House of Commons Hansard Debates for 7 May 1992

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marginal tax rates are and given what the Government have already done on changing the housing benefit scheme, whereby an unemployed person on income support has the whole of his rent paid, but, because the income scales were changed for those in work, people now move from having rent totally paid when they are unemployed to an income which is hardly any different when they are in work, but facing practically the whole of their rent charges. Therefore, a council tenant paying a large rent such as those that we have in the Wirral has now to be patriotic beyond belief to move from unemployment to work, other than finding himself in the position of making his family worse off.

Those are real conditions that our constituents must face. I make the plea that, when we open the debate about the future shape of welfare, we do not do so just on an intellectual level but use one of the great resources that each of us has, and that is that we represent an area in this country and that we listen to what our constituents say, particularly those who will be most affected by the changes. There is all the difference in the world between keeping a universal provision of child benefit, which is a springboard to freedom, and thinking about how more selective one might be in future about making above-the-board increases in the standard rate of the old-age pension.

I am taking much time, but I wish to end on one other theme if I may, and that is pensioners. I wish to open up two themes briefly. The House is awaiting the Government's response to the Select Committee report on the ownership and control of pension funds. Way back in 1976, I thought that the Labour party should advocate the sale of council houses. Unfortunately, it was not a view which my party accepted. We now have an opportunity of extending capital ownership on the pensions front which makes the sale of council houses small beer. I am talking about the equity stake that most of us have through our pension scheme. Most of us do not realise that we have any asset there at all. If one worked for Robert Maxwell, one realises that one does not.

A person on average earnings approaching retirement, will have a portfolio of about £100,000 to support his or her pension, yet no one thinks that he owns that £100,000. None of us thinks that collectively through our pension funds we own about a third of the stock market. If we are to achieve the next big leap forward in people having control of their own assets and having the right to move those assets from one pension fund to another accepted body, I hope that the recommendations in the Select Committee will be accepted.

I end as I began, on a sombre note. I make a plea about those pensioners who thought that they had assets in Maxwell-run pension schemes only to find out that the funds were either sadly depleted or non-existent. I know that the Government are thinking about what their response will be. I make an immediate plea to the Government. I do not expect the Government to say this evening that they will underwrite all those pension funds, but they could say that they will give a conditional undertaking to underwrite on a month-by-month basis those funds which now find that they are not solvent and, therefore, must close.

The Government know the disadvantages of schemes closing. Not only are pensions lost but the body which seeks to trace the assets which may have been misappropriated disappears with the closure of the

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scheme. So there is a real need to pump money on a short-term basis into such schemes so that pensions can be paid. But there is also a longer term objective. Through the schemes we may retrieve some of the assets and give them back to the pensioners who own them. It is not simply a matter of people losing their pension. Many of us in the House will know from our constituents who are Maxwell pensioners that with the loss of their pension goes the loss of their home. Pensioners have to sell their homes because they do not have the monthly income to keep them going. So before many more schemes close--one closed two weeks ago--I hope that the Government will respond, not in a universal way but in a selective way, to ensure that while they are thinking about the longer term reforms no more pension schemes go to the wall. With the closure of a pension scheme, people face the horror of losing not only the whole of their provision for retirement but their other greatest asset, their house.

Mr. Wolfson : I support in the strongest terms the point that the hon. Gentleman is making. I have experience of several constituents who, in some cases, worked for 37 years for a company which was not part of the Maxwell group but was taken over in the last three years of their employment. They now have no pension whatever. We need to keep open all possible gates to retrieving those funds.

Mr. Field : I am grateful for the hon. Gentleman's support. I hope that those on the Treasury Bench listened most carefully to his comments.

Labour Members have difficulties in approaching the Queen's Speech after our fourth election defeat. I hope that in the next year or so we shall use the debates in the House, both to criticise and probe the Government, as we rightly should, and to open up the debate about what our policy should be so that in five years' time we shall not suffer five losses in a row.

4.9 pm

Mr. Peter Fry (Wellingborough) : I am delighted to be called so early in the debate on the Queen's Speech, particularly because it enables me to join in the congratulations to you, Madam Speaker, on your well merited promotion to the Chair. I should also like to take the opportunity publicly to congratulate my right hon. Friend the Chief Secretary and his colleagues on their promotion to the Treasury Front Bench.

As so often, the hon. Member for Birkenhead (Mr. Field) produced a thoughtful speech. I should not like him to think that only constituencies in the north-west of England experience the problems that he outlined. Some of the ideas in his speech will cause much thought, not least on the Opposition Benches.

