House of Commons Hansard Debates for 19 Feb 1992

Mr. Steve Norris (Epping Forest) : It is always a pleasure to follow the right hon. Member for Bethnal Green and Stepney (Mr. Shore) and to listen to his characteristically interesting and illuminating remarks. But it is an even greater pleasure to remind the House that this is an Opposition Supply day. My extraordinary observation is that this is supposed to be a day when the Opposition pick a subject on which they feel that the Government are most vulnerable. Having listened to the contributions from the two Front Benches, I do not think that many people will be left in any doubt that my right hon. Friend the Secretary of State for the Environment put on a superb performance. His speech was as peppered with amusing anecdotes as the speech of the right hon. and learned Member for Monklands, East (Mr. Smith), whose contributions I always enjoy. I was very taken with university debating societies and it is good to see that tradition continued in the House.

The unruly behaviour, however--in which I would have no part, Madam Deputy Speaker--may have arisen from the Conservative Benches because of the unique failure of the right hon. and learned Member for Monklands, East to answer any of the direct questions put to him by my right hon. and hon. Friends. In the course of the next few minutes, in what I hope will be a quieter atmosphere, I shall repeat some of those questions so that the hon. Member for Dagenham (Mr. Gould) can think about answering them when he winds up.

Mr. Stuart Randall (Kingston upon Hull, West) : Will the hon. Gentleman give way?

Mr. Norris : The hon. Gentleman usually addresses the House on home affairs, but I am anxious to hear his comments on the economy.

Mr. Randall : Although we heard an entertaining speech from the Secretary of State for the Environment, there is a serious point to be made. Many people will have been watching the debate on television. They will include people who are unemployed, who have had their homes repossessed, and who have lost their businesses. They will wonder what on earth is going on in the House of Commons when there are so many problems outside, so there are two sides to the coin.

Mr. Norris : In the next few minutes I intend to follow the line that the hon. Gentleman has just taken. I shall offer my contribution as a small business man--one who

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has been in business for himself on and off for the past 20 years. Others will no doubt wish to contribute to the debate from their own perspectives.

I am happy to acknowledge that the Government, in the wake of the 1987 stock market correction--it was called a crash at the time, but we all know that it was a correction--pulled the levers of demand too hard. I supported the Government, as did my right hon. and hon. Friends, because we desperately wanted to avoid a crisis of confidence--a recession, sadly--and in doing so it is clear that we over-ignited the flames of demand. The consequences of that were very sad.

I merely make two observations. The most salient one, which should oft be repeated, is that Opposition Members urged us at that time to take even more fierce action to ensure that demand was maintained. Now that the House is quieter, I can say that it is also clear beyond peradventure that conditions in world markets have now exacerbated a situation which faced this country just at the point when we would otherwise have been beginning to come out of recession. The evidence of what is happening in the United States has already been felt by the British car market, for instance. Evidence of what is going on in Germany was cited by my right hon. Friend the Secretary of State. I therefore have no qualms about accepting the full share of moral responsibility for the present position of the British economy. I see no point is pulling over entrails to determine the proportions of such responsibility, particularly in view of the evident collusion and strong endorsement of the Opposition.

Furthermore, I deeply resent the implication in the remarks of the hon. Member for Kingston upon Hull, West (Mr. Randall) that only the Opposition care about the unemployment consequences of the recession. I know of no Conservative Member who believes that one unemployed person is a desirable feature of any economy. One unemployed person is one too many, one failed business is one too many, and we have seen too many of both those individual tragedies. Business failures are tragedies in themselves. They are as regretted as sad news, and as desperately disappointing to my hon. Friends as they are to Opposition Members. They are the sad and inevitable price that is paid for the brave action that the Government took when they recognised that the levers of demand had been pulled too hard and the economy was overheating.

Although the Government took brave, draconian action which hurt, it has had, beyond any doubt, the desired effect in re-establishing the essentials for recovery and growth in the 1990s, such as low inflation and the best record of employment losses through strikes for the past five decades.

