House of Commons Hansard Debates for 26 Feb 1992

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per cent. It is inequitable that the national insurance burden should fall most heavily on those on average or just below average wages. The next Labour Government will ensure that that tax burden is shared fairly and more evenly.

Dame Elaine Kellett-Bowman : Has the hon. Gentleman taken into account the fact that the recent pay settlement for teachers means that 150,000 teachers will have to pay an additional 9 per cent. in national insurance contributions? Is that not most inequitable? It will lead to a great many people deciding not to enter the teaching profession. Nurses, hospital workers and policemen will also be caught by the additional 9 per cent. national insurance contribution which forms part of the Labour party's policy. It is the only part of their policy of which we are absolutely certain.

Mr. Flynn : Once again, the hon. Lady repeats the mythology that is printed in the tabloid press. That is the tabloid version of what the Labour party will do. As for what has been referred to as tax on unearned income of £30,000, again there will be a levelling up. The tax system is unfair and inequitable. Does the hon. Lady believe that we should maintain a system that places the highest tax burden on the lowest earners? I am sure that she does not believe that we should. Reference has been made to business failures. One of the saddest sights during the recession has been the number of companies going into liquidation. Inflation, the obvious reason, is not the main cause of companies going into liquidation. It is indefensible that the Government have failed to control the main cause of business failures in my constituency and many other parts of the country. I refer to the insolvency laws and the Government's failure to control those parasites in business who make a habit of going into liquidation.

I give as an example a company owned by Mr. Brian Walker in my constituency. Nine of his companies went into liquidation. Six of his factories caught fire. That gentleman has built up debts amounting to more than £1 million, but he would say that he has no debts at all : that only those companies had debts. As the debts are corporate, not personal, debts he can carry on and not be declared insolvent or be disqualified from carrying on a business. What both he and many other people do is form a company and run up huge liabilities. They then unload the assets of those companies into a lifeboat company, after which those companies are put into receivership. They then leave their debts behind them.

Madam Deputy Speaker : Order. I have to call the hon. Gentleman to order once again and remind him that he ought to look at the substantive motion and the amendment. I am not hearing very much about inflation from him at the moment. Perhaps he will come back to that.

Mr. Flynn : The subject of bankruptcies has been raised during the debate and--

Madam Deputy Speaker : Order. It may well have been raised, but not while I have been in the Chair. I am sure that the hon. Gentleman is not challenging my ruling on this matter.

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Mr. Flynn : I would not dream of doing such a thing, but I am afraid that we have been the victim of the average chairmanship throughout most of the debate and I now realise that--

Madam Deputy Speaker : Order. I insist that the hon. Gentleman should now keep his remarks either to the amendment or to the substantive motion.

Mr. Flynn : Thank you, Madam Deputy Speaker.

The arguments about the rate of inflation advanced by those who sit on the Treasury Bench show a certain loss of memory. The speech of the hon. Member for Welwyn, Hatfield (Mr. Evans) was laced with stories gleaned, it appears, from Christmas crackers, which led to hysterical laughter from his hon. Friends. He did a pantomime turn on interest rates and the levels of inflation. It is right to point out to Conservative Members that there was a time, painful though it may be for them to remember it, when inflation rose to 22 per cent. under this Government. That was in May 1980. I see that the hon. Member for Canterbury (Mr. Brazier) is looking at me in astonishment. That was no joke. The rate of inflation was stoked up by the Government. Contrary to the promises that the Conservative party made in its election literature not to increase VAT, as soon as it got into power, it stoked up inflation by 4 percentage points.