I reinforce the hon. Gentleman's comments about the terrible trap into which people fall, particularly when they are unemployed and have families to support. He mentioned those who pay council house rents. I hope that my right hon. Friend appreciates that a considerable number of people live in the private sector where rents are often much higher than in the council house sector, and where the pressure on people is even greater. Even with the family credit system, many of them would find it not worth working at all. The pressure exists throughout the housing sector for those who do not own their own homes.

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The hon. Member for Birkenhead also spoke about pensioners, particularly those who were let down by the collapse of the Maxwell empire. The Conservative party has a great obligation to ensure that people who take out private pensions receive them. It is not much good for us to say that we have an alternative to the state scheme and that we want people to stand on their own feet. We must ensure that when people have contributed money from their earnings and when firms have also contributed to pension schemes, those pensions are realised when they are due. There will be all-party agreement on both those points.

At the start of debates on the Queen's Speech, comments are always made about the election. I should just like to put in one little caveat to the euphoria that exists in the Conservative party. I must admit that, going round the country as I did, I did not find that the support for me and my party was based on unqualified approbation for everything that had happened over the past two years. The Government should accept that we were chosen as the best possible

alternative--perhaps the least of all the available evils. I think that that lesson has been learnt, and I welcome many of the measures contained in the Queen's Speech. We are entering a period when there may be less political strife and bickering than in the past 12 months. There is a feeling in the country that political bickering does no good in getting us out of the recession. Now that the election is behind us, people expect the Government to get on with the job of helping industry, helping to create jobs and helping people to raise their standard of living once again.

I was impressed that my right hon. Friend the Chief Secretary took as his theme value for money. Rather like the hon. Member for Birkenhead, I should like to look in a little more detail at one aspect of public expenditure. I was pleased to read in the Queen's Speech that the Government were committed to increasing the role of the railways in meeting the country's transport needs. However, I was not too happy to note that that was the only reference to the problems of the country's transport needs. The problem goes much wider than merely privatising part of British Rail.

While I am on the subject, I congratulate the Government on at long last grasping the nettle and dealing with how to bring competition into rail services and, at the same time, covering the cares and concerns of many people about what would happen if the whole system were privatised.

Sixteen or 17 years ago, I was a member of the Conservative party's transport policy committee when we first proposed the idea of separating the maintenance and ownership of the track from the operation of rail services on it. I am only too pleased that, at long last, that idea has been accepted by my right hon. Friends. The new regime that we set up for British Rail and the rail services can only benefit the country, the consumer and I hope, public expenditure as well.

However, the problem that has not been touched on, and which is fundamental, is that of how we shall deal with one of the greatest sources of waste and environmental pollution that exists in our society. How are we to use public expenditure to do something about the appalling traffic congestion in our major cities? The Government

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have already done a remarkable amount. I discovered that many people were totally unaware of the Government's achievements, and the fact that some imaginative schemes have been proposed and commenced for heavy rail systems, particularly in London.

There are light rail schemes, which are virtually 100 per cent. funded by the taxpayer, in Sheffield, Manchester and Birmingham. Many more schemes are queueing up to be approved. We have the biggest plan for inter-urban road building that the country has ever seen, which is surely important to ensure our economic recovery.

However, we have not yet resolved the problem caused by the massive public expenditure that will be needed to cope with the congestion that is becoming an everyday occurence, not only in the big cities, but in medium- sized towns. London is a special case, and I do not want to consider its problems at the moment, but I have been impressed by the fact that, if we are not careful and do not obtain value for money when we spend taxpayers' cash up and down the country, that will cost us much more in the future, not least in the environmental impact that the over-use of motor cars and lorries will have.

Some hon. Members will be surprised to hear me make such comments as, over the years, I have been known as a supporter of the road lobby, and I believe that roads play a fundamental part in the national economy. However, when we are dealing with the problems of urban centres, road building alone cannot be the solution. It is politically unacceptable, and the cost is too heavy. We have to ask ourselves, in the words of the Chief Secretary to the Treasury, "How will we get value for money?"

If we embark on enormously expensive schemes, they will take up money that could be used elsewhere. They also take a long time to complete and, as the former Secretary of State for Transport, Mr. Parkinson, said, if one conducts too many schemes at any one time in any one place, the ensuing chaos makes them counter-productive. We could turn to more of the light rail schemes that have been promoted, but it is my view that the number of those schemes that are viable is limited and that there is a danger that too many of them are being promoted merely to advance the aspirations of some local authorities. The problem remains.

I noted that the new Secretary of State for Transport said once again that the Government were considering road pricing. I warn my right hon. Friend that, just as many people who responded to the opinion polls before the election made monkeys of the pollsters, so there is a danger of assuming that, when people answer that they are in favour of road pricing and deliberately restricting the use of motor cars, that is what people actually think.