Mr. Gould : I do not intend to intervene frequently, but I am listening with great interest to what the hon. Gentleman is saying. Although I would reach a different conclusion about the beneficial consequences of the policy that he describes, I am entirely with him in his description of the sequence of events and the causal connection between those events. How does his analysis square with the case made by the Secretary of State for the Environment a moment ago, when he said that the recession had nothing to do with mistakes of economic policy made by the Government ?

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Mr. Norris : I have a clear impression of the exchanges between the two Front Benches. The Opposition absolutely refused to recognise that international conditions have an impact on Britain's economy. That is patently absurd. It would be unrealistic to attempt to discharge the Government of their share of responsibility for the present economic conditions. That is so beyond peradventure as to be hardly worthy of debate.

The crucial point is that we are now faced with a choice. For the British economy we have a choice between two paths into the 1990s. I have a message for any potential elector, of whatever age or income. Some people believe that one can make the poor richer by making the rich poorer. The right hon. and learned Member for Monklands, East called it redistribution, but we know what it means. What of those people who bother to drag themselves up and make a success of their lives, who start businesses which create genuine employment? Some believe that, by so doing, such people become class enemies, and some believe--this is crucial--that there is credibility in the idea that raising personal taxes is the way out of recession. Anyone who believes any of those three fundamental adages should vote Labour at the next election. That is what the Labour party is offering, and it is no more and no less than the politics of envy.

The reality is quite the opposite. Higher personal taxes simply deter consumer confidence. People have less money to spend and the expectation of still less spending power, and they refrain from doing the one thing that needs to be done if we are to emerge from recession--namely, spend. Such a situation destroys the housing market. Hon. Gentlemen opposite are good at telling us how many jobs there are in construction.

Mrs. Llin Golding (Newcastle-under-Lyme) : And hon. Ladies.

Mr. Norris : Yes, the ladies are just as guilty as the men. If Opposition Members do not see the inevitable consequences of higher personal taxes for the housing market and, therefore, for the construction industry, they are blind to the obvious realities.

Mr. John Battle (Leeds, West) : Will the hon. Gentleman give way?

Mr. Norris : I hope that the hon. Gentleman will forgive me if I do not give way. As you, Madam Deputy Speaker, have pointed out, time is limited.

Let us consider the effect of higher taxes on pensioners, on people who during their working lives saved for the purpose of enhancing their retirement incomes. Why should significant additional burdens be imposed on those people? Why should such people be condemned for putting all their effort into the accumulation of a small capital sum? Why should they be driven to the conclusion that it was never worth while, that they should never have bothered, that thrift was never the right policy, that there is a distinct disincentive to save and provide wealth for investment in this country?

The ludicrous minimum wage policy that the Opposition offer as a way out of recession would also be disastrous for the British economy. There can now be no doubt that a national minimum wage would only raise overall unit costs and add to inflation. A minimum wage is wonderful in theory, but utterly impractical. That is accepted by Conservative Members and, as I believe

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Opposition Members know, even the Fabians have pointed out time without number that the minimum wage would be a recipe for disaster for the British economy.

Then there is the whole matter of the extent to which the Labour party is obliged by those who pull its own levers to relax the reform of trade union law that the Government, over a considerable number of years and with a great deal of effort, have put in place. Our industrial relations record is at its best for five decades. That being the case, we should not be thinking about a return to the old chaos--the old business of half Britain being on strike at any one time. In those days, one could count strikes by the dozen. I was about to refer to counting them on one's fingers, but perhaps I should rephrase that as it would have taken far more than the available digits to count the strikes on any day anywhere in Britain.

I wish to refer to another consequence of the policies of the Labour party. This is something that matters a great deal to me. Spirit, entrepreneurship and initiative constitute the germ of business and the creation of new jobs. People starting businesses do what such people have always had to do- -that is, risk probably most of what they have ever built up during their working lives. They may have to secure second mortgages on their homes. They often have to work seven days a week rather than five ; they are the last out through the door at the end of the day, the ones who switch off the lights ; they are the ones who check the quality of every item leaving the factory ; and they are the people who, year in and year out, are unable to take holidays. In this country there are many thousands of such people. But a person can be asked to make those sacrifices only if he is offered the prospect of the ability to enjoy his success.

