
PRIVATE BUSINESS
Redbridge London Borough Council Bill
(By Order) Order read for resuming adjourned debate on Question proposed [24 October],
That this House doth agree with Lords in their Amendment, to leave out Clause 6.
Debate further adjourned till Tuesday 30 October.
Birmingham City Council
(No. 2) Bill-- (By Order) Order read for resuming adjourned debate on Question proposed [26 February],
That the Bill be now considered.
Debate further adjourned till Thursday 8 November.
Mr. Speaker : As the four private Bills set down for Second Reading have blocking motions, I propose to deal with them as a single group.
Vale of Glamorgan (Barry Harbour) Bill
[Lords] (By Order) Order for Second Reading read.
To be read a Second time on Thursday 8 November.
London Regional Transport (Penalty Fares) Bill
(By Order) Order read for resuming adjourned debate on Question proposed [10 May],
That the Bill be now read a Second time.
Debate further adjourned till Thursday 8 November.
Southampton Rapid Transit Bill
[Lords] (By Order)
Killingholme Generating Stations (Ancillary Powers) Bill
[Lords] (By Order)
Orders for Second Reading read.
To be read a Second time on Thursday 8 November.
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Oral Answers to Questions
NATIONAL FINANCE
Manufacturing Output
1. Mr. Morgan : To ask the Chancellor of the Exchequer if he will make a statement on the prospects for manufacturing output in 1990.
The Chancellor of the Exchequer (Mr. John Major) : I shall be publishing a forecast of manufacturing output in 1990 with the autumn statement.
Mr. Morgan : Will the Chancellor confirm that, according to his officials, the manufacturing side of the British economy is now in recession? Will the right hon. Gentleman also give up his previous habit of trying to alter the definitions of expressions such as "recession", renaming it "technical recession", which we understand is the current ministerial sales line, just as he has done with "inflation", renaming that "headline inflation", with "convergence of inflation" in the Madrid conditions becoming "divergence of disinflation"? Does he accept that what industry now wants from the Government is some leadership out of recession so that just entering the exchange rate mechanism is not seen as the answer, because on its own that can be no more than putting on a gas mask full of carbon monoxide?
Mr. Major : I have rarely heard such a short point put at such length. I can certainly confirm that output is slowing and has been slowing over the past two or three months, as I have repeatedly said. Whether it is within the normal definition of "recession"--which is, of course, why my officials and subsequently I use that term--is a matter that we shall soon see. It is not entirely clear yet. It is conceivable that it is, but we must wait and see.
Mr. Oppenheim : Will my right hon. Friend remind the macho champions of manufacturing interests on the Opposition Benches-- [Hon. Members :-- "Oh."]--that in the past decade, manufacturing output in Britain rose faster than in any other EEC country, according to OECD figures, and that during the period of the previous Labour Government, manufacturing output fell?
Mr. Major : I can certainly confirm those OECD figures. I can also confirm that manufacturing investment has grown on an annual basis over the past decade, whereas that also fell during the period of the previous Labour Government.
Mr. Beith : Has the Chancellor noted the bleak report produced by the British chambers of commerce earlier this week? Recognising that the task of manufacturing industry will not be any easier in the early days of the ERM, will the right hon. Gentleman help it by seeing that we get more investment in skills and skill training and in transport for access to markets so that it can have some hope of increasing competitiveness?
Mr. Major : I read that survey with some interest. It has, of course, been only a recent survey and has not yet passed through a complete economic cycle. There are signs that some of the observations in that survey were a little overdone, but we must wait and see what happens in the
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next few months. It is certainly consistent with the slowing down in the economy that we are seeing. That is a necessary part of the cycle. It has been predicted, it is expected and it is here, and the sooner we have it, the sooner we shall be through it and back to low inflation and growth again.Mr. Beaumont-Dark : Does my right hon. Friend agree that wage restraint is needed from the very top of industry, but that it is failing to give the right lead? If industry is to become profitable, it is no good having 6 per cent. wage increases in the German car industry while Rover and other workers are getting 13 per cent. That is the way to ruin and to losing jobs, not the way to prosperity.
Mr. Major : I agree with my hon. Friend. He will recall that it was about a year ago, possibly in answer to one of his questions, that I first made the observation about pay affecting people at the top of industry as well as on the shop floor. That was true when we had that exchange a year ago, and it remains true today.
Mortgage Repayments
2. Mrs. Fyfe : To ask the Chancellor of the Exchequer what is the present number of people six to 12 months in arrears on their mortgage repayments.
