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5.18 pmMr. A. J. Beith (Berwick-upon-Tweed) : The right hon. Member for Shropshire, North (Mr. Biffen) has given the Chancellor much food for thought. I want to draw attention to something that he said at the beginning of his speech, when he referred to the reception that the autumn statement got from those on the Government Back Benches. That reception was indeed a warm and enthusiastic one, but it seems to have faded a little. However, the point is that the Chancellor should not look to his Back Benchers to assess the value of his policies. The fact that he has a great need to do just that because of recent events, and the fact that those who delivered that reception have, primarily, short-term considerations because of recent events, are bad pointers for economic policy. The pursuit of an economic policy based on judgment will not be assisted if the test of that judgment on the day is how pleased the people sitting behind the Chancellor are. I hope that he will bear that in mind in the future.
First, I wish to enter a complaint that we are having this debate so soon after the autumn statement. Our normal practice has been to give the Treasury Select Committee time to prepare a report and take evidence. The Chancellor and the Chief Secretary have made it their business to come along to the Committee during the short interval, but there has not been enough time for hon. Members to study the contents of the autumn statement, which makes me suspicious that the Government did not want us to have time to consider the details before this debate.
Usually, the statement, together with an avalanche of press releases from Departments, can bear a different interpretation when studied more closely. Even Conservative Governments juggle and emphasise the figures in order to give the impression that they are spending more new money than they really are. It is sometimes surprising that Conservative Governments should want to give that impression. Time to study the detail is necessary.
Time is also needed for the Secretary of State for the Environment's statement on what will happen to local government finance and what the standard spending assessments will be. The Government clearly promised that this year the same mistake would not be made. We were told that the Secretary of State for the Environment would probably make his statement by the end of October, and that we would be able to consider in this debate not only central Government but local government finance. We are being denied that opportunity, because that statement has not yet been made.
When the figures are studied in more detail, they become interesting. For example, the Government seek to argue that they have done well in protecting the overseas aid budget, but the figures are constant for the two years after next year, at £1.9 billion, which implies a real cut of 6 per cent. over those years using the autumn statement's assumptions on inflation--the GDP deflator.
The increase in overseas aid to take place in the coming year is effectively dedicated to aid to eastern Europe. I strongly support helping eastern European democracies and economies to develop, but the Government have always asserted that that would not be done at the expense of aid to developing countries. Therefore, the figures for aid to developing countries turn out to be less rosy than the Government suggest.
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Transport expenditure had a significant boost in the spending plans that were already in place, but it becomes apparent that there is not really a further increase. The extra money for British Rail next year--£130 million--buys only the new Networker trains promised before the election. The extra £100 million for 1994- 95 is only for channel tunnel expenditure.London Underground is complaining vociferously about the effect of the Government's plans for it, because, although the Jubilee line is in-- despite not yet having been finally agreed--modernisation of the Northern line goes out as a consequence. None of the key projects that British Rail has planned, from modernisation of the north-west line to smaller routine maintenance projects or further electrification, finds a place.
The Government have said that they are protecting existing capital expenditure. To that extent, they have been clear about what they have done for most of the time. We argue that additional capital expenditure is needed if this is to be the route to economic recovery. I think that the Government feel that, by protecting capital expenditure, they have assisted the dash for growth, to which the Prime Minister referred in his recent remarks. If it is to be a dash for growth, it will require additional capital spending. One of the most confusing areas is local authority capital spending.
Mr. Stephen Milligan (Eastleigh) : Will the right hon. Gentleman repair the omission by the hon. Member for Dunfermline, East (Mr. Brown)-- he would not answer the question put by my right hon. Friend the Chancellor --as it appears that the Liberal Democrats, too, would like to see much more spending in those areas? If the right hon. Gentleman favours more spending on capital projects, would he pay for it by cutting current spending on, say, pensions or would he raise taxes?
Mr. Beith : I shall come to financing before the end of my speech, if the hon. Gentleman will wait that long. I shall not make the same mistake as Labour Members in not saying how they propose to finance their suggestions--or, to be fairer to them, by having a smaller programme of additional expenditure than some of their rhetoric suggests. That would be a fairer criticism, and that is what the Chancellor said.
The Government have chosen to allow local authorities to increase their capital spending on the basis of the sales of capital which they undertake from now on. They have closed off the route of using previous sales of assets for that purpose. Their argument for doing that is that they do not want to reward local authorities that hung on to money and failed to repay debt.