The second most important purchase that most people make after their house is their car. Having bought it, they are going to use it. The problem facing much of the western world is not stopping people buying and using cars but persuading them to use them less often--in other words, using public expenditure to persuade people voluntarily to leave their cars in the garage or to use park and ride operations.

I have not yet mentioned the one form of public transport that can make the greatest contribution to solving traffic congestion : the bus. The trouble with the bus is that it has a down-market image. Years ago, we used to talk about the man on the Clapham omnibus as the fount of all wisdom, the man whose opinion should be taken as the average view. Alas, today, too many

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passengers on the Clapham omnibus are pensioners or those on concessionary fares, children going to school or people on low incomes, not traditionally the groups whose opinions are first taken into account when decisions are made.

I suggest that, if my right hon. Friends want value for money from public expenditure on public transport, they should take a good look at ways in which they can exploit the bus, rather than devoting hundreds of millions of pounds to schemes that can offer only limited relief.

There are those who ask why we should make such a fuss about the bus ; surely now that the bus companies have been deregulated, they can sort out the problems for themselves. I venture to suggest that they cannot. First, traffic is already too bad, and only the Government at national and local level can alter the rules to give the bus greater priority. That needs to be done.

Secondly, if higher income groups are to use this form of public transport, they must have a convenient system--a clean, comfortable and swift system. At the moment, it is virtually impossible for bus companies to purchase the kind of new buses they want. The bus building industry in this country has virtually collapsed in recent years. Treasury Ministers must re-examine the regime under which many bus companies operate, to enable them to produce the profits with which to buy better, cleaner and more modern vehicles.

Thirdly, we must look seriously at the regime in which we expect our public transport operators to run their services. I was privileged a couple of months ago to go to Brazil. Hon. Members may wonder what on earth Brazil could teach us about public transport, but they may be interested to learn that the finest system of buses that I have seen anywhere in the world is to be found in the city of Curitiba, in southern Brazil. With the right sort of investment, that town is achieving levels of service as good as those provided by light rail systems in many other parts of the world ; at the same time, it has successfully enabled people to leave their cars at home and move around the city without causing enormous traffic jams. We should examine other systems. I hope that the Treasury will allow the Minister for Public Transport to go and have a good look at how other countries are solving their problems. It is not necessary to spend enormous sums on heavy or light rail or even on road building. We need, as the Chief Secretary said, to choose the right priorities. By choosing them wisely much can be achieved, we can obtain value for money and our appalling traffic congestion can be relieved.

I hope that, when the Secretary of State replies to the debate, he will deal with the vexed question of the future of care in the community. There is considerable unease, especially in the private residential homes sector, about what will happen over the next two years as a result of the change in funding for people who cannot look after themselves. County councils are currently presenting their broad outline plans, but they cannot say exactly how those plans will be implemented, because they do not know how much money they will receive.

I hope that the Secretary of State is aware that many thousands of elderly people are quite happy to remain in residential care. However, a shadow is being thrown over them because of the uncertainty of future funding. One of the greatest assurances that my right hon. Friend can give is that those people will not suddenly find, because of a change in county council policy as a result of a vast

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reduction in funding, that they will not know where they will stay when the new system is introduced. If care in the community is to be placed at the forefront of our social policies, it is essential to find the public expenditure to enable the policies to be carried out, to the satisfaction and happiness of thousands of our elderly citizens.

4.26 pm

Mr. Matthew Taylor (Truro) : I should like to repeat in public the private congratulations that I offered you, Madam Speaker, when I took my seat. The House looks forward to your continuing stewardship. The overwhelming vote of confidence in you was a measure of the respect for the work that you carried out when you were Deputy Speaker.

The speech by the hon. Member for Derby, South (Mrs. Beckett) failed to address the reality of the position of all the Opposition parties. The hon. Member for Birkenhead (Mr. Field) gave a rather more honest appraisal of the situation facing all of us who want to see not just a change of Government in the near future but, perhaps more importantly, the effective operation of democracy in this country.

In the weeks following 9 April, journalists, political commentators and politicians have advised, preached and speculated on the lessons that the Labour party and my party have to learn from the election result. There are certainly lessons to be learned, and the challenge is to provide an effective alternative. That means an alternative vision which is backed by practical, affordable policies. At this stage in the Parliament it is not enough for any Opposition Member simply to address the political situation as if those questions did not arise.

I am sure that, privately within the Labour party, those questions are being widely discussed, but in the past few days the tone of some of Labour's public comment on recent Government policy has failed to acknowledge that problem. That is not to say that the policies presented by my party and by Labour did not prove popular. Many Liberal Democrat policies and the positive way in which they were presented proved popular. Our pledge to invest more in education, even at the price of 1p on income tax, was the most popular policy of the campaign. We must also make it clear that a Liberal Democrat vote means Liberal Democrat policies, and fortunately people voting in today's local elections understand that. That will result in a record number of Liberal Democrat councillors and a record number of Liberal Democrat-led councils.

