London Underground (Safety Measures) Act 1991
Order for consideration, as amended, read.
To be considered on Monday 2 December at Seven o'clock.
Mr. Gill : I congratulate my hon. Friend on the Government's significant progress in reducing corporate tax rates. However, will he assure the House that the importance of retained profits is truly understood by his Department, especially in relation to unquoted companies where the profits ploughed back by those companies are often the only source of capital? If that seedcorn is confiscated, it inevitably drives companies into the hands of their bankers, which gives rise to many of the problems that small businesses are currently experiencing.
Mr. Maude : I take my hon. Friend's question as an expression of support for our policy of increasing the amount of profit that is left with companies for them to retain or distribute as they think proper. That is the best way of providing a good environment in which businesses can flourish. That is the judgment not just of the Government, but of those hard-hearted characters who decide where mobile investment projecs should go in the EC. The majority of Japanese mobile investment projects and many of the American projects are coming to Britain in preference to anywhere else because Britain has the best environment in which to do business.
Mr. Maude : Britain is full of small business people who are breathing a sigh of relief that their business rate is limited to an increase in the retail prices index rather than the 60 or 70 per cent. annual increases that some irresponsible Labour-controlled councils were imposing and which had the sole effect of driving businesses out of many of our major inner-city centres.
Mr. Hill : My hon. Friend will realise that his statement on corporation tax for small companies needs slight adjustment and I am sure that he is considering a major adjustment on capital gains, which I understand is one of the taxes where the cost of collection exceeds the revenue. Will he consider those matters before the next budget?
The Economic Secretary to the Treasury (Mr. John Maples) : Both I and my officials have had a number of such discussions with a variety of people. On 6 November I saw a delegation of small business men who had been customers of BCCI, and yesterday I saw representatives of the BCCI depositors protection association.
Mr. Vaz : Will the Minister join me in welcoming the proposals put forward by the provisional liquidator and the Sheikh of Abu Dhabi as a first step towards a settlement of the problem? Will he confirm that the Government support a further adjournment of the liquidation period on Monday to allow the negotiations to be completed? Does he agree that the liquidators and other representatives should study every proposal and option in order to secure the best possible deal for depositors, creditors and former members of staff?
Mr. Maples : Obviously, the Government share the hon. Gentleman's pleasure at the fact that the liquidator may well be working out an arrangement with the main shareholders that would mean BCCI's creditors possibly getting a considerably greater return on what they are owed than was previously thought possible. Those negotiations are a matter for the liquidator and shareholders, and the question of what the court should do is a matter for the court and the parties before it, not the Government.
Mr. Molyneaux : Does the Minister agree that we are long past the stage of apportioning blame? People may have been misled, but they may not have been. Should not we now bend our efforts to supporting the proposal that the Minister mentioned and to finding some way of compensating those who have lost dearly?
Column 1053to come into effect. Whether or not that will happen on 2 December remains to be seen. The Government will welcome any arrangement that the liquidator and the principal shareholders can make that would result in BCCI's depositors getting a considerably greater return on their investment than was previously thought possible.
Mr. Boateng : Does the Minister share the view of Sir Leon Brittan and the European Commission that there should be a Europeanwide deposit protection scheme--[ Hon. Members-- : "No."] Such is the hostility of Conservative Members to Europe that it is quite mind-boggling. Does the Minister also share Sir Leon's view that such a scheme should include non- sterling deposits? In the aftermath of the Bingham inquiry, will he ensure that there is a full review of the second banking directive?
Mr. Maples : Clearly, the Government will take appropriate action on any recommendations that result from the Bingham inquiry. Early drafts of a possible EC directive on a Europeanwide deposit protection scheme are being discussed. We think that the basis should be home country protection and that one should not be liable to pay deposits in other people's currencies.
The Chancellor of the Exchequer (Mr. Norman Lamont) : Headline retail prices index inflation in the United Kingdom was 3.7 per cent. in the year to October--the lowest for three and a half years. The latest available average for the European Community is 4.6 per cent. in the year to September.
Mr. Greenway : Are not those figures very encouraging? Does not the fact that our inflation rate is lower than the European Community average offer a real opportunity to British industry to improve its competitiveness? Does my right hon. Friend by any chance recollect the average inflation rate under the last Labour Government? What does he think about that?
