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for Warrington, North, with his union background, will no doubt tell the House later, we do not have the back-up in capital, equipment, machinery and labour that our competitors have.Mr. Doug Hoyle (Warrington, North) : My right hon. Friend should add that the Government came to office to bring down inflation, and that inflation is now higher than it was in 1979, despite one third of manufacturing industry having been destroyed.
Mr. Williams : It is just one more example of the way in which the Government ignore points that are difficult for them to explain. Less than 10 per cent. of the increase in productivity has been labour based. The rest has been technology-based. The significant point about why the Government have nothing to boast about is that more than half that increase and improvement took place in the first three years of the decade. It took place despite the fact that investment in manufacturing had fallen 41 per cent. under this Government. As the article points out, they were enjoying the benefits of the record level of investment that they inherited. The article states :
"But, whatever the reason, the actual rise in labour productivity is pretty small beer compared with the very sharp increases in technological productivity of about 36 per cent. recorded over the decade."
The article goes on to state :
"Thus, the 10.8 per cent. a year peak increase in technological productivity during the early Thatcher years until 1983 was really caused by the investment boom of the outgoing Labour administration."
That is what we always told them. That is what the industrial strategy was all about--improving productivity and bringing industry up to date. In the early part of the decade, the Government lived on the seedcorn of the 1970s, and in the rest of the decade their economic policy has been kept afloat by North sea oil revenues. Let us think about what could have happened to our competitiveness, productivity and unit costs if only the Government had sustained investment--£20 billion more would have been invested had they sustained the level that they inherited, and £30 billion more would have been invested, according to the Chancellor of the Exchequer, had they maintained the rate of growth in investment under the Labour Government. The tragedy of this decade--it will probably not be fully realised by the British people for many years--is that we have thrown away the one and only chance in the whole post-war period to have sustained growth. It was the only time when we could look ahead and know that, because of the oil revenues that were to come, we were to be free of the stop-go pressures that were the result of the balance of payments crises that have beset all Governments of both parties in the post-war period.
Despite having a £130 billion cushion against foreign currency pressures of the decade, the Government have still ended up with balance of payments crises and without the break into continuous and sustainable growth that we could have had. We are now back at "stop" yet again. Today, the Chancellor came as near as he is likely to for some time to admitting that the country is now in recession. We heard yesterday in the resignation speech how, five years ago, the then Chancellor and the then Foreign Secretary threatened resignation unless the Prime Minister gave a nebulous guarantee that, at some time in the future, she would take the country into the ERM. Indeed, some
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hon. Members might say that perhaps she was at least more faithful to her beliefs over those five years than the then Chancellor and the then Foreign Secretary were. One is bound to ask what has happened. After all, the Chancellor who threatened to resign has already resigned and gone. The then Foreign Secretary who threatened to resign was a trivialised and irrelevant member of her Cabinet. The pound could not be in a more difficult situation. We have high inflation. What made the Prime Minister say, "Although for five years I have resisted all threats of resignation and all the better opportunities that there have been to go in, I shall now go into the ERM"? There can be only one explanation. It is purely electoral. It is because she sees an electoral benefit which is sufficiently great to overcome the antipathy that enabled her to alienate members of her Cabinet and resist their pressures for all those years.Why did she do that? With £30 billion of private enterprise hot money- -a sort of private enterprise version of the international monetary fund loan--swilling around and that the Government have to keep here, in an election year the Government need the extra shield that the collective reserves of the central banks of Europe will give them to carry them through times of pressure. The crucial point--it is why there is a gap in the autumn statement--is that the key is in interest rates and the need for interest rate cuts.
We had a 1 per cent. cut when the Government entered the ERM. The aim--it is probably unattainable--is to get a total 3 per cent. cut, and more if possible, but 3 per cent. is the probable level between now and the spring. Let us consider what that means in economic and political terms. A 1 per cent. cut in the mortgage interest rate puts £2 billion of spending money in people's pockets--that is after allowing for MIRAS. It represents a £2 billion boost to spending for a Chancellor who is always saying, "But of course we are spending too much." If the Government attain the target of a 3 per cent. interest rate cut--it is the explanation of the gap in the autumn statement--they will release £6 billion of purchasing power into the economy within the next six months, or they will start the process. Of course, the political impact is somewhat different from a change in income tax. Whereas 21 million people pay income tax, only 9 million people will get the benefit of the mortgage interest rate reduction. For those who have mortgages, the relief will be the equivalent of a 6p in the pound cut in income tax. In the south-east of England, excluding Greater London, because of the average level of mortgage rates there, it will be the equivalent of a 7p cut in income tax. In Greater London, because of the higher level of mortgages, it will be the equivalent of an 8p cut in income tax. That is the gap in the autumn statement and it is the key to the tactic and the argument that persuaded the Prime Minister to go into Europe.