The second boom, which led to another bust, was stoked up in 1988 by the totally irresponsible Budget of the right hon. Member for Blaby (Mr. Lawson), the previous Chancellor. The Chief Secretary to the Treasury said that he wanted credit for all that the Government have done. Perhaps in the reply to the debate the Government will tell us how much credit they claim for the position that we are in. I gave them a model to work on. It was from a man greatly revered in the House by those on the Government Front Bench when they were all "Yes ma'am, no ma'am" Ministers and Sir Alan Walters was an adviser to the previous Prime Minister. His assessment was that the world recession was 30 per cent. to blame, as one would accept. It is more difficult for Britain to get out of recession because of the position in the rest of the world. No reasonable person would pretend that that was not the case. Sir Alan Walters said that the Government were mainly responsible for the recession. He apportioned the responsibility at 70 per cent. to the Government's mismanagement of the economy and 30 per cent. to the world recession.

I do not know whether those on the Treasury Bench wish to be more ambitious and claim even more credit for it, but it would be nice to know how they apportion blame in the argument about black and white--world recession and British recession. I know of no commentator who does not agree that the Government's policies are responsible. The hon. Member for Pembroke (Mr. Bennett) once criticised the right hon. Member for Blaby as the man who had got us into this mess. That was recorded in an early-day motion. If it is understood that the problems are the result of the actions and the unfortunate Budget of the right hon. Member for Blaby, why on earth do not Conservative Members recognise that?

We are told that unemployment is a price worth paying. That is nonsense. Even in the Government's fiddled figures there is enormous unemployment. For example, one lady works as a cleaner in the Palace of Westminster in the early

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morning, at St. Thomas's hospital in the afternoon and occasionally in the evening in a hotel bar. She is one person receiving three low wages. According to Government figures, she is three people, because they count her three times in the employment figures. Again, the hon. Member for Canterbury looks astonished, but that is right. That is part of the mythology of the Government's figures. We have heard in the debate that there are more people in work than ever before. That is nonsense. There are more people in the job count, because many people are counted several times.

My right hon. Friend the Member for Blaenau Gwent made a telling speech. I shall end by reminding the House of what he said, because it was apposite. He quoted the words of Pope. We will be meeting in the House in a few months' time with many absentees from the Government Benches. My right hon. Friend said that we might well feel that the spirits glide here

"And haunt the places where their honour died."

The motion is one without honour.

8.43 pm

Mr. Conal Gregory (York) : I wish to address the important subject of inflation from the historical perspective, its current relevance and in the context of the family and employment in York.

In the historical context, under the last Labour Government the average rate of inflation was 15.5 per cent. Sadly, as I think all economists, even socialist ones, would admit, inflation rose in 1975 to a peak of 26.9 per cent. I trust that that will go down in the history books and that we shall not see it happen again, even as a footnote. It was a real warning to the country.

The underlying rate of inflation in December was the lowest since 1969. Only a month ago, in January, the inflation rate was 4.1 per cent. As my right hon. and learned Friend the Chief Secretary said earlier, that is below the average for the European Community and for the OECD. Those welcome figures have been achieved against opposition by the Labour party and by the Liberals throughout. Every anti-inflationary measure taken by the Government has been opposed. Inflation is not a significant part of current socialist philosophy. I followed with interest the party conference of the socialists in 1991. In the major speeches made on that occasion by the Leader of the Opposition, I could find no reference to inflation. That shows the interest of the socialists in inflation.

Rather than talk in the abstract, I should like to deal with how inflation affects one part of the economy. In that context, I shall take my constituency of York. Low inflation benefits the elderly, who were the subject of my maiden speech. The savings of the elderly now count for something, but they were eroded in times of high inflation. Those on fixed incomes, often forgotten by political parties, now find that their incomes count for something.

Mortgage payers, about whom we are concerned constantly, are purchasing their homes but there was a period of hyper-inflation--at over 26 per cent. under Labour--when it made no sense for people to take on that long-term commitment for 20 or 25 years. The Government, who have stood firm on the right of tenants to buy council accommodation, know that it makes sense for people to be able to develop that nest-egg and pass it on to future generations.