The Opposition parties have lessons to learn and thinking to do, but so do the Government. Indeed, a Government with such a reduced majority have the greatest responsibility to learn the lessons of the election and to consider what the citizens were saying. It is not enough to claim a mandate on a minority of votes or even on a small majority of seats in the House. Yet the Queen's Speech and the Prime Minister's comments yesterday suggest no such new thinking. Shortly before the election campaign, I received a letter from the Prime Minister. It outlined, somewhat sketchily, his vision for the future and expressed the hope that I might share his views. It even suggested that I might contact the Truro Conservative association to see whether I could help in any way. I imagine that many members of the public received the same letter. No doubt the Conservative central office computer targeted it at those

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who were considered to be likely Tory voters, probably those in jobs with good incomes and with reasonable job security.

I wonder whether the Prime Minister sent his letter to the unemployed, to those whose homes have been repossessed, to old people struggling on the state pension or to those on health waiting lists. I doubt whether that was the intention, but it is those people who are most dependent on the Government's policies. Many of them will not have voted Conservative but some will have done so, perhaps in the shaky hope that they can rely on the Government to put things right. It is more likely, perhaps, that they did so because they were afraid that, with a Labour Government, their position might be even worse.

The Government have a duty especially to help those who for fear of anything else--another Government--put their trust in them. It was the Tories who fought a campaign to create that fear. Many of those who voted for them did so, as the hon. Member for Wellingborough (Mr. Fry) rightly said, not out of any enthusiasm for what had happened over the past few years under Conservative Governments but out of a fear--in my view, it was in part misplaced but in the Conservative party's view the fear was justified--of the options that were on offer. I do not believe that there was any great endorsement of Government policy. That being so, Conservative Members cannot afford to be self-satisfied about the Conservative election victory that was won on less than half the votes cast. They need to show that they deserved the victory, but there is little sign of that in the Queen's Speech.

During the election campaign, the so-called citizens charter was trumpeted as the flagship for a Tory Government. It appears, however, that no legislation is planned that would put citizens in charge of what takes place. No money is committed to giving the charter any bite. The Queen's Speech appears to be that of a Government who did not expect to be re- elected.

What are the plans to improve public services and how will they be funded? The subject of today's debate is public expenditure, but we have not heard how the Government will improve investment in basic public services. During the election, I believe that my party won the debate on education because the public recognised that the service could be improved only with substantial extra investment and that there was an honesty in explaining that that meant that they would have to pay for it.

The Labour party failed to bring the two components together. It gave the impression that it believed that the public could be persuaded that almost too much could be given at no cost to them. The Government said that it would cost, as it were, but failed to recognise that there was a mood to meet that cost or to face some of the costs that would be involved, provided that the public knew what it was that they were voting for and precisely what the costs would be. The poll evidence showed precisely that, when the issue was put together in that form--the potential benefits and an accurate indication of the costs involved--the public would support it, as they supported the 1p increase in income tax that was proposed by the Liberal Democrat party.

How, for example, do Ministers intend to ensure that we have a high-quality train service, never mind who owns or operates parts of it? How do they intend to ensure that

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vital health operations are carried out quickly and well? How will they ensure that parents can be guaranteed high- quality education for their children in all instances and not only in flagship schools? How will they ensure that disabled people have access to the services and support that they need ; and that care in the community can be made a high-quality reality delivering the support that people have been promised?

The Government say that they will provide improved services, but the financial equation fails to add up. The Government have also made other various spending commitments to index-link pensions, to child benefit and to a Department of Trade and Industry run by a more interventionist Secretary of State--who has made it clear that he will want additional cash. As more schools opt out, it will be in the expectation that they will receive the additional financial support that those which have already opted out have received.

Alongside those spending commitments, the Government have pledged further tax cuts and have said that their intention is to balance the books. Given the present and projected levels of borrowing, how can balanced books be achieved without cuts in services, let alone cuts in the promises that the Government have made? Indeed, it has already emerged that the Government projections assume too high a level of growth. More realistic assessments of growth suggest that borrowing will need to be even higher to meet the expenditure plans. There have already been widely leaked projections for the coming public expenditure round, and cuts are expected. The services that will be hit will be the health service, education and community care-- the very services about which the election showed people care most. Education authorities and governing bodies already face the prospect of having to sack teachers and cut the delivery of education to children in the classrooms. Over the next few months, the unwritten home truths about the Government's general election campaign will emerge. While the Government were effective in raising fear of the alternative, they were hugely ineffective in explaining the contradictions within their manifesto. That can mean only broken promises and further cuts.