Mr. Tebbit : I must apologise ; I was trying to follow the right hon. Gentleman's argument, but my attention lapsed for a moment. I therefore did not hear him say whether he thinks that the Government should have joined the ERM, whether interest rates should be kept high to keep purchasing power out of the hands of people who have mortgages or whether they should be cut. I am a little confused about what he thinks should happen.
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Mr. Williams : Of course I want a reduction in interest rates, but a major, national strategic economic decision has been taken not in the national strategic interest but in the short-term electoral interests of the Conservative party. The purpose is to create a window of opportunity
Mr. Hoyle : A fleeting opportunity
Mr. Williams : That is right. We are not going from stop to go ; there will be only a slight selective movement. As I said, because of the way in which mortgages are geared, the major benefit will be felt in the south of England. I do not have to spell out for hon. Members the selective advantage of that for the Conservative party's political interests.
Mr. Alex Salmond (Banff and Buchan) : Is the right hon. Gentleman aware that the disproportionate effect of mortgage tax relief in the south of England will be more than £1,000 million this year, which is more than the entire regional aid budget for the United Kingdom?
Mr. Williams : Ministers and Conservative Members speak of regional policy and of assistance for the regions, but nowhere has had more money pumped into it than the south-east of England. Further, £23 billion has been given to the top 5 per cent. of wage earners, more than half of whom live in the south of England. The amount of regional assistance for Northern Ireland, Wales, the north and Scotland is dwarfed into irrelevance compared with the incredible injection of purchasing power into the south of England. That explains why the property boom began in the south so early and why prices have escalated so rapidly compared with elsewhere in the country, creating not only an income gap but a capital gap between the regions. The gap is widening as a result of taxation policy. Mr. Ian Bruce indicated dissent.
Mr. Williams : The hon. Gentleman will no doubt take part in the debate. I am glad that at least I am keeping him awake.
The ERM has nothing to do with the strategy for national economic recovery but everything to do with the election. When the £6 billion that I mentioned is pumped into the economy, as we have a marginal propensity to import of 36 per cent.--one of the highest levels in the western world-- £2 billion will immediately be spent on drawing in extra imports. As mortgage funds feed through into spending power later in the year, the balance of payments deficit, which the Government say is reducing to only the third worst in history, will worsen. By the end of next year and the beginning of 1992, when our unit costs will be higher than those of Europe, when the pound will still be far too high and when our inflation will be higher than that of any of the major industrial EC countries, our balance of payments will become even worse. That is why the Chancellor has concentrated his attention on the third quarter of next year.
We shall then be in a renewed stop, having barely had a period of go. The Government's aim must be to jump during that very short opportunity, because after it has gone we shall be back in a recession from which there will be little hope of recovery. As the Government know, as industry knows and as the right hon. Member for Chingford must know, given his industrial experience, we have joined the ERM at an unsustainable rate of sterling.
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6.45 pmMr. Ian Bruce (Dorset, South) : I am grateful to be called in probably the first economic debate in which I have spoken since becoming a Member, and at a time when much interest is being expressed in our European policies.
I must disagree with hon. Members who have attached such high importance to what is happening with the ERM. Strangely, we seem to be holding a leadership election based on European policy and how people perceive it-- there have even been resignations about it--yet we should be concerned about the underlying strength of our economy. When talking about a single currency, one finds that the vast majority not only of the Conservative party but of the Labour party and of our constituents agree with the Prime Minister's policy. One of my local free newspapers, the Swanage and Wareham Advertiser --this is probably the first time that it has appeared in Hansard --spoke to ordinary people in the street who were Labour or Liberal voters, but it found only one person who disagreed with the Prime Minister's policy. They said all sorts of terrible things about the Prime Minister, but they wholly agreed with her policy to ensure control of our economy.
We are beginning to realise that the ERM is not a panacea but simply a tool, like so many other tools of economic policy, such as linking with the gold standard, or the Bretton Woods system. We have always needed such flexibility in our monetary policy.
In the past five years, there have been enormous changes in the value of sterling. In a difficult market, we have had to ensure that our underlying economy was strong. In the recent past, employment, investment in industry and the improvement in our productivity have been extremely strong. We have done extremely well with our debt repayment, which goes against the trend of almost all other countries, which have financed much of what they have done through deficits. The real wages of poor and rich people alike have been doing extremely well--perhaps too well, given the current level of inflation.