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As regards exporters and their employees, the only opportunity for big international exporters such as Nestle , Rowntree, Terry, and British Rail Engineering Ltd. to develop a sound national base is to look further afield for markets, not just in Europe but worldwide. Those markets will be eroded if we have hyper-inflation at home. If we have low inflation, companies will not have to increase prices three or four times a year, with the consequent high prices that have bedevilled us.

Employment has not been explored adequately in the debate. One praiseworthy aspect of low inflation is the numbers who have moved into employment. Since the last election, unemployment in York has been reduced by 24 per cent.

The fastest growth area of the economy, not only nationally but in York, is tourism. Because people have more money in their pockets as a result of low inflation, that disposable income can be spent on tourism.

Finally, employment in York has benefited from construction. When there is low inflation, it is worth while for companies to extend their properties, as has happened with General Accident, whose premises are close to the River Ouse. Because the company has additional responsibilities and has taken on additional employees, it has had to extend its building.

I contrast that good record with what would happen under Labour. Higher inflation is a concomitant of socialism and would come about through the artificial minimum wage. A number of economists have said--I believe that they are accurate--that it would raise prices by 3.5 per cent. over three years. Higher inflation would also be caused by the social charter. That is Euro-speak and Euro-engineering. The training levy proposed by the Labour party would add significantly to inflation. Higher state borrowing would require private companies such as those I have mentioned as well as those in the state sector to increase inflation. Higher interest rates would result. I must draw to the House's attention the unrealistic hopes of the public sector. The Association of Locomotive Engineers and Firemen and the union that used to be known as the National Union of Railwaymen, both of which are well represented on the Opposition Benches, have expectations way beyond the level that could be paid for by British Rail or by the users of British Rail. Those artificial expectations would be raised under a socialist Government. Also, the red tape, especially in employment matters, caused by the Opposition's proposals would strangle business and would increase costs. The black economy would also be encouraged. People would think that there was little point paying one's full taxes if there was high inflation. The black economy would rise to monumental proportions. I shall try to be as charitable as I can, but the socialists believe that there should be a wider public sector, and that through that there would be a larger economy. In fact, it would simply mean that costs would rise artificially and excessive spending would lead to increased inflation.

In contrast, the Conservatives have safeguarded public services. For example, from 1964 to 1970, investment in the railways fell by 57 per cent. in real terms under a Labour Government. It rose by 48 per cent. under the Conservatives from 1970 to 1974. It rose by only 13 per cent. under Labour from 1974 to 1979, and it has increased

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by a staggering 55 per cent. in real terms since 1979. Therefore, we can have low inflation at the same time as good services. If the Labour party is to safeguard the economy by borrowing, it would have to sell gilt-edged securities at a high level. That would raise inflation. It would also increase taxation. I hope to hear from the Opposition Front-Bench spokesman that the Opposition's proposals would mean raising the basic rate of tax by 10p or 15p, abolishing the ceiling on national insurance, raising the top rate of income tax back to 50p in the pound and reducing the value of many tax reliefs and allowances, as well as imposing a swingeing 9 per cent. surcharge on savers. The Labour party believes that high wages would restore living standards. In fact, they would lead to higher prices--

Mrs. Beckett : I am sorry that I have not had the pleasure of listening to all the hon. Gentleman's speech, but I am struck by his remark about a swingeing 9 per cent. surcharge on savers. I am sure that he will be aware that what we propose is a 9 per cent. charge on investment income above £3,000 and on investments per person at well over £30,000. I am sure that he was a Member of the House when, in 1988, the Government withdrew all help with housing costs from those with capital of £8,000. Today, help with housing costs is lost to those with capital of £3,000 per unit--that could be a couple. In other words, the hon. Gentleman was a Member of the House when the Government really penalised small savers, who have to be those on the lowest incomes or they would not be eligible for consideration in these matters. So we do not need any lectures about penalising savers from the hon. Gentleman.

