House of Commons Hansard Debates for 26 Feb 1992

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one of its inventors, although he would have claimed he was if he had thought that it would do him any good at the time. He disowned those matters easily thereafter.

The whole exhibition of the flagship committee is due chiefly to the poll tax, but it is also connected with all the Government's other misdemeanours, disasters and economic catastrophes. It has been one of the most disgraceful episodes of our political history. It is not easy to find words to describe it properly. The best words to describe the conduct of the flagship committees and their past, present and attempted future were written by Alexander Pope : "As hags hold sabbaths, less from joy than spite,

So these their merry, miserable night

Still round and round the ghosts of beauty glide,

And haunt the places where their honour died."

That is a fitting epitaph for the Government.

We have seen, especially during the past few years but even before that, the prostitution of Parliament to serve the narrow interest of the Conservative party. That has happened before in our history, and when prostitution has taken place on that scale, as it did in the 1930s, the threat to our country has been severe. I do not say that the present Administration have the same evil quality as the Conservative Government of the 1930s, but they are the nearest rival in our history, and we should take account of that.

I say that not only because of the Government's antics and the way that they have pressed through legislation, or because of their performance in this debate, but because of their performance over the whole poll tax Parliament. We are approaching the end of it, and as soon as the flagship committee has the courage to go to the country, the people will pronounce on this perverted, prostituted Parliament the judgment that they pronounced in 1945. The liberation that the British people sought then they will seek again, and nothing will stop them achieving it.

5.40 pm

Sir Gerrard Neale (Cornwall, North) : It is always a pleasure to be in the Chamber to listen to the right hon. Member for Blaenau Gwent (Mr. Foot). His best speeches have a number of consistent points--they show great parliamentary debating skill and great humour, but his very best ones rarely deal with the point of the debate. It was interesting to note that, even in response to an intervention, he found it impossible to clarify the Opposition's stance on the exchange rate mechanism.

My right hon. and learned Friend the Chief Secretary and the Treasury team have every cause to be congratulated on their achievements on the rate of inflation. It is no surprise to me--although it appears to be one to Labour Members--that we are having a debate on inflation. When my right hon. Friend the Prime Minister took office, he made it plain that low inflation was a fundamental part of his policy. He was joined in that by our right hon. Friend the Chancellor of the Exchequer, who made it similarly plain. I am glad to see my hon. Friend the Member for Cornwall, South-East (Mr. Hicks) in his place and no doubt hoping to catch your eye, Mr. Speaker. We view the position with a clear perspective--that high inflation is bad news for the economy of the west country in general and of Cornwall in particular. I am surprised that the

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Opposition do not appear to have grasped the fundamental importance of inflation to our economy. Several industries in Cornwall have been hit by high inflation. Tourism suffers dramatically if prices rise quickly ; our farming industry is hit heavily if food prices rise quickly ; and our economy depends on competitive pricing and firm monetary policies. Without them, we would have fearfully high levels of unemployment and transport costs, which would make it impossible for us to get our products and services into the economy of the remainder of the United Kingdom.

I want to make a few comments on behalf of small business. Some 85 per cent. of businesses in Britain employ fewer than six people, and 95 per cent. fewer than 20. They are fearful of what would happen if the Labour party took office--although I agree with my right hon. Friend the Member for Hertfordshire, North (Sir I. Stewart) that that is very much less likely after the speeches that we have heard today from Labour Members. Small business men have a fear of high interest rates. Labour Mambers may chuckle, but my right hon. and learned Friend the Chief Secretary let them off lightly today. He quoted a number of reports from different economic institutions on the calculations of any increase in interest rates. He referred to the Nomura report, but what he did not say--and what the Opposition should remind themselves of--is that the report envisages that, with the advent of a Labour Government, interest rates could rise not by 2 per cent., but by 21 per cent. If we need proof of where that has happened before, we need look only at what happened when a socialist President was elected in France and short-term rates rose to 31 per cent.