I was interested in the speech of the right hon. Member for Ashton-under- Lyne (Mr. Sheldon), who made an interesting point about the requirements of bankers and politicians. He said that we should not rely solely on monetary policy to overcome difficulties in our underlying economy.
The social charter is far more serious for European policy. Our European partners would like us to agree to a raft of measures that are socialism writ large. It is nonsense for the Labour party to speak of the minimum wage as a percentage of the average wage, because any mathematician knows that, as soon as the minimum wage is made a percentage of the average, the average increases and keeps increasing. The only way of achieving what our European partners want is for everyone to be paid at the highest level.
Leaving aside the mathematical impossibility of the Labour party's suggestion, the minimum wage, as suggested in the social charter, would ratchet up costs within the European Community, which would be bad for Europe, for jobs and for many other matters. It is easy to sell the idea of giving more maternity pay, more sick pay, more time off for training, more this, that and all the other things, but it all ratchets up the cost to our industries.
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As a Young Conservative, I remember us Tories talking about the difference between direct and indirect taxes, but that is not something about which we hear much these days. When we came to power, we deliberately put up VAT and increased indirect taxation. Our policy was to reduce direct taxation by bringing down income tax. The ratio between direct and indirect taxes has improved, as we have reduced income tax. However, in some economic respects, we do not have a level playing field with our European partners. In fact, we are tipping the playing field against us in terms of VAT. VAT in the United Kingdom is probably the lowest in the Community, and that has a strange effect. VAT is imposed on every product when it gets to the shops, whether an import or an export. If there is high taxation through VAT, or any other form of indirect tax, on all products when they get to the shop, imports and home-produced goods are taxed equally. We try to front-end-load the costs of our manufacturers with such things as employers' national insurance contributions which, under the Government of my right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath) were 5 to 6 per cent. and then rose to 11 per cent. We have must reduced that slightly, but we have told companies that they will have to pay a greater proportion of sick pay.We should concentrate on reducing the direct costs that go into the costs of manufacturers and service industries--for example, the rates bill, which has just increased by 10.8 per cent.--and transferring them to the VAT side of the equation. We would thereby reduce the basic costs for our manufacturers and service industries. All the goods and services that are purchased in the United Kingdom would be taxed. That would increase the price of imports. If the basic costs to a home manufacturer were cut, the consumer would pay more or less the same for home-produced goods, even though VAT was added. Goods exported to France or Germany end up with 25 per cent. VAT, whereas at home the rate was 15 per cent. French companies which import have a lower cost base, because VAT in France is 25 per cent., and only 15 per cent. is levied at this end. A graph wold show that we were tipping the scales against exporters and in favour of importers. Treasury Ministers should consider this point. I have written to my right hon. Friend the Chancellor about it.
From my constituency point of view, we are looking forward to a reduction in defence costs, but that can have severe economic implications. There is a naval base, a Fleet Air Arm base and an Army base in my constituency as well as a body which is involved in military research, and manufacturers which service that industry. It is important for constituencies such as mine that the Government look at the problems of reducing defence expenditure, to ensure that the burden does not fall on one community. The Government should have the overall responsibility to ensure that they do this sensibly. We know that we will have to take cuts and we gladly accept our share, as long as the cuts are spread correctly.
Many people may say that the Queen's Speech referred to few radical measures, but the Government have an enormous job to do in terms of education, with the local management of schools ; in ensuring that the right percentage is given to schools rather than held in county halls ; and in the national health service in ensuring that the additional money we give is used efficiently. Although the Queen's Speech may be seen as a consolidation measure,
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firm management of our changes is needed. I believe that we have the right team in Cabinet to see them through. I commend the Queen's Speech.Several Hon. Members rose--
Mr. Deputy Speaker (Sir Paul Dean) : Order. I remind the House that the 10-minute limit on speeches is now in operation.
7.5 pm
Mr. Ken Livingstone (Brent, East) : The main gap in the Gracious Speech, as identified in the amendment tabled by my right hon. and hon. Friends, is in economic policy. It is a damning indictment that we should face this situation after 11 years of Conservative Government. That is 11 years in which we have had the bonus of North sea oil--a bonus denied to our major competitors--and we have squandered it. Can we imagine what would have happened in Germany or Japan if they had had the benefit that this Government had of revenues of £12.5 billion in the best year? Those Governments would have invested it in industrial regeneration, research and development and training. We have invested it abroad in the economies of our major competitors and have squandered much of the rest of it in completely spurious consumer booms aimed at winning the 1983 and 1987 elections.