How do the Government intend to lift our country out of recession and into sustained recovery? In my part of the world, we are well aware that natural growth, coming out of the few early signs that we are now seeing, will do nothing to tackle the deep-rooted problems of the British economy as a whole, and more specifically those of areas such as mine where, no matter how well the economy performs, there are always lower wages, higher unemployment and fewer prospects for young people.

We sought to present a costed manifesto that dealt with those problems--a manifesto aimed at recovery and investment in vital services such as school and college building programmes, housing schemes and NHS building, with investment that would create jobs while improving basic services. Whatever the result of the election, I believe that those policies were popular. As I toured the towns and villages, not only in my constituency but in areas where we did less well, the message I received was one of concern about schools, the health service, pensions and the sewage on our beaches.

There was uncertainty about whether people could risk the alternative that was offered to tackle those problems, but there was no uncertainty about the reality of those

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problems and the need for them to be tackled. It appears that the Government would rather ignore those concerns in order to achieve a tax cut. Why the obsession with tax cuts? The only way to achieve them will be through cuts in education and job creation and through further environmental decline. The economy needs new ideas and new investment if we are to emerge from the recession and if our long-term needs are to be met.

I shall cite a local example. Last July a Trade and Industry Minister told me that he recognised the case for Truro and St. Austell to receive assisted area status and a review was promised--but not until after the general election. Local people keenly await the result of that review, but it will call for additional investment by the Government. Cornwall has some of the highest levels of unemployment in the country. We need the benefits of assisted area status, combined with a development agency for that county, to bring us out of recession. The decision must be made now.

The Government know that they have campaigned on an agenda that means that they cannot possibly deliver the required investment while delivering cuts in taxes and the balanced economy that they have promised to deliver--at least, not unless they are prepared to go down the road suggested by the hon. Member for Birkenhead and attack tax benefits and privileges, including mortgage tax relief. Having stood for a party that talked about such reform, I know that the Government have been only too keen to exploit the subject without examining the issues that underlie such a programme. The Government will be judged on their determination to act on those matters.

The Queen's Speech contains many small actions, but fails to face up to the great acts, the great reforms, that Britain needs. Even the Government's narrow ambitions are undermined by the financial crisis and the self- imposed financial limitations which they face and which they still do not allow themselves even to acknowledge in public let alone face. That is the truth of the Government's programme, and that is why it should be opposed.

4.40 pm

Mr. Ian Taylor (Esher) : I congratulate you, Mr. Deputy Speaker, on your new position. We look forward to you holding the fort on many occasions such as this when the House is not quite as full of hon. Members who wish to speak as you, in your position as Mr. Deputy Speaker, might wish. Nevertheless, I am delighted to take part in this debate on the Gracious Speech.

From my experience in my constituency, I believe that the problem with the Liberal Democrats' plan, which was mentioned by the hon. Member for Truro (Mr. Taylor), for 1p on income tax to fund education was that progressively during the campaign it was regarded as a gimmick. The principle of such an hypothecated tax does not stand up to examination, because ultimately the question arises : does everything have to be hypothecated? Why not have an extra 1p for something else and something else more? The idea also looked increasingly feeble in comparison with what the Government were already predicting that they would spend in Red Book proposals for the forthcoming financial years. Therefore, even on that basis the Liberal Democrats' proposal did not answer the question.

After the Liberal Democrats' sorry showing in the election, they will have to go a good deal deeper than that

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sort of exercise to win votes. I am not questioning the fact that education is important ; I am merely saying that there is a much bigger debate about how to finance public services, including education, and the answer is not to hypothecate tax in that way. I shall return to some of the broader themes but I do not want to miss the opportunity to pay tribute to the hon. Member for Birkenhead (Mr. Field). I shall not embarrass him by praising him too much--that might not be what he is seeking. However, I suspect that he embarrassed the Opposition Front- Bench spokesmen. Certainly, the hon. Member for Derby, South (Mrs. Beckett) would have done better to speak after the hon. Gentleman--that might have improved her own speech. I am sorry that she is not here to hear my comments, but listening to her speak one began to understand why the hon. Member for Sheffield, Brightside (Mr. Blunkett) considered that it would be a disaster if she were to succeed in her attempt to become deputy leader of the Labour party. There was no new thinking there. She spent most of her time trying to justify the Labour party's election campaign which so visibly failed to obtain the support of the British people. There was no message for the future non-Conservative forces, which may be seeking to coalesce in order to make a better attempt against the Conservative party at the next general election, whenever that might be.

