House of Commons Hansard Debates for 14 Nov 1990

Mr. Robert Sheldon (Ashton-under-Lyne) : The right hon. Member for Cirencester and Tewkesbury (Mr. Ridley) is the last remnant of the unreconstructed monetarists. His speech was a defence of policies enunciated in 1980. I remind him that the level of inflation of 21.9 per cent. was the level reached after one year of the Tory Government, who had inherited a level of 10.1 per cent. That is the measure of their achievement in those years, which led to a third of the industries in my constituency closing because of the high level of the pound and of interest rates. That was the achievement that the right hon. Gentleman seems to be the only person capable of applauding.

I was particularly interested in, and I welcome, the Chancellor of the Exchequer's comments that he was not going to be sidelined in Europe. That was most fundamental and, whether or not he cleared that with the Prime Minister, it will be important in bringing about the reconciliation with Europe that I hope will now follow as a result of his comments and the comments that we are hearing elsewhere. He said that the hard ecu is gaining ground. I do not see that when I look around. Who will use the hard ecu? The mystery is how it came to be part of the Government's policy and why it is still in play. A further question is what we are trying to achieve with it. Tim Congdon, in today's edition of the Financial Times, rubbished it as effectively as any new economic suggestion has ever been rubbished. I think that the new hard ecu was brought in to confuse the issue. Perhaps it was introduced to receive the plaudits of the Prime Minister in presenting another factor which it was thought might delay matters within the Community. For a time it was successful. For a time there was no reaction from the rest of the Community. Perhaps the other members of the Community were trying to work out all the complications, or perhaps they just dismissed it. Whatever happened at the beginning, it is clear now that it is not a runner. I think that we should cut our losses, forget it and start again. We have heard that the level of inflation will be the judge and jury of the Government. What is to be the level of inflation? Do we take the retail price index or the underlying rate? My right hon. and learned Friend the Member for Monklands, East (Mr. Smith) explored this issue in a most penetrating way. In effect, the Chancellor of the Exchequer said "That is all finished with now. The underlying rate is not a matter of importance any more. It is the retail price index that matters." Looking at these matters year upon year, we know that, when inflation is rising it is better to choose the underlying rate, and that when it is falling it is best to choose the RPI. It is only sensible of us, the Opposition, to ask why the Chancellor of the Exchequer is not giving the underlying rate. He said that that would involve secrets which he cannot reveal.

That is what used to be said about the RPI. Forecasts were never made of what the RPI would be. Governments never used to give forecasts of unemployment levels. When it comes to such forecasts, of course, they are described as assumptions that are built in. The same could be done with the levels of interest rates. Similarly, an assumption could be made of the underlying rate of RPI. That could be compared in the same way that we can compare the RPI as it is expected to be with what it turns out to be.

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The right hon. Member for Cirencester and Tewkesbury dealt at length with European monetary union and the problems that go with conceding some of our sovereignty and some of our rights. If we could secure a convergence of the various economies, we could have one trading area with the same taxes. We would have to have the same welfare treatment and comparable living standards, employment opportunities and so forth. That, however, is a long way off. We need to consider now whether we should be a part of the discussion. That is the real question before us. When the Chancellor of the Exchequer says that we are not to be sidelined, he is saying precisely what my right hon. and learned Friend the Member for Monklands, East and my right hon. Friend the Leader of the Opposition are saying. The right hon. Member for Cirencester and Tewkesbury was right to say that, in past years, there have been transfer payments of billions of pounds to the regions. However, even when the sums transferred were much larger than they are now, they were never enough to meet the need for evening out the great disparities within the country. Scotland and the north, among other regions, received large payments, but within the United Kingdom there have always been two safety valves. They may not be very good ones, but they have helped to eliminate the damage of real and perceived regional differences.

The first safety valve has been the willingness of our people to see part of their living standards used to help others in different parts of the country. The second safety valve has been the ability of some people to move to more prosperous parts of the country. Getting on one's bike can seriously damage the area that is exporting its best talents and there is serious condemnation of it, but it provides some opportunities in the absence of proper resources being made available to rebuild the economy.

The operation of the two safety valves is much more limited across national frontiers within the Community. The Germans cannot be expected to subsidise those in the south of Italy to anything like the extent that is required. Likewise, Belgium will not transfer resources to our north-east to anything like the extent that a United Kingdom Government would. Nor can people cross language frontiers and expect to be treated much better than guest workers, who have fewer real rights and expectations than the people of the host country. Regional disparities will not be reduced to anything like the extent that is required because of an inability to alter the exchange rate or to undertake national policies to enable damaged communities to recover. People do not have much sympathy for other people's economic problems. We always think that our neighbour's economy would be easy to run if only all the sensible things available to be implemented were put into effect.

Nicky Kaldor--he was shamefully denied a Nobel prize for economics, a matter which I brought to the attention of the shamefaced head of that organisation on one occasion--advised several new countries on their economies. Tales were told of the implementation of his policies, which were invariably followed by riots. These stories were grossly exaggerated. But in the end, economics is always subject to political judgment. Nicky was right on economics but he did not always understand the politics of the situation.