Mr. Gregory : I am delighted that the hon. Lady has confirmed that there would be a tax of that nature on savers. She sidestepped the important point that high inflation under Labour eroded the value of people's savings by one third. I would not want to face the electorate of Derby, let alone York, with that appalling track record.

I should like to pursue this further, but time does not permit me. The important point is that Labour would continue to be the party of high inflation, which would affect the interests of the public sector and the vast majority of employers and employees. The defeat of inflation continues to be the core of the Government's economic policy, and in that way we shall ensure a sound and prosperous Britain.

8.55 pm

Mr. Thomas Graham (Renfrew, West and Inverclyde) : Some time ago, I asked Ministers to tell us the price of certain basic foods, and none of them could do so. Can the Minister tell me the price of a pint of milk, a loaf of bread, a tin of beans or a 3 lb bag of potatoes? I should be delighted if he could do so. If he cannot, I must tell him that pensioners, the unemployed and everyone in the country has to purchase those goods to survive. If the Government do not know their cost, they should not be sitting here hypocritically debating inflation.

The Government's attitude to inflation worries me. Their methods of driving down inflation have put 3 million people on the dole. Not long ago, I spoke to a young unemployed man with a family of three. I asked him what was the most important consideration to him. He said,

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"Obviously, Tommy, taking care of my family, ensuring that we can purchase our groceries, pay for heating and children's clothing and ensuring that our children go to school and are educated." Today that man needs a job. The Government are concentrating on low inflation, but they have thrown millions on the dole.

Inflation is important, but the right to a wage is even more important. I am convinced that the young family to whom I spoke would have liked to earn an average wage, even if it meant a 10 per cent. increase in inflation. I hope that the Minister understands that the right to work is an important part of the fabric of life in Britain. The Government have been so blinded by inflation that they do not see the realities of life. Their policies have driven people into the most abject poverty imaginable to mankind. Britain is supposed to be a high-technology country, but thousands of companies in Strathclyde have gone to the wall. Manufacturing industry has been decimated. In the Strathclyde regional council area alone, 166,000 manufacturing jobs have been lost--more than half its manufacturing base. Those are mind-boggling figures, yet the Government, who tell us that they are concerned about inflation, are allowing our manufacturing base to go to the wall. If those manufacturing companies were kept open and their workers employed, perhaps we could have zero inflation. I agree with my hon. Friend the Member for Glasgow, Provan (Mr. Wray) that it is madness to go for zero inflation. The Government know what I mean by that, so I shall not spell it out.

For the past 10 years, the Tory Government have promised miracle after miracle. The only miracle is that they are still in office. Unemployment is 2.6 million--9.2 per cent. of the work force. Who do we blame when nearly 10 per cent. of our modern society's work force are unemployed instead of making this country a good and fit place to live? Who can believe that 9 per cent. of the work force are unemployed when our schools are falling apart, when there are pot holes in our roads and when hospitals are collapsing? We need regeneration to improve the fabric of our society. We need restructuring--now. After 13 years--

Madam Deputy Speaker : Order. I must call the hon. Gentleman to order. I refer him to the amendment and the motion, which deal with inflation. If he referred to inflation from time to time, he would keep himself in good order.

Mr. Graham : I take your point, Madam Deputy Speaker, but I am saying that although the Government are obsessed with inflation they are not tackling its root causes. They should ensure that Britain has better infrastructure and a manufacturing base.

I am sure that your house, Madam Deputy Speaker, is nicely furnished. Before furnishing a house, one must decorate the walls and ensure that the floor is secure, that there is water in the taps and that there is a bathroom to flush the waste away. What I am saying to the Government is that they do not have a bathroom to flush the waste away. There is no water to drink for refreshment and no electric current to get the nation going again.

The economy contracted by 2.5 per cent. in 1991--the worst calendar year since the depression of the 1930s. My

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mother was unfortunate enough to be a young person in that depression in Scotland, but she remembers very well that when someone took ill the people in the close gathered up sixpences to pay the doctor, who came along and did the business. That was how society behaved in the depression of the 1930s.