The Opposition's case rests on the desperate fallacy that, somehow, such people are class enemies rather than people on which the whole future of our economy depends. Entrepreneurs must be allowed to enjoy the fruits of their success, of all their effort and their risk. That is something that the Labour party has never understood. No party with any understanding of how business operates could ever propose raising taxes as a way out of recession and conducting a kind of class warfare, which is not only desperately out of date but also desperately inappropriate to this country at present.

We have the lowest corporation taxes of all the G7 countries, and we have our best strike record for five decades. Conservatives are committed to lower personal taxes and lower corporation taxes because we genuinely want to encourage investment. But what we want is real investment, not the state -directed picking of winners. That is the disastrous policy that the Labour party adopted in the 1970s.

Mr. David Evans (Welwyn Hatfield) : It failed.

Mr. Norris : Yes, it failed significantly.

What we want is real investment. We want to encourage reward. We want to encourage success and entrepreneurship. We want to encourage risk-takers. Anyone in business, contemplating going into business, or even working for a small or medium-sized business, should look at the choices on offer in the forthcoming general election. Such people ought to say no to the politics of envy. They should say yes to the party of entrepreneurship, the party

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that wants the British economy to grow, the party that wants a successful outcome in the 1990s. I am convinced that, as the general election programme unfolds, ordinary men and women will realise increasingly the wisdom of that conclusion.

6.27 pm

Mr. A. J. Beith (Berwick upon Tweed) : The hon. Member for Epping Forest (Mr. Norris) gave a very graphic and accurate description of the life of small businessmen, the risks that they take, and the anxieties and burdens that they have to bear. He seemed to want to give the impression that the entire small business community, despite its difficulties during the recent recession, is generally weathering the situation remarkably well and can afford to look with enthusiasm to another period of similar government.

The reality is so dreadfully different. The hon. Gentleman talked about people who switch the lights on in the morning and are the last out at night, people who have risked their savings and, as many have second mortgages tied up with their businesses, their homes. Those are the people who are going bankrupt at a record rate. They are experiencing business failure on a scale that this country has never seen before. Incidentally, it is not they who are paying out large amounts of income tax and corporation tax, as the return on their investment is currently so low, but they are the people who have to find the uniform business rate. They have been taxed at a ludicrous level because of the Government's decision, in successive years, to pitch the uniform business rate at the highest legally permissible level. Why do the Government, who are supposedly concerned about small business, pitch the uniform business rate at the maximum that they have legally permitted themselves to do, and then claim that, if the matter were in the hands of local government, business would pay far more? What a ludicrous proposition that is.

Mr. Stephen Day (Cheadle) : Am I correct in saying that the Liberal party has proposed giving local authorities the power to impose a business rate based on land values? Is that not a recipe for disaster for employment figures in places such as Lambeth and Liverpool?

Mr. Beith : No, it is not. If the hon. Gentleman wants to talk about local government finance and the sort of measures that we would take to help districts such as Liverpool, so long as they were properly run and not run as they have been during much of the past decade, I can explain how those measures would not prove disastrous. Land values in much of Liverpool have been at a relatively low level for fairly obvious reasons. One thing that does not make sense, however, is to pitch the business rate at the highest level legally permitted when there is a crisis among small businesses, which is what the Government have done.

The Secretary of State for the Environment seems to have brought forward his dinner engagement so that he can return in time to hear the hon. Member for Dagenham (Mr. Gould) and is no doubt trying to digest his prawns so that he can enjoy the hon. Gentleman's speech later.

I know why the Chancellor did not speak in today's debate. It was for the very good reason that he was appearing before the Treasury Select Committee, answering questions about why this country is committed to the cohesion fund of European monetary union while

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not actually committed to joining the monetary union. British taxpayers will pay for the convergence exercise that must take place, even if the country is not to enjoy the benefit of being in the monetary union. The Chancellor had a job to do.

I do not understand why the Secretary of State for Trade and Industry was replaced by the Secretary of State for the Environment, but I can think of a reason. The Secretary of State for the Environment squashed the Secretary of State for Trade and Industry out of sight on the subject of RECHAR and European funds. The Secretary of State for the Environment told the Government that they would have to climb down on that issue and, ultimately, they did. I am grateful to the Secretary of State for the Environment for making his views known both within and, eventually, outside Government. I represent a coal mining district which has suffered all the consequences of the decline in the industry. We need that money, and I am glad that a deal has been struck between the Government and the European Community on that issue.