Mr. Terence Higgins (Worthing) : The problem with Nicky Kaldor's prescriptions was not that they were

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wrong but that Governments did not realise that they were supposed to put his taxes into effect instead of the existing ones and not in addition to them.

Mr. Sheldon : That may have been the case in one instance. More generally, the problem was Nicky's failure to consider the political situation and to understand it. He was always proud of his political expertise, but we know that it was his mastery of economics that was the clue to that giant of a man.

If we do not examine the politics of a country, we shall not succeed with economics. For example, the United States says that the Soviet Union needs to do the obvious thing and increase bread prices threefold. That is its prescription. Meanwhile, the United States cannot bring itself to double its tax on petrol, which would solve its problems at a stroke. The Germans say that we, the British, need more discipline in respect of wages, while they threaten to disrupt the world's trade arrangements by entrenching their grossly indulged farmers within their highly prosperous economy. We like to discipline others in accordance with our own prejudices. Those who have the strongest economies are foremost in their disciplinary zeal. The Bank of England has a certain amount of autonomy even within the structure of a nationalised industry. Mr. Pohl knows that he would have difficulty in controlling the area of his interest and involvement if he were to have other people in charge. We must ask whether the interest of bankers is the same as the national interest, or even the interest of the Community. Bankers want solid and safe loans and a strong currency, as that gives them scope for financial dealings. It is easier to operate successfully in international markets if there is a strong currency.

Sometimes that may coincide with the national or even the international interest. Everything is seen by bankers, however, in financial terms. In the inter-war years, the role of the Bank of England was considered deplorable, and it was even opposed by Conservative Members. Some Conservative Members even voted for the nationalisation of the bank. Let us not assume that bankers can be operated and even controlled by political forces.

Financial terms are not everything. We want jobs and prosperity for all. Those are not bankers' terms. We want industrial progress. Bankers want that, but only up to a point. As the hon. Member for Berwick-upon-Tweed (Mr. Beith) said, the task of the Bundesbank is to secure a stable rate of inflation, but that is not its only job. Its main job is to look after its own interests. Ours is not to make the world safe for international bankers. Of course, no one doubts that, on crucial issues, Governments will play a part and actually win. They do not do so, however, when it comes to day-to-day operations. The Chancellor of the Exchequer does not see the thousands of banking transactions that are made each day. There is great scope for clearing banks, which have a great deal of power when it comes to important decisions.

I have outlined the problems. We must do what the Chancellor and my right hon. and learned Friend have suggested, and be a part of the discussions and the negotiations. We must not adopt the tone of being superior to the remainder of the Community. Al my arguments and all the arguments of the right hon. Member for Cirencester and Tewkesbury are known. We are not

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the only people in Europe who understand the problems. Other people understand them and are concerned about them.

We are talking about a period years hence, so we do not have to decide every detail now. I am reminded of the story about a couple, one of whom said, "I think that we should get married." The other replied, "Yes, what a good idea." The first one said, "We will have a lovely home." "Yes we will," the other replied. "We will have a couple of children," said the first. "Yes," the other replied. "We will have a boy and a girl, and the girl's name will be Valerie." "No, no, no," said the first, "her name will be Joan." The couple split up.

It is nonsense. Our task is to say, "We are talking about a period long hence ; we are not the clever ones and you the foolish ones ; we do not have such experience that we can say that we know how to run our economy much better than you know how to run yours. We are all trying to find solutions."

Mr. David Howell : The right hon. Gentleman is speaking with great wisdom, as he often does in economic debates, but is he not unnecessarily complicating the issue of the authority of central banks and their independence of elected Governments? Surely a central bank should look after monetary policy and monetary affairs, as the Bundesbank does, while the elected politicians have the last say on higher matters of state--for example, the unification of Germany. The process must be open and understood. It must be made clear when the interests of monetary stability are put second to other matters. There is no difficulty with that, so I do not understand the right hon. Gentleman's problem.

Mr. Sheldon : The right hon. Gentleman is aware that a number of decisions are made each day in discussions between the Governor of the Bank of England and the Chancellor. He is also aware that the Chancellor is not always successful in those discussions. The Governor has a great deal more detailed day-to-day information at hand. We must not assume objectivity in some of the actions taken by some people. That is the major problem.

Another issue I now wish to raise is the fact that capital allowances are only 25 per cent. With the downturn in investment, especially in manufacturing, it is essential that investment is maintained at as high a level as is reasonably possible. I have said again and again that 25 per cent. is nonsense. If a company buys a piece of machinery for £1,000, at the end of the year it is written down to £750. Very often, that 25 per cent. reduction is less than the commission earned by the person selling that machine. The machine is not worth £750. Far from being an investment incentive, the level of capital allowance is frequently an investment disincentive. I hope that the Government will consider short- term improvements in the capital allowance, as has happened in the past.

With the change in the perceived roles of the Chancellor and the Prime Minister, I hope that the right hon. Gentleman will firmly nail on the head any question of mortgage interest relief being raised above the current level of £30,000. We all know that it is the Prime Minister's dearest wish to have higher and higher levels of mortgage interest relief. We all know that all that does is feed through into the price of houses and so increase the

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difficulties for those who want to start on the house ownership ladder. The relief is costing £8,000 million a year. It is a waste of money. Instead, we should find some way of putting that £8,000 million into industry, especially manufacturing industry. That is one task that the Chancellor must undertake.