I know that it is unpalatable, but Labour Members must accept that unless they are much clearer about their economic policy, especially in relation to the exchange rate mechanism, on the night of the election the institutions handling funds will be ready to remove money from this country at the very moment that they think there is any threat of a Labour Government. It is not something that any of us can do anything about. Those people handle funds on behalf of investors. If they think that there is a risk of a Labour Government, with the sort of wishy-washy approach that they would take, the institutions will move money out of this country at such a rate that the rate of inflation will have to rocket if the Labour party is to hold firm to the ERM. If any Labour Member disbelieves me, he should look at the Nomura report.

My right hon. and learned Friend the Chief Secretary and my right hon. Friend the Member for Hertfordshire, North referred to the minimum wage. I say again to Labour Members that if they came to my constituency, which is heavily dominated by small businesses--as many rural constituencies are-- they would appreciate that those employed in such businesses on low wages help to keep the books and to collect the money. There is little money in many of those businesses because they are small. Everybody is a Man Friday of some description or another. They know the facts of life for their businesses. Of course, everybody would like to have more money per week. The bosses of those small businesses would like to have more money per week. There is hardly anyone in this country who would not like to have more money per week. However, the people in those small businesses know that the money simply is not there. If a minimum wage were imposed, such businesses would disappear. To

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survive, many of them need the same number of people that they have helping them ; they could not get by with fewer people. If the basic wage is pushed up, those businesses would become unviable. My right hon. Friend the Member for Hertfordshire, North pointed out the way in which a minimum wage could affect differentials. In the west country, like any other area, those in small

businesses--which are trading in considerable difficulty, not only because of the market place but because of their size--understand that the minimum wage would kill many jobs as quickly as a snap of the fingers.

Another matter relating to small business is especially important and I have spoken to Treasury Ministers about it. The Government have been extremely supportive of small companies by helping them to expand and by allowing them to keep more in their pockets by lowering the level of taxation.

Mr. Enright : And by helping them to go bankrupt.

Sir Gerrard Neale : The hon. Gentleman should think about how many small businesses there are now compared with 1979. He should remember that there are now relatively more people in employment in this country than all other Europan countries bar one.

The Government deserve congratulation for supporting small companies. Undistributed profits are now taxed at a rate of only 25 per cent. up to a limit of £250,000, and beyond that there is a graded scale up to 37 per cent. That has enormously helped small companies. There remains an inconsistency, however, in respect of unincorporated firms. Once the profit level reaches £23,700, if there is a single proprietor--and whether or not the profit is drawn--the tax level rises from 25 per cent. to 40 per cent. If there are two partners and the profit level is double that I mentioned, the same situation arises.

That disadvantage was clearly identified by the National Federation of Self Employed and Small Businesses, and it could be overcome if undistributed profits made by small unincorporated firms were taxed on the same basis as that applying to incorporated companies. Over a 12-month period, an unincorporated firm would gain enormously, as incorporated businesses do. The money saved could be invested in new equipment, such as computers, or creating new jobs.

I dispute the argument that such an arrangement would be impracticable because there is no set accounting procedure for small, unincorporated businesses. Every such firm keeps accounts, not least for the purposes of calculating value added tax. The Inland Revenue informs me that there are 2.8 million unincorporated businesses, and it estimates that 470,000 of them pay tax at the 40 per cent. rate. The Government have proved conclusively how welcome have been their successful actions in respect of incorporated businesses, and I ask my hon. Friend the Economic Secretary to consider the case of the small unincorporated business sector in future. The Government's policies have secured the great achievement of an inflation rate currently of only 4.1 per cent., and they show every sign of reducing it further.

The Government made it perfectly plain that the process would be extremely painful for many sectors of business, but they clearly explained their policies and their effects. Those policies are working, and it is evident to me

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and to all my hon. and right hon. Friends that were the country to suffer the misfortune of Labour being elected to power, a Labour Government would never show anything close to the determination displayed by my right hon. and learned Friend the Chief Secretary and the other members of the Treasury team in defending the value of sterling and this country against the high inflation rates that we saw under previous Labour Governments.

5.52 pm

Mr. A. N. Beith (Berwick-upon-Tweed) : In making his useful points about small businesses, I am surprised that the hon. Member for Cornwall, North (Sir G. Neale) did not refer also to the penal level of uniform business rate that small firms suffer, involving the projection by the Government of the highest rates of inflation into small business costs for the following year--using the maximum permitted level--instead of exercising the discretion that the Government had to set the business rate at a significantly lower level. That decision has affected businesses of all sizes, and small firms in particular.