Mr. Hind : The hon. Gentleman commented on why the Secretary of State for the Environment led for the Government. Perhaps in years to come he will be grateful to him for introducing a new concept of Labour policy-- economics bolognaise--a phrase that may live with us for many years.

Mr. Beith : I do not think that that phrase will be what anyone from among the unemployed and homeless who heard or took notice of the Secretary of State's speech will remember. They will remember the Secretary of State reducing Conservative Back Benchers to gales of delighted laughter by his oratorical skills.

The Secretary of State did not apply any of his energies to developing policies that could give homes and jobs to the people so desperately in need of them. That was the action of a Secretary of State who is known to have a genuine interest in shifting the direction of Government policy towards a more interventionist role than that favoured by the former Prime Minister. As a spending Minister, the Secretary of State is also responsible for local authority funds, which are currently tied up but which could be spent on building houses.

The Secretary of State seemed more interested in what--if they will forgive me for calling them this--obscure Members of the Labour Front Bench team may or may not have said about housing capital receipts, than he was about directing those capital receipts towards reinvesting in our housing stock, which is what matters to people who are not homeless. They are concerned not with what the hon. Member for Hammersmith (Mr. Soley) may or may not have said, but about whether money from local authority bank accounts will flow into building and repairing houses, and provide jobs in the construction industry. That is what the economy needs now.

Unemployment increased by 53,000 last month and has increased by 713,000 over the year. Yesterday's figures on long-term unemployment showed the largest rise for 10 years. The output figures published on Friday show that output is no higher than it was at the last election. After almost five years of the most recent Conservative Administration, and the boom and bust cycle, we are back where we were. Manufacturing output fell by 5 per cent.

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between 1990-91. In the last quarter of 1991, total output fell yet again. Are those figures explained by a world recession? Of course they are not.

A world recession makes it much harder for us to get out of the recession that we entered long before some other parts of the world. It makes the problem more difficult for any Government, but it strengthens the argument for the Government to take anti-recession steps and to develop anti- recession policies. An export-led recovery will not come easily when other countries are also experiencing economic difficulties. Some of the difficulties experienced by those countries look like benefits compared with what we have been through in the past couple of years.

In the rest of the Community, gross domestic product has still risen, while in this country it has fallen by 2.5 per cent. In France it has grown by 1.4 per cent. Italy's GDP is growing. Japan's GDP has been slowing down, but it still grew by about 4.5 per cent. in 1991. If those are problems, they are problems that we in this country would prefer to the experience that we have suffered in the past couple of years. Forecasts for the future show the outlook for Britain to be far worse than that for other countries.

Mr. David Nicholson (Taunton) : I should alert the hon. Gentleman to one of his own party's proposals, which is hardly likely to advance Britain's economic recovery. I believe that the Liberal Democrats are committed to swingeing increases in the price of petrol, which will hit all people, including business people in rural districts such as his constituency, the constituency of the right hon. Member for Yeovil (Mr. Ashdown) and my own constituency. I believe that the right hon. Member for Yeovil has also proposed drastic increases in energy taxes. Surely that would have a crippling effect on industry. How can the hon. Gentleman justify those proposals?

Mr. Beith : The hon. Gentleman should read what Ministers have said on the subject--for example, what the chairman of the Conservative party said when he was Secretary of State for the Environment. He said that energy prices would have to rise. If the hon. Member for Taunton (Mr. Nicholson) thinks that increases of 10p per year over a period of four years represent swingeing increases in the price of petrol, and if he refuses to take into account the extent to which we--unlike the Government- -intend to channel resources into rural districts which might be affected more adversely than urban districts, he fails to understand what is happening in terms of environmental policies. He might be surprised at what the Government have in store, were they to be in office much longer.