We are approaching the end of our debates on the Gracious Speech. It is not a happy tale. It appears that the balance of payments deficit will continue indefinitely. Despite the many years of benefit from the vast sums of money from North sea oil, despite the many years of the benefit of £5,000 million a year from privatisation, what has been achieved with that enormous amount of income? It has all been a vast disappointment to the country.

5.44 pm

Mr. Michael Grylls (Surrey, North-West) : The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) made an interesting and amusing reference to a couple considering their family planning and their dreams about how many children they would have. Of course, I understand his analogy with Europe, but if we spent all our time dreaming about having a family, we would never get around to having one. That is relevant to this debate because people on the continent appear to spend a great deal of time dreaming about what might happen at some time in the future, while forgetting to deal with the problems of today.

British business--the wealth-creating sector of our economy--wants the final, proper and complete establishment of a single market in Europe. That is what is needed and that is what will create greater wealth, but it will not happen if we just dream about the possibility of a common currency. My right hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) dealt with that point extremely well. My right hon. Friend the Chancellor rightly spoke about the prospects for a reduction in inflation under present policies and under the medicine that he is administering to remedy the problems that have hit this country. He is right to suggest that the medicine has bitten hard and that the effects will soon be evident. After all, we have been through this before. At the beginning of the 1980s, the Government had to deal with inflation and there were high interest rates. There was a resurgence of the problem in 1985, and again financial constraints were imposed and inflation brought down. I believe that the same will happen now.

The right hon. and learned Member for Monklands, East (Mr. Smith) tried to have some fun with the question whether or not Britain is in a recession. I do not think that it is a matter for fun and he was being silly. He knows-- or at least he should know--the correct definition, because my right hon. Friend the Chancellor had to remind him, in answer to his intervention. If the right hon. and learned Gentleman really wanted to be helpful, which he does not, he would admit that the medicine is working and that the economy is slowing down. Everybody knows that that is true. The sooner that that process is completed, the sooner we shall be out of any difficulties. After 10 years of record growth in the economy, people expect that to continue. They think that there is some sort of magic about it and that, because we have done so well for 10 years, we shall continue to do so and that there will be no decline. I am not making a political point but merely

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stating what I believe business men and individuals perceive to be the position. They are concerned about what is happening. People have forgotten that life goes in cycles, and that there are economic cycles which do not last for ever. The history books show that. In a way, 10 years of growth is a great record, but sooner or later there had to be a dip. That is exactly what has happened now.

I wish to quote from a report which states :

"Employment is in steady decline and industrial output is in steady decline. Housing stocks are down by one third. Companies are battening down the hatches. Recession is a fact. People who have lost their jobs have given up hope of finding any new ones."

That is a description not of the British economy, but of the United States economy. Although Britain has been hit by high inflation, the economic cycle does not apply uniquely to Britain. It is happening in all industrialised countries.

The other day I met an old friend with whom I went to school but had not seen for many years. We were reminiscing, as one does on such occasions, and he told me that when he was at school his family was poor because all their money had been lost in the depression of the 1930s. I had not realised that. How easy it would have been after the stock exchange crash in 1987 for the world to go into a spin similar to the great depression of the 1930s. The reason why it did not was that the economies worked together to ensure that interest rates were cut. With the benefit of hindsight, it is easy to be critical of those interest rate cuts--there is no point arguing about whether they were right or wrong, because they happened--but it is easy to forget that without them the world economies might have gone into a spin which might have had the tragic consequence of wiping out people's money and jobs on a mass scale, as happened in the 1930s. Despite the problems that America and Britain are experiencing, Britain, happily, is fortunate in having a basically sound economy. In support of that, I cite the creation of new small businesses--an area in which many people, including myself, have taken an interest over the years. Despite the high interest rate policies since the middle of 1988 to deal with inflation, the net number of new businesses being created has been running at 1,700 per week, which surely proves that, even with high interest rates, the economy is basically strong. It is important to remember that. The economy is strong because it has been growing for most of this year, despite high interest rates.

The economy is fit. It is rather like a horse that is fit and strong but needs to be reined back, and that is what is happening. As we learned from the autumn statement last week, our finances are still in a prudent shape compared with some of our neighbour countries, including the United States with its huge budget deficit. That is a wonderful thing. It is helpful that our public finances are strong. People's disposable income is still rising, unemployment is lower than that of our European competitors and youth employment is half the EC average. Those are all signs of a fundamentally strong economy. Whatever the shadow Chancellor may say, he cannot get away from that. He knows that the British economy is fundamentally strong, finances are strong and the problem of inflation will be resolved. In addition to the 1,700 new smaller businesses per week being created, there are 70,000 more medium-sized firms than there were a year ago, so I do not take it seriously when business men say that it is difficult to sell or that there is not much of a market today. Not only are

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there 2 million more people in work, which is a market for goods and services, but there are also all those new firms which did not exist a year ago.