Mr. Lamont : Just by chance, I do remember it. The average inflation rate under the last Labour Government was no less than the astonishing figure of 15 per cent. What is so interesting is that despite that disastrous performance, Labour's policies have hardly altered--and they would have the same effect again.
Sir Michael Neubert : While the reduction in price rises is very welcome--taking us back to where we were three and a half years ago--does my right hon. Friend recognise the irony that, as a result, current interest rates--the price of money--are, in real terms, at an all-time high? Can he defy what may appear to be a paradox by both easing the burden of excessive interest rates and pressing on relentlessly until inflation is completely eradicated from the economy?
Mr. Lamont : My hon. Friend asks me to do several things that might not be so easy to do at once. Our first priority must be to maintain the pound's position within the exchange rate mechanism. That is our policy for interest rates. At the same time, we have been able to achieve a dramatic reduction in inflation--which, because it is better than the European Community average, means that there are better prospects for exporting firms and for the jobs in them. There is no way that we can sustain high employment unless we are competitive in inflation levels.
Dr. Bray : Is the Chancellor worried that we are not sustaining high employment? Is he worried that it has taken such a deep and prolonged recession to reduce inflation to its current level? Does he think that he is doing a good job in alerting the country to the rapid rate of convergence at which he is aiming in the exchange rate mechanism and the possible move towards European monetary union?
Mr. Lamont : I am astonished at the hon. Gentleman's last point. If I understood him correctly, he seemed to be saying that our inflation rate was converging too quickly, and that that was imposing costs on the economy. That is an extraordinary contrast with the uncritical support for monetary union expressed by his right hon. and hon. Friends, who want to leap in with no conditions and to throw away the conditions that we have negotiated-- [Laughter.] Labour Members scoff, but that is precisely what the Leader of the Opposition said in the debate the other day.
Mr. Higgins : My right hon. Friend is to be congratulated on the dramatic reduction in the inflation rate. Is he aware that in setting standard spending assessments for prudent local authorities, my right hon. Friend the Secretary of State for the Environment expects them to achieve an even greater reduction in costs and prices? In the light of that, will my right hon. Friend the Chancellor consider consulting the Secretary of State to establish whether the SSAs for prudent authorities, which demand such remarkable reductions in costs and prices, are really justified?
Mr. Lamont : That is an extremely ingenious question. I know that my right hon. Friend has already made those points to my right hon. Friend the Secretary of State for the Environment. We believe, however, that the settlement that my right hon. Friend the Secretary of State announced to the House the other day is realistic and generous and that all responsible local authorities should be able to cope with it.
Mr. James Lamond : The reduction in inflation is to be welcomed ; it will greatly assist in increasing the number of job opportunities. However, does not every reduction in the inflation rate leave the real interest rate a little higher? Surely the Chancellor now has the opportunity to announce a further cut in interest rates. That would help every company in the country, including the small companies that were the subject of an earlier question.
Mr. Lamont : As I have already said, our first priority will be to maintain the external value of the currency--that is, to maintain its position in the exchange rate mechanism. I dread to think where the pound would have been in the past few days if I had followed the advice of Opposition Members.
Mr. Chris Smith : The Chancellor will probably recall that his right hon. Friend the Prime Minister, when he was Chancellor, told the House on 15 February 1990 that the retail prices index was an inaccurate measure of the real rate of inflation. He reiterated that point in June and again in July.
Is not it the case that the present underlying rate of inflation in the United Kingdom is 5.5 per cent. if mortgage interest rates are excluded, and 7.3 per cent. if both mortgage interest rates and poll tax are excluded? Is it not also the case that the underlying rate was 5.9 per cent. when the right hon. Member for Huntingdon (Mr. Major) became Chancellor, and that it is now 7.3 per cent? A little more humility would not go amiss.
Mr. Lamont : I touched on those points yesterday when I appeared before the Treasury Select Committee. Whether we take the retail prices index minus mortgage interest payments or producer prices, the rate of inflation has declined sharply in the past year and I suspect that the underlying measures of inflation will continue to decline in the next year- - [Interruption.] I can tell the right hon. and learned Member for Monklands, East (Mr. Smith), who is interrupting from a sedentary position, that the underlying rate of inflation compares extremely well with the position under the Labour Government of which he was a member.