The Economic Secretary to the Treasury (Mr. John Maples) : Figures published by the Council of Mortgage Lenders show that at end June 1990 there were 76,280 mortgage loans six to 12 months in arrears.
Mrs. Fyfe : Is the Minister aware that in the past six months more than 400,000 people were two to three months in arrears and well over 14,000 had their homes repossessed? Does he think that his 1 per cent. cut in interest rates will make much of a dent in those figures?
Mr. Maples : I am sure that any cut in interest rates will help people who, for that reason, are in trouble with their mortgages. While all of us feel a great deal of sympathy for people in difficulty with their mortgage payments, the problem should be kept in perspective. The level of repossessions in the year to 30 June was less than one third of 1 per cent. of all mortgages, and we should keep the problem in perspective.
Mr. Jack : Does my hon. Friend agree that one of the great tributes to the Government's economic performance has been that mortgages have been readily available to people at prices that they can afford, which has encouraged the responsibility of home ownership? Will he do what he can to use his good offices to encourage the building societies to help fund the excellent debt advice services currently run by the Advice Services Alliance?
Mr. Maples : I shall take up my hon. Friend's second point first. As he probably knows, the Government already give a grant of £11 million to citizens advice bureaux. On his first point, it is worth recalling, when considering the figures, that during the past 11 years there have been 3.5 million additional home owners--more than ever before, and 3 million of whom have mortgages--and 900,000 additional mortgages have been taken out in the past two and a half years.
Mr. Winnick : Is the Minister aware of the number of people who, because they could not find rented
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accommodation, decided to buy a house, and were actively encouraged to do so by the Government and building societies, but who now find themselves--certainly in the west midlands and my district --in tremendous difficulties? A number of my constituents face the repossession of their homes, with the local authorities not always being able to help. Is the Minister further aware that those and millions of other people who are just able to cope with paying their mortgages do not have the benefit of the tax havens mentioned in The Sunday Times last Sunday? When will that loophole be closed? Why is it that time and again the rich are rewarded with the advantages of loopholes that other people cannot use?Mr. Maples : If the hon. Gentleman is so worried about the unavailability of rented accommodation, perhaps he should not have had such a doctrinaire opposition to the various rent Acts and supported us when we tried to free that sector of the housing market. As for people having difficulties with their mortgages, as I said, that is certainly true and all hon. Members have a great deal of sympathy with such people. However, most arrears are sorted out and few short-term arrears turn into long-term arrears. The figures for repossession show that the total number of repossessions in the past 12 months has been 21,780, and in 1987 it was more, at 22,930. During the intervening period there have been nearly 1 million more mortgages. Perhaps the figures do not bear out what the hon. Gentleman said.
Mr. Ian Bruce : Will my hon. Friend consider what the position would have been if interest rates had not gone up last year, when house prices were going up at a rate of 20 or 30 per cent., particularly in the south- east and south-west, and the first-time buyer was being completely taken out of the market? Has he noticed that during the past year, house prices, particularly for the first-time buyer, have gone down by 10 per cent. in those districts?
Mr. Maples : My hon. Friend makes an extremely good point. There was no way that house prices could continue to rise at the 20 per cent. a year at which they were rising, which was damaging for potential home owners. Some adjustment was long overdue.
Child Poverty
3. Mr. Leadbitter : To ask the Chancellor of the Exchequer when he last met representatives of the Child Poverty Action Group to discuss the effects of the Government's policies on child poverty.
9. Mr. Ted Garrett : To ask the Chancellor of the Exchequer when he last met representatives of the Child Poverty Action Group to discuss the effects of the Government's policies on child poverty.
Mr. Major : I have not myself recently met representatives of the CPAG, although I am aware of their representations to my right hon. Friend the Chief Secretary.
Mr. Leadbitter : Will the Chancellor consider that between 1979 and 1987, 1.5 million more children were living in families on half the average income ; and that from 1987 child benefit was frozen, so its value in real terms this year had fallen by £1.35? Has he got his priorities right,
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taking into account the fact that people earning £70,000 a year have had tax cuts 200 times greater than families living on £5,000 a year?Mr. Major : There are two points in the hon. Gentleman's remarks to which I want to refer. It is relevant that the total amount of money now available for child benefit has risen from something under £2 billion 10 years ago to something over £4 billion this year--a substantial amount.