Inflation is bad. I am sure that other right hon. and hon. Members have shared my experience of being told by constituents, and by pensioners in particular, every time that the television news announces a fall in inflation, "I don't understand it. They say that inflation is coming down, but prices are rising in the shops that I use."

Any inflation means rising prices, so unless there is zero inflation, we are talking about something that damages the economy in a number of ways. Inflation makes pricing impossible, disguises relative prices, and enables some price rises to be concealed in the general level of increases--and thereby prohibits rational economic decisions being made. Inflation redistributes wealth from the prudent to the profligate. It penalises saving and rewards borrowing. Inflation makes property a more attractive investment than production, and allows Governments to escape responsibility for their actions. It is not without significance that the two groups that tend to like inflation are those who borrow extremely heavily and see the cost of their debt falling, and Governments who behave imprudently and want to rescue themselves from their actions by printing more money.

Inflation is at the root of all short-termism, and is the enemy of sensible, long-term decisions. One cannot safely predict what to do about business investment and pricing if one does not know what will happen to the future value of the country's currency.

Even modest levels of inflation can be highly significant. Inflation of only 5 per cent. will bring a doubling of prices in 14 years. We should not deceive ourselves that, because inflation is currently running at 4 per cent. to 5 per cent., the problem is solved. The problem remains, and much more must be done.

The Government obviously tabled today's motion to emphasise that Labour does not appear to have any policies for dealing with inflation. However, the debate has the added effect of emphasising that the Government also are short of policies. Let us start, however, with Labour.

Even our old friend credit control has disappeared from Labour's amendment. It must have accepted at long last that credit control is not a feasible or practicable way of containing inflation, and is not something that could reasonably be introduced into the economy. Labour no longer mentions that subject.

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I did not expect the debate to end with even more doubt being cast on Labour's already weak position on inflation-- but it was, by the unwillingness of the hon. Member for Derby, South (Mrs. Beckett) to answer with a straight yes the question "Would you be prepared to see interest rates increase if that was necessary to defend sterling's position in the exchange rate mechanism?" There were shades of Labour's old attitude to nuclear weapons--"It may be necessary to have them, but we announce now that in no circumstances will we ever use them."

There is no point in being a member of the ERM and having interest rates that, although uncomfortable in their effects, are not as drastic as nuclear weapons if one is not prepared to say that one is prepared to use them.

I accept that the hon. Member for Derby, South believes in Britain keeping its position in the ERM, but her very hesitation is a dangerous signal.

Mr. Enright : Is the hon. Gentleman suggesting that the only way to maintain parity in the exchange rate mechanism is by use of interest rates? That is an interesting economic theory.

Mr. Beith : That is a method which Governments use, and which the present Government have been compelled to employ. Intervention by use of reserves is one such mechanism that must be used in those circumstances. General economic management is another. At the end of the day, however, if one is not prepared to use the interest rate weapon, one might as well not be in the ERM.

Mr. Enright : The hon. Gentleman did not--

Mr. Beith : The hon. Gentleman has a loud voice, but that does not alter the fact that his argument is weak. The hon. Member for Derby, South could have given a simple and straightforward answer, but she did not. It was unwise of her to take that stance.

The Government's problem is that they have two anti-inflation policies. One is membership of the ERM. The Chancellor of the Exchequer has answered questions from me to the effect that he would use interest rates if necessary to maintain this country's position. The other is recession-- which is, by the Government's own indications, a temporary mechanism. They do not want recession to continue, but it looks likely to remain for some time. When it ends and recovery arrives, prices will no longer remain as low as they have been recently.

It is incontrovertible that over the Christmas and new year period prices of household goods were lowered, and that had a beneficial effect on the retail prices index. If recessionary conditions change, as we all hope they will, the Government will need other means of controlling inflation, yet they still show no sign of being willing to address that question.

