(No. 4) Bill-- (By Order)
[Lords] (By Order)
Bill-- [Lords] (By Order)
[Lords] (By Order) River Humber (Upper Burcom Cooling Works) Bill-- [Lords] (By Order) Orders for Second Reading read.
To be read a Second time on Wednesday 16 December.
Ms. Quin : Do the Government accepted that the sale of premium bonds has plummeted since they changed the rules so that £100 became the minimum amount that one could purchase? Does that not penalise many people who would like to buy bonds in small amounts for themselves or as presents? Are the Government trying to kill off the premium bond scheme altogether?
Mr. Nelson : I acknowledge the need to encourage the savings ethic, but it is also important to ensure that the taxpayer's interests are protected. The cost of administration is considerable and that change, associated with the other changes to National Savings bank accounts, will save the taxpayer about £5 million a year.
Mr. John Greenway : Does my hon. Friend agree that if we want to encourage the savings ethic among young children, it is important that they learn what is a realistic return on the investments made on their behalf? A return
Column 980based on a computer deciding whether they have won a cash prize seems totally artificial and unrealistic. Would it not make more sense if young children invested in National Savings certificates?
Mr. Nelson : I am bound to agree with my hon. Friend. Rather than rely on the luck of the draw, it is better for a young saver to build up savings that have an assured rate of return. After March, the odds of winning will be 15,000 : 1, but the rate of interest applying to savings certificates will be about 5 per cent.
The Paymaster General (Sir John Cope) : The existing tax relief for capital investment allows appropriate write-offs. The measures announced in the autumn statement will give additional encouragement to investment in the year to October 1993.
Mr. Wareing : Is the Minister aware that between 1987 and 30 June this year, no fewer than 24,725 manufacturing concerns went into liquidation? What could the Government have done? Does the right hon. Gentleman believe that they could have done anything to prevent those bankruptcies? Is he aware that, although reductions in interest rates are welcome, confidence is needed? Until unemployment is reduced, there will be no confidence, no demand and no inducement to invest.
Sir John Cope : Measures were introduced by my right hon. Friend the Chancellor in the autumn statement to deal with those problems. The measures were widely welcomed and, on investment and other matters, responded to the calls made by industry.
Mr. Bill Walker : My right hon. Friend will be aware that one of the finest industries in Scotland is the Scotch whisky industry, which contributes massively to the Exchequer through excise duties and value added tax and produces more than £1,700 million worth of exports a year. Will my right hon. Friend give serious consideration to the proposal that, rather than the present system, excise duty should be levied on the alcoholic content of the product? That would help negotiations in Europe, increase revenue intake for the Treasury and give substantial help to the Scotch whisky industry.
Sir John Cope : I am, indeed, aware of the importance of the Scotch whisky industry, from what my hon. Friend and other hon. Members have told me about it, from what I have been told by the Scotch Whisky Association and from my own appreciation of it. I note my hon. Friend's comments and assure him that we consider everything carefully in the approach to the Budget, but I could not possibly anticipate my right hon. Friend's Budget statement. My hon. Friend will also be aware of the disadvantages, from our point of view, of the system he suggests.
Ms. Harman : Is the right hon. Gentleman not concerned by the fact that his Department's monthly monetary report, issued today, shows that manufacturing employment fell in September by 32,000 and that the rate
Column 981of job loss in manufacturing is accelerating? Is it not time that the Government recognised that unemployment is not just, as they call it, a lagging indicator but is now in itself a cause of the continuing recession, which is why the Government must take action on unemployment?
Sir John Cope : The proportion of output from manufacturing has been declining for a long time not just in this country but far more widely. Investment in plant and machinery, which is part of what is needed, is already increasing and productivity is at a record level. That is what we need and what the autumn statement encouraged.
Mr. Sykes : I am grateful to my right hon. Friend for that reply. Is he aware that in Scarborough and Whitby, England's two finest resorts, we have many successful companies, such as McCain Foods makers of oven chips, and Pindar Graphics, and that interest rates and exchange rates are so competitive that great British companies such as those are winning orders hand over fist at home and abroad?
Mr. Lamont : I am sure that my hon. Friend's constituency is typical of many that are benefiting from the reduction in interest rates. That is being reflected in high streets throughout the country. Retail sales in the last three months are up 1 per cent. on the previous three months and are the highest since 1990. In the car industry--it is not so strongly represented in my hon. Friend's constituency, although car retailers are-- we have also seen an increase in recent months. There is no doubt that the economy is benefiting from the reduction in interest rates, which I believe will work through increasingly into other parts of the economy. The key consequence of the reduction in interest rates is through mortgage rates. There have already been substantial reductions in mortgage rates, but many people, particularly those with annual mortgages, have yet to see--they will do so early in the new year--further, very substantial, reductions in their mortgage rates. That will help consumer spending very considerably.