The hon. Gentleman interrupted me at an early stage in my argument when I was seeking to relate how the recession came about and the way in which it was fuelled by the Government. The hon. Member for Epping Forest (Mr. Norris) was honest enough to admit that the Government cannot absolve themselves of the blame for the recession, but he did not go into that part of the blame relating to the way in which the Government deliberately stimulated the economy to an extent that was bound to lead to debt on a scale that is now protracting the recession. It is the experience of recession and the debts that people incurred during it that makes them so unwilling to rush into shops and create the consumer-led recovery that the Government said would be the way to emerge from the recession.

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Ministers are now beginning to make some admissions about what has happened. The right hon. Member for Blaby (Mr. Lawson) has admitted that the authorities in this country, including the present Prime Minister, greatly underestimated the demand effect that deregulation--a supply side reform--would have. We know what happened : at one and the same time, the Government presided over substantial deregulation--making capital much easier to borrow--promised tax cuts later in the year, thus leading people to believe that it would be safe to get into debt, and told people that if they wanted to buy a house in London they should do so in the next few months as there would never be such a time for tax relief. They made tax changes on that basis. The combined effect of those actions was a dramatic credit boom, within which lies the cause of many of the problems and the extent of the present recession. The Government mercilessly fuelled the recession.

With the economy so deep in recession, Britain needs a programme that recognises the urgent need to get the economy going and reduce unemployment. There is little room for using interest rates, due to the importance of the exchange rate mechanism in anti-inflation policy, so one is left with a choice between cutting taxes or increasing public expenditure to get the economy going again. All the signs are that the Government's approach will be to try to achieve that aim through income tax cuts. We do not believe that that is the most efficient approach. Income tax cuts take time to come through and the people who gain by tax cuts may use the

money--understandably--to repay their debts and not to engage in the consumer boom that the Government hope will get us out of recession. Income tax cuts only increase the spending power of those in work--not those relying on the state pension or those who are unemployed. Nor is it financially prudent to fund income tax cuts by public borrowing. It would be most irresponsible to increase public borrowing in the Budget in order to fund tax cuts. When Britain desperately needs investment-led recovery, Liberal Democrats do not think it responsible to concentrate scarce public resources on attempting to foster an unlikely consumption-led recovery. As for Labour's approach, there are signs that it has been criticised from within as timid and that key changes will have to be phased. That was indicated some time ago after the Leader of the Opposition's slightly confused comments about Labour's tax plans. He said that if the tax changes were to be phased, perhaps increased pensions and benefits would also have to be phased. There is an air of extreme caution, born of a desire to live down the reputation gained by earlier Labour Governments, and the caution may be so great that it leaves Labour offering no better option for an investment-led recovery than the Government. It will be interesting to see how much borrowing the Government engage in. If Labour comes up with a figure before the Government, they may find that in the end the Government have a higher PSBR than they would have had.

The other great weakness of Labour's position so far is that it lacks the anti-inflation policy which is necessary to accompany the investment measures set out in the motion. That is why we sought to amend the motion by adding the anti-inflation buttress which we believe would best be

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provided by an independent central bank. It is a mistaken charge for the Government to lay against the Labour party that its proposals would deepen recession. I do not believe that they would, although they might have some effect on the beginning of recovery from recession. The danger is that they might restart inflation if not accompanied by a firm anti-inflation policy.

Labour has other proposals, such as the one-off increase in capital allowances to 100 per cent., which sounds a good idea, but on examination they do not seem likely to have all that great an effect. I would favour providing a consistent taxation environment for business--for example, by indexing the corporation tax allowance so that business could plan in the knowledge of its corporation tax commitment if earnings increased.

If we are to cut taxes, one of the best places to aim tax cuts might be at business, and particularly small business, by cutting the uniform business rate and business rates in Scotland. That would improve liquidity for every business and there would be an immediate cash flow improvement. At the same time, we could get rid of some of the silly restrictions in the uniform business rate transition relief scheme--such as the fact that relief is attached to property and not to the business, thus discouraging businesses from moving premises when that might be one of the best ways for them to cut costs in response to the recession.