The Chief Secretary to the Treasury (Mr. David Mellor) : Manufacturing investment, narrowly defined, averaged £9.8 billion a year between 1974 and 1979 and £9.8 billion a year between 1979 and 1990 at constant 1985 prices. Total capital investment in plant and machinery averaged £17.7 billion between 1974 and 1979 and £24.3 billion a year between 1979 and 1990, also at constant 1985 prices.
Mr. McKay : The Minister has chosen his statistics carefully. Has not he forgotten to mention that between 1979 and 1981 investment fell sharply and that it was lower in the third quarter of 1991 than in any other quarter--12 per cent. of the 1979 level? With all the income from oil and from selling off the family silver, is not it a disgrace that manufacturing investment is now lower than in 1979? If the right hon. and learned Gentleman believes in that vital sector of our economy, why does not he take measures to increase investment?
Mr. Mellor : If one takes the narrow definition of manufacturing investment, which excludes a range of investment that is made by manufacturing companies in services that no longer count as manufacturing investment but which they used to do in-house, the average for the past six years was £10.9 billion--much higher than under the previous Labour Government. I do not know what the Labour party is so proud of, because under the previous Labour Government manufacturing output fell by 2 per cent. whereas between 1981 and 1991 it increased by 25 per cent.
Column 1056about what happened before 1979, if he visited various parts of Yorkshire he would see massive investment in manufacturing, including £1 million in wool textiles.
Mr. Mellor : My hon. Friend is absolutely right, but the international comparisons are even more telling. In the 1970s--for much of which there was a Labour Government--the United Kingdom was the only Group of Seven country where average year-on-year manufacturing output fell. In the 1980s, we ran joint third among the Group of Seven, which was a considerable improvement.
Mr. Nicholas Brown : Is the Chief Secretary aware that today 900 of our fellow citizens in Derby, Crewe and York will lose their jobs in the manufacturing sector? Is he further aware that since 1979, 2 million of our fellow citizens have lost their jobs in the manufacturing sector? Is it the Government's policy to arrest the accelerating decline in manufacturing-- both in investment and employment--and, if so, when they will do it and how?
Mr. Mellor : There is evidence that the decline in manufacturing has been arrested, and I shall give the hon. Gentleman that evidence. It seems clear that in 1991, as in 1990 and 1989 and after decades of decline, Britain's portion of world trade in manufacturing exports will increase. That is a significant achievement, of which the hon. Gentleman should be aware. Despite the Labour party's smears about what has been happening recently, manufacturing exports are up this year, notwithstanding the recession.
Mr. Alex Carlile : The latest Confederation of British Industry economic forecast shows a decline in manufacturing investment in 1991 of almost 20 per cent. and a further decline of 4.4 per cent. in 1992. Is the right hon. and learned Gentleman satisfied with that performance?
The only basis on which criticism can be made of the inevitable decline in investment during the recession is if high praise is lavished on the Government for the three years in the last 1980s when investment touched peaks. Even with the decline in business investment in this recession, it is about 40 per cent. higher in real terms than in 1979. That is the proof of our achievement in the 1980s, to which we can return.
Mr. Andrew Mitchell : Does not business investment, of which manufacturing investment is a part, remain extremely high? Is not it higher today than throughout the 1970s and the first half of the 1980s?
Mr. Mellor : My hon. Friend is absolutely right. I am only too happy to discuss manufacturing, as it is an important sector of the economy. However, it is 20 per cent. of the economy and I never understand why the Labour party is not interested in the other 80 per cent. It appears that unless people go to work in some landscape recognisable to L. S. Lowry, their jobs, conditions and efforts are not worth talking about.
Mr. Alton : Those figures, which show £52 billion of personal debt excluding mortgages, surely represent personal misery and are a major cause of family and social breakdown. Does the Minister think that it is now time to implement the proposals in the report "Escaping the Debt Trap" to introduce social loans, to take more stringent action against loan sharks who exploit poor people by their extortionate interest rates and to encourage a more responsible lending policy by banks?
Mr. Maples : On the question of extortion and credit, the Director General of Fair Trading published a report in September which the Department of Trade and Industry is considering. As for the proposals contained in "Escaping the Debt Trap"--the hon. Gentleman kindly sent me a copy--it will not surprise him if I do not agree with all of them. It is not the Government's business to start telling banks and consumers what arrangements they should make between themselves although, clearly, some people are in difficulties with consumer credit. I do not think that the fact that consumer credit is at a high level is evidence that people are miserable--they have done things with the money that they have. Most have either made sensible investments or have bought what they wanted and could afford.