It is said in criticism of my right hon. Friend the Prime Minister that she has been abrasive, that she will not go along with the majority in the Community, that if she were a bit more polite she would have more influence in Europe--not that I have ever known her to be impolite--but is it not more sensible to judge by results? When Britain's large budget contributions were being discussed in 1981 and 1984, people said that it was improper to discuss such a measly matter as a budget rebate. But my right hon. Friend succeeded beyond most of our wildest dreams and obtained a rebate of £10 billion. It is extraordinarily churlish of anyone inside or outside the House to criticise someone who has so successfully delivered the goods. We saw another example of firm negotiation--call it abrasive if you will--in the fact that, 10 days after my right hon. Friend the Prime Minister raised the matter in Rome, the farm subsidy issue was resolved. It is absurd to accuse her of wrecking the Rome summit. The fact that she raised the GATT talks at the Rome summit must have had an effect because the matter was resolved and we now have the chance to save those all-important talks.

Mr. Roy Beggs (Antrim, East) : Does the hon. Gentleman agree that in signing the Anglo-Irish Agreement the Prime Minister showed that she was capable of extreme compromise and also capable of taking bad advice?

Mr. Grylls : You would be critical of me, Madam Deputy Speaker, if I transgressed on to Irish matters in a debate on the economy. I hope that many of the things that I have said about the economy will apply to the important and much-loved Province of Northern Ireland, for which I have a great affection.

My right hon. Friend the Prime Minister has been criticised for fighting for British interests. I have just described two matters on which she fought successfully. I would rather put my faith in someone who has fought battles and proved that she can succeed. In the tricky negotiations at the intergovernmental conference next month, so well outlined by my right hon. Friend the Member for Cirencester and Tewkesbury earlier, and in the future negotiations on monetary union, I would rather put my money on the Prime Minister leading us in the right direction than on anyone else.

5.57 pm

Miss Joan Lestor (Eccles) : I have tried to translate some of the phrases used by the Chancellor of the Exchequer and one or two Conservative Members into what is happening in my constituency and others like it. I have listened to phrases such as the strength of the economy, how wages have risen and how the economy has grown, but I have heard little about the effects of what has happened in the past 10 years, about low pay and long- term unemployment, in constituencies such as mine in the north-west where there has been no investment and where traditional industries have declined. I have tried to consider what has been taking place and what that has meant to people, because it is people and how matters affect them that Government policy should be about.

There is one section of society whose interests are not being adequately represented and who are rarely discussed

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in the House. They do not organise, they do not lobby and they do not have a voice or a vote. They are the children and the young people below voting age. For them, the Chancellor's autumn statement and the Gracious Speech brought no cheer. There were no proposals to tackle child poverty. There was no commitment either to ending the misery of long-term unemployment, which has been a characteristic of my constituency for many years, long before I was returned to the House as its Member of Parliament, when it was represented by Lewis Carter-Jones. There was no promise of the industrial regeneration that it so badly needs to provide jobs now for parents, and the prospect of employment tomorrow for their youngsters.

The Gracious Speech contained no coherent strategy aimed at strengthening the family, whose importance we have heard so much about, to offer employment, and proper child care so that women could be free to work and provide their families with a better quality of life. Instead, we have heard only of proposals to penalise errant fathers in such a way that the main beneficiary will be not their children but the Treasury. There are proposals to withhold benefits from mothers who are, for many reasons, unable or unwilling to name the fathers of their children. That is to visit the sins of the fathers upon the children in true Victorian fashion.

Characteristic of many Conservative Members and Government statements is their attitude to one-parent families, because that term is becoming the swear word that "bastard" and "illegitimate" were in my youth. One-parent families are perceived as the cause of so many problems, so they must be punished.

Last week, the Chancellor had the ideal opportunity to put right some of the damage inflicted by the Government on children over the past decade, yet he turned his back on them, and on the poverty in which so many of them are forced to live. The freezing of child benefit for four years and the meagre new £1 payment for the first child reveals the Government's attitude to child poverty. The Child Poverty Action Group suggests as a definition for poverty, those living on and below the level of supplementary benefit, and those living below 50 per cent. of average income. I commend also the definition in the Church of England's 1985 report, "Faith in the City", which drew widespread comment :

"Poverty is not only about shortage of money. It is about rights and relationships ; about how people are treated and how they regard themselves ; about powerlessness, exclusion and loss of dignity. Yet the lack of an adequate income is at its heart."

The Government's refusal to define an official poverty line makes it difficult to arrive at a yardstick. It is yet another manifestation of the Government's reluctance to produce official figures for homeless children, for example--whose numbers are lost in the statistics for homeless households.

I can tell the House what poverty is, because I see it in my own constituency and the surrounding areas. I see it in the people who come to my surgery week after week. Poverty is kids sleeping rough in our cities and begging for money. Poverty is pensioners counting out their last few pence at the supermarket checkout, and having to return something to the shelf because they cannot afford to buy it.

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Poverty is a mother with two or three children crowded into one room in a sleazy bed-and-breakfast hotel, or having to use her child benefit to pay the poll tax instead of buying clothes for her kids--because otherwise the bailiffs are likely to arrive. Poverty is children in Conservative Britain having to be kept away from school because they have no shoes. All that after a decade of a so-called economic miracle.