Nor can the Government claim an unblemished record. Britain has one of the worst records for inflation. Since 1950, prices in Britain increased faster than in the United States, Germany, France, Japan, or Canada. Italy apart, Britain has the worst inflation record of all the G7 countries.

The British people have seen the value of their pound reduced under successive Governments, both Conservative and Labour. Since 1950, the pound's value has fallen consistently : a 1950 pound is worth only 7p

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today, whereas today's German mark and American dollar are worth 32 per cent. and 19 per cent. of their respective 1950 values. If that record is ever to improve, Britain must adopt a long- term policy to deal with inflation. Our advocacy of an independent central bank, committed to price stability, is the only such policy that is on offer to the British people. I have rarely heard a more compelling demonstration of the case for an independent central bank than that provided by the evasiveness shown today by hon. Member for Derby, South. I should be much happier if I knew that the central bank would decide interest rate policy on the basis of price stability and maintaining sterling's position, and that future Ministers in any party would have nothing to do with that decision--that they would get on with the job of managing fiscal policy and providing the infrastructure that the economy requires.

If control of interest rates were taken out of the hands of politicians and given to an independent central bank, the fight against inflation would be continued all the time, and the problem of Governments going soft on inflation--particularly in the run-up to general elections--would be avoided. Greater stability of prices, interest rates and economic growth would result. Recent studies have concluded that countries with independent central banks typically enjoy lower inflation, irrespective of their political make-up and budgetary policies ; and there is no cost in terms of lower growth.

Mr. Ian Taylor : I have followed the hon. Gentleman's argument about price stability. Can he tell us what would be his party's policy at this juncture? It appears that he has some plans to raise taxes, but that, surely, would be an irresponsible policy for a country that is moving out of a recession. Will he clarify his party's fiscal policy?

Mr. Beith : It is certainly not irresponsible to invest in the economy now, as we suggest. As was pointed out in a recent report by the Treasury and Civil Service Select Committee, the best time at which to invest in the public infrastructure is a time of recession. Some of the investment will need to be financed by borrowing, but I regard investment as a much more prudent use of borrowing than tax cuts. Tax cuts ought to be achieved by means of growth, which should bring public finances to a point at which we do not need as much revenue, or revenue is buoyant because of the extent of that growth in the economy.

Surely it is much more prudent to use the means at our disposal to invest now. Such tax cuts as we have proposed have been designed either to make real decisions possible on such matters as the use of energy, or to achieve a better distribution between the richest in society and the poorest. We have made specific proposals--different from Labour's proposals--about the tax scale. Our proposals are designed to enable us to increase pensions and child benefit. Incidentally, that would probably work into the economy faster than tax cuts granted to the better off. On the whole, people with no money to spend will spend more of what they subsequently gain by way of increases in pensions and benefits.

The absence of any coherent alternative suggests that no one can produce a better method of building in a firm anti-inflation policy than central bank independence. Already, the Government are becoming complacent about

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their inflation policy. The Prime Minister claimed that he had inflation licked--although prices were still rising at a rate of more than 4 per cent. a year, and although the recent reductions have taken place during the longest recession since the 1930s and could easily be reversed in the event of a recovery. Prices have more than doubled since May 1979 ; the pound of May 1979 is worth only 41p in 1992.

Labour scarcely mentions inflation in its economic policy documents. I do not think that the party sees inflation as a problem : I do not think that it recognises the corrosive effects of inflation to which I referred at the beginning of my speech. Labour appears to have abandoned the policy of credit controls, for instance. Having read the motion and the amendment, we find that we are left with the only coherent alternative--an alternative that we shall probably use in the end in any event. The Government have given us to understand that, if we joined the European monetary system and a single currency were introduced, that currency would have to be operated by an independent central bank. The Chancellor has been quite clear about that. He said in the House that, in stage 3, the European central bank

"would have to be free to set interest rates without interference. That is the view of every member state."--[ Official Report, 21 November 1991 ; Vol. 199, c. 517.]

Clearly, the Chancellor has accepted that a European single currency could not be run without an independent central bank. Why should we not enjoy that advantage now? Why should we not say, here and now, that the central bank would exercise independent responsibility for monetary policy, having price stability as its objective?