One of the more interesting debates within the Labour party at the moment concerns the interpretation of its platform on the Budget during the election campaign. I was interested in the fact that the hon. Member for Dagenham (Mr. Gould) made a trenchant attack on the proposals of the right hon. and learned Member for Monklands, East (Mr. Smith), saying that what had crucially affected the Labour party's chances in the south of England-- those who come from Scotland should remember that there are quite a few people in the south-east and south-west of England and in the midlands, as the hon. Member for Dagenham also pointed out--was its fatal capping of the aspirations of those people who were not earning as much as £20,000 per annum but who saw no good reason why they should not earn that much as their careers developed.

Before the Labour party preaches to the country, it is crucial that it should understand that, during the past 13 years of Conservative government, the country has changed and people do not necessary feel that they will always be at the bottom of the heap. They have a chance to improve themselves in all sorts of ways, not only through their earnings but through the houses that they purchase and the investments that they make, including pensions, which the hon. Member for Birkenhead rightly said was the great hidden asset of most British people, to which they pay least attention, but which is of great significance and magnitude.

We must understand that the British people do not like being taxed at levels higher than they regard as reasonable and do not welcome the prospect of being part of a socialist redistribution of wealth from one section of society to another which, in order to have some impact, must begin taking at a fairly low income level. I was delighted to hear the hon. Member for Birkenhead challenging those old ideas. His presence here is a tribute to him, although not necessarily to his party, which may have represented a greater threat to him than anyone else in his constituency at the general election, as we know only too well.

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I welcome the Gracious Speech. It contains many points which we shall be able to debate in the several days to come and subsequently.

I wish to breach convention slightly by taking up a point made by the hon. Member for Truro about the citizens charter having no real teeth and receiving little emphasis in the Queen's Speech. That is far from the truth when one considers not only the Queen's Speech but the speech yesterday by my right hon. Friend the Prime Minister. I have some little link with the Chancellor of the Duchy of Lancaster who is responsible for the citizens charter, so it is slightly in breach of convention for me to raise the issue in the House. Nevertheless, I shall do so, but only to set out the agenda. The citizens charter and the principles behind it will now be at the heart of all Government decisions right across the board. It is an essential part of opening up public services and Government are making them more efficient and responsive. The new Department with a voice in Cabinet means that the citizens charter will not just have teeth but be of great importance. It is also critical to the concept of public expenditure. If I do not say too much about it it is because, as a Parliamentary Private Secretary, I am not free to do so.

The important statement in the Gracious Speech was that the Government intend to

"reduce the share of national income taken by the public sector and balance the budget over the medium term, reducing taxes when it is prudent to do so".

That is the right objective, which is probably shared, privately or openly, by several Opposition Members. It is important not to prejudge the speed or the nature of moving to objectives such as reducing taxation.

There is nothing wrong with reducing taxation. It is clearly not right to reduce taxation imprudently when the buoyancy of consumer demand which leads to company profitability is insufficient to increase the total revenue from tax. Therefore, given the current state of the economy, it is difficult to predict when it will be possible to reduce taxation. However, there is no doubt that we can assist the increase in buoyancy of company and private fortunes by reducing taxation if that is done at the right time. We should never get ourselves stuck on the problem of why it is that at the right time a reduction in the level of taxation can increase the revenues that the Government receive from taxation, as was shown in the 1980s. If the Opposition could grasp that point, they would understand why it is possible to have low levels of taxation and large increases in expenditure on our great public services.

Since 1979, we have had a good record in real terms of spending money on the great public services. There is no embarrassment about that for a Conservative. As a Conservative, I believe in the role of the public services. That does not mean that I believe that everything should be done by the Government, but there is no doubt, that where people in our community require assistance, that is quite properly acted upon by the Government, who should constantly seek to make sure that no one is left outside the net, in financial or other terms. That would create the kind of underclass to which the hon. Member for Birkenhead referred. Because an underclass increases instability in society, that cannot be part of a Conservative objective.

One of the greatest objectives of all Conservatives is to create a stable society. If that is not done, tensions will be

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created that lead to insurrections and changes in society at too dramatic a pace, which would be worrying to anyone of a Conservative mind. Over many decades, Conservatives have quite properly attempted to ensure that the inevitable divisions that occur in society--only a theorist believes that there can be no divisions--are not of a magnitude that could ever cause our society to become unstable. As Conservatives, we do not necessarily believe that the closing down of such instabilities should be entirely a function of the Government. The role of the individual--or, to use today's colloquial term, the active citizen--is most important, in a partnership with the Government. A Government who encourage the individual's desire to bind others in their community to them, participate in voluntary work and have some say in the institutions that they value, such as health and education, are playing their part in encouraging those allegiances in society that are essential if social stability is to be maintained.