Of course, the missing element in the hon. Gentleman's equation about average income is important : the extent to which average incomes generally have risen dramatically and to which the impact of direct taxation has fallen correspondingly. On the greater level--this is what lies behind the hon. Gentleman's question about family benefits in total--expenditure has risen from well under £2 billion when we took office to well over £5 billion today.
Mr. Ralph Howell : Is my right hon. Friend aware that it is no longer acceptable to take tax from people who earn less than a third of the national average wage to give child benefit to the richest people in the country? How much money would be saved if only those earning under £20,000 a year received child benefit?
Mr. Major : I cannot immediately give my hon. Friend an answer. It would certainly be a substantial amount, but child benefit is recognised as a universal benefit paid to the mother, and we have no intention of changing that arrangement.
Mr. Boateng : Will the Chancellor explain how it is that a Government who purport to put the family at the heart of their policies have presided over an increase by more than a half of families living on or below the poverty line, who now number 6.2 million? How does that square with the party of the family? How does he explain a situation in which targeting the first-born is seen as some sort of a substitute for coherent family policy? There may be an historical precedent for that, but it did not do Pharaoh any good and it will not do the Prime Minister any either.
Mr. Major : We return to the definitional point with which we commenced Question Time. What the hon. Gentleman refers to as the poverty line is the level at which social security benefits start. Because we have extended them much more dramatically than the previous Government, more people automatically fall within the statistics.
Miss Emma Nicholson : Does my right hon. Friend agree that under the Conservatives payments to the family have risen by more than a quarter while under the previous Labour Government they fell by 8 per cent?
Mr. Major : I certainly agree with my hon. Friend, except that the figures are, I think, a little more favourable to the present Government than she said.
Taxation
5. Mr. Caborn : To ask the Chancellor of the Exchequer what proportion of gross earnings a married couple with one earner on average earnings, with two children, paid in tax, treating child benefit as negative income tax, in 1978-79 and in 1989-90.
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The Financial Secretary to the Treasury (Mr. Francis Maude) : A one- earner couple, with two children, on average male earnings saw the proportion of gross earnings paid in income tax fall from 14.4 per cent. in 1978-79 to 12.3 per cent. in 1989-90.
Mr. Caborn : I thank the Minister for that answer, but it would be good if he answered the question on the Order Paper. Does he agree that the information given by the Library shows clearly that in 1979 the tax referred to in the question that the Minister has not answered was 35.2 per cent. and is now 36.6 per cent. and that that represents for the average family an increase in taxation of £300 a year? Does not that underline what many are saying--that the Government are the Government of high taxation?
Mr. Maude : I answered the hon. Gentleman's question. He may have asked the wrong question but I gave the right answer. The level of taxation for average households has fallen considerably. A further fact, of which he may not be aware but which is worth sharing with him, is that real net income for the average household has risen by 34 per cent.
Mr. Paice : Does my hon. Friend agree that, despite massive reductions in income tax rates, we have seen over the past decade a massive increase in income tax yields? The top 10 per cent. of taxpayers now contribute nearly 30 per cent. of the yield as opposed to 24 per cent. when we came to power. That demonstrates that tax reductions help the country to find the money to spend on social services.
Mr. Maude : My hon. Friend makes the point well. Very high tax rates provide no benefit at all for the country. They do not result in extra tax yields but drive successful people who are on high incomes overseas to be taxed elsewhere. That is of no benefit to anyone. The only other thing that they do is to appease socialist spite and envy.
Mr. John Smith : The Minister must know that one person's tax dodge is another's tax burden. Is not it time that tax dodges by a wealthy minority, such as those publicised in The Sunday Times last Sunday, were brought to an end? That question was put to the Economic Secretary and, significantly, was not answered. Why do the Government permit the easy avoidance of tax by a wealthy few using offshore trusts while ordinary families have to pay every single penny that is imposed on them?
Mr. Maude : The short point is that, above all, what creates tax avoidance and made the tax avoidance industry in the 1970s one of the most successful industries in the country is a high level of taxation and complicated tax laws. Of course, there may be a problem here and we are looking closely at it. If the right hon. and learned Gentleman thinks that the right way to deal with such complicated international matters is to leap to instant conclusions, I am afraid that we part company with him.
Mr. Conway : Is it the case that four out of five families with children of school age are direct tax payers? If that is so, will my hon. Friend tell the House how their family lot could possibly be improved by the high taxation policies of the Labour party?