Liberal Democrats believe that the most effective way out of the recession would be through a large-scale programme of capital investment and training measures over the next two to three years. Such a programme would boost confidence throughout the economy, reducing the fear factor which worries so many firms and people. It would help the troubled construction industry, enabling firms to continue in business and to expand their labour forces. It would enable British Rail to go ahead with the plans already drawn up to modernise and electrify more routes. It would enable many councils to start on projects for major and minor repairs to schools and housing stock. Health authorities would be able to implement improvements to hospital buildings which they have been wanting to make for years. There would be employment and export opportunities in the major energy conservation programme and the programme to develop our skills in energy efficiency.

Perhaps even more importantly, such projects have to be carried out if Britain is to be more competitive in the long term. The Secretary of State said much about Britain's competitiveness, but too little about how important some measures are to secure that competitiveness in future. We need investment in our infrastructure and more efficient use of energy, backed by a firm anti-inflation policy. I noted that the Secretary of State quoted the Bundesbank a lot. I was interested to hear the deputy president of the Bundesbank calling on Britain yesterday to speed up moves to create an independent central bank to

"ensure adequate prior familiarisation with the new structures of decision making".

He was warning the British Government that they should understand their commitment that if they go into the monetary system they will accept an independent central bank. Alongside that, there must be a genuine commitment to free enterprise and to a free market economy.

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I was very struck by the fact that the UBS Phillips and Drew economic briefing published on Monday last week said of the Liberal Democrats' economic programme, part of which I have outlined : "Of the economic programmes on offer, theirs is easily the most logically argued and the most sensibly radical."

Looking forward to a balanced Parliament, and considering the possibility of a minority Government, the review said :

"For economic performance the better outcome would involve power sharing in which the Liberal Democrats pressed home their sensibly radical economic programme--enhancing the best features of the Conservatives' policies or limiting the possible damage of Labour's".

That was a sensible and wise judgment.

In the light of the unemployment and misery which stalks so much of the country, we must offer the people some hope. Without an investment programme for jobs, backed by a programme to beat inflation, the Government are offering no hope to the unemployed millions, no prospect of improvement and therefore no basis for recovery.

6.46 pm

Mr. David Nicholson (Taunton) : The hon. Member for

Berwick-upon-Tweed (Mr. Beith) is always heard with respect in the House. He made a serious contribution to the debate, unlike the right hon. and learned Member for Monklands, East (Mr. Smith). We take issue with him on energy costs and on the idea that businesses would be better off if local authorities were free to determine their own business rates, but I shall return to that shortly.

With regard to the prospects of the Liberals influencing policy if there were a hung Parliament, I reflected with sadness on the time when the Liberals tried to influence the policy of the Labour Government during the Lib-Lab pact. I am afraid that the Government of Lord Callaghan and the right hon. Members for Leeds, East (Mr. Healey) and Blaenau Gwent (Mr. Foot) had the Liberals for breakfast, if we are pursuing the admirable gastronomic parallel of my right hon. Friend the Secretary of State.

My hon. Friend the Member for Epping Forest (Mr. Norris) made the point that, probably in a few weeks' time, the electors will have to choose between alternative policies to govern the country. Electors are irritated by the badinage across the Floor of the House, which was particularly marked earlier today during the two Front-Bench speeches.

In the approach to the February 1974 election I was in a position to observe matters as a party back-room boy. Possibly because there was a big miners' strike which diverted attention from politics, I do not believe that the Conservative party warned the electorate adequately in those months about what a Labour Government would mean.

My hon. Friends may remember that Labour was elected to power without a majority in the House and with 1 per cent. less of the electorate voting for it than voted for the Conservative party. If we had properly warned the electorate of what the policies of the right hon. Member for Chesterfield (Mr. Benn) and his right hon. Friends would inflict on the country in 1974, 1975 and 1976, I suspect that we might have tilted the balance and retained power. My God, would not the country have been a better place and would not the economy have been better if we had done that.

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So I fear that the electors must put up with our analysis of Labour's alternative policies. For myself, I am content to rest with what I think we all agree was a brilliant speech by my right hon. Friend the Secretary of State for the Environment. He certainly dealt with most of the main weaknesses in Labour's programme for Britain's future. I intend therefore to speak mainly about certain matters affecting my constituency and about policies for getting out of the recession.