It is not the Government's job to do that alone, thus creating a dependency culture. It is their job to do sufficient to encourage others to participate in that process. That is relevant to the whole public sector, which should not be seen as a total umbrella or framework for everything that ought to be done. The public sector exists to enable individuals to contribute to what we as Conservatives consider to be socially desirable ends. Achieving that balance is a constant concern for all Governments. At some times there is more emphasis on state intervention and at others more emphasis on the Government withdrawing from that course.

The Government can achieve none of those socially desirable objectives unless there is a stable economy. We have encountered a difficult recession over the past two or three years, but it is of academic, although perhaps political, interest whether the Government were entirely responsible for starting it. Matters would have been much worse had we listened to the recommendations at the time of the right hon. and learned Member for Monklands, East, who argued for deeper interest rate cuts during the boom prior to the recession. He would have engineered a recession that was more vicious than that which we have suffered.

Our current situation is relatively stable. It was made clear at the G7 meeting only the other week that in comparative terms we have a stable base from which to recover in the 1990s and from which to compete against other nations. Our percentage debt as a total of gross domestic product is perhaps the lowest of them all, and that is a good position from which to embark on recovery.

It is of concern to anyone to have a public sector borrowing requirement of 4.5 per cent. of GDP, but at this stage in the recession, that is less than it might be--and is certainly less than that of certain other countries, which look upon us with some envy. Since joining the exchange rate mechanism, we have enjoyed consistent interest rate cuts, despite the tensions that could otherwise have arisen. I agree with my hon. Friend the Member for Beaconsfield (Mr. Smith) that, when trading patterns predict that it will be safe to do so, we should move into the narrow band of the ERM, because currency stability is an absolute prerequisite of growth and economic rectitude for our country.

Sterling has performed extremely well in recent months, which indicates not only domestic but international recognition of the fact that the return of a Conservative

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Government and the continuation of our policies to damp down inflation and resolutely to maintain a proper balance in overall public expenditure create confidence. There can be no greater vote of confidence than the narrowing of the difference between the Lombard rate in Germany and this country's base rate to only one quarter of a point. That would have been unimaginable in the past. If someone had written that that would occur in 1992, he or she would have been written off as a lunatic or Sir Alan Walters.

There are, however, certain matters that the Government must address. There is no doubt that the public sector borrowing requirement is at a level higher than that with which we would feel comfortable. That has been admitted by the Government, and there is no point in trying to hide it. If we attempt to do so, we shall not be able to tackle that problem in the way that is necessary. It is not necessarily relevant to worry whether the PSBR will grow next year to more than £30 billion, as the Red Book predicts ; it is much more important to find ways of reducing it over a period. The great thing about balancing a budget over a cycle is that one passes quickly on without defining the word "cycle" or the length of the cycle. Nevertheless, that is an important objective, and one of which we ought never to lose sight.

I hope that the Government do not slip into the view that it will be sufficient to meet the Maastricht convergence terms. Although I believe that we ought to move towards the convergence set out in the Maastricht treaty--the Gracious Speech rightly gives priority to that--the objective of bringing the PSBR below 3 per cent. of GDP is not itself a sufficient target. We must obviously go much below that.

Whether a surplus can be achieved depends on many other variables, such as the rate of growth--which itself is dependent on the performance of other world economies, because our nation spends much of its time and effort on trading. It is, however, crucial to attack public sector borrowing, and there are two ways of doing that. We know that in the current phase, there is far from any truth in Labour's accusation that we bought votes and therefore increased the borrowing requirement. In net terms, we injected only about £1.8 billion through the Budget's tax changes and the move towards the 20 per cent. band, which Labour was foolish to oppose during the general election campaign.

Our real problem has been that, in a recession, the Government quite properly use the automatic stabilisers. I do not believe that the great debate that The Guardian tried to foist on the electorate during the campaign was relevant. I refer to the golden rule about balancing Government income and expenditure over any period, however calculated, and whether or not the figures exclude items of capital expenditure. I refer also to a recent leading article in the Financial Times , which, judging by its editorial on election day, is not necessarily a Conservative newspaper. According to the Financial Times, it is entirely proper for the Government to be borrowing at this stage in the cycle, bearing in mind the depth of the recession. I think that that is absolutely correct ; it offends none of my Conservative economic principles.

Of course the automatic stabilisers to which I referred will create a burst of expenditure on unemployment benefit. The point is, however, that that expenditure will be more than compensated for as the economy picks up. There will be a lagging effect on both sides, but, once tax revenues have picked up as a result of the buoyancy of the

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economy--a buoyancy that I believe is already present, and independent evidence underlines my belief--they will rapidly begin to provide us with some scope.