That would be a much better position to adopt for an Opposition party entering an election. It would be helpful if people knew that, during an election campaign and subsequently, a central bank would exercise that independent responsibility. The Government might do the country a service. If they are so worried about the consequences of other parties' coming into office, why do they not build that in now as part of a firm, permanent anti -inflation policy?

The Economic Secretary to the Treasury (Mr. John Maples) : Surely there is a difference between an independent central bank that is running a single currency--I do not think that there is any practical alternative to that--and the Government of the day continuing to be responsible to the House of Commons for monetary policy when running their own currency. I follow the hon. Gentleman's argument about the independent central bank ; indeed, some examples, such as the Bundesbank, work extremely well. Does he not agree, however, that some non-independent central banks--such as those in Japan and France--seem to work equally well?

Mr. Beith : Japan's central bank has gradually increased its independence from Government, and that has contributed to Japan's control of inflation. Let us take the example of countries that simply have more independent central banks than we have. The United States Federal Reserve, for instance, is not an independent central bank in the full sense of the term, but it has still been able to produce a better inflation record--even with its high public-sector deficits--than we have managed in this country. Generally, the record seems favourable.

As the Economic Secretary pointed out, there is a difference between running a single currency for Europe

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and running our own domestic currency. There is a practical difference : taking instructions from 12 or more Governments would be even worse than taking instructions from one Government. A central bank will be in a much better position if, on this issue, it takes no instructions from Governments. The present Government are denying themselves a permanent contribution to anti-inflation policy by refusing to embody that principle in our system.

There are many other ways in which we should fight inflation. We should fight it by increasing our manufacturing capacity ; we should fight it by promoting competition, and by ensuring that we do not have the rigged markets that exist now in some of the privatised utilities, where genuine competition has not been allowed to develop. Competition is crucial to keeping prices down. At the end of the day, however, the only firm and reliable anchor is an independent central bank, and we shall continue to advocate it until, eventually, the country gets it.

6.6 pm

Mr. Dudley Fishburn (Kensington) : It is a pleasure to follow the hon. Member for Berwick-upon-Tweed (Mr. Beith), who could justly claim-- perhaps alone--that when his party was last in power, before Britain came off the gold standard, inflation rates were very much more stable and sensible than they are today.

As my hon. Friend the Member for Cornwall, North (Sir G. Neale) said earlier, the remarkable control of inflation that has been exercised over the past 18 months is a real tribute to my right hon. Friend the Prime Minister, who made it clear that that would be his top priority when he got the job. Moreover, it was he who, as Chancellor of the Exchequer, took us into the exchange rate mechanism--a discipline that has done so much to squeeze out inflation from our economy in the long term and, notwithstanding the prevarications of Opposition Front Benchers, will continue to do so. Interestingly, in those first speeches when my right hon. Friend the Prime Minister determined the need to control inflation, he made the point that is so seldom made : inflation is, above all, a social cruelty. It hurts parts of our society that are often overlooked in the great economic debates. It hurts the quiet : those who save, the elderly and others who are often at the greatest disadvantage. My right hon. Friend the Prime Minister was right to say that that was one of the main reasons to control inflation.

The previous Prime Minister also believed strongly in the need to control inflation, but she took her eye off the ball. Had she but done what the German Chancellor did so frequently, and looked at the back pages of The Economist every week, she would have seen that the broad gauge of monetary growth in 1987, 1988 and 1989 was running away at a rate that was much greater than the economic growth of the time. Even though economic growth in those years was strong, at about 4 per cent. a year, none the less monetary growth was between three and four times the rate of our real economic growth.

There is no mystery about inflation. If the rate of increase in the amount of money keeps pace with the growth of domestic output, there is no inflation. If, however, the increase in the amount of money runs ahead of the increase in gross domestic output, there is inflation. The likelihood is that we shall have real growth in the

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economy of about 2 per cent. in the year ahead. If the money supply grows by about 6 per cent. in the year ahead, then, as sure as eggs is eggs, inflation will be about 4 per cent.