Mr. Beith : Does the Chancellor accept that lower short-term interest rates, although welcome, are not likely to have as rapid an impact on the economy as, for example, contracts held by companies that benefit from increased spending on public works? Does he recognise that many small businesses do not have confidence that interest rates will remain low and that they are at a disadvantage compared with businesses in many other European countries, because they are much more dependent on short-term interest rates than those businesses?
Column 982but pressure to reduce interest rates. We now have the lowest interest rates in the European Community. That is good for our economy, and nobody can gainsay that.
Mr. John Townend : Leaving aside the remarks of the right hon. Member for Berwick-upon-Tweed (Mr. Beith), does my right hon. Friend take encouragement from the fact that the very low rates of interest in America are now resulting in significant economic growth in that country? Does he agree that that gives enormous opportunities to British exporters, in view of the more competitive pound, and that countries that remain in the exchange rate mechanism will see no significant recovery until the Bundesbank reduces its rates?
Mr. Lamont : It is certainly true that recovery is strongly under way in the United States, based on the low interest rates that have obtained there for some time. Given that a higher proportion of our exports goes to the United States than do the exports of other European Community countries, we stand to benefit enormously. I have made clear for many months my belief that it would be for the benefit of the European economy if interest rates in Europe were generally lower.
Mr. Gordon Brown : On the question of a co-ordinated reduction in interest rates, does the Chancellor support the Christopherson European recovery plan? Why is the French Finance Minister and not the British Chancellor taking the lead with new proposals for a European recovery programme? Why has the issue of unemployment been relegated on the British agenda for Edinburgh from the formal session to a mere open-ended discussion over lunch? Will the right hon. Gentleman not realise, even at this late stage, that the test of the British presidency is whether the Government will show the political will to take a lead in reducing unemployment?
Mr. Lamont : As question 5 is on that subject, I do not know why the hon. Gentleman could not hang on and ask a supplementary question that is relevant to the question tabled. He may insist on asking an irrelevant question but I shall give a relevant answer. First, the Christopherson plan has nothing to do with interest rates, so the hon. Gentleman should be clear about that. Secondly, we shall discuss at Edinburgh with other member states a package of measures designed to get the European economy moving again. Contrary to what the hon. Gentleman says, this country has led the way with the package that I announced in my autumn statement : greater priority for capital programmes, with tight control over current spending ; special help for the housing market and the construction industry ; and additional incentives for private sector investment. Moreover, in the past couple of months, I have announced three percentage points off interest rates, which is providing significant extra help to British business and those with mortgages. At Edinburgh, we shall suggest that others in Europe follow Britain's lead.
Column 983the lowest interest rates in the European Community, inflation below the European Community average in each of the last 14 months, as well as a competitive exchange rate. In addition, the measures in the autumn statement are targeted on sectors where assistance will be most effective. Against that background, I hope to see increasing optimism and confidence about the future.
Mr. Winterton : Does my right hon. Friend agree that, if the manufacturing and construction industries are to be stimulated again and are to rise to fulfil their potential as vital parts of the United Kingdom economy, we need a new recognition and understanding by his Department, the Department of Trade and Industry and the banking and investment sector of the vital long-term potential of those industries as the only source of non -inflationary economic growth? Does he agree that they must not be sacrificed on the altar of a quick buck or a big dividend?
Mr. Portillo : My hon. Friend's support for manufacturing industry is one of the best-known facts about the House of Commons. My right hon. Friend the Chancellor has strongly echoed part of what he said, in particular in his speech at the Mansion House when he said that the Government should examine every policy to ensure that it supports industry. My hon. Friend will have been pleased--indeed, I remember his remarks at the time--at the measures in the autumn statement : increased capital allowances ; a new 20 per cent. allowance for industrial buildings ; the abolition of car tax ; the additional export credit cover ; and a further reduction in interest rates.
Mr. Portillo : The autumn statement set out what we believe to be an appropriate level of public spending. It is extremely important to keep it under tight control. I am surprised that the hon. Gentleman appears to be proposing that we should have higher spending and higher borrowing.