Conservative Members have complained that the problem is that the measures we took to avert the major slump after the stock market crash in October 1987 led to the problems we face, but that is nonsense. The measures that were agreed by all the G7 nations were broadly similar, but the same problems do not afflict the economies of our major competitors in the Group of Seven. The problems which we face are the result not of an attempt to avoid that slump but of the Government's short-sighted, profligate and wasteful policies at home.
For all the talk of monetarism, the Government have been prepared massively to inflate the money supply to save their own neck as elections have come along. We now have the most recent gimmick--the idea that, if we join the exchange rate mechanism, this will save us from our problems with the British economy. It is a gimmick, and that is why the market is not supporting the level at which we joined the ERM.
The international financiers who will have to consider what to do with their money know that we entered the ERM at an unrealistically high level, and they are not prepared to prop up the pound at that level. As everyone who looks at the figures knows, they know that, whoever wins the next national election, or the election next week, will have no alternative but to devalue the pound, or we will waste years propping up an unrealistic exchange rate, just as the 1964-70 Wilson Administration did. We must not repeat that mistake. The real indictment of the Government is that, over their 11 years in office, the percentage of GDP that we export has declined by 3.5 per cent. That may not sound like much, but each percentage point of GDP means £5 billion. Let us compare that record with those of our two most similar European competitors.
Over the same period, France has increased the proportion of its GDP going into exports by 2.5 percentage points, and Germany by eight. It is against that background that we should judge the Government's record. These are reasonably comparable European
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neighbours who have faced the same broad international circumstances and have had roughly the same opportunities as we have--indeed, our opportunities have been better, given North sea oil, but we have thrown them away.Now people are jumping up and grasping at the exchange rate mechanism as though it will save us from further difficult problems. Hon. Members on both sides of the House and editorial writers outside it are saying that entry into the ERM will lead to a convergence of our economies : that somehow, by the simple miraculous act of joining the ERM, we can achieve German levels of economic productivity and competitiveness. But that is not what happened to the nations which composed the ERM before we joined it. France, the Low Countries and Germany achieved roughly equivalent increases in productivity in 1962 and 1963 and they stayed broadly close together throughout the succeeding two and a half decades. That allowed them to have an exchange rate mechanism that linked their currencies.
Many people are looking at this the wrong way round--putting the cart before the horse. We must achieve the same increase in productivity in the British economy if we are to sustain any realistic membership of the ERM ; otherwise, as regularly as clockwork, we shall have to devalue, and our hold on what remaining markets we have will be continually eroded.
I am not here merely to attack the Government. I believe that we must propose positive alternatives. There is not the slightest doubt that, while we remain in the ERM at this level, we shall not be able to get our economy working properly. We should immediately devalue to about DM2.50. Indeed, I would go further and suggest that we go to DM2.40, so that the pound would be positively undervalued and then tied to the narrow 2.5 per cent band.
That would send the message to all markets that the Government are committed to a massive expansion of our industrial base. It would show that we were putting our industrial economy ahead of our financial and City interests. That basis would give the British economy sustained growth--
Mr. Gerald Howarth (Cannock and Burntwood) : On what basis does the hon. Gentleman calculate that DM2.50 is just the right rate for the British economy?
Mr. Livingstone : I said that we should undervalue, taking my advice from economists who have calculated that, from the viewpoint of our exports, we should be in the range of DM2.50 to DM2.60. That represents a broad consensus among economists, and in linking such a decision to an immediate cut in interest rates of 2 per cent. we should also take measures similar to ones that have been used in the past, although not the simple reintroduction of exchange controls. I do not believe that they are necessary, but we need to take measures with our domestic financial institutions to slow down the flow of wealth out of Britain and to ensure that, instead of investing abroad, we invest in building our industrial base.
Let us remember that half of all the investment abroad under this regime has been in the economy of the United States of America, one of our major competitors ; and the profit that we have received back from that investment has done nothing to help to close the real gap which has opened up in our trade deficit as American workers have
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got the jobs that British wealth has created. The trade deficit has developed as we have imported what they have made because we are not creating it here.Moreover, to help the balance of payments deficit, we have had to keep our interest rates high to attract short-term hot money. I challenge Conservative Members to go out and explain that to the people of Britian-- that to allow our financial institutions to invest in the economies of our major competitors and create jobs there, we are prepared to keep our interest rates high and hence impose a heavy burden on every mortgage holder in Britain. The people would say that that was mad. If we had followed policies like that in the second world war, it would have been called economic treason and Churchill would have shot whoever did it.