When pressed, as Ministers were before the Treasury Select Committee, to explain how local authorities would achieve those sales in a depressed market, Ministers said that it was all right, because some local authorities had dragged their feet over council house sales. So the authorities that will be able to spend--those that will be rewarded--are those that have dragged their feet over council house sales. I do not see the logic of that. What sense does it make as an incentive?
An even more perverse incentive--to use the Chief Secretary's phrase--is to tell local authorities to go out now and achieve sales of assets, when the market is in its
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worst possible condition, when the price achievable will be the worst possible, when the effect on the market for everybody else will be as bad as it can be and when they will be unable to start their capital projects until they have achieved those sales. There can be no rapid or early action, because local authorities cannot undertake that capital expenditure until they have carried out the sales.Mr. John Watts (Slough) : Rewarding local authorities is one of the arguments that my right hon. Friend the Chief Secretary used, but there was a more fundamental one, which the hon. Gentleman will acknowledge. The total of Government borrowing as a proportion of GDP is an important economic factor.
Being committed to Maastricht, the right hon. Gentleman would not wish to see the British economy diverge too far from those criteria. Does he not accept that there is a fundamental difference between releasing past receipts that are currently treated as reducing growth borrowing to get to the net figure of general Government indebtedness, which adds to total borrowing, and allowing the full use of future receipts, which are self- financing? When a local authority sells an asset and receives funds from the private sector, there is no net additional Government borrowing.
Mr. Beith : If the hon. Gentleman is right, capital expenditure by local authorities on a self-financing basis would have been acceptable had the Government allowed it before now, so I do not understand how the hon. Gentleman can advance that argument. The question is simply how much of it we think that the economy can stand. The Government think that the economy can stand £1.8 billion of it over three and a half years, and prefer to see it financed from new asset sales. I doubt whether that figure will be achieved, because local authorities will be unable to achieve those sales, particularly in the earlier part of the period, when it is most necessary for the capital expenditure to take place.
I do not need to dwell on the needs that that capital expenditure could meet in terms of housing, school repairs and other improvements to the stock of things that help the community and industry. There is considerable doubt whether the Government's objective of increasing capital spending by local authorities will be met.
The Chancellor has taken a significant change in direction on fiscal measures. He used to be opposed to fiscal fine tuning and any measures that smacked of that. He has now accepted that changes in car tax and capital allowances, housing market intervention and the spending of capital receipts are desirable, although he found them undesirable earlier in the year.
A number of those measures are welcome, but they do not add up to much. If the Chancellor has accepted the case for fiscal stimulus, why does he not do the job properly, instead of stinting on capital receipts and making no additional funds available? The reflationary impact of his small fiscal package may be more than offset by the deflationary impact of public sector pay curbs.
The right hon. Member for Shropshire, North mentioned incomes policy. It is a confused area. In the public sector, there is to be a 1.5 per cent. ceiling, although that does not mean that no individual will get more than 1.5 per cent.--it would not be possible under the
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increasingly decentralised mechanism. It is supposed to mean that no Department or major area of activity could achieve more than 1.5 per cent.What is to happen in the private sector? According to the Prime Minister, the private sector must take note and respond, but the Treasury forecasts for the economy assume higher real personal disposable incomes of about 1.5 per cent., while the public sector is expected to suffer a cut in real incomes. What is the Prime Minister saying to the private sector? Is he saying, "Don't achieve an increase in real disposable incomes or our recovery plans will not work"? That seems to be the Government's dilemma.
If the private sector does not receive a substantial increase in real incomes, the money will not be available in the form of spending power to bring about recovery. It is possible that some of that money, if not paid in wages, might be paid in industrial investment and enter the economy by another route. However, a significant part of that money might well stay in industrial saving--it would not be spent in the short term, the period about which we are most concerned. Should the private sector listen to the Prime Minister and obey the instruction to model itself on the 1.5 per cent. limit, or ignore it and follow the message contained in the Treasury's forecasts? There is great confusion about the Government's overall objectives. All those factors seem to add up to the fact that the Chancellor has become an honorary member of the Cambridge Economic Group. We have devaluation, a fiscal boost and an incomes policy--the tripartite policy of the Cambridge group. The Chancellor has bought the lot. He has given a limited fiscal boost ; he has introduced an incomes policy in a traditional Conservative way, starting with the public sector and asking the private sector to follow.