Mr. Ward : Does my right hon. Friend agree that the best thing that the House could do for this country is to prevent the Labour party from talking down the country, particularly the manufacturing industry, at every opportunity both at home and abroad?
Mr. Portillo : My hon. Friend is absolutely right. The greatest challenge that we face now is the restoration of confidence. It is not only the Government who must play a part in restoring confidence ; it is business, the Labour party and the media. There are many reasons why we should feel confident about the future, and I have already given some of them. Recovery in our car industry is another example. Recently, production increased by 20 per cent. on the same period last year, and forecasts show that there will be a 12 per cent. increase in car production next year. One would hope that Opposition Members would promulgate such facts as evidence of the recovery and evidence that confidence should be picking up.
Mr. Anthony Coombs : Does my right hon. Friend agree that, with low interest rates, record productivity and a competitive exchange rate, the base for the manufacturing industry to take advantage of the upturn is the best that it has ever been? Does he agree that the last thing that manufacturing industry wants is to be burdened with additional costs of the sort that the social chapter would impose on it?
Mr. Portillo : My hon. Friend is absolutely right. Productivity in the third quarter was up by 4.4 per cent. on the year before and stood at a record level. Manufacturing exports now stand at a record level. The United Kingdom is in a highly competitive position. We should like to see all of the European Community being more competitive in world markets.
It is certainly the United Kingdom's policy not to adopt the social chapter, because of the extra costs that it would impose. Our Community partners have already decided to adopt it. That decision may be to their disadvantage, but the United Kingdom will not follow them down that road.
Mr. Lamont : Ministers at the last Economic and Finance Council agreed that there should be a full discussion of the Community's economy at the Edinburgh Council and that member states should consider what action can be taken, both individually and collectively, to hasten recovery.
Mr. Cann : Does the Chancellor accept that the half-yearly report of the Organisation for Economic Co-operation and Development forecasts that 34 million people in the western countries and Japan will become unemployed and that unemployment in the United Kingdom will reach 3 million shortly after Christmas, even by the Government's method of accounting, and 4 million by the method of accounting that applied in 1979? Does the Chancellor agree that it would be totally wrong to go to the meeting of Finance Ministers tomorrow and say, "Look what we have done in the autumn statement. Why don't you do that?"? We need a proper, well-funded European- wide growth strategy.
Mr. Lamont : I do not agree with the hon. Gentleman. I believe that the measures that I announced in my autumn statement have been widely welcomed by industry and all the representative organisations of industry. They accorded very well with the proposals that they were asking for and thought were appropriate from the Government. Although unemployment in the United Kingdom has risen, it has risen, as the hon. Gentleman well knows, in many other European countries as well. Other European countries have higher levels of unemployment than we do. But we now have the lowest interest rates in Europe, which will be of enormous benefit to this country. Not only the consequences of the lower interest rates, but the actions in
Column 985my autumn statement, put the United Kingdom in a strong position. At Edinburgh we will urge other countries to follow where we have led. We will persuade the Community to take measures that protect jobs, promote investment and lead the way to recovery.
Mr. Oppenheim : Is not one thing certain--that the surest way to prevent growth in Europe would be for the European Commission to increase burdens on the European economy by massively increasing its spending, as it proposes? That burden would come on top of the onerous load of regulations and the hefty burden of the social chapter, which the Opposition are always so keen to support.
Mr. Lamont : My hon. Friend is absolutely right. Opposition Members and the shadow Chancellor seem to think that the only place where jobs come from is Government spending. The shadow Chancellor's only answer to the unemployment problem is more spending. As my hon. Friend says, more spending can destroy jobs rather than create them. It is essential, when not only Britain but every country in Europe is seeking to control spending, that spending should be controlled at European Community level just as much as at national Government level. The important point that will come up at Edinburgh is our rebate from the European Community. We in Britain are determined to stand firm on that. I notice that the shadow Chancellor has said that there should be a negotiation about that.
Mr. Darling : Is not the truth of the matter that the British Government reluctantly agreed to discuss unemployment over a lunchtime chat --as opposed to making it the main priority at Edinburgh--as a result of pressure from other European states? Will the Chancellor accept that there will be no investment, and no recovery unless confidence improves, and that confidence will not improve unless unemployment comes down? What specific new projects does he intend to propose at the European summit in the next few days? How many jobs will be created in Britain and Europe, without which there will be no return to the confidence that we so desperately need?
Mr. Lamont : The truth is very different from what the hon. Gentleman says. As I have already said, Britain has taken the lead in putting the economic issues on the agenda at Edinburgh. Labour Members ought to tell us why they make it appear to all those who follow these events from abroad that our rebate is up for negotiation. Why should the Opposition weaken our position at Edinburgh?