The right hon. Member for Bethnal Green and Stepney (Mr. Shore) referred to manufacturing industry and the trade imbalance. He may recall that before I arrived in this House I worked for the Association of British Chambers of Commerce which took a great interest in those matters and, in the early to mid-1980s, was critical of various aspects of Government policy on manufacturing industry, the state of our trade and our trade balance. It is therefore with some relief that I can refer to exchanges that took place during Treasury oral questions on 16 January.

In the first of these exchanges, my right hon. and learned Friend the Chief Secretary pointed out that United Kingdom exports have grown by 23 per cent. in the past five years and reached record levels during 1991. In December 1991, export volumes, excluding oil and erratics, were the highest on record. My right hon. and learned Friend also pointed out that after decades of decline the United Kingdom's share of world trade in manufactures flattened out in the mid-1980s, just after the time when my previous employers were issuing their warnings to the Government, and then increased in 1989 and 1990--and are expected to have increased again in 1991. That is a remarkable achievement at a time when this country was in economic difficulty.

The other important figures in the exchanges at oral questions emerged in a reply to a question from me to my hon. Friend the Minister of State, Treasury. She pointed out that in 1988 and in 1989 62 per cent. of all United States inward investment in the European Community came to the United Kingdom, and that 42 per cent. of all Japanese direct investment in the Community came to the United Kingdom. I believe that the figures for 1990 will show that investment from the United States and Japan came here in proportions of 60 and 50 per cent. respectively. That, too, is a remarkable achievement for a country experiencing economic difficulty. The achievement of the Prime Minister in negotiating at Maastricht an agreement that would protect industry and employment from the social charter and the other horrors that some in the European Community and all the Labour party want to inflict on us has helped to promote the prospect of more inward investment to this country. Turning to my constituency, I am pleased to see that, following the movement last autumn of the Treasury Solicitors's property division and the Charity Commissioners' southern regional office to Taunton with several hundred employees, the construction of headquarters for Western Provident Association, health insurers, is going ahead on the Blackbrook business site. The firm has already begun to recruit locally. Inquiries for the Blackbrook business site, which is under construction, have come from the service sector--Taunton is strong in services--and also from manufacturers from other parts of the country.

At Chelston, outside Wellington, where there has been a business park for more than a year, there are now 300 jobs. Developments are also just beginning at Dellers

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wharf in Taunton, most of the site having been cleared in the past six months. It is also awaiting the start of construction of a Safeway food store and other shops, and a housing development. I take this opportunity to warn those responsible for planning in my local authority and in similar authorities not to depend too much on the retail sector. In the past Taunton has been rather heavily dependent on that sector and a number of large retail developments are in the pipeline, but we have seen during the past few years what can happen when there is a slump in retail purchasing. If, God forbid, fashions should change and people no longer wanted to shop in Taunton, there would be a further problem. I want a diversified local economy, which is why I welcome the movement of professional jobs that I have already mentioned.

It is estimated that the various developments to which I have referred have provided 700 jobs in Taunton and Wellington ; unemployment, which, in the travel-to-work area in January was slightly more than 3,400 or 6.6 per cent., would have been more than 4,000 had those developments not taken place. I pay tribute to all involved in them. They have rendered Taunton's unemployment rate well below the regional average in the south-west, which is 9.1 per cent. I move on to various matters which I believe are relevant to the Chancellor's forthcoming Budget. The policy of the Liberal party on this matter notwithstanding, Conservative Members expect some reduction in personal taxation. I am glad to see my hon. Friend the Financial Secretary on the Treasury Bench. There is a perfectly good reason for wanting to reduce personal taxes : a reduction would help to encourage and restore consumer spending. It is one of the ways in which this country can move out of recession. I would prefer the reductions to come from a raising of thresholds, not from a reduction in the basic rate, but we have had debates on that. I now want to move on to certain other proposals.

The hon. Member for Berwick-upon-Tweed mentioned business rates. I do not think that many Conservative Members would like to return to each local authority setting its own business rate, but I know that Treasury Ministers already acknowledge that the revaluation, which was necessary and which had been disgracefully postponed by Governments of both parties, has, despite phasing, caused crippling damage to a number of businesses--especially small businesses and small shops, and particularly in the south.