The Government's drive towards private medicine is preventing many people from getting proper treatment, yet the Government think that inflation is the main problem. What they are doing to the country is savage. Manufacturing investment in 1991 was down 14 per cent. Britain is the only EC country where manufacturing investment is lower than in 1979. The sum of £30 billion in manufacturing investment has been lost because the Government have failed to make such investment at the same rate as Labour. Investment in the whole economy is down 11 per cent. In 1989, the Government spent 0.52 per cent. of the national wealth on civil research and development, compared with 0.92 per cent. in Germany, 0.86 per cent. in France and 0.66 per cent. in Italy. Since 1979, revenue from North sea oil has amounted to more than £100 billion.

Those figures are an indictment of the Government. They have squandered the revenue from North sea oil, which has been dug out in the most savage weather conditions by workers who have seen their compatriots thrown on to the dole. That revenue should have been spent on education, health, training and industry to get everyone back to work.

I ask the Minister to please stop squandering and privatising the nation's wealth. The public built the companies that the Government have given to their friends in the City. The general election will not be long. The time has come when the people of Great Britain want to take back what rightfully belongs to them, not to the Government's rich friends. We should be looking after people who are in need, in hospital and on the dole, and people who are unemployed and handicapped. The Minister should hang his head in shame. I have told him that until I am sick and tired--

Madam Deputy Speaker : Order. I have heard enough. If the hon. Gentleman will relate his comments to inflation, I shall listen. If not, he must resume his seat.

Mr. Graham : I have related my remarks to inflation. The Government have mismanaged the economy, inflation and every part of our society. I am delighted that it is not long until the general election when we can show them what is what.

9.5 pm

Mr. Nicholas Brown (Newcastle upon Tyne, East) : Not only are the Conservatives absolutely useless in Government but it is pathetically clear that they are not shaping up as very much of a parliamentary Opposition. They are struggling to get the hang of holding Supply days. They choose the wrong topics and the wrong decade. Government business managers have recently held Tory Supply days on taxation, privatisation, industrial relations, and now inflation. In his excellent speech, my right hon. Friend the Member for Blaenau Gwent (Mr. Foot) said that that was merely an election stunt but, having considered the topics that they have chosen to

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debate on their four Supply days, it is clear that they are getting ready to fight the 1979 election rather than the one that is coming in a few weeks.

Do the Government want to debate the recession? We could talk about the longest and deepest recession for 50 years. Do they want to debate unemployment? We have experienced the highest rise in unemployment since records began. Do they want to talk about record mortgage repossessions, business closures, the lack of economic growth or rising crime? No, the Conservatives do not want to discuss those issues. Their choices for debate are tangential and even when discussing the topics that they have singled out for our attention, they spend most of their time attacking a fictional version of the previous Labour Government's record or an invented and highly speculative version of what they allege will be the next Labour Government's record.

Before dealing with current affairs, I must respond to the case made by Conservative hon. Members against the previous Labour Government. I have sat through most of this debate. Has anyone heard any Conservative hon. Member mention, let alone praise, Mr. Anthony Barber? My hon. Friend the Member for Hemsworth (Mr. Enright) remembers Lord Barber, the Tory Chancellor, whose monetary policies in 1972 and 1973 stoked up inflation for the incoming Labour Government. That incoming Labour Government inherited inflationary pressures in the economy from the Barber regime and then had to tackle the quadrupling of world oil prices.

The Labour Government cannot be blamed for Anthony Barber or for the quadrupling of world oil prices. The 1974-79 Labour Government deserve credit for getting inflation down to below the average of the Twelve in the European Community. As my hon. Friend the Member for Glasgow, Provan (Mr. Wray) said, they did not have the benefits that North sea oil brought to the Conservatives in the 1980s, yet Labour never had a manufacturing deficit. The Conservatives have had one every year since 1983.