Mr. Maude : When a party proposes reckless increases in spending, as the Labour party has, the only ways in which that can be paid for is either by increasing taxation,
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which would hit precisely the families to which my hon. Friend refers, or by borrowing. We all know the disastrous effects that that had in the 1970s.6. Mr. Bill Michie : To ask the Chancellor of the Exchequer what proportion of non-oil gross domestic product he forecasts taxes and national insurance contributions will represent in 1990-91.
Mr. Maude : My right hon. Friend will publish a forecast of tax receipts in the autumn statement.
Mr. Michie : In view of the fact that last year, in 1989-90, the proportion of non-oil GDP taken in taxes and national insurance contributions was 36.75 per cent., which compares with 34 per cent. in 1978 -79, whatever the Government say by huffing and puffing at the polls, will the Minister now admit that the Conservative party is the party of high taxation?
Mr. Maude : That is an odd contention in view of the much lower levels of taxation that now prevail. The Government fund their spending honestly by taxation and not by borrowing. When the previous Labour Government left office they had a PSBR of no less than 5 per cent. of gross domestic product. We have chosen to reverse that and to raise honestly the money that the Government spend, by taxation. If Labour's tax regime had remained in force in the way that it was in 1979, the tax burden would now have increased by £12 billion a year.
Sir William Clark : Does my hon. Friend agree that the Opposition's promises on benefits and public spending mean that the proportion of taxation taken by any Labour Government would be vastly increased, to the detriment of ordinary taxpayers as well as the rich?
Mr. Maude : That would be the inevitable consequence. Such reckless promises--of which the Labour Front Bench cannot even keep count--would have to be funded either by higher levels of taxation on everybody or by borrowing, which would be disastrous.
Dr. Marek : The Financial Secretary is wrong if he believes that Labour is the party of low taxation-- [Laughter.] Will he confirm that the percentage of GDP taken in taxation has been much higher during this Conservative Government's years in office compared with the halcyon days when Labour was in office-- [Laughter.] Oh yes, the figures are there to prove that, and the Financial Secretary does the House no good by trying to deny them. When will he tighten up the offshore tax concessions that have proliferated during the past 10 years? When will he bring down taxation for the British people to what it was in the 1970s?
Mr. Maude : It is good fun to be lectured by a member of the Labour Front Bench for being a party of high taxation, compared with the Labour party's wonderful history of low taxation--although under Labour taxation levels rose to 83 per cent. and 98 per cent. in the pound. If that is low taxation, thank heavens Labour never went in for high taxation.
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Government Expenditure
7. Mr. Carrington : To ask the Chancellor of the Exchequer what is his latest forecast for the share of gross domestic product to be taken by central Government expenditure.
The Chief Secretary to the Treasury (Mr. Norman Lamont) : The forecast for the unadjusted ratio of general Government expenditure, excluding privatisation proceeds, to gross domestic product published in the "Financial Statement and Budget Report" is 39 per cent. The central Government component of that was 29 per cent. of gross domestic product.
Mr. Carrington : Will my right hon. Friend confirm that a substantial proportion of the gross domestic product taken by central Government is spent by local authorities, and that that spending has recently risen dramatically? Will he further confirm that it is an outrageous and unacceptable burden on ordinary people, which must not be allowed to continue?
Mr. Lamont : My hon. Friend is right. Local authorities in England this year increased their current spending by 13 per cent. That is quite unjustified. My right hon. Friend the Secretary of State for the Environment has made it clear that the Government intend to make vigorous use of their community charge capping powers if that continues.
My hon. Friend will be aware that we have introduced a new local authority capital finance regime, which we believe will help to deal with the problem of overspending on capital. My hon. Friend was right to say that it is a serious problem.
Mr. Douglas : To meet that expenditure, what percentage of revenue does the Minister expect to come from oil revenues? As there has been a dramatic rise in the price per barrel--it is touching $40--can we expect an increase in revenue that might, perhaps, touch £5 billion?
Mr. Lamont : The hon. Gentleman takes a special interest in energy matters, so he will be aware that the revenue from North sea oil is a small proportion of total tax revenue. I speak from memory, but I think that it is about 2 or 3 per cent. The level of oil revenue would be affected if there were to be a sharp rise in the oil price, but it would not have a significant effect on total tax revenue.
Inflation
8. Mr. Andrew MacKay : To ask the Chancellor of the Exchequer if he will make a statement on the current level of inflation.
Mr. Major : I expect there to be a substantial reduction over the coming year.
Mr. MacKay : As there is a clear need for pay restraint, does my right hon. Friend agree that those chairmen and chief executives of major companies who received highly publicised and spectacular pay rises last year--which, by and large, were supported because they were linked to increased profits--must equally accept reductions in their salaries this year, which should be equally spectacular if their profits are suitably reduced?