Mr. Loyden : Does the Minister recognise that the question of loan sharks has been on the agenda for the past 12 years, but that nothing positive has occurred other than the report to which he referred? Is not it time that the Government took on board that question and began to tackle the problem of loan sharks positively? Such action is certainly lacking at the moment.
Mr. Maples : As I said in reply to the hon. Member for Liverpool, Mossley Hill (Mr. Alton), the Government have obtained a report from the Director General of Fair Trading, which was only published on 24 September. It is reasonable to give the appropriate Ministers at the Department of Trade and Industry a little more time to respond to it.
Mr. Mellor : The Government's plans for public spending were announced in the Chancellor's autumn statement on 6 November. Further details were set out in the written statement published on 13 November.
Mr. Cohen : Most people who see the run-down state of schools and public transport do not think that the picture of public spending is as rosy as that set out by the Chancellor. Does the Minister remember that before the last general election the Government promised an increase
Column 1058in public spending of £11.2 billion in the following three years? In fact, it turned out to be a cut of £12.7 billion. In those circumstances, is not the Chancellor's promise of an extra £10 billion a similar Tory election hoax? Far from protecting public services, is not the Conservative party the party of public squalor?
Mr. Mellor : The hon. Gentleman would do me a great favour if he could kindly confirm that his party, if in power, would spend an extra £13 billion above what we are spending. We have been trying to extract the figures from the Opposition. If the hon. Gentleman has agreed with members of his Front Bench that that is the line to take, I should be glad of confirmation.
Mr. John Marshall : Does my right hon. and learned Friend agree that spending an extra £35 billion could be financed only by massive increases in taxation and higher interest rates, which would lead to a massive increase in the level of unemployment?
Mr. Mellor : This is a point to which we return time and again. No Opposition have ever mutilated more forests in the interests of producing an endless stream of written policy documents containing come-ons and pledges of all sorts to every sectional interest, but when we add up those pledges and cost them, the Labour party becomes very coy. We want to know-- [Interruption.] The right hon. and learned Member for Monklands, East (Mr. Smith) can leap up and tell me--the House would be delighted to hear from him--how he will cover the difference between the £10 billion of extra taxation to which his party has already committed itself and the £35 billion of extra spending to which it has also committed itself?
Mrs. Beckett rose --
Mrs. Beckett : When I am on the Government side of the House it will be my turn to answer questions. Now it is my turn to ask them. Speaking of how to meet levels of public spending, does the Chief Secretary recall the sharp increase in borrowing forecast in his public spending programmes? Will he confirm that it would be grossly irresponsible for any Government to cut the standard rate of income tax when public borrowing is about to shoot up in that way and that consequently, if the Chancellor of the Exchequer proposes such a cut in his next Budget, he will have to make it up by increasing other taxes--perhaps VAT?
Mr. Mellor : The record shows that during the 1980s we were able both to increase public expenditure in real terms by about 20 per cent. and to cut tax rates-- [Hon. Members :-- "No !"] Oh yes--and for the decade following 1981-82, we reduced the tax burden.
Mr. Nicholls : Given the new-found concern of the hon. Member for Derby, South (Mrs. Beckett) about public borrowing, will my right hon. and learned Friend remind her that the previous Labour Chancellor of the Exchequer managed to borrow not only more money than any
Column 1059previous Chancellor, but more money than all previous Chancellors added together? What would that do for the living conditions of the poor?
Mr. Michie : Is the Chief Secretary aware of the IMF prediction of a further 2 per cent. cut in investment next year? Is he unaware of the ever- deepening industrial crisis if such cuts were to take place next year? Is not it time that he built the economy in a constructive way rather than just waffling about it?
Mr. Mellor : As Gavyn Davies, who may be better known to some Opposition Members than he is to us, has said, the interesting thing is at how high a proportion of GDP investment has settled, notwithstanding the recession. It is 14.1 per cent. of GDP for the second half of 1991--that is a high level. If Labour Members wish regularly to employ international statistics on investment, they should bear in mind the fact that during the 1970s the average annual growth rate in business investment in the United Kingdom was 2.3 per cent., against an average of 3.1 per cent. for the Group of Seven. In the 1980s the average annual growth rate in business investment was 6.7 per cent. as against a Group of Seven average of 4.6 per cent. That is quite a transformation.