We are in an economic war with our major competitors, and we should put our interests first. The problem is that the Conservative Benches are littered with people who think that we have a special relationship with the United States which overrides our own immediate interests. We subordinate ourselves again and again in domestic, economic and foreign policy to the interests of the United States. Finally, we should initiate a major cut in defence spending of up to 50 per cent. over five years, thereby releasing wealth for a major programme of investment in industrial regeneration and in training. If we took those measures tomorrow, we should broadcast to the whole world that we intended to end 100 years of relative industrial and economic decline and to commit ourselves to an expanding economy that was capable of sustaining growth and providing the wealth to support the level of social services that the people in this nation have a right to expect. It would be an economy capable of rivalling within a decade the West Germany that is and the united Germany which will rapidly develop.
The debate on the ERM has been unrealistic. In or out of the exchange rate mechanism, in or out of the Common Market, whoever wants to govern Britain well in the 1990s and avoid disastrous increases in unemployment must implement the sort of measures that I have described, which my party has argued for throughout these years that the locusts have eaten, when the best opportunity that the British economy ever had has been squandered.
7.16 pm
Mr. Terence Higgins (Worthing) : It is traditional to debate economic affairs on the final day of the series of debates on the Gracious Speech, but that has the disadvantage that the Leader of the House has to deal with a whole range of debates from previous days when he comes to wind up today. I hope that he will pick up just one point in the opening speech by the shadow Chancellor of the Exchequer, who dealt at great length with the issue of whether we were or were not in a recession--after which he said not a single word about what the Labour party would do to deal with the recession. I hope that my right hon. Friend will pick up on that.
I shall eschew commenting on the autumn statement, because the Treasury and Civil Service Select Committee will be taking evidence on it from officials next week, and
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then from the Chief Secretary and the Chancellor, and we shall have an opportunity to debate the statement in depth once the Committee has reported to the House.I shall therefore concentrate on the main thrust of today's argument--the relationship between the economy and Europe. Before doing so, however, I wish to comment on one other aspect of the Queen's Speech. I am delighted that it includes provision for compensating those affected by road programmes, which have long constituted what can only be described as highway robbery. I fear that such compensation will not be able to cover everyone affected by such schemes, especially those off the main routes, but we look forward to seeing the details and I am pleased that we can make some progress. I am also glad that my right hon. Friend the Secretary of State for Transport in his speech last Friday referred to me as advocating this idea.
The question of a single currency has proved to be the touchstone of this debate. It is extraordinary that it should be the centre of our discussions, given that there is no realistic prospect of a single currency being implemented for many years to come. The most bizarre suggestion that I have heard in recent days was the suggestion in The Economist that we should have a referendum on the subject. I am and always have been wholly opposed to referendums. I believe that Edmund Burke was right to stress the importance of our representative system of democracy and I have therefore always regarded the idea of a referendum as incompatible with that system. It would be particularly extraordinary to hold one on this subject, not least because many of our parliamentary colleagues appearing on radio and television recently have failed to distinguish between a common currency and a single currency and have treated them as though they were the same. There is a fundamental difference between a common currency, which runs alongside an existing one, and a single currency which would involve the abolition of all existing EC countries' currencies. If our colleagues are so confused, it is clear that this would not be a good subject for a referendum.
This is a highly technical subject. This afternoon, I was delighted to hear my right hon. Friends the Members for Cirencester and Tewkesbury (Mr. Ridley) and for Chingford (Mr. Tebbit) pick up a point that I have been making for some considerable time in debates and at Question Time. They have said that opting for a single currency would mean that we would be giving up for all time the most effective means of adjusting for regional variations in costs and prices. Over a period, for an extended geographical area, that would inevitably lead to high unemployment in some parts of the Community and to the accumulation of financial imbalances between one part of the Community and another.
As I stressed when we originally debated the exchange rate mechanism, the idea that that can be compensated for by financial flows contrasts with our experience, which shows that even within the United Kingdom such transfers are ineffective and do not make up for regional variations. There would be no guarantee that such flows would take place. Together with the sovereignty issue, that is the fundamental objection, which must be brought out as strongly as possible. I am glad that both my right hon. Friends made that point. In present circumstances, an area about the size of a deutschmark bloc--Germany, France and the Benelux countries--could continue to operate without impossible strains. It is clear, however, that if we extend the area to
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include Spain, Greece, the United Kingdom and Italy, the strains will be completely intolerable. I hope we can convince our fellow members of the Community of the real risks.There would be other dangers as well. If we were to implement a single currency over an extended area, it would be far more difficult for countries in eastern Europe such as Hungary and Poland to join as full members. It would tend to make the Community inward-looking rather than outward-looking. My right hon. Friend the Prime Minister was right to stress the dangers of protectionism and the importance of making the European Community an outward-looking Community instead of an inward- looking one.