Do Conservative Members believe that there will be only one year of incomes policy? What will happen in a year's time, when the Chancellor--whoever he may be by then--has to say to the public sector that it cannot have wage increases of much beyond 1.5 per cent. and to the private sector that it must continue to exercise restraint? We seem to be re-entering a familiar period, which some of us who have been in the House for some time can remember.
The policy marks a significant change of direction, but I do not believe that it is the right one. Some people, including Conservative Members, suggested that the Chancellor had to make a choice--to adopt a cautious policy or to take considerable risks by undertaking additional borrowing to stimulate the economy. They suggested that the Chancellor had a choice between caution and risk, but there is no such choice. There is a choice of two risks. The first is to borrow in order to invest in measures that create employment and help to bring about recovery. The second risk is that there is no recovery and the borrowing requirement goes up and up because of the costs of recession.
The Government did not acquire their present high public sector borrowing requirement through a conscious desire to bring it about, and their objective was not to invest through borrowing. They acquired the high PSBR because of the recession. The borrowing requirement exists to pay for unemployment benefit and social benefits, and replace forgone tax revenue. That pattern will continue if we do not have a recovery.
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We believe that the package proposed will be insufficient to bring about recovery. Our alternative would be to give a substantial boost to capital spending, funded by additional borrowing. That would be combined with a sound basis for monetary policy by means of an independent central bank and direct help to business.We also argue that it might have been more sensible in the current circumstances to help those businesses which would otherwise go to the wall, by providing a cut or holiday in the uniform business rate, rather than introducing a capital allowance scheme that helps only those businesses that expect to pay significant amounts of tax, against which they can use an allowance. Many businesses are not in that position ; what they fear is not paying tax, but going bankrupt. That is particularly true of many small businesses.
We would also like to have seen a significant expansion in training, which is quite out of the question under the projections given in the autumn statement figures. Instead of those measures to bring about recovery--
Mr. Iain Duncan-Smith (Chingford) : Will the right hon. Gentleman give way ?
Mr. Beith : No, I shall not give way ; I am coming to a conclusion.
The Prime Minister thinks that he has changed his policy in favour of a dash for growth, but the Chancellor thinks that the policy is unchanged, except for the consequences of black Wednesday, which meant a change in interest rate policy. The current method of economic management, which is based entirely on judgment, is in the hands of a Government who have made all the wrong judgments. They have introduced a package which is supposedly dedicated to recovery, but which is insufficient to bring it about.
5.36 pm
Mr. Cranley Onslow (Woking) : I mean to be brief, but I hope that I shall be forgiven if I join my right hon. Friend the Member for Shropshire, North (Mr. Biffen) in congratulating my right hon. Friend the Chancellor on his autumn statement. I particularly welcome one part of the statement that has not yet been mentioned today : the undertaking given in column 994 of Hansard for 12 November that the Government would bring before the House a resolution to apply to Members' pay the same limits as they intend to apply to the public sector. That will be widely welcomed outside the House and, I hope, supported inside the House.
The problem has a long history, which I do not intend to rehearse today. I believe, and always have believed, that hon. Members should never shuffle off responsibility for fixing their own salaries. It would be an abdication of responsibility to do so. The temptation to do so has not always been resisted in the past, and the way that salaries have been decided has not always been satisfactory. Therefore, I am pleased to see a return to previous practice, and I hope that it will herald a change in the basic approach to the matter, for which I have always argued and which I hope to see introduced now. Whatever is judged to be the appropriate salary for a Member of Parliament should be fixed by an outgoing Parliament before a general election, so that the incoming Members of
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Parliament know what their salary is, never have to pass judgment on it, and need not expect it to be increased during the life of that Parliament.Mr. Salmond : Will the right hon. Gentleman give way?
Mr. Onslow : No ; I intend to be brief.
I hope that we can move towards such a policy, which is the only sensible and honourable way to tackle that difficult matter. I can identify two sectors of our society where a change of attitude will be needed if the Chancellor's proposed measures are to work as well as he intends. The first is the banks. I do not think that any banker could deny the charge that banks have made a number of serious mistakes in policy judgment in recent years. They have made lending mistakes on an international and domestic level. If I am rightly informed, between 1987 and 1989, the remuneration of an average bank manager was fixed on the basis of the amount of money he lent. It was based not on the quality but on the quantity of money that he managed to lend. It is not surprising that many of our fellow citizens in business found themselves encouraged to take on risks that, with better advice, they might have been encouraged to avoid. That was done in the name of market share among the major clearing banks. The consequences of that policy have been extremely unfortunate and regrettable.