The chance now before us--the success of the past 18 months has led to that chance--is to reach out and grab not stability at 4 per cent. but stability at 0 per cent. inflation : to have a system in this country, as other countries have had so frequently in the past, under which the value of money and the price of a basket of consumer goods do not change from year to year. We shall look ahead, as my right hon. Friend the Member for Hertfordshire, North (Sir I. Stewart) so clearly said, to the long term without the short-term uncertainty that creates its own disparities.

I was delighted to hear the speech of the right hon. Member for Blaenau Gwent (Mr. Foot), not least because, as always with him, there was that great historic reach. He went back through Alexander Pope to Oliver Cromwell. If we were to return to a time of 0 per cent. inflation, it would be, on any historic basis, a return to normality. It is broadly true to say that, from the time of the Restoration after Oliver Cromwell until the outbreak of the first world war 250 years later, consumer prices in Britain remained stable. That is not to say that prices in Britain did not change within that general overall basket. Of course they did. For example, there was the dramatic collapse in the price of wheat in the 19th century which, in itself, led to the industrial wealth of that century.

When there is stability within a currency, leading to stability of prices overall, there can of course be great changes in individual parts of the economy. It is interesting to note that throughout the 19th century--the time of greatest industrial wealth and expansion in this country--when things were changing with every passing decade, there was, none the less, complete price stability. From the start of the 19th century to its end there was no change. I recall the famous anecdote of the Duke of Wellington who, in 1933, sold some land that his ancestor had bought on returning home triumphant from the battle of Waterloo. He sold, for exactly the same price sterling, exactly the same amount of land as the first Duke of Wellington had purchased.

The real increase in inflation started when we abandoned the gold standard in the 1930s. Since then, the value of the pound has fallen catastrophically--to about 2.5 per cent. of its value in 1933. However, the chance to reach out and grab true stability--0 per cent. inflation--will take great political courage. In a sense, inflation is like valium. It creates an easy sense of well-being. One can do nothing very much, yet one can feel that things are jogging along nicely.

It is in that drugged state that many savers say that they like inflation. It gives them the illusion of a high rate of return on their investment. House owners may say that they like inflation because it wipes out their debt and seems to give them a capital increase on their main investment. Some companies pretend at times to like inflation because it gives them a seemingly effortless ability to increase turnover and profit. Worst of all, though, Governments occasionally say that they like inflation because it allows them to hand out excessive public spending year after year without having to pay the true cost.

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No party likes inflation more than the Labour party. When the Labour party was in power, it was what can only be described as an inflation junky, with prices rising year after year, way beyond 5 per cent. inflation--which gives that easy, if illusory, feeling of well-being--to about 20 per cent. inflation, which led to economic catastrophe.

We now all know--it is not a matter of debate--that the sense of ease that even low inflation gives is wholly illusory. It undermines Britain's wealth year after year. Even 4 or 5 per cent. inflation, which seems to be so attractive, undermines and, in the course of 20 years, almost eradicates the existing wealth of the country--the wealth that has been built up over generations. Even worse than that, it blunts the ability and the zest of those people who are able to create wealth in our society, for the benefit of us all.

There are only two ways in which we shall fail to reach this chance of price stability, of zero inflation. The first is devaluation. One hesitates to say it, but I think that the reply that the hon. Member for Berwick-upon -Tweed gave this afternoon increases the likelihood that we shall have a sterling devaluation, or that there will be uncertainty over sterling in the years ahead.

Mr. Beith : Does the hon. Gentleman agree that that was the reply that I elicited from the hon. Member for Derby, South (Mrs. Beckett)?

Mr. Fishburn : I apologise to the hon. Gentleman for not having made that clear.

The risk of devaluation is one of the ways in which we can be sure that our inflation norm of 0 per cent. cannot be reached. Devaluation would not make this country more competitive. It would make higher interest rates a certainty--a spectre that would cast its shadow for years ahead. It would also mean that once again we would absorb other countries' inflation through higher import costs. Membership of the exchange rate mechanism, to which the Government are so strongly committed, puts the risk of devaluation behind us, so long as the Government remain in power.