Conservative Members may argue that none of that is true. It may not be true of the children in their constituencies. It is not true of many children. But one must judge the success of any economy and society by conditions at the lowest end of the scale. That is the true test--not how wages have increased for the majority. If Conservative Members are honest with themselves, they will admit that the claims that I make are true in respect of an increasing minority of our children. Not a single agency dealing with children in this country would fail to support my remarks. Those agencies are the source of the statistics that I shall give shortly, not the Labour party.

Since 1979, and the so-called economic miracle, the number of families receiving supplementary benefit has increased by two thirds, despite there being only a small rise in its real value--far behind the increase in real earnings that we heard about today. There is a shocking stagnation in the incomes of the poor. How much longer must they wait for the benefits of the "economic miracle" to trickle down to them? The theory was that if the economy came right, the benefits would trickle down to the poor. That did not happen in America, from which the Government borrowed that theory. The substantial increase in the numbers dependent upon supplementary benefit is a direct consequence of rising unemployment during the 1980s.

It is a shameful indictment of the Government that they are still prepared to countenance one child in 10 living in households in which the head of the family is unemployed. Half a million children have lived with their parents' unemployment for more than two years. I see that in my constituency day in, day out. It is in areas such as mine that one can see poverty, in which people must choose between paying the poll tax and buying their kids a pair of shoes.

What are we to make of the self-styled party of the family, who suggested that fathers should get on their bikes in search of a job, and placed family relationships under intolerable stress as a result of unemployment that was cold-bloodedly engineered by the Government? When I hear people deploring the divorce figures, I think of the constituency that I represented for 17 years until 1983. Unemployment had not at that time hit Slough as it had the north-west. People moving there and elsewhere in the south-east could not afford to buy property even if they had owned a house before, and families were torn apart. Among the most important factors in divorce are poverty and the intolerable strains imposed by separation and the attempt to keep a family together on a meagre income.

In 1987, more than 10 million people--one fifth of the population--lived in poverty. The number of families with income below supplementary benefit level increased by 18 per cent. between 1979 and 1987, to 1.9 million. The bottom line is that more people are on low incomes and making use of the minimum safety net benefit. Among the poorest of the poor are the children of such families. According to the Institute of Fiscal Studies, in 1987 nearly 2 million families comprising 3 million individuals

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had incomes below supplementary benefit level. That is an intolerable record of economic mismanagement and moral insensitivity. I never hear debated in the House what unemployment and poverty really mean for families.

There was nothing in the autumn statement for the children of Salford, Eccles and other areas that the so-called economic miracle has passed by. The hon. Member for Surrey, North-West (Mr. Grylls) spoke of the number of new businesses that have been started, but I should like to know how many folded over the past few years. There has been no new investment in industry, to offer a future for our children. Children and young people are among the worst casualties of the past decade. Many in my own constituency and in others who are now young adults have never worked since leaving school seven or eight years ago. If the Government continue as they have, and given the content of the Gracious Speech and the autumn statement, the brothers and sisters of those youngsters will face exactly the same fate.

6.9 pm

Mr. Norman Tebbit (Chingford) : It is always a privilege to follow the hon. Member for Eccles (Miss Lestor), because she always speaks with great sincerity on these matters. However, she should not think, because Conservative Members may take a different view of the way in which those problems are best resolved, that we are less conscious of them. I did not have to wait to become a Member of Parliament for a seat in the north to know about unemployment and poverty. I especially enjoyed the traditional turn from our resident cheeky chappie, the right hon. and learned Member for Monklands, East (Mr. Smith), who was on his usual cheeky form. [Interruption.] He entertained us with selective economic memoirs. He made a long speech, and if he will contain himself for a moment, and stop talking to his right hon. Friends, I shall continue my speech. The right hon. and learned Gentleman seemed to be completely unable to recollect the name of the only British Chancellor who had to apply for an International Monetary Fund loan. Since he sat down, perhaps he has been able to remember which Chancellor had to go to the IMF. He shakes his head, so I see that he still cannot remember. The name "Healey" clearly escapes him. I think that that is a fair example of selective amnesia.

I should like to deal with other issues, but I think that the phrase which the right hon. and learned Gentleman used today-- "there can be no unity in ambiguity"--

will be today's bon mot and will be hung round his neck for ever more. It may be quoted back at him on many occasions.

There is no doubt that the economy is slowing down quite rapidly. That was my right hon. Friend the Chancellor's intention and he was quite right. The economy had expanded over a long period at a high rate of growth and had finished up by expanding too fast. That was the consequence of excessive monetary growth. [Interruption.] I see that the right hon. and learned Gentleman is at it again. He cannot resist talking all the time. If only he said something, it would not be so bad, but he managed to talk today for about 45 minutes without saying a word. I wish that he would shut up for a minute now. One of the interesting aspects of the current slow- down, recession or whatever one wishes to call it, is that there has

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been-- [Interruption.] He is at it again. Some of us realised a long time ago that it is difficult to have one's ears and mouth open at the same time. The right hon. and learned Gentleman has not learnt that.