I should like to think that we shall now see a change in attitude on the part of the banks--a much more positive, supportive and understanding approach, particularly to small businesses. I am afraid that, to judge from present evidence, that seems unlikely to happen. The press has recently had many stories about small business men being harshly treated by bankers. The House will have great sympathy with small business men, and much less sympathy with the banks. I have recently been visited by a constituent in connection with this subject--as no doubt have many other hon. Members. My constituent brought to my surgery a letter that he had received from his bank undertaking to grant him a £75,000 overdraft. But the small print of the letter stated that the interest on the overdraft would be 4 per cent. above the bank's base rate, and subject to a minimum rate of 11 per cent. per annum no matter what happened. Not unnaturally, my constituent wrote back and said that the conditions seemed unfair, as they meant that he was unlikely to share in the full advantage of any prospective interest rate cuts. He asked how the bank could justify its policy.
The letter that he received in reply stated :
"The Bank has taken the view that, in all but the largest lendings, as base rates fall there comes a stage where it is not cost-effective for us to continue to pass on these reductions. The minimum interest rate is the Bank's way of overcoming this."
I am sure that the bank manager who wrote that thought that his head office would approve and may even have thought that he had put himself in line for promotion. However, as a contribution to the revival of the economy it counts for nothing. It does nothing for the confidence of the small business man, and seems to embody much of what is wrong with the banking sector.
I hope that, when the Chancellor next has an opportunity to speak to, whisper in the ear of or shout at
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the chairmen of our leading banks, he will tell them that a change in attitude on their part is an essential ingredient of economic revival.Mr. Quentin Davies : Does my right hon. Friend agree that the fact that banks can get away with imposing such conditions on their customers at a time of recession, when there is falling demand for loans, poses questions about the degree to which there is a genuinely competitive market in banking? Some 90 per cent. of the corporate lending business in England is in the hands of four lenders. Does my right hon. Friend agree that that is prima facie evidence of oligopoly, which should be examined by the competent authorities sooner rather than later?
Mr. Onslow : My hon. Friend makes an excellent point. I forecast that, when economic conditions change and borrowers are in a stronger position vis-a-vis their current enslavement, there will be a fundamental change in the structure and composition of the banking system. Some of the principal banks may be displaced by incomers who will adopt a different approach and to whom would-be lenders will be almost irresistibly drawn. That will not be good for the banks. The second change of attitude that the country and the Chancellor needs if his policies are fully to work must be made by the media. It is a long time since I suggested in the House that the "Today" programme was totally dedicated to getting the nation out of bed on the wrong side, and since then I have not noticed much change. However, it would be unfair to single out that programme, because the tendency is widespread. Shortly after the autumn statement, a "PM" programme thought it worth carrying a report from someone sent to the nearest high street to ask whether the autumn statement had led to any sign of a spending spree, as if that was an informed judgment and a fair test of the Chancellor's measures.
The concept that the effect of economic policy can be judged only by its impact on retail sales is fairly over-simplistic. However, it would be unfair to single out the BBC for criticism. To correct the balance, I need to look back only to last Sunday and quote the extraordinary episode on Brian Walden's programme.
The Secretary of State for Transport had been invited to be interviewed by Mr. Walden about the autumn statement, with particular reference to its impact on the Department's spending plans, which, of course, is a relevant matter. My right hon. Friend had been warned that in passing he might be asked one or two questions about other topical subjects such as Maastricht. But once in front of the camera, my right hon. Friend found himself subjected to an increasingly hysterical tirade by Mr. Walden because he refused to answer questions about Matrix Churchill, a matter totally outside my right hon. Friend's area of responsibility and totally outside the area upon which he had been led to expect he would be invited to answer questions. That is a thoroughly irresponsible way to conduct a current affairs programme.
It would still be unfair to imply that only radio or television are exclusively preoccupied with dishing out daily doses of doom and gloom. Any newspaper on any day will show that, generally, reporting is as negative as possible. The cumulative effect on the nation's morale cannot be ignored-- and I am speaking about the effect not on the Government's standing but on national morale. Perhaps too many current affairs programmes and too
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many newspapers and journalists are competing for sensational news in the progress of a circulation war. The media leaders should ask themselves how they expect confidence in Britain, at home or abroad, to revive when they ceaselessly accentuate the negative.The positive elements in the autumn statement have been well listed in the CBI's reaction, part of which has been quoted. I shall rehearse them briefly. There is to be a significant increase in the transport network, not just in the construction of the Jubilee line but nationally in road building. That is right.