As for the second way in which inflation could take off again, an increase in our domestic money supply could come about as a result of excessive Government-induced wage increases in the public sector which have shot ahead of wage increases in the private sector. If we can hold on to the idea that, having reduced inflation to 4 per cent., we can, together with the other countries of Europe, reduce it to the point where there is constant stability, the prize ahead of us will be enormous.

We must not, however, risk becoming number blind. Even if we hold inflation at 4 per cent., we must be aware of the fact that a 6 per cent. pay settlement will be 50 per cent. above the rate of inflation, that a 20 per cent. increase in the community charge will be five times the rate of inflation and that increases in council rents of, say, 16 per cent. will be four times the rate of inflation. As inflation becomes ever lower, the demand that it makes upon us is that we should not be figure blind and that we should concentrate on the smallest increase in inflation rates. The prize of zero inflation is clear : that we shall have ever lower unit production costs, which will make our exports more competitive. The prize is long-term planning. For the first time, the attraction of short-termism- -the ability to take profit now because of the uncertainties of the future- -will be diminished. People will

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say to themselves, "I can invest for 10 years in the knowledge that the underlying value of the money that I invest over that decade will not change." Of course, it will increase the well- being of the people because every increase in wages earned in an economy with 0 per cent. inflation is real wealth and not merely an illusion.

Inflation benefits the debtor and penalises the creditor. As society becomes older, as shown in its age profile, so the public will tend to become more a public of savers and less a public of borrowers. They will demand increasingly that we do not allow inflation to rise, as it has done so frequently in the past. Most of all, to keep inflation still and to aim towards the 0 per cent. target will require a political will which my right hon. Friend the Prime Minister has shown. For that reason, I believe that the country will show where its support for him lies.

6.20 pm

Mr. Greville Janner (Leicester, West) : I remind hon. Members that the motion starts by inviting the House, at the Government's behest, to congratulate the Government

"on its"--

that is, the Government's--

"prudent economic policies".

That anyone should invite the Government to congrat-ulate even themselves on their economic policies is the height of breathtaking cheek. It is the ultimate in chutzpah. It is the most monstrous zenith of shamelessness. The Government are inviting the House to congratulate them on their economic policies when those policies have created a totally unnecessary recession, depression and slump which are ravaging the country. That is a matter of not just statistics but of human suffering.

I wish to hold up my constituency, my city of Leicester and my county of Leicestershire, as a mirror, because I know it best. Of course high inflation is bad news, but low inflation is a disaster when it is at the cost of vast unemployment, a massive collapse of businesses, large and small, mortgage misery and repossessions on an unparalleled scale, poll tax chaos and crime leading to social misery and the breakdown of the lives of far too many families.

A year ago, when the position was only starting to get really bad, The Sunday Times said :

"Any fool can reduce inflation when the economy is flat on its back."

Our economy, which the Government say that they have managed prudently, is not just flat on its back ; it is prostrate. It is knocked out for the count. It is destroying the lives, security, homes and happiness of millions. Yet the Government say that the House should congratulate them on what they have done.

Jobs do not mean just the right of people to go out to work ; they mean the dignity of work, the ability to earn a living and the right not to be in debt. In the east midlands, 49,000 jobs were lost last year, 29,000 of them in manufacturing industries. Manufacturing industry is on its back. It is in the worst mess that it has ever been in.

My dad, who was Member of Parliament for my seat yes, I have an hereditary seat, of which I am proud used to say, "Don't worry, my boy, about Leicester. It will be all right, because in Leicester we make what people have to have--hosiery, knitwear and shoes. They cannot go without them. In the last slump in the 1930s, Leicester was fine. Don't worry, my boy. Leicester

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is the second most prosperous city in Europe". My poor father would turn in his grave if he knew what was happening today. Hosiery, knitwear and footwear are all dying. The traditional industries of our city are prostrate and jobs are falling away.

Since 1979, when the Government came into power, unemployment in Leicester has risen by 174 per cent. That is the second highest rise in the country. In my constituency, unemployment rose by 37 per cent. in the last year. That is not just a statistic : it means human misery and disaster.