Labour ran a higher annual growth rate of 2 per cent. compared with 1.75 per cent. under the successor Tory regime. Mortgage rates under Labour averaged 10.75 per cent. compared with the 1979-92 Tory average of 12.65 per cent., yet the Conservatives claim to be the party of the home owner and pretend that we are not.

Under Labour our share of the world's major manufacturing exports rose from 8.5 per cent. in 1974 to 9.1 per cent. in 1979. By 1984, the Conservatives had got that back down to 7.5 per cent. If investment in our nation's manufacturing base had continued at the same rate of growth as under the Labour Government an extra £30 billion would be invested in manufacturing industry in Britain today.

Instead, it is pitiful that manufacturing investment today is lower than when the Conservatives came to office. We should remember that all this took place under a Labour Government committed as a matter of policy to bearing down on unemployment. In 1979, Saatchi and Saatchi hired actors to pretend to be unemployed workers in a poster campaign with the slogan "Labour isn't working". There is no need to hire actors now. The Employment Gazette shows that--without exception--for every single year the Conservatives have been in office the annual average percentage rate of the work force unemployed has been higher than it was under the last Labour Government.

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In 1979 the Tory election slogan implied that the Conservatives wished to reduce unemployment. What they have actually done is to maintain it at considerably higher levels every year for the past 13 years. Truly is it said that "Unemployment is nature's way of telling you that you voted Conservative"--

Sir Gerrard Neale : If what the hon. Gentleman says about the Labour Government at that time is correct, perhaps that would explain why there was a sterling crisis under that Government which forced them to devalue. Does the hon. Gentleman put it down to coincidence that both the Labour Governments before the one under discussion had sterling crises and had to devalue?

Mr. Brown : The hon. Gentleman is trying to rewrite the history of the last Labour Government. Conservative Members always try to depict that period as a grim disaster. It was nothing of the sort. There was much to praise in the last Labour Government's programme, especially given the problems with which they had to deal. The two major problems were inflation, which had been stoked up by the previous Conservative Government led by the right hon. Member for Old Bexley and Sidcup (Mr. Heath) and Chancellor Barber ; and the quadrupling of world oil prices. How that Government conducted themselves must be seen in that context.

Mr. Radice : Is it not also true that since 1979 the pound has considerably depreciated against the dollar, the yen and the mark?

Mr. Brown : My hon. Friend, who made an excellent contribution to the debate, hits on a good point. Ministers do not come to the House and explain their depreciations of the currency. I recall the Prime Minister saying that the Government had no higher duty than to maintain the value of the currency ; he did not go on to explain why he has not done that.

Mr. Maples : I am sure that the hon. Gentleman does not want to mislead the House about the exchange rates. The value of the pound against an average basket of foreign currencies is the same now in real terms as it has been for the past 12 years.

Mr. Brown : The Minister asserts that having first carefully picked his basket of currencies--without referring to the dollar, the yen or the mark, which would have constituted a more relevant comparison. When discussing anything that has happened since 1979 it is official Government policy to blame someone else for the shortcomings of the past 13 years, but I did think it a little disloyal of the Secretary of State for the Environment to come to the House last week and to blame the rest of the world--in a much better speech than the Prime Minister would have made in similar circumstances. I hasten to add that I make no such charge against the Chief Secretary. In the 1979 election manifesto, the Conservative party included a section sternly headed, "The control of inflation". It said : "To master inflation, proper monetary discipline is essential, with publicly stated targets for the rate of growth of the money supply. At the same time, a gradual reduction in the size of the Government's borrowing requirement is also vital."

The Conservatives, we note, did not mention a gradual reduction in the public sector borrowing requirement being vital over the cycle.