The change in the treatment of capital receipts is especially welcome. Unlike the right hon. Member for Berwick-upon-Tweed (Mr. Beith), I do not think that it should be impossible for local authorities to meet the Chancellor's target, especially if they look not only at house property but at industrial estates. Many councils should long ago have left the business of investing in such estates, and should have realised those assets and applied the money to more constructive uses.
The reduction in interest rates is welcomed by everyone, and the treatment of capital allowances and the stimulus to housing have been sought by many people, who will be glad to see those measures. I must make one qualification. Although it is important to stimulate the housing market and to rescue many of my constituents from the negative equity trap, it cannot be sensible to try to drive house prices back to the peak of the late 1980s. That would make no sense and do no good. It would benefit estate agents, but eventually it would force up the price of development land, which is an artificially restricted commodity. Such an increase has no lasting value for any economy.
I hope that the Chancellor will bear that in mind, and that he will constantly seek to shift the emphasis on saving and wealth accumulation towards investment in productive industry and commerce and the creation of real national wealth.
I welcome the autumn statement. The country has welcomed it, and I hope that the House will also do so.
5.47 pm
Mr. Roy Hughes (Newport, East) : I agree with the right hon. Member for Woking (Mr. Onslow) that Members of Parliament should be responsible about their salaries. However, I am worried that some hon. Members are more equal than others and by the failure to consider remuneration from outside sources that is so prevalent among Conservative Members.
The autumn statement has been coloured by black Wednesday and our withdrawal from the exchange rate mechanism. Our problems have been exacerbated by the increasing depth of the recession. As unemployment approaches 3 million, the need to put people back to work is being increasingly recognised. The cost of state benefit for 3 million people must be enormous. It is like a tap left running--a complete waste.
To meet this situation, all that we had at first was a smokescreen, with all manner of horrors being suggested--increases in national insurance contributions, savage cuts in social security benefits and tax increases, all this amidst the worst recession in the past 60 years. None of these horrors materialised. What we got was a crackdown on the pay of public sector workers, many of them poor and needy. The policy will mean that a hospital domestic
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will get only £1.80 a week extra and a staff nurse only £2.38. There is not much justice there when we think of the many thousands awarded to the chairmen of public companies, particularly those of the former public utilities--water, gas, electricity and British Telecom--and the cool half a million or so that is going to the chairman of British Airways. As for the chairmen of supermarket chains, they seem to have a licence to print their own money. We have been told that the economy is suffering from a lack of effective demand. People are just not buying houses, cars, washing machines and so on. That is a classic Keynesian situation. The wages of the lowly paid public sector workers are to be restrained, yet they tend to spend what they earn, for their income is stretched to the limit. To restrict their wages could have the effect of further depressing the economy. Therefore, not only is it morally wrong to knock poor people in this way but it does not make economic sense. The Chancellor has succeeded in keeping Government spending within the £244.5 billion ceiling fixed in advance, but only just. However, the PSBR has risen for the current year to £37 billion and is likely to be £44 billion next year. Conservative spokesmen had said that such figures spelt the horror that was likely to ensue if Britain elected a Labour Government in the spring of this year. Some of us are accustomed to such hypocrisy on the part of the Conservative Government.The 1 per cent. cut in interest rates--a policy that has long been advocated by my right hon. and learned Friend the Member for Monklands, East (Mr. Smith), the Leader of the Opposition, and my hon. Friend the Member for Dunfermline, East (Mr. Brown), the shadow Chancellor--is welcome. It will benefit home owners and generally help to restore confidence. However, there is only limited help for the construction industry. Capital receipts accruing to local authorities from now until the end of 1993 can be spent over the next three years. If the Government really wanted to assist the construction industry, improve the quality of housing and increase the amount of affordable housing, they would have unlocked the £5.1 billion in accumulated receipts and directed it to a housing investment programme. Such a decision would have been a major factor in providing urgently needed housing as well as in creating jobs, since the benefit of a boost to the construction industry would be that it would put back to work not only unskilled workers and tradesmen but highly trained architects.
