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Mr. Gordon Brown : During the election campaign the Chancellor said that he would hold to all the public

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spending figures in the various statements, and that was confirmed by the Prime Minister. Can he give an absolute undertaking that that is still the Government's policy?

Mr. Lamont : I have announced the remit for public spending and we are sticking to our published plans for next year. That is crystal clear.

Mr. Gordon Brown rose --

Mr. Lamont : No, I must get on.

I fully understand the difficulties faced by many businesses and families. The Leader of the Opposition said that since the election every economic indicator had declined. Does he not know that manufacturing output increased in both the first and second quarters of this year ? Has his hon. Friend the Member for Dunfermline, East, who, no doubt, has to advise him nowadays, not told him that retail sales rose in the second quarter and continued to rise in the latest three months to the highest level for almost two years ? Has the right hon. and learned Gentleman not been told that in the second quarter manufacturing investment rose by over 3 per cent. and that business investment was up in the first and second quarters of this year ? Most of all, he did not seem to be aware that, in the quarter following the election, non-oil GDP actually rose. Every one of those developments is good news, but, of course, we could not expect to hear about them from the Opposition.

The reaction of the hon. Member for Dunfermline, East to the cut in interest rates to 9 per cent. broke all records for gall. He appeared on television and criticised me for changing interest rates five times in four days. What on earth does he mean ? Since he supports the ERM, was it wrong to increase interest rates to defend the ERM ? What did he mean by saying that he is committed to the ERM ? Would he have caved in at the first sign of trouble or would he have increased rates just once and then caved in ? Is he saying that once we had left the ERM it made sense to keep interest rates at 15 per cent ? Surely he could have welcomed the reduction in interest rates to 9 per cent.--the lowest level since the summer of 1988.

Only last week, as soon as the Bundesbank announced that German rates would be reduced, the hon. Member for Dunfermline, East was jumping up and down like a dervish, as he seems to be doing now. Even before hearing by how much German rates would be reduced, he rushed to the nearest television studio and called on me to slash interest rates. I received a lot of advice last week, but that was undoubtedly the dumbest that I received.

The hon. Gentleman's position on interest rates lacks any credibility. He spent his first few weeks as shadow Chancellor calling on me to maintain our position on the ERM but to slash interest rates at the same time. As the right hon. Member for Bethnal Green and Stepney (Mr. Shore) wrote in the Evening Standard : "I do not reveal any new economic law when I say that this is simply nonsense."

The Leader of the Opposition and the hon. Member for Dunfermline, East have tried to maintain that what happened on the foreign exchange markets had something to do with the fundamentals of the British economy, but Britain has a lower rate of inflation than the Community average, has one of the lowest debt-to-GDP ratios in Europe and few European countries have a stronger

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underlying financial position. Are they seriously saying that what the markets are doing to the French franc is due to fundamentals? Do they think that the 13 per cent. interest rate dictated by the French markets is what the French economy fundamentally requires? Is that their view of markets?

Fortunately, the hon. Member for Dagenham (Mr. Gould) knows better. Only last week he said in The Guardian :

"It is misleading to say that it is the recession which caused the problem of the pound."

If he were here, perhaps the hon. Gentleman could explain that to the Leader of the Opposition.

The hon. Member for Dunfermline, East talks about the need for a long-term strategy for the British economy. We know that his idea of a long-term plan is thinking up tomorrow's soundbite a week in advance.

Mr. Gordon Brown : The Chancellor's case this evening is that there has been no alternative. Will he answer directly and specifically one question that I put to him : was a realignment discussed?

Mr. Lamont : I have answered that question. I have said that a unilateral German-- [Interruption.] That is what the word realignment means. The hon. Member for Dunfermline, East shows that he does not know what he is talking about. I cannot disclose confidential discussions. [ Hon. Members :-- "Ah".] The hon. Gentleman is asking me to disclose the position of other countries whose currencies would be affected by that, which shows how little he understands.

Sound money, free enterprise, light regulation and less government are the principles on which we fought the election. Nothing that has happened in recent days changes our commitment to those objectives or the fact that we are the only party that bases its policies on them. We will continue with those policies, which have brought record living standards to this country, the reform of industrial relations, the privatisation programme, which has returned two thirds of nationalised industries to the private sector, and the reform of company taxation, which has given this country the lowest level of corporation tax in the European Community.

Whatever the difficulties of the past week, our determination to achieve our goals remains unshakeable. We have set them for ourselves, we will stick to them, and I ask my right hon. and hon. Friends to support them.

Question put, That the amendment be made :--

The House divided : Ayes 288, Noes 330.

Division No. 72] [10 pm

AYES

Abbott, Ms Diane

Adams, Mrs Irene

Ainger, Nick

Ainsworth, Robert (Cov'try NE)

Allen, Graham

Alton, David

Anderson, Donald (Swansea E)

Anderson, Ms Janet (Ros'dale)

Armstrong, Hilary

Ashdown, Rt Hon Paddy

Ashton, Joe

Austin-Walker, John

Banks, Tony (Newham NW)

Barnes, Harry

Barron, Kevin

Battle, John

Bayley, Hugh

Beckett, Margaret

Beith, Rt Hon A. J.