It is obvious to some of us who are engaged in the world of business rather than merely the world of politics and the weasel words of the law, that there has been a considerable slow-down in the economy, but it has not been uniform. One aspect of the slow-down which has been immediately obvious to those of us who travel around the country is that the recession has hit hardest and earliest in the south-east, in industries such as retailing and distribution. It is the first such slow-down or recession in this country. For a long time, the north and manufacturing were not affected. It is now clear that the slow-down is reaching the north, and it is cutting into manufacturing industry.

I can tell my right hon. Friends on the Front Bench and the right hon. and learned Member for Monklands, East that a time is coming when present policy should be eased. There is another respect in which this recession is different from some earlier recessions--in the quality of commercial undertakings today compared with 10 or 12 years ago. As the House will know, I am a non-executive director of a number of companies, including British Telecom. The rate of growth in the telecommunications industry has slowed markedly but, none the less, better cost control has meant that profits have increased. That is a safeguard for investment, which is running at twice the level in real terms that it was when the industry was nationalised. The right hon. and learned Member for Monklands, East talked about the poor quality of British firms today. He could travel anywhere in the world and ask about British Telecom's reputation. Every great multinational company in the world would place British Telecom among the top three telecommunications companies in the world. Would they have done so in 1987? Would they hell. That is not an isolated example. All the companies with which I am associated are having difficulties, naturally enough, as the economy slows down, but they all look upon this as a time when they have to cut costs and prune back to become more competitive, knowing full well that it will not be long before the economy is booming again, and they will be in good shape.

The attitude of the management and the work force--I do not like to distinguish between the two, because the work force stretches from the board to the shop floor without distinction, in my view--is totally different now and more realistic than it has ever been. There is no bleak pessimism in any of the businesses with which I am associated.

I must tell my right hon. Friends on the Front Bench that it is clear that tight monetary policy is healing the inflationary wound inflicted by earlier excessively loose monetary policies. For the productive economy, the time is fast approaching when we should ease interest rates and allow growth to resume. It is clear that inflation is on a downward path.

I appreciate that, in the present atmosphere of political uncertainty, it may be difficult for the Chancellor to ease interest rates, since we are locked into the ERM. At some stage, my right hon. Friend the Chancellor will be faced with the unpleasant dilemma of whether to hold interest rates higher than would be right for our domestic purposes because of his obligations under ERM. That does not mean that I am necessarily against entry into the ERM, but that "it ain't no free lunch".

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Not long ago, Opposition Members saw the ERM as the answer to all our problems--until we joined, when they turned against it, as they always do.

The ERM leads me naturally to the problem of a common or a single currency within the European Community. In the debate on the Queen's Speech this year, I have heard two speeches which I thought were quite remarkable of their kind--another speech was quite remarkable because it was unkind, but that is another matter. The first speech was that of the right hon. Member who was the former leader of one half of the alliance--I do not wish to be objectionable, but I cannot remember his constituency for the moment. [Hon. Members :-- "Plymouth, Devonport."] Yes, the right hon. Member for Plymouth, Devonport (Dr. Owen), who spoke on Wednesday. There was scarcely a word that he uttered with which I or my right hon. Friend the Prime Minister would disagree. There can be no politician more devoted to the European ideal than the right hon. Gentleman--he walked out of the Labour party over it.

Mr. Beith : No.

Mr. Tebbit : That was one of the reasons. Perhaps some of the other reasons were even uglier than the quarrel over that policy. I do his former right hon. Friends the favour of saying that he walked out over policy rather than style.

The second remarkable speech was that made today by my right hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley). He chose to make his resignation speech in a debate in which he could be challenged. There were few who challenged a word of what he said. I only wish that certain Opposition Members, particularly the right hon. Member for Bethnal Green and Stepney (Mr. Shore) had been here. I know, from the way that he nodded during the speech of the right hon. Member for Plymouth, Devon (Dr. Owen), that he would have agreed with just about every word that was uttered by my right hon. Friend the Member for Cirencester and Tewkesbury. That is because these are great issues with which we are dealing.

Perhaps I felt that they were good speeches because I agreed with them. They revolved around issues that I have tried to raise--issues not of sovereignty but of the political rights of the people of this country. That is what we mean by sovereignty. We should do well to use such blunt words. They also revolved around the issues that my right hon. Friend the Member for Cirencester and Tewkesbury raised. With merciless logic, he exposed the fact that, if a single currency were to be imposed across Europe, it would necessarily involve huge transfers of wealth from the wealthiest countries to the poorer countries.

"Good," many people might say. However, my conclusion is exactly the same as that of my right hon. Friend : that it would not be long before all the old sores of nationalism were reopened, as the Germans began to say, "This is no good for us. We don't mind our farmers in Bavaria remaining fat on the common agricultural policy, but we're damned if we see why we should be bled white not only by our commitment to sort out socialism in East Germany, among our brothers, but also by having to sort out socialism in Greece and the consequences of socialism elsewhere in the European Community."