The Chancellor also ended car tax--a move that I warmly welcome. The construction industry and the motor industry could be the engine of our economic recovery. I have long been an unashamed supporter of the motor industry. Personal transport has been a great boon to ordinary families. Apart from the immediate facility, for them the car has opened up new horizons. It is used to travel to work, and more and more housewives take the car to the supermarket when they purchase the week's necessities. I appreciate that there are the problems of congestion and pollution, but these are issues that must be, and are being, tackled.
Another aspect of the industry is that, unfortunately, slightly over half of new cars coming on to British roads are assembled overseas. For at least a quarter of a century, the Volkswagens, the Mercedes and the BMWs from Germany, together with the Renaults from France and the
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Fiats from Italy, have had a field day in the British market. Despite all the EC regulations, I want the Government to use their ingenuity to boost our car industry.British cars are now first class. If we increase their share of the market, we shall ease our balance of trade problems and put our people back to work. The growth of the motor components industry has been heartening news. Wales relies heavily upon it, with companies such as Ford engines at Bridgend, Lucas Girling at Cwmbran and many other major firms. From a Welsh point of view, stimulus of the car industry will assist our steel industry, which is suffering badly from the effects of the recession.
Having said that, I should also say to my many friends in the motor industry that they should beware of a Shetlander bearing gifts. The Chancellor has already said that the £750 million lost through the decision to end car tax is to be recouped in the Budget through an increase in other forms of motor taxation. Yet the fact is that, of the £19 billion collected annually in motor tax, just over 20 per cent. is spent on roads. The Government are said to be seriously considering putting tolls on motorways. Wales already has tolls, on the short stretch of the M4 that runs over the Severn bridge. From 1 January, any heavy vehicle bringing vital goods and supplies into south Wales on the M4 will pay a toll of £9.30.
Any outside observer would imagine that Wales had an overheated economy. In fact, we have heavy unemployment. There is terrible deprivation in some areas, particularly in those badly affected by pit closures and steel redundancies. These tolls are a disgrace. What is more, the Government had no business to hand over the Severn bridge, together with construction of the second Severn crossing, to a French-American backed consortium, which is determined to extract the last penny. Tolls are an anachronism and for the Government even to be considering them on other motorways is the height of folly. The matter does not end there. Some weeks ago, on 12 October, I challenged the Secretaries of State for Transport and for Wales to deny reports that the contract for the steel structure of the second Severn crossing was to be handed over to a foreign company. In reply, both said that the contract had not yet been awarded.
That answer was evasive, to say the least. A report on page 11 of yesterday's Financial Times clearly revealed that the £7 million contract is to be awarded to Cimolai--an Italian company that allegedly entered the lowest tender. I bet my bottom dollar that there is a hidden subsidy involved in that Italian tender. Britain has an efficient steel industry, and right by the Severn crossing is a company named Fairfield Mabey, which specialises in the construction of the steel works required for new bridges. A host of expertise in that type of work is available among the people of Severnside, but many there are out of work.
The President of the Board of Trade should keep his promise to the Conservative party conference to intervene before breakfast, before lunch, before tea, and before dinner on behalf of British industry. There is an urgent need for that, and I call on the right hon. Gentleman to act without further delay.
The Chancellor has taken a few short steps in the right direction, but there is a sleight of hand in it. One commentator remarked that the autumn statement is
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stimulus by magic mirrors. It anticipates and embodies a growth rate of 1 per cent., yet to make any impact on unemployment Britain needs growth of at least 2.5 per cent. The autumn statement deserves to be judged in the way I suggest.Several hon. Members rose --
Mr. Deputy Speaker : Order. I remind the House that Madam Speaker has imposed a limit of 10 minutes on speeches made between now and 8 o'clock.
6.1 pm
Sir Rhodes Boyson (Brent, North) : I welcome the autumn statement, as other of my right hon. and hon. Friends have done, and was intrigued by the speech of my right hon. Friend the Member for Shropshire, North (Mr. Biffen)--particularly in respect of incomes policy. As to the salaries of Members of Parliament, I agree with my right hon. Friend the Member for Woking (Mr. Onslow).
I am only sorry that the autumn statement was not made two months ago, on the day that Britain left the exchange rate mechanism. We seem to have wasted two months finding a distinctive alternative policy. I have no belief in the ERM, which is something like GCSE economics grade seven. Schoolchildren run three-legged races, but the ERM was a 12-legged race, and all the runners fell down. It has been said that it is easier to foretell the winner of the Derby in the year 2000 than to know the value of a country's currency next year, because it is a judgment by the rest of the world as to the economy behind it.