The basic manifestation of that inward-lookingness has been the common agricultural policy and the intrinsic schizophrenia, which has existed in the Community ever since its foundation of a general policy for industry which is in favour of competition and trade across borders and a policy on agriculture which is essentially protectionist. We must stress that point in the discussions. A great deal of attention has been focused on the remarks of Doctor Pohl, the president of the Bundesbank, for whom I have the greatest respect, particularly at a technical level. He has stressed his objections to the Government's proposal for a hard ecu. They need analysis and I do not agree with them. However, insufficient publicity has been given to the effects that Dr. Pohl believes that the Delors proposals will have. In many ways Dr. Pohl is more opposed to those proposals than to the hard ecu proposals. He is clear that it would be a mistake to rush into the kind of proposals that Mr. Delors has been putting forward.
However, I am a little puzzled by Dr. Pohl's attitude to a European central bank. He seems anxious to design that in the greatest detail, but it seems to have been put into cold storage until it is needed. That is rather uncertain. Dr. Pohl raises all the issues that have been raised by my right hon. and hon. Friends as to who would be accountable for democratic control in such a European central bank. In that regard, it is important that the Government argue those fundamental points in the IGCs. I hope that it will be possible for my right hon. Friend the Chancellor, in what will be a very difficult task, to get the support of Spain and Greece for his proposals. A parallel currency would have considerable advantages at the moment. I am afraid that there is a danger of rushing into a treaty amendment, which would not be acceptable for the reasons that I have given. We would then face the difficulty of deciding whether to use the veto and there might be a danger that some Community members might set up their own arrangements for a single currency. I cannot help but feel that the economic analysis of those issues must lead us to conclude that that would be a mistake. However, the Chancellor will have difficulty persuading those countries, although I am sure that he will carry out his task most effectively. I believe that there is no great division of opinion on the matter on either side of the House. Of course, there are hon. Members at either end of the spectrum, but the vast majority of hon. Members are not in favour of a rush towards a single currency or stages 2 and 3 of the Delors proposals. I hope that my right hon. Friend the Chancellor will bear that in mind.
The Community must concentrate on the other difficult issues, not least the problems with agriculture. The Commission's proposal in the Uruguay round is
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inadequate. We should not simply be pressing for a 30 per cent. reduction in agriculture subsidies. We must recognise that there should be urgent reforms. Measures for economic integration should be worked for steadily, but they must rely on greater convergence of the economies. That must come first, rather than our seeking to establish a single currency which would inevitably create quite intolerable strains.7.26 pm
Mr. Jack Thompson (Wansbeck) : I have listened carefully to nearly all the speeches that have been made today. Hon. Members referred to the broad brush situation of our economy and I found it intriguing that the speeches today have been dominated by our relationship with Europe. That is all very well, but we must remember that other elements of the economy must be considered. I make no apology for referring to the position in my region. I am the secretary of the northern group of Labour Members and I have a great interest in my part of the country. I am sorry that the Chancellor has just left the Chamber. If he had spent more time visiting the north of England, he would have discovered that the recession has existed there in various stages for 10 years. In fact, we have never really been out of a recession.
It is often repeated that this nation's chief economic resource is its people and that the maintenance and improvement of material, intellectual and environmental living standards depend upon the people's skills, knowledge, ingenuity and application. A further powerful influence are Government policies, which in the past 10 years have done little to enhance those attributes in the northern region of England. In fact, the vast reservoir of skills and talents has been deliberately stifled and wasted in terms of the uncontrolled destruction of the region's traditional industries, causing thousands of highly skilled personnel in the shipbuilding, engineering and mining industries to lose their jobs and future prospects of employment for their children.
Even if the argument is accepted that the old industries had to decline-- and that is an argument in its own right--a huge pool of skilled workers were left with no future and many of them still languish on the banks of the Tyne and Wear, in Cumbria, Cleveland, Durham and Northumberland. They suffer when a planned change in the industrial base of the region could have harnessed their talents without the traumatic events of the past few years. Those people are not the sort to adapt easily to working in the tourist or service industries. Their backgrounds and traditions preclude that. Their skills, knowledge, ingenuity and application have been wasted in the pursuit of free market dogma and can never be replaced by the pseudo, superficial training schemes which have been introduced, revised, revised again and are still found wanting.
The issue of closer links with the EEC greatly concerns many who have an interest in the economic advancement of the northern region. Increasing numbers of people feel that the only genuine support that the region will get is from the Community, because it is clear that the Community is far more sensitive to the problems of peripheral regions than the present Government are. Those people do not see EEC support as a handout but rather as a return on investment. The Government do not recognise that, being notable in their reluctance fully to adopt the principle of additionality.