Mrs. Gorman : I thank my right hon. Friend for his reply. Will he take this opportunity to reiterate that it is no part of the Government's policy to increase either indirect or direct taxes? We know that economic recovery means that we must leave spending power in the domestic economy and relieve the pressure for increased wages. Of course, higher taxes would reduce people's income and
Column 986take money out of the pocket of the business man who wishes to invest his money in his firm. Does my right hon. Friend agree that the economic strides made by the Government in the last decade were built on the back of tax reductions, not of tax increases?
Mr. William Ross : The Minister has told us that the Government have no plans to increase the rate of taxation. Will he also assure us that they have no plans to increase the scope of taxation, and especially that they have no plans to include newspapers and other periodicals?
Mr. Alan Howarth : If at some point my right hon. Friend the Chancellor has reason to suppose that the public sector borrowing requirement might become disproportionately large, and if the Cabinet concludes that that cannot be remedied by tightening control of public expenditure, will the Government be willing to increase taxation, and to do so sooner rather than later?
Mr. Campbell-Savours : Did the £4,000 contribution that was made by the Treasury to the Chancellor of the Exchequer to enable him to evict a stripper from his private home include a VAT component? Do the Government intend to increase VAT on legal matters?
Mr. Nigel Evans : Does my right hon. Friend agree that not so long ago we fought a general election and that one of our major platforms was taxation--both direct and indirect? The public knew our taxation policies and were also well aware--[ Hon. Members :-- "Ask a question."] Does my right hon. Friend agree that the public knew what our taxation policies were and what those of the Labour party were? That is one of the major reasons why we are sitting on this side of the House and Labour Members are sitting on that side.
Mr. Nicholas Brown : The Paymaster General is being unnecessarily coy. On 12 March, his predecessor told us of the "categorical pledges" that had been given by the Chancellor and the Prime Minister that there would be
"no increase in the standard rate of VAT either before or after the election."
The Paymaster General's predecessor also assured us that there were
"no plans to extend the standard rate, or to put up other taxes."-- [Official Report, 12 March 1992 ; Vol. 205, c. 959.]
Will the Paymaster General confirm that those categorical pledges still hold good?
7. Mr. Hargreaves : To ask the Chancellor of the Exchequer what was the value of assets seized by Her Majesty's Customs and Excise in each year since the Drug Trafficking Offences Act 1986 became operational ; how much of the assets were put back into Customs and Excise work ; and if he will make a statement.
Sir John Cope : The total amount of confiscation orders made by the courts since the Drug Trafficking Offences Act 1986 as a result of Customs and Excise cases is £21.96 million. I will arrange for the figures for individual years to appear in the Official Report. The amount distributed to Customs and Excise through Home Office administered seized assets funds is £614,000 for 1992-93, the first year of the fund's operation.
Mr. Hargreaves : I am sure that my hon. Friend will wish to congratulate the Customs and Excise drug investigation division on the success of its recent operations, which have resulted in huge seizures. Will he also reassure the House that, after 1 January, when border controls are removed, a far greater proportion of any assets--or, rather, funds realised from the seizure of assets from drug trafficking--will be redirected towards the investigation division?
Sir John Cope : I certainly join my hon. Friend in congratulating Customs and Excise, both on last year's seizures of dangerous drugs with a total street value of about £350 million and, in particular, on two recent seizures which have gained a good deal of publicity. The fight against drugs will certainly remain the top priority of Customs and Excise after 1 January, and we are arranging to step up that fight. We must fight drugs at all costs. The majority of resources come from the usual public expenditure round, although the seized assets allow us to use some international funds to top up the public funds.
Mr. Foulkes : Does the Paymaster General recall a report produced during the previous Parliament by the Select Committee on Home Affairs, which suggested that the Channel islands were being used to launder drug money? What action are he and his colleagues taking to ensure that such reprehensible action does not continue?
Following are the figures :
Year |£ million ------------------------------ 1986-87 |nil 1987-88 |0.80 1988-89 |6.00 1989-90 |7.59 1990-91 |4.73 1991-92 |2.84
Mr. Nelson : Average annual growth between 1979 and 1991 was 1.8 per cent. in the United Kingdom and 2.8 per cent. on average in OECD countries respectively ; but between 1981 and 1991, of the G7 countries only Japan had a substantially higher average annual rate of growth than the United Kingdom.