Although I do not wish to predict or even to request further tax cuts at this stage, I nevertheless expect to see a dramatic difference over the next two or three years in the revenues that the Government receive from current taxation levels. That will begin to give us a degree of freedom. Any economist who predicts growth rates is either a fool or working for the Treasury, but it is true to say that the rate of growth that is generally forecast for the country could be well above the trend established in the 1980s. I am heartened by the G7 forecasts of growth in other countries. We may well find that an automatic correction takes place in the PSBR in regard to revenues, and that would benefit the Government. The other side of the PSBR is expenditure. The Government have a remarkably good record of expenditure on the great public services. While not going back on any of our current plans, we should clearly restrain the rate of increase in that expenditure. My right hon. Friend the Chief Secretary--he is not in the Chamber now, but I congratulate him on his appointment--faces a difficult public expenditure round, but that is an essential part of ensuring that the economy as a whole is put in a position from which a strong recovery is possible. Many other matters will depend on that.

It is often forgotten, for example, that some of our great public services are undermined by inflation. Unless inflation is controlled, we shall eat away at the very public services that we wish to support. By bringing the overall economy under control and lowering inflation, we shall help to improve those public services. That it is possible to do that only and simply by spending money is one of the great myths of politics. We must attempt to restrain the rate of public expenditure growth.

That leads me to a major point. Clearly, all our citizens want better services--better education, better local government and a better health service. In their wisdom, however--a wisdom that they demonstrated by returning a Conservative Government despite the background difficulties-- the British electorate know that better services cannot be achieved by means of money alone. Sensibly, the Gracious Speech referred to a continuation of the privatisation programme. This crucial factor must be taken into account : if a service does not need to be performed by Government, it is better for it not to be performed by Government.

Before that observation is dismissed as dogma, let me explain it. The Government run many services extremely badly, placing limitations on expenditure and capital investment that are totally contrary to the cycle needed by the industries concerned. Many people criticised us strongly for denationalising the water industry for instance. They seemed to think that water and water purity were God-given. Perhaps they were originally, but I would not want to rely on God alone for the treatment of sewage!

The fact is that, once the water industry was removed from Government control, the Government could fulfil their role of protecting the consumer by toughening the regulatory controls, because they were not simultaneously providing the service. It is impossible to be both regulator and provider. Now, there is a massive programme of investment in the water industry.

The hon. Member for Dagenham--who is trying to do all the Labour party's thinking, apart from that done by

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the hon. Member for Birkenhead--said that Labour had its own solution : simply change the Treasury rules. But that is not possible, simply because if the Government are the guarantor in the last resort, even of a leasing programme, the public sector must stick to the Treasury's public expenditure budget. Total freedom from Government will be necessary. Then, access to the private markets will make it possible to improve services and raise the level of capital in the industries involved, without reducing the Government's responsibility to ensure that those services are delivered efficiently.

Another aspect of the public sector is the removal of waste. Contracting out is one method, and I hope that it will be adopted across the board in the public services. The Government, as the purchaser and the regulator of quality, need not be the provider at the same time ; as I have said, the same applies to all the former nationalised industries and public services.

Those are the ways forward, and they represent a much clearer view of the Government's attitude to the way in which society should be run. We do believe in state activity ; we do believe in embracing the concept of the welfare state. Any Conservative Government will require social provision. The critical difference between the parties lies in the fact that our interest is in the end user rather than in the provider. The provider could be the Government, or it could be any private contractor wishing to offer its services. There is now fresh thinking about the way in which the Government can run the railways, coal, water and social security--the "next steps" agencies are an example. Ultimately, the pressure on public expenditure may be lifted, allowing access to private capital and resources. I believe that those are the great strands of thinking on which the Queen's Speech was based. They are the way forward, and I am confident that the economy, as its base becomes increasingly strong, will be able to deliver better public services without necessarily resorting solely to dramatically increased public expenditure. I commend the Government's programme, and I welcome the Queen's Speech. I think that we are on the right track for a very successful few years.

5.7 pm

Mrs. Bridget Prentice (Lewisham, East) : I am grateful for this opportunity to explain why the measures set out in yesterday's Queen's Speech will not benefit people in east Lewisham. First, however, let me say one or two words about my predecessors. Colin Moynihan had held Lewisham, East since 1983. For much of that time, he was a junior Minister. I sometimes wonder whether the fact that the press often dubbed him a very energetic person might have been the reason for his being moved from sport to energy. I acknowledge his work in the constituency, and I am sure that the House will join me in wishing him and his wife--he recently married-- all the best for the future.

Let me also mention Roland Moyle. He too was a Minister but served in a Labour Government. I want to put on record my thanks for his tireless work in the campaign for my election. I was honoured to receive his support, as I was to receive that of the people of east Lewisham.

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