Anyone who doubts that should come to my surgeries to meet the people who come to seek help. In the past, those were often manual workers, people without skills. Such people may have no special skills to sell, but they are just as entitled to jobs as brilliant people emerging from universities and technical colleges. Recently, three professional people have come to my surgery. One was an accountant who had been employed in a major accountancy firm in the City and who had come back home to Leicester for family reasons ; he could not get a job. A second accountant had been told by the local job centre that, because he was under 5 ft, he was too small, and that was why he could not get a job. That was ridiculous. When we consider how difficult it is for people of average height, with average intelligence, to get jobs, what a terrible time it is for the disabled, the sick, the handicapped and people with learning difficulties who have to compete in the same market. There are no jobs for them. For that we get low inflation. Thank you very much. I prefer higher inflation and jobs for my constituents.

It is not just the unemployed and the ordinary workers, as they are sometimes called, who have a problem. Some of the worst sufferers now are people who have never been unemployed in their lives. For the first six months, they cannot get help from the Government because of the rules. They cannot even get on training schemes, and they do not know how to cope.

I am president of an organisation called the Retired Executives Action Clearing House, REACH. It is a fine, non-political organisation which looks for jobs for people who were retired early, when in their prime. They want to do something constructive even if they are not paid. People are entitled to jobs when they are young, but as I approach middle age I think that jobs for older people are also important. Why should not people have jobs? We are told that it would create higher inflation and that the cost is too high. The cost of low inflation is too high and is ravaging the lives of too many of my constituents.

As to business failures, there was a 79.4 per cent. increase in the east midlands last year. There was a 96.5 per cent. rise in bankruptcies. Do the Government know that ? These were honest, decent business people who have gone bust. They could not pay their debts. When they go down, they pull other people down with them. Those innocent people all suffer because the Government, who are inviting us to congratulate them on their economic policy of all things, do not know how to manage a corner shop. It is a disgrace. The east midlands has become the worst region for business failures, and it is the Government's fault. Firms large and small are going out of business unnecessarily. That is the cost of low inflation. I always thought that people were entitled to homes. My right hon. Friend the Member for Blaenau Gwent (Mr. Foot) is wearing a daffodil.

Column 1011

"The land, the land, it was God that gave the land,God that gave land to the people."

That was another of my father's ditties. People are entitled to a roof over their heads. What has happened, all in the name of low inflation ? House prices have collapsed. That is not all right for those who happen to own houses, especially if the house is a family's entire wealth. If someone wants to sell his house so that he can get on his bicycle and go to look for another job, he is stuck because he cannot sell.

People who have bought their houses, including council houses, cannot pay their mortgages. What happens then, in the name of low inflation ? In 1991, 716 possession orders were made in Leicester county court--an increase of 48 per cent. on 1990. People who were entitled to have homes lost them. There are no rented houses because, in the name of low inflation, local authorities are not allowed to build houses. They cannot even use the money they get from those that they have sold. So people have no jobs, no businesses and no homes. That is the price of low inflation, and the Government say that we must congratulate them on their record.

They say that they are the Government of law and order. In the name of low inflation, they do not want high pay or too many policemen, although we have a few more than we used to. In Leicester, the number of police may have increased by 10 per cent., but crime has increased by 187 per cent. since 1979. I asked the Home Secretary

"by what number, and by what percentage, reported (a) criminal offences and (b) crimes of violence have increased in Leicestershire since May 1979."

The Minister said :

"The available information compares the 12 months to June 1979 with the 12 months to June 1991".

They do not want to give us the figures for the next nine months--I do not blame them--because the figures have got much worse. The answer went on :

"Between these periods, the total of notifiable offences in Leicestershire increased by 52,906".

There was an increase from 29,481 to 82,387.

"crimes of violence increased by 2,245."--[ Official Report, 25 February 1992 ; Vol. 204, c. 421-22. ]

There was an increase from 1,823 to 4,068. Although I asked for the percentage, the Government did not provide it, because it does not sound good. It is an increase of 300 per cent. Crime is burgeoning and our social fabric is collapsing. People do not have homes, jobs or businesses, but we are asked to congratulate the Government on their economic policies. What a cheek.

The Government should be slung out, not con-gratulated. Recession is when other people are out of work, depression is when you yourself are out of work, and recovery is when the Government are out of work.

6.32 pm

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