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The break-up of the Community would be brought about by the refusal of the wealthier countries, as my right hon. Friend said, and as I believe the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) implied, to do that. Although they could stomach substantial transfers of wealth within their own boundaries, they would find it increasingly difficult to stomach them widely across national boundaries. We should be embarking on policies that would inevitably increase, not reduce, nationalism in Europe.

Wearing my business hat, the idea of a common currency--with a strong commitment to maintaining the relative parity of sterling--or of a single currency looks highly attractive, but the former would make less likely and the latter would make impossible devaluations to restore the competitiveness that had been lost by a deterioration in cost control, howsoever brought about. I fancy, therefore, that even some of those in the Confederation of British Industry who are most enthusiastic about such policies might find that their enthusiasm was tempered quite soon after a common currency, let alone a single currency, was imposed.

There are other implications. It is right to raise one of the simple conundrums of a single currency, which is this : where are there two Chancellors per currency, let alone 12? There can be only one Chancellor for a currency. There is one for the dollar, another for the rouble and yet another for the deutschmark. As soon as the deutschmark spread across East Germany, the East German Finance Minister closed the door of his office and went home. There was no place for him.

The case was made--disgracefully, I believe, by Sir Leon Brittan because the case was unworthy of the integrity and intellect of that very considerable politician--that we could get around these difficulties by putting sterling on one side of a piece of paper and the ecu on the other. That was a good enough idea to fool the Leader of the Opposition, but to fool intelligent people one has to go a long way beyond that.

Today, in this kingdom, the Royal Bank of Scotland can print notes with a distinctive motif on them but the currency is sterling and Scotland's Chancellor of the Exchequer is my right hon. Friend the Member for Huntingdon (Mr. Major)--no one else. No doubt Sir Leon Brittan and his fellow commissioners would be prepared to allow a Scottish ecu with thistles on one side, a Welsh ecu with leeks on one side and an Irish ecu, which would probably come with the shamrock or the red hand of Ulster, according to taste, on one side. Perhaps there could be English ecu notes with red or white roses on one side, according to taste. However, that would not make four, six or eight Chancellors out of one. There can be only one Chancellor for one currency.

Mr. David Trimble (Upper Bann) : I hate to spoil the right hon. Gentleman's interesting and entertaining analogies, but I ask him to consider the currency of the Republic of Ireland. It was firmly linked to the pound sterling from its inception in 1921 until about 10 years ago. There were two Chancellors for a currency that was firmly linked.

Mr. Tebbit : The hon. Gentleman makes the fatal error of failing to distinguish between what is in effect a common or linked currency and a single currency. Such monetary discipline as there is in the Republic of Ireland is imposed

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by the need of the Chancellor there to maintain some value for his currency relative to that of sterling. That is the discipline. If people in the Republic of Ireland wanted to renege on the linking of their currency to ours, they would be free to do so. If they wanted to devalue or upvalue their currency, they would be free to do so. The parities between the two have changed from time to time. That is what could happen under the regime of a common currency, such as the hard ecu.

Let me put it again more clearly than perhaps I did earlier to the right hon. and learned Member for Monklands, East the point about the hard ecu. Yes, if the hard ecu were adopted by our partners, it would accelerate this country towards that rubicon that we should have to cross to reach a single currency. It would have no effect upon that decision, but it would bring that decision closer. That, I believe, is what my right hon. Friend the Chancellor of the Exchequer meant. To return to my analogy of the ecu decorated, according to taste, throughout the European Community, all that decoration would not give back to the people of this kingdom the right that they have today to sack or to elect a Government who are responsible for economic policy. No Government are entirely sovereign over their economic policy, but that is no reason for throwing away what sovereignty we have. It is a great idea to have an independent bank that would be responsible for making sure that the currency was in good shape. I am delighted to know of the trust that Opposition Members put in bankers. They have grown up a lot in recent years.

The Opposition Chief Whip points at those who sit on the Liberal Benches, the implication being that it is not just the Labour party that has grown up in recent years. He has not, however, been listening to what his right hon. and hon. Friends on the Opposition Front Bench have said. He simply does not understand what they say.

Mr. William Cash (Stafford) : Will my right hon. Friend give way?

Mr. Tebbit : I hope that my hon. Friend will excuse me from allowing him to intervene. Many other hon. Members wish to speak, and I do not intend to detain the House for much longer.

The right hon. Member for Ashton-under-Lyne also made a significant point about the relationship between the German federal authorities and the Bundesbank. He said that, at the end of the day, on big issues, the politicians will have their way over the bank as they did in the reunification issue. That is fine, and I agree with him. That would be so. In that case, when are we going to discuss the democratic institutions that would control the politicians who would have control over the bankers when vital issues are at stake? We need to ask ourselves that question. I do not think that we should allow ourselves too much ambiguity, even in the cause of unity, when we are debating these matters.

I recall that the right hon. and learned Member for Monklands, East said that the question of a single currency divides my party. I have to admit that there is a good deal of truth in that. It does not divide the Social and Liberal Democratic party. It has only one view and that establishes it for the non-party it is. To have a single view on such an issue can be accomplished only by a party with no more than half a dozen Members. When I asked the right hon. and learned Member for Monklands, East

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whether he would be willing to accept a single currency, which by common consent means the end of independent budgetary policy, he took refuge in the unity of ambiguity. I do not know why, because he had even made my point that such a decision would be irrevocable. That is an important step forward. At least the right hon. and learned Gentleman knows the magnitude of the decision that the Leader of the Opposition would take so lightly.