I am glad that Britain has left the ERM, and that we now have a policy of moving towards lower interest rates. Again, it would have been better to take that action earlier and in larger dollops. That would have helped the housing market and those who pay mortgages--many of whose businesses are dependent on their properties. It would also have helped business men and encouraged people to borrow more. Interest rates will have to fall still lower before we move out of the recession. When we left the gold standard in 1931, interest rates fell to almost a negative level before growth occurred again. No growth came between 1925 and 1931, because the pound was over-valued on the 1914 gold standard parity. With low interest rates between 1931 and 1937, Britain enjoyed the fastest economic growth of any power in the world--far ahead of America and even of Germany. In 1939, we had the economy to be able to stand up to Germany, and low interest rates are the only way of achieving growth again. I welcome the emphasis on the construction industry and particularly on the Jubilee line investment, which will create employment for 12,000 people. Without it, the whole of docklands would have become a ghost town and a depressed area. The sooner that the Jubilee line is built, the better. However, I share the concern expressed by London Transport's chairman about lack of investment in the capital's other tube lines. My right hon. Friend the Minister should travel on the Northern line early in the morning and late at night to appreciate the agony that commuters suffer.
A number of lines run through my constituency, and they are used by those who commute to the City. Regular delays and breakdowns mean that travellers must leave home 15 or 30 minutes earlier in the morning--and can
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never tell when they will arrive home. That has created the sandwich society, because the wife has no chance of knowing when to have a hot meal ready for her husband's return.Mr. Mark Wolfson (Sevenoaks) : Will my right hon. Friend give way ?
Sir Rhodes Boyson : No, because I am under the ten-minute speech rule.
I have lived in London since 1962 and have represented a London constituency since 1974, and I believe that if it is to remain a major capital city, three important factors must be considered. One is transport. We are living still on the capital investment of the Victorians and Edwardians. Present investment is nothing compared with that which must be made to give the capital a proper transport system.
The second is London's theatres, and the third is its museums. I am sorry that cuts have been made there, because our capital has some of the best museums in the world. We must keep them up to standard, because many tourists come to London not just for its theatres but for its museums. They certainly do not come here for the tube travel.
I am suspicious and alarmed at the prospect of spending three quarters of a billion pounds on acquiring 20,000 repossessed houses. It would be better to help people to remain in the homes that they have. Why wait until home owners have lost their houses, local schooling, churches, and neighbours and then hand them over to a housing association ? If that is not something out of "Alice in Wonderland" I do not know what is. Money available should be used to help people pay their mortgages, particularly at a time when the interest rates are being reduced so that they can remain in their homes.
I await the result of the council tax in London and the south east. If it costs no more per household than the community charge, I and my constituents will be happy. If it costs more, I shall not be happy--any more than my constituents. We are threatened again with a rates system from Labour, but householders will compare the council tax with the community charge that they have paid for the last three years. Anything new must be comparable.
Mr. David Evans (Welwyn Hatfield) : The council tax will not, on average, be more than the community charge.
Sir Rhodes Boyson : My hon. Friend puts his head on the block, but obviously he has specialist knowledge that will make headlines in tomorrow's newspapers. I know that he is a very wealthy man, so if my council tax is more, he can make it up. I welcome his gesture. It is one of the finest gestures that I have known for some time. As to defence, I am increasingly concerned about this country's safety and that of the world. We will look back at the balance of power between the NATO countries and the communist bloc as the most peaceful of our lifetimes. All the wars that are being fought around the world today will escalate and threaten us. I do not want any more cuts in this country's defence, for two reasons. First, I want the safety of this island of ours to be preserved ; secondly, I think that the organisation of the armed services is one of the things that we still do well.
We are good at training. I would like to see a lot of short-service commissions, along with training for other ranks before they move into civilian life. I mentioned the
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underground earlier. I think that a general should be put in charge of tube trains : he could be told that he will be made a lord if he makes them run in a year, and that if he does not his head will be chopped off. That, I think, would be a very effective sanction. [Interruption.] Perhaps my hon. Friend the Member for Welwyn Hatfield (Mr. Evans) would prefer to offer alternative financial incentives--if, that is, any money is left after my constituency receives the subsidies due to it.I welcome the autumn statement, because it seems that we have a policy at last. I am sorry that it came rather late, but I am glad that we have it. I hope that interest rates will be reduced further, and quickly, so that we can get the country going ; I do not think that any other course will help. I also think that the construction industry is the key to recovery. It is not a question just of the extension of the Jubilee line ; something must be done about the rest of London's tube network. We should provide incentives where we can. Having said that, let me add that I am much happier than I was before I heard the autumn statement--although I hope that I shall be even happier on the day when the council tax is announced. 6.11 pm
Mr. Alan Milburn (Darlington) : The autumn statement will probably go down in history as a missed opportunity. To Opposition Members, it seemed a very eclectic statement : it managed to steal a little from the CBI, a little from the House-Builders Federation and even a little from the Labour party. We were presented with a veritable pot-pourri of initiatives and ideas. Given the Government from whom the statement emanated, however, it still managed to come out reeking of free market failure ; after all, a pot-pourri of initiatives does not add up to a strategy for growth.