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To the Conservative party led by the right hon. Member for Finchley (Mrs. Thatcher), a gradual decline in the PSBR was vital--full stop. History, alas, does not record whether the present Prime Minister and Chancellor of the Exchequer were dissenting voices in those days, but I suspect that they were not. I will lay odds--which would have been attractive to the hon. Member for Welwyn Hatfield (Mr. Evans) who spoke earlier--that the present Chancellor never had the nerve to say to the right hon. Member for Finchley what he said in Treasury Questions last November. When asked how he would pay for borrowing, he said :

"We shall pay for borrowing by borrowing--that is the normal way in which one pays for it."--[ Official Report, 28 November 1991 ; Vol. 199, c. 1062.]

I must try that out on my bank manager. I do not think that it will work with him and I am certain that it would not have worked with the previous Prime Minister. It shows how times have changed. We shall find out in a couple of weeks how that line is working for the present Prime Minister.

In its 1979 election manifesto, the Conservative party also said : "The state takes too much of the nation's income ; its share must be steadily reduced. When it spends and borrows too much, taxes, interest rates, prices and unemployment rise so that in the long run there is less wealth with which to improve our standard of living and our social services."

The Conservative party then went on to do the opposite. It increased, not reduced, the share of the nation's income which the state takes, and it has maintained that increase for every year since 1981. By the summer of 1980, the Conservative Government had British inflation running at 21 per cent. The comparable average for the 12 EC countries was 14 per cent. Unemployment was high and rising. The Conservatives' response was to bring about the worst recession since the second world war.

In describing the 1st century Roman conquest of northern Britain, Tacitus said :

"They created a desert and called it stability."

The Conservative approach to north Britain's industrial base has been similar. When Conservatives say, "Oh, the north has not been so much affected by our latest recession", they forget that the north has not yet recovered from the earlier one. The point was effectively underscored by my hon. and learned Friend the Member for Leicester, West (Mr. Janner).

By 1983, the Conservatives were telling us in their manifesto, under the heading, "Success against inflation", that

"We shall maintain firm control of public spending and borrowing. If Government borrows too much, interest rates rise, and so do mortgage payments."

By 1987, in "We the People"--the right hon. Member for Finchley was using the royal "we" even then--the language had become far more robust. It was even slightly hysterical. The manifesto said : "Inflation is an evil. As with all cancers, it needs to be completely eradicated. To this end, we shall endeavour to achieve zero inflation."

Oh yes? In view of the Conservatives' previous methods, the more frightening question is "How?". The manifesto continued : "We shall maintain strict control of public expenditure and borrowing."

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There is also a warning against

"extravagant monetary and fiscal policies which would produce hyper- inflation and economic chaos."

I presume that the Chancellor and the Prime Minister have read that.

On the 1988 Budget and its aftermath, I will read to the House an extract from a candid article in an American magazine called International Economic Insights. There are more economic insights in the article than we ever get from the Government in the House of Commons. The article, referring to the 1988 boom and its aftermath, says :

"In the latter stages of the boom, however, it was becoming clear that macroeconomic discipline was being threatened by one of the government's microeconomic reforms : deregulation of the financial sector."

This is very honest stuff. The article continues :

"There was an explosion in bank lending in the late 1980s which sent broad money growth soaring into the high teens. That unleashed a boom in asset prices, particularly houses, which generated an unprecedented and unsustainable surge in consumer spending. Government macroeconomic policy then turned to the task of curbing the inflationary consequences of that boom. The main policy instrument was high interest rates"--

as we all know. The article then says :

"Clearly, the reduction in inflation has not been painless." The people who said that the reduction had not been painless might have thought of that before they allowed it to be stoked up. The article goes on to state :

"we have had to forgo some output as a price for eliminating its inflationary consequences."

Quite. The author, our own Chancellor of the Exchequer, clearly accepts on the Government's behalf both the blame for the problem and the responsibility for the chosen remedy. In order to bear down on inflation, the Conservatives have engineered in this country the worst recession since the 1930s. They do not know when it will end. Last summer, the Prime Minister told us that

"Britain's position is strengthening month by month."