It is long overdue that we should remove the ambiguities that surround these issues, even if it might bring about accord across the Floor of the House between those who take different views within their own parties. There is nothing wrong at times with agreement across the Floor of the House, and there is nothing wrong with an honest acceptance of the fact that, when issues as great as these arise, there can be differences within parties.

I will fight for the whole of my political life to avoid a socialist economic policy being imposed upon the people of this country. The right hon. and learned Member for Monklands, East will struggle against it as best he can, but if he were elected to office, his colleagues would make him eat his words and he would have to impose one. I shall also struggle for the whole of my political life for the right of the British people to have a socialist policy if they want one. I shall fight for them to have a free market, Liberal policy or even a salad policy or a green policy if they so wish. However, those decisions should be taken in this country by British people. We should not find ourselves in the position where our rates of tax and our budgetary policies are beyond the control of the people of this country. That is the great issue, on which my right hon. Friend the Prime Minister, and the right hon. Members for Devonport and for Bethnal Green and Stepney are right.

6.33 pm

Mr. Alan Williams (Swansea, West) : The right hon. Member for Chingford (Mr. Tebbit) started his speech with typical charm but, without being patronising, his speech then became worth listening to. His analysis of the trend of the present recession is faulty. He said that the recession is hitting first in the south of England and has not yet hit as hard in the rest of the country. That is natural when we are dealing with a deflation that is consumer based. It is not generally realised that Oxford street has the retailing turnover of Leeds. Therefore, when the Government decide that to achieve their recessionary impact they will hit consumer spending, inevitably it is the main retailing centres that feel the first blows.

There is nothing novel or different about that. Indeed, even during the problems caused by the oil price increases, the north-east of England retained its employment levels far longer than the rest of the country. That was not because it was healthier but because it had long lead industries such as power plant and so on where existing contracts take time to work through. When the contracts had worked through, the recession hit. When there was an upturn, it was not felt in that area. Therefore, there is no solace for the regions in the pattern that is being followed in this recession. It is a natural consequence of the economic policy that has been adopted by the Government.

Many of us have known the right hon. and learned Member for Surrey, East (Sir G. Howe) for a great many years. Without any hypocrisy, I should say that hon.

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Members on both sides of the House listened to his speech yesterday with great sympathy, because we understand the humiliations that have been heaped upon him by the Prime Minister. However, it was a limited sense of sympathy because, as a fellow Welshman, my hon. Friend the Member for Warrington, North (Mr. Hoyle), and my hon. Friends who represent the north and Scotland all remember that it was the right hon. and learned Gentleman's 1979 Budget that unleashed the industrial carnage that destroyed one third of the jobs in our manufacturing industry.

When I was at the Department of Trade and Industry, Keith Joseph, now the noble Lord Joseph, and the right hon. and learned Member for Surrey, East, who then spoke for the Opposition, were the architects of British monetarism. They were the only people foolish enough to absorb the nonsenses of the Chicago school that had been the joke of economists for decades. We were the only country to adopt those nonsensical policies. Galbraith thanked heaven that it started in Britain because they then knew that they should not try it in the United States.

The right hon. and learned Member for Surrey, East together with Lord Joseph convinced the Prime Minister that she should adopt monetarism. It was a conquest of persuasion over comprehension. In his speech yesterday, the right hon. and learned Gentleman was somewhat selective about history. He said, quite rightly, that he had brought inflation down from 22 per cent. to 4 per cent. However, I remember that he put inflation up to 22 per cent. in the first place. It was his opportunity Budget and his doubling of VAT that led to us having to have high interest rates and high sterling for many years. That made it impossible for us to sell abroad, compete or invest. He was rather like the captain who is claiming credit for getting off the rocks the ship that he put on the rocks in the first place. He tried to ignore the fact that he lost 2 million of his industrial crew along the route and severely damaged the engine room at the same time.

This may be the last year of the Government. What do we find? We have rising unemployment again, inflation is higher than when they came to office and we have a balance of payments crisis. It is a measure of the mess in which we find ourselves that the Chancellor was boasting that the balance of payments deficit next year will be "only" £11 billion. That is the third highest in our history. That is the measure of 11 years of achievement by the Government. All that is left to them and their Thatcherite revolution--the Prime Minister, the Chancellor and others keep returning to it--are claims relating to improving fundamentally Britain's productivity. However, even that was laid to rest on Monday.

There was a fascinating article in The Guardian by Victor Keegan, based on a 20-year study by academics at Aston and Leicester It showed that nearly all the productivity gain that is claimed by the Government is actually technological productivity. Before Conservative Members say, "Good, that is what we want," I warn them that it is not necessarily in their favour. Nearly all the productivity that has been gained since the Government came to office is technology-based rather than labour-based. The Government have not produced the enormous turnaround in attitudes and so on that they talk about. That was not the problem. As my hon. Friend the Member

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