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Many of my constituents and others in the northern region are not particularly concerned about a single European currency. They tend to think in terms of what is happening in the region. We have a substantial amount of Japanese industry, some German-based industry and some Canadian-based industry. My constituents recognise the value of the Canadian dollar, the yen and the deutschmark as being every bit as important as the value of the British pound.The approach of the single European market is of great concern in the region. Due to the Government's lack of interest in regional regeneration, we lag far behind in communications, especially road systems north of Newcastle and west to Carlisle. They are vital links in developing the region. We lack skills training for our young people and need more modern plant. All those factors add to our problems, which the Government could have helped us to overcome. We are not inspired by the advent of the channel tunnel without proper links to the north. The northern region could cope with those changes if it were allowed to compete at the same level as other regions. We do not ask for privileges--only fair treatment.
Equality of opportunity was evident in the 1960s and 1970s, when industries were specifically encouraged to establish in the region. Examples in my constituency are Alcan Aluminium, Glaxo, Searle and a number of others. Boots, Merck Sharpe and Dohme, and Bristol Myers are in the constituency of my hon. Friend the Member for Blyth Valley (Mr. Campbell). All those industries responded to the opportunities made available to them, mainly by the Labour Government, and they continue to survive despite the pressure of high interest rates, inflation and the unified business rate. The only real efforts being made to regenerate the region are coming from two organisations--the Northern Development Company and the Northern Region Councils Association, both of which are doing splendid work on behalf of the region with only minimal Government support for the NDC.
There is urgent need for a proper regional dimension in Government policy. I fully support the Labour party's proposals to introduce a form of regional structure, decentralising some of the Government's inward-looking services and allowing more scope for local input and decision making. There are too many decision makers cocooned in Whitehall and Westminster, unaware of the real situation in the far-flung reaches of the Thatcher empire. Flying visits by Ministers of a half or one day's duration do nothing to inspire confidence in remote decision making.
In a recent report in the Newcastle Evening Chronicle, Mr. Paul Briggs, chairman of the Northern Confederation of British Industry, said :
"As a nation we need to force-feed investment. This is not whingeing and whining--this is reality. Time is not on our side and we cannot achieve increased productivity, lower unit costs and consistently low unemployment without the equipment to make it possible. Investment in manufacturing industry had a very small share of the national investment and without it-- we cannot keep up with our overseas competitors."
I agree entirely with those sentiments because he, at least, is a man who lives with the problems and knows some of the answers to them.
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7.33 pmMr. Gerald Howarth (Cannock and Burntwood) : Anybody watching our proceedings on television, as many seem to do nowadays, cannot fail to be impressed by the contrast between the speech of my right hon. Friend the Chancellor of the Exchequer and the entertaining speech of the right hon. and learned Member for Monklands, East (Mr. Smith). My right hon. Friend was right to suggest that the speech from the Opposition Front Bench was incredibly shallow. If it revealed anything, it was that, as far as we could determine the Opposition's policy on Europe, it was identical to that of the Government. I, too, welcome the Gracious Speech, not least because we are promised a Session of rather less frenetic activity than we have been accustomed to in recent years. It will not do hon. Members any harm to get home to their wives at a more civilised hour.
It is a great privilege to serve in this Parliament and it has been a privilege to serve throughout the past two Parliaments, especially under the leadership of my right hon. Friend the Prime Minister. She has unquestionably brought about an enormous resurgence in Great Britain's standing throughout the world. Wherever one goes now Britain is a respected country. Indeed, even where people do not know the name of our country, they know the name of our Prime Minister. That high standing has been transferred to the United Kingdom economy where welcome and dramatic changes have taken place.
The hon. Member for Wansbeck (Mr. Thompson) mentioned foreign investment in the United Kingdom. He answered his hon. Friend the Member for Brent, East (Mr. Livingstone), who complained that United Kingdom profits were invested overseas. The hon. Member for Wansbeck has demonstrated that investment is a two-way process. Thanks to the liberal trading climate that we have created in the United Kingdom, foreign investors want to invest here alongside British investors. We have seen a massive 50 per cent. increase in productivity over the past 11 years, record growth in the past eight years, strikes becoming less and less frequent, a low taxation regime and, the greatest achievement of all, balanced budgets. Those are sound, solid achievements, on which this Queen's Speech builds.
Like my right hon. Friend the Member for Worthing (Mr. Higgins), I welcome the proposal for compensation for compulsory purchase. That will go a long way towards ensuring that the infrastructure projects that we need are unlocked rather more quickly than they are at present.