It has been said that there is no strategy behind the autumn statement. There is a strategy ; the problem is that it is concerned more with digging the Chancellor and the Government out of a hole than with rebuilding the British economy. It is precisely because the autumn statement was so geared to the short term, rather than to the long-term, deep-rooted crisis into which the economy has been plunged, that it will ultimately fail to return either long-term prosperity or growth to the country.
In many respects, the autumn statement constitutes an admission--an admission that many of the economic icons that Conservative Members have worshipped so long and with such affection have been destroyed. Whatever happened, for example, to the hostile attitude to borrowing? The public sector borrowing requirement is now set to spiral not to £40 billion but to £60 billion by 1994-95, and it may be even higher if we fail to achieve growth of 2.5 per cent. per annum.
The autumn statement is hardly confidence-inspiring in itself. It promises growth of just 1 per cent. next year ; that hardly suggests that the Treasury believes its own claims about the statement's potential. It also fails to answer the question that the whole country is asking : when will unemployment stop rising? That is not an incidental issue. Without a reduction in unemployment, there will be no return of consumer confidence. The Henley Centre for Forecasting recently announced that some 6 million households were failing to spend because they feared that an increase in joblessness would affect them directly.
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I am afraid that the increase in unemployment will not abate, because the Government have not done enough to make a real difference. Over the past two weeks, two major engineering firms in my constituency--Torringtons, and Darlington and Stockton Rolling Mills--have announced that 80 skilled workers are to be made redundant. Perhaps equally worrying is the fact that the redundancy announcements were accompanied by dire warnings that there would be no recovery in the market for the foreseeable future. The measures in the autumn statement will not hasten the recovery of first-class companies like those, because they fail to acknowledge the depth of the problem and do not tackle the three performance gaps that currently hinder the British economy : the gaps in manufacturing investment, training and support for the regions.The temporary capital allowance incentive scheme for industry is all very well, but a sum of between £200 million and £300 million is hardly likely to close the investment gap between the United Kingdom and its competitors. Our industries are having to struggle for international markets with competitors that possess much better and more up-to-date plant and equipment. Between 1980 and 1989, this country spent less than £2,000 a year per employee on manufacturing investment ; Germany spent nearly £3,000 a year, and Japan more than £5,000. That is not a temporary problem, and temporary solutions simply are not good enough.
The CBI's report "Making it in Britain" calls for a doubling of investment in plant and machinery by the end of the decade to enable United Kingdom companies to compete more effectively in the international market. The Government have ducked their responsibility to encourage industry to invest and to provide the necessary incentives.
The same applies to the Government's attitude to the United Kingdom's training deficit. It is universally acknowledged that the United Kingdom has the worst-trained work force in Europe : we have fewer workers with occupational skills than any other European country. Yet--as hon. Members will see when they read the fine detail in the autumn statement--our training budget is to be cut in real terms. Already this year, 500,000 fewer employment training places are being made available ; the ET budget has been cut by £30 million, and almost half our training and enterprise councils are worse off in this financial year than they were in the last.
In regional terms, my region is the biggest loser. The north has lost £21 million. My TEC, Durham, has been cut by nearly £6 million. It would be an understatement to suggest that it is economically illiterate to cut training programmes in the region that has the highest unemployment in mainland Britain : in my view, that is plain daft.
Not only do we have a Chancellor and a Prime Minister who have destroyed more than 1 million jobs since getting theirs ; they have cut the funds for those who are desperately trying to return to work. By cutting training budgets still further, the Chancellor is not only writing off the unemployed in the north, but weakening the whole country's competitive position.
The autumn statement as a whole spells further decline for the regions. The industry budget is to be cut by almost half between now and the middle of the decade--and, if
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