Mr. Milburn : Is the Economic Secretary aware that, if economic growth in this country had matched the performance of our leading industrial competitors, the United Kingdom's output since 1979 would have been some £245 billion higher than it was under his Government? Does he not recognise that his failure to ensure long-term investment in British industry means that, day by day, the gap between Britain and other industrialised nations is widening rather than narrowing? Is not that £245 billion growth shortfall a simple indication that the Government have failed this country?
Mr. Nelson : Like so many Opposition Members, the hon. Gentleman seems to enjoy talking down the United Kingdom's economic performance. Let me tell him that, during the 1980s, this country grew faster than France, Italy or Germany, and took the lion's share of inward investment from the United States and Japan. They have confidence in this country's economic future, even if the hon. Gentleman does not.
Mr. Butterfill : Does my hon. Friend agree that the surest way to ensure that we did not have good economic growth would be to adopt Labour's policies, have the Government choose where we invested and pile tax increase on tax increase, as was so enthusiastically espoused by the Labour party in the last election?
Mr. Andrew Smith : Is not the truth that it is not us talking Britain down but the Government who have been doing Britain down? The failure of their policies for growth are evident in the wrecked businesses, wrecked industries and wrecked lives up and down the land. We need action for investment, action for training, action for research and development, and an emergency programme for jobs. If the Government will not give us that programme, are they not accepting that unemployment will carry on rising?
Mr. Nelson : I assert again that we never hear any good news from the Opposition. The facts of the matter-- [Interruption.] I shall give some facts. Industrial production is up ; retail sales have not been higher for more than two years ; interest rates have come down ; and inflation is falling. The hon. Gentleman should recognise that Britain is well set for growth.
Mr. Ian Taylor : Does my hon. Friend agree that one of the most important facts of the past five years has been the level of inward investment in Britain, compared with the lack of it in other countries? That was recently recognised by Germany, which tried to increase tax incentives. Some
Column 989250,000 jobs have been created by that inward investment. Does he agree there are two potential threats to its continuation? One, earlier this year, was the possible election of a Labour Government ; the second is the possibility that we might be sidelined by not ratifying the Maastricht treaty.
Mr. Nelson : My hon. Friend is right : the level of inward investment, which is precious and important, has been a tremendous vote of confidence in Britain's future economy and industrial performance. The extent to which inward investment in the car industry has been translated into jobs in some of the most important regions of this country is remarkable. That must be succoured and encouraged.
9. Mr. Hall : To ask the Chancellor of the Exchequer what are his latest proposals to help the United Kingdom meet the convergence criteria on Government deficits as laid out in article 104c of the treaty of Rome proposed under the Maastricht treaty.
Mr. Portillo : The Government are determined to return their budget towards balance as the economy recovers. On the expenditure side, the autumn statement set out firm plans for public expenditure to grow over the medium term at a rate within the average rate of growth of the economy. This will help to ensure that fiscal policy remains consistent with the requirements of article 104c.
Mr. Hall : The Minister will be aware that in my constituency of Warrington, South there are 4,139 people out of work and claiming benefit. Does he agree that the convergence criteria of the Maastricht treaty represent the economic agenda of the 1980s, which was a deflationary agenda, and do not meet the needs for growth of the 1990s? Will he therefore give a commitment that he will place at the top of the Government's agenda the eradication of the fear of unemployment?
Mr. Portillo : I believe that the Government's policy on spending and borrowing is appropriate to the 1990s. The Government have allowed for the extra spending required during the recession to meet additional Government obligations in respect, for example, of the unemployed. None the less, the Government cannot borrow on the never never and it is extremely important that our borrowing should be reduced as the economy recovers. That is why it is our determination that the budget will return to balance as the economy recovers.
Mr. Brazier : I welcome my right hon. Friend's commitment to meet the convergence criteria on the fiscal side by moving our budget into balance, but we should reconsider the full-funding rule. We have substantially lowered the price of money, but we need to increase its availability by easing the liquidity in our over-tight banking system.
Mr. Portillo : I know that that is my hon. Friend's view. He will know that my right hon. Friend the Chancellor of the Exchequer is following a full-funding policy. That is the clear policy of the Government.
Mr. Denzil Davies : Is it not a fact that the convergence criteria in the Maastricht treaty are a recipe for deflation, depression and higher unemployment in Europe? Is there not a contradiction between support for the Maastricht
Column 990treaty on the one hand and calls for a co- ordinated European policy of economic growth on the other? After all, one cannot worship God and mammon at the same time.