The Opposition have no constructive policies to offer. As time goes on, more and more of our people will take things for granted as their unhappy experience of socialism in the United Kingdom fades into the distance.
Privatisation has been one of the great jewels in the crown of successive Conservative Governments since 1979. It has been a spectacularly successful policy. It is worth reminding the British people, our electorate, of the four principal benefits that it has brought. First, it has released the flair and enterprise of managers and people working in industry. Secondly, it has given people a stake in the business for which they work. They now have more commitment and reason for commitment. Thirdly, it has released those industries from Treasury control. Now they can invest funds in much needed investment when they believe that it is right and not have to take their place in the queue as the Treasury thinks fit, competing with other
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political priorities. Fourthly, it has brought better service to customers, which is most important. Fifthly and incidentally, it has raised about £28,000 million for the Exchequer, but that is only a happy by-product.Privatisation has been most successful where we have introduced competition. There has been competition in the airline industry and it is no accident that British Airways is the world's favourite airline. It has been transformed beyond all recognition from the days when it was in the public sector.
Mr. Salmond : What does the hon. Gentleman think of competition in the privatised steel industry?
Mr. Howarth : Wherever there is competition, it is good for consumers, whether private individuals or corporations.
We have seen enormous changes in British Telecom. It has been transformed from a moribund industry where there was no choice, into an industry that is successful and meets the demands of customers. It is now possible to buy a telephone for less than £20. Under the socialists we had no choice-- just what was on offer. The investment has taken place at a rate of £3,000 million in the latest year, in addition to a total investment of £40,500 million. That shows that the private sector invests in technology for the benefit of consumers when it can make profits and run its own affairs. We were told it would not be interested in the consumer or in public service, but not only do 96 per cent. of payphones work, but whereas in 1984 there were only 77,000 payphones, today there are 95,000. Mercury is providing real competition, and I look forward to Friday when I shall be opening a new Mercury payphone in my constituency.
The success of the denationalised industries is shown by the transformation in their finances. Whereas, in 1978-79, those industries that have since been privatised received Government subsidies of £19 million, excluding capital grant and public dividend capital, in 1989-90, those same companies contributed no less than £1,500 million to the Exchequer in corporation tax. That is a demonstration of the success of privatisation. Those companies have been turned round in an exciting development.
Other countries have followed our example. Recently, Argentina privatised its telephone service. Even the Opposition are paying lip service to competition, although I thought that it was rich for their spokesman to say yesterday, "While we welcome competition " Every time that the Government have introduced competition, the Opposition have opposed it root and branch. They do not like the consumer having choice. The British people will not trust a party that pays lip service to the ideas that we established and carried to fruition. We have a great deal further to go, but we are making progress. We have introduced choice in education. Local management of schools is proving to be a great success. Our proposals on health are going through. I am pleased that privatisation will feature in this legislative Session.
These are not the easiest of times for the Conservative party. Inflation is the litmus test by which we judge ourselves, and there is no doubt that we have not been as successful at containing inflation as we should have been. However, my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe)--I am sorry that he is not here now--was wrong to suggest that, had we joined the ERM five years ago, we should have been able to contain
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inflation. There is no evidence to sustain that argument, and my right hon. Friends the Members for Chingford (Mr. Tebbit) and for Worthing (Mr. Higgins) have demonstrated without any doubt that fixed exchange rates offer no solution to the problems of the United Kingdom.When my right hon and learned Friend was Chancellor of the Exchequer, he distinguished himself by being the Chancellor of floating exchange rates. We should have kept to that policy, for in that lay a mechanism by which the strains and imbalances of trading patterns could be taken care of by the marketplace rather than politicians. It was ridiculous of the hon. Member for Brent, East to suggest that DM2.50 is the rate at which the pound should be linked to the deutschmark. He has no idea what the right rate is, and nor does anybody else. It should be left to the markets to determine. Fixed exchange rates will inevitably lead to centralised monetary and economic control and my belief is that that will lead to severe and dangerous tension throughout Europe.
While I welcome much in the Queen's Speech, there is one omission. The hon. Member for Ashfield (Mr. Haynes) will agree that it is a shame that there is no Bill on coal-mining subsidence. I hope that my right hon. Friend the Leader of the House will be able to devote time to ensuring that that will come before the House during this Session.
Several hon. Members rose --
Mr. Deputy Speaker : Order. The winding-up speeches are expected to begin at 9.10 pm. Six hon. Members wish to speak in the debate. If my mathematics is correct, that means that I can somewhat relax the 10-minute limit on speeches, but were any hon. Member to abuse that, I should have no hesitation in putting on the clamps again. 7.44 pm
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