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Mr. Major : As I said earlier, if there is a need for wage restraint throughout industry to ensure greater competitiveness, it must apply at the top as well as at the bottom. I am happy to reiterate that.
Mr. Robert Sheldon : Does the Chancellor realise that we are now two years into the counter-inflationary strategy of relying on high interest rates? Does he realise that, by increasing the retail prices index--which is what high interest rates have done, through mortgage interest rates, quite apart from the other factors--the Government are now relying on exhortation, and that exhortation will not be enough as the RPI rises?
Mr. Major : The right hon. Gentleman makes a better case against the way in which we measure prices than against the policy that will bring inflation down.
Mr. Ian Taylor : Does my right hon. Friend agree that the most sensitive guides to the direction that inflation is taking is not the latest RPI figure but the movement of monetary aggregates? Will he confirm that there has been a steady decline in monetary aggregates over the past six months--particularly in MO but also in M4? Does he agree that that is a good sign that he has got inflation under control and that the Government's policies are working at last?
Mr. Major : I strongly agree with my hon. Friend's view. The reduction in MO has occurred over the past six months or so and the reduction in broad money has continued throughout this year in each and every month since January.
Mr. Flannery : Like his predecessor, the Chancellor is constantly explaining to us that he is trying to bring down the rate of inflation. Why does he talk as though it was an act of God that caused inflation? Why does not he admit that the Government did it? Why is it that, with the bonus of North sea oil, which no other country in Europe has enjoyed, our inflation rate is higher than those of our European counterparts--in some cases twice as high?
Mr. Major : At no stage have I placed the blame where the hon. Gentleman suggests I have. The problem that created inflation was excessive demand, as I have repeatedly stated. That is accepted by commentators and it is broadly accepted by hon. Members on both sides of the House. As a result of monetary policy, demand is falling away, and inflation will come down as well.
Investment
10. Mr. Anthony Coombs : To ask the Chancellor of the Exchequer when he last met the Governor of the Bank of England to discuss levels of investment.
Mr. Maples : My right hon. Friend meets the Governor regularly and discusses a range of issues.
Mr. Coombs : Will my right hon. Friend confirm not only that investment in this country has risen by 40 per cent. in the past three years but that in the past 10, investment in the United Kingdom has risen faster than in any other industrialised country except for Japan? Will he also confirm that, on current trends, investment in the United Kingdom economy in 1990 will be no less than 40 per cent. greater, in real terms, than it was in the so-called halcyon days of the previous Labour Government?
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Mr. Maples : My hon. Friend is right. Business investment in the past three years has risen by 44 per cent., and in the 1980s, it rose faster than in any other G7 country except Japan.
Mr. Cousins : When the Minister meets the Governor of the Bank of England, will he be reinforcing the view of the Secretary of State for Trade and Industry that there is a deal-making culture in the City that hurts industry and investment?
Mr. Maples : That is a matter for my right hon. Friend the Secretary of State for Trade and Industry.
Mr. Jacques Arnold : When my hon. Friend meets the Governor of the Bank of England, will he discuss with him the fact that the greater proportion of foreign investment coming into the EEC comes to Britain, as opposed to the continental countries?
Mr. Maples : My hon. Friend is right. Under this Government and over the past 10 years, Britain has proved an extremely attractive place for foreign investment.
Unemployment
11. Mr. Jack Thompson : To ask the Chancellor of the Exchequer what is his assessment of the effect of high interest rates on the level of unemployment.
14. Mr. Cohen : To ask the Chancellor of the Exchequer what is his assessment of the effect of low output growth in 1990 on the level of unemployment.
Mr. Norman Lamont : A period of high interest rates and slow output growth is necessary to defeat inflation. The precise effect of this on unemployment depends crucially on whether wages growth slows as well.
Mr. Thompson : Is the Minister aware that the principal reason for the present large number of bankruptcies is high interest rates? What words of comfort can he give to firms teetering on the brink of collapse?
Mr. Lamont : As my right hon. Friend has repeatedly made clear, a slowdown is necessary so that we can get on top of inflation, and continuing high inflation would do immense damage to all companies, and it is essential for their prospects that we get inflation down.
Mr. Speaker : Mr. Harry Cohen. Is he here? [ Hon. Members :-- "Yes."] The hon. Gentleman may not have heard the whole answer, but he may ask his supplementary question.
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