Mr. Batiste : Is not it clear that the excellent record of business investment in the United Kingdom reflects the fact that business men recognise the Government's commitment to containing inflation in the long term? After all, it is the cost of capital which determines business investment. Would not that be threatened only by the advent of a Labour Government, with their profligate spending plans?
Mr. Mellor : Yes. It also reflects the bold decision taken by my right hon. Friend the Member for Blaby (Mr. Lawson) to cut corporation tax and liberate a range of resources for investments which companies would choose for themselves rather than being pointed in a certain direction by the distorting effect of allowances. In the middle to late 1980s that led not only to an unprecedented increase in investment in terms of value, but to a sharp increase in the quality of that investment. That is evidenced by the unprecedented increase in the productivity of all manner of industries that has taken place since.
Mr. Robert Sheldon : Will the right hon. and learned Gentleman have a serious look at capital allowances, especially for plant and machinery, which should not have only a 25 per cent. capital allowance? That is not an
Column 1060incentive ; it is a penal rate. Will the right hon. and learned Gentleman consult the Confederation of British Industry, which is coming round to the view that a 40 per cent. rate--which is not enough--would be appropriate?
Mr. Mellor : The real point that one needs to note is the increase in capital investment in plant and machinery under this Government-- [Interruption.] It is no good hon. Members shaking their heads. Since I gave the figures to the House last time, they have not been contradicted. I will give them again and, if I am wrong, I shall have to be put right next week. Gross investment in plant and machinery in the last year in which the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) had stewardship of these matters, at constant 1985 prices, was just over £17 billion. In 1990, it was over £32 billion. That is comparing like with like and is a sign of the real difference in investment under this Government.
Mr. Ian Taylor : Does my right hon. and learned Friend remember that under the previous Labour Government, the International Monetary Fund came to the rescue? Is not a warning signal needed for Labour Front-Bench Members over the current draft proposal on economic and monetary union, because it contains a no bail-out clause? This country had better not be under a Labour Government.
Mr. John Smith : As the Chief Secretary takes refuge in international comparisons, especially with the other countries of the Group of Seven, will he explain why the United Kingdom is not only at the bottom of the investment league of the G7, but at the bottom of the investment league of leading European nations?
Mr. Mellor : That is a very short-term statistic. It is clear that over the 1980s, our investment record has run well ahead of that of the rest of the Group of Seven. We shall return to that. The right hon. and learned Gentleman and I can swap statistics quite soon and I look forward to it.
Sir John Farr : Does my hon. Friend believe that interest rates should be reduced by 0.5 per cent. now and that immediate action would save thousands of jobs? Do the Government have the ability to make that adjustment, or are they tied hand and foot by the exchange rate mechanism? If so, will my hon. Friend say so?
Mr. Maples : My hon. Friend knows that our policy on interest rates is to set them in a way that is compatible with our commitment to the pound's band within the exchange rate mechanism and to bear down on inflation. That policy has been manifestly successful over the past 12 months in reducing the rate of inflation to 3.7 per cent.
Column 1061the Exchequer, in response to the hon. Member for Ealing, North (Mr. Greenway), about lower inflation, should not the Chancellor have a little more regard for board rooms where, in the balance between optimism and pessimism, the state of opinion remains distinctly negative, than for the exigencies of the exchange rate mechanism?
Mr. Maples : The mood in board rooms as disclosed by the CBI business confidence survey shows something rather different--a substantial and continuing increase in business confidence. Business men who are borrowers naturally want lower interest rates, but I am afraid that the Government have to take a rather broader view of what is in the interests of the economy. They cannot simply allow one sectional interest in the community to override others.
Mr. Nicholas Winterton : Does my hon. Friend accept that high interest rates are a disincentive to investment? Instead of indulging in sterile exchanges of statistics across the Chamber, should not the House decide whether the level of investment in this country is adequate to ensure that our manufacturing base can compete against other countries? [ Hon. Members :-- "Hear, hear."] How does the level of investment in this country compare with that of our major competitors?