Bell, Stuart

Benn, Rt Hon Tony

Bennett, Andrew F.

Benton, Joe

Bermingham, Gerald

Berry, Dr. Roger

Betts, Clive

Blair, Tony

Blunkett, David

Boateng, Paul

Boyce, Jimmy

Boyes, Roland

Bradley, Keith

Bray, Dr Jeremy

Brown, Gordon (Dunfermline E)

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Column 109

Brown, N. (N'c'tle upon Tyne E)

Bruce, Malcolm (Gordon)

Burden, Richard

Byers, Stephen

Caborn, Richard

Campbell, Mrs Anne (C'bridge)

Campbell, Menzies (Fife NE)

Campbell, Ronald (Blyth V)

Campbell-Savours, D. N.

Canavan, Dennis

Cann, Jamie

Carlile, Alexander (Montgomry)

Chisholm, Malcolm

Clapham, Michael

Clark, Dr David (South Shields)

Clarke, Eric (Midlothian)

Clarke, Tom (Monklands W)

Clelland, David

Clwyd, Mrs Ann

Coffey, Ann

Cohen, Harry

Connarty, Michael

Cook, Frank (Stockton N)

Cook, Robin (Livingston)

Corbett, Robin

Corbyn, Jeremy

Corston, Ms Jean

Cousins, Jim

Cox, Tom

Cryer, Bob

Cummings, John

Cunliffe, Lawrence

Cunningham, Jim (Covy SE)

Cunningham, Dr John (C'p'l'nd)

Dafis, Cynog

Dalyell, Tam

Darling, Alistair

Davidson, Ian

Davies, Bryan (Oldham C'tral)

Davies, Rt Hon Denzil (Llanelli)

Davies, Ron (Caerphilly)

Davis, Terry (B'ham, H'dge H'l)

Denham, John

Dewar, Donald

Dixon, Don

Dobson, Frank

Donohoe, Brian H.

Dowd, Jim

Dunnachie, Jimmy

Eagle, Ms Angela

Eastham, Ken

Enright, Derek

Etherington, Bill

Evans, John (St Helens N)

Ewing, Mrs Margaret

Fatchett, Derek

Faulds, Andrew

Field, Frank (Birkenhead)

Fisher, Mark

Flynn, Paul

Foster, Derek (B'p Auckland)

Foster, Don (Bath)

Foulkes, George

Fraser, John

Fyfe, Maria

Galbraith, Sam

Galloway, George

Gapes, Mike

Garrett, John

George, Bruce

Gerrard, Neil

Gilbert, Rt Hon Dr John

Godman, Dr Norman A.

Godsiff, Roger

Golding, Mrs Llin

Gordon, Mildred

Gould, Bryan

Graham, Thomas

Grant, Bernie (Tottenham)

Griffiths, Nigel (Edinburgh S)

Griffiths, Win (Bridgend)

Grocott, Bruce

Gunnell, John

Hain, Peter

Hall, Mike

Hanson, David

Hardy, Peter

Harman, Ms Harriet

Harvey, Nick

Hattersley, Rt Hon Roy

Henderson, Doug

Hendron, Dr Joe

Heppell, John

Hill, Keith (Streatham)

Hinchliffe, David

Hoey, Kate

Hogg, Norman (Cumbernauld)

Home Robertson, John

Hood, Jimmy

Hoon, Geoffrey

Howarth, George (Knowsley N)

Howells, Dr. Kim (Pontypridd)

Hoyle, Doug

Hughes, Kevin (Doncaster N)

Hughes, Robert (Aberdeen N)

Hughes, Roy (Newport E)

Hughes, Simon (Southwark)

Hume, John

Hutton, John

Illsley, Eric

Ingram, Adam

Jackson, Glenda (H'stead)

Jackson, Helen (Shef'ld, H)

Jamieson, David

Janner, Greville

Johnston, Sir Russell

Jones, Barry (Alyn and D'side)

Jones, Ieuan Wyn (Ynys Mo n)

Jones, Jon Owen (Cardiff C)

Jones, Lynne (B'ham S O)

Jones, Martyn (Clwyd, SW)

Jones, Nigel (Cheltenham)

Jowell, Tessa

Kaufman, Rt Hon Gerald

Keen, Alan

Kennedy, Charles (Ross,C&S)

Kennedy, Jane (Lpool Brdgn)

Khabra, Piara S.

Kilfoyle, Peter

Kinnock, Rt Hon Neil (Islwyn)

Kirkwood, Archy

Leighton, Ron

Lestor, Joan (Eccles)

Lewis, Terry

Litherland, Robert

Livingstone, Ken

Lloyd, Tony (Stretford)

Llwyd, Elfyn

Loyden, Eddie

McAllion, John

McCartney, Ian

Macdonald, Calum

McFall, John

McGrady, Eddie

McKelvey, William

Mackinlay, Andrew

McMaster, Gordon

McNamara, Kevin

McWilliam, John

Madden, Max

Mahon, Alice

Mallon, Seamus

Mandelson, Peter

Marek, Dr John

Marshall, David (Shettleston)

Marshall, Jim (Leicester, S)

Martin, Michael J. (Springburn)

Martlew, Eric

Maxton, John

Meacher, Michael

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