I know that there is a lot of pressure on the Chancellor to provide in his Budget some relief from business rates. The simplest way of providing that relief would be a cut in the poundage, but that would mean the benefit going to businesses of all kinds, including many which benefited from the revaluation and the introduction of a uniform business rate--for example, businesses in areas which used to have high rates. If we are really aiming to bring relief where the boot hurts most--I realise that that may be administratively difficult--we should direct it to the businesses whose rate increases have been most dramatic in recent years.

I echo a point made by the hon. Member for Berwick-upon-Tweed : can we not do something about businesses that want to move premises? At present they do

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not benefit from the phasing, which is one reason why there are so many unoccupied shop premises and offices. I hope that this can be dealt with in the Budget, because the problem represents one way in which the business rate pinches hard.

Small firms in my constituency complain a great deal about bank charges-- having to pay for paying in cheques and so on. Some of the banks' policies are just an irritant, but others affect businesses' ability to compete and survive.

I note that the Financial Times of 29 January reports a survey of 30 managers carried out by Birmingham polytechnic which suggests that bank managers, when assessing business proposals, pay too much attention to narrow financial criteria and not enough to factors such as management skills and technical knowledge.

The Forum of Private Business, which has many members in my constituency and carries out regular surveys of those members, not only on business expectations but on policy matters, has addressed the policy of the banks. In a statement issued on 21 January 1992, it said :

"There is still a gulf of misunderstanding and fear between borrowing businesses and their banks With a third of businesses still taking the risk of growing out of recession, it is tragic that the codes"--

which my right hon. Friend the Chancellor has encouraged the banks to produce--

"have missed these real life and death' issues".

The Forum of Private Business then marks the banks according to its own assessment based on the experience of small businesses. The exception to which great praise is given is the Royal Bank of Scotland, whose charter for business customers received an 82 per cent. rating. I do not want to mention the important national banks because I have accounts with one or two of them myself, but I assure the House that their ratings were well below 82 per cent. Two of them were rated as 63 per cent. effective and one disappointed greatly, being only 33 per cent. effective.

Mr. Stan Mendham of the Forum of Private Business said : "we are pleased that the banks have yielded to our long-standing call for invoicing for charges. But unfathomable bank charges have been more a cause for resentment than a threat to survival. The biggest threat to small businesses has been bank-imposed restraints on borrowing--at a time when small businesses need financial support to see them through"

The Forum of Private Business went on to say :

"Of 33 per cent. of businesses reporting a tougher attitude from their banks in the past six months, one in five said this took the form of removal, reduction, or refusal of borrowing, or increased interest rates."

We understand why the banks are in difficulties and, regrettably, have to impose burdens on business. I hope that those burdens can now be lessened and that the Government will do what they can to encourage that process. That leads on to a matter that I raised at Prime Minister's questions about a year ago. I remember, as will my hon. Friends, that three or four years ago the lending institutions encouraged businesses and personal borrowers to borrow in the most irresponsible way.

When I first purchased property, I was subject to a restriction of two and a half times my income and about 70 per cent. of the value of the property. We all know that ridiculous 100 per cent. loans were available at four and five times people's incomes. That was why the property market fell into such extraordinary difficulties, the down

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side of which has hit the construction industry so badly during the past year and, I fear, will continue to do so. The same was seen with lending to businesses, including farming businesses in my constituency.

We have debated the Government's role in that situation through their low interest rate policy in 1987 and 1988 and their perhaps rather delayed response to the great credit boom. Everyone in property and retail was enjoying that boom, but few pointed out that it might end in tears, as it did.

Therefore, as the Conservative party produces its Budget and election manifesto, I hope that it will reassure the electorate that we have learned from these experiences in credit control and credit borrowing in recent years which have led to the difficulties of high interest rates which, happily, in the past year have been falling. We move into the next few months on the basis of lower inflation, much lower interest rates, and lower personal taxation compared with the past and compared with many of our competitors, and the best strike record for 60 years. That is a situation in which I am content for us to go to the country and ask for a further term of office. Several Hon. Members rose --

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