It was not. The Chancellor, last May, said :

"Things are starting to go rather well for the economy." They were not. Later, the Chancellor told us that

"The green shoots of economic spring are appearing once again." That is a poetic image. It turned out to be not so much the "Darling Buds of May" as the "darling buds of maybe". The reason that the green shoots of economic spring are not coming through is, of course, that both the Chancellor and the Prime Minister have been talking to the plants. The Chancellor clearly repeats over and again that

"Rising unemployment and the recession have been the price that we have to pay to get inflation down. That price is well worth paying." The Prime Minister drones on at the poor little green shoots of economic spring, saying :

"Inflation must go. Ending it cannot be painless. The harsh truth is that if a policy isn't hurting, it isn't working."

No doubt he was half remembering something that his mother told him as a child. In the circumstances, is it surprising that the green shoots of economic spring are not coming out of the ground? They want to be spoken to in a much more soothing manner, probably in a lilting Edinburgh accent.

In 1987, the Conservatives claimed their objective to be zero inflation, yet in 1987, 1988, 1989, 1990 and 1991 they could not even get inflation down to the EC Twelve average--something that the Labour Government managed to do in their last full year in office. That is not surprising, as, although they claim to be bearing down on

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inflation, in a number of key areas the Conservatives were actually stoking it up. As well as VAT increases, to which successive Conservative Governments seem to be addicted, the poll tax made its unique contribution to our inflation rate.

As my hon. Friend the Member for Newport, West (Mr. Flynn) has pointed out, the Conservatives have also been at it with the public utilities. If one takes the cumulative change in the retail prices index from 1979 to 1981, one finds to one's surprise that the cumulative change is not zero but 135.4 per cent. That is from the party that has inflation as its priority. If one then takes certain public utilities and compares the inflation rate from 1979 to 1991 with the all-items rate--135.4 per cent., let me remind the House--one finds that electricity prices have gone up by 149.1 per cent., that gas prices have gone up by 167.7 per cent., and that telephone charges have gone up by 142.2 per cent., increases that were front-loaded in 1980 and 1981, with percentage increases of 28.2 per cent. and 23.5 per cent. respectively. Perhaps most obscenely of all, water charges have gone up by 265.3 per cent. from 1979 to 1991. Why should all those items have price rises substantially ahead of the rate of inflation? What possible explanation could one seek? The explanation is pretty obvious. The Government intended to sell off those industries and ensure that the prices rose so that they could get a successful sale. Who pays the price for that successful sale? It is the consumer with Conservative-inspired inflation.

In the debate, Conservative Members asked what Labour would do. They always ask that when they can think of nothing to say. They do not listen or bother to follow the debate. They just say, "Well, what would Labour do?" If they had bothered to read the Labour amendment to the motion, they would see that we call on the Government "to introduce measures which include support for investment in manufacturing industry and in training, since without such measures inflationary pressures will simply re-emerge."

I am certain that that would be the case.

That policy, combined with our commitment to the exchange rate mechanism, seems to me a sufficiently substantial anti-inflationary policy. Let no one, absolutely no one on the Conservative Benches, try to peddle the misleading statement that the Labour party is not committed to playing its full part within the workings of the ERM and ensuring that it bears down on inflation. We were committed to the ERM well before it became fashionable on the other side of the House. We understand the disciplines that are involved.

However, it is not necessary to spell out from this Front Bench precisely which mechanism at which point in time a Labour Chancellor of the Exchequer would need to use in order to preserve our position. A series of options would be open to a Labour Chancellor, just as a series of options is open to a Conservative Chancellor. Conservative Members know that and know that we shall have a full range of options open to us just as they have a full range of options before them. In drawing her excellent speech to a conclusion, my hon. Friend the Member for Derby, South (Mrs. Beckett) introduced a further quotation. I should like to refer to it again. But before I do so, hon. Members on both sides of

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