House of Commons Hansard Debates for 12 Mar 1993

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Virtually all of the growth then was accounted for by an increase in consumption, essentially because it was financed by borrowing. We started with the North sea bonanza and towards the end of the 1980s, there was financial deregulation, easy credit and booming property values, all of which resulted in an unsustainable consumer boom. That economic recovery was financed entirely by borrowing--borrowing from overseas and private sector borrowing within the country. The Government's strategy today, as in the past, is based on borrowing. In fact, the Government would be delighted if consumers picked up their plastic cards, shot out to the high street and borrowed a lot more money, so injecting some demand into the economy. They see that as the only way to get the economy moving again. As the autumn statement made clear, investment will not increase significantly over the next 12 months and nor will exports. Therefore, something must happen to engineer economic recovery. The Government desperately want an increase in consumer borrowing with more indebtedness to the private sector, on the back of which they hope there will be an increase in demand. I do not believe that that will be easily forthcoming. Nor do I believe that it is the way to fund an expansion of the economy and to secure the investment that is desperately needed to sort out the supply side, to which the Government are fond of referring.

The Government's own projection of a 1 per cent. growth in output over the next 12 months guarantees that unemployment will increase, and will continue to increase. Indeed, their projection shows no reduction in unemployment by 1996. That is the scale of the problem. Their policy is that unemployment should continue to rise, so that by 1996 there will still be 4 million people unemployed, although, after massaging the figures, they will say that the figure is nearer 3 million. That is unacceptable.

Although important supply-side measures must be adopted, we must also invest in capacity and skills and improve our export performance. In the short term--the next 12 months--an increase in demand is absolutely necessary just to stabilise unemployment, let alone reduce it. According to the Government's own figures, that will not happen unless they step in and boost demand.

It is clear that, over the long term, 2.5 per cent. growth a year is required simply to stabilise unemployment, let alone bring it down. Growth of just 1 per cent. next year will not even stabilise it. Consequently, it is inevitable that an additional £10 billion to £15 billion needs to be injected into the economy as soon as possible to stabilise rising unemployment.

Unlike my hon. Friend the Member for Brent, East (Mr. Livingstone), I am not a hard-line monetarist. I am quite prepared to say that it makes sense to borrow £10 billion to £15 billion to fund investment in our economy with the object of reducing unemployment. If, on a wet Tuesday, the Chancellor can borrow £7 billion to prop up an overvalued pound, we can borrow £10 billion to £15 billion to invest in the economy and to create jobs. If anyone feels that that is unacceptable, I agree with my hon. Friend the Member for Dagenham (Mr. Gould)--of course the Government can create credit.

In summary--I can see that the Front-Bench spokesmen are anxious to enter the debate quite soon--the important fact is that the Government's strategy is dependent on injecting demand into the economy, but it

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will fail miserably because demand will not occur on a significant scale. We do not want a consumer boom. We need to invest in the economy for long-term growth. Therefore, it is the Government's responsibility to finance that investment.

The only conceivable way in which we can return to full employment in a reasonable time is with a Government who consider the supply side and deal with macro-economic policy, which involves rejecting the ludicrous idea that it is good for consumers and the private sector to borrow to finance their expenditure but that it is madness for Governments to do so. That is a nonsense which is costing us jobs and billions of pounds in national income.

I am grateful to my hon. Friend the Member for Birmingham, Selly Oak (Dr. Jones) for tabling the motion, which has given many of us the opportunity to tell the Government that there is an alternative strategy and that, at some stage, someone will have to pick it up and run with it.

1.25 pm

The Parliamentary Under-Secretary of State for Technology (Mr. Edward Leigh) : Following on from those remarks by the hon. Member for Kingswood (Dr. Berry), I am sure that the House is grateful to the hon. Member for Birmingham, Selly Oak (Dr. Jones) for giving us the opportunity to see that the left wing of the Labour party is still alive and well, and as dangerous as it ever was.

The debate was foreshadowed in today's edition of The Guardian, in an article headed, "Labour faces challenge from the Left on economic policy", which informs us that the Leader of the Opposition "and his shadow chancellor will today face the first organised challenge to the front bench's new economics The launch"-- of the Full Employment Forum--

"will run in parallel with a rare debate in the Commons today in which leading leftwingers"--

such as the hon. Members for Dagenham (Mr. Gould), for Brent, East (Mr. Livingstone) and for Selly Oak--

"will criticise both Government and Labour economics."

We have heard some very interesting speeches.

I am sure that, as always, the House listened with great care to the hon. Member for Dagenham, who, characteristically, gave an intelligent and interesting discourse on our economic history. As always, we listened with great care and attention to the honest thoughts of the hon. Member for Brent, East. I am sure that he often speaks for the true voice for the Labour party, if Labour Members were as committed as he is to principle, but clearly less committed to holding office in any future Labour Government--if there is one. I am sure that the House is grateful to the hon. Member for Brent, East for some wonderful remarks, which we shall treasure and which will no doubt figure in some future Conservative campaign guide. For instance, he told us that "the weakness of the Labour party is that it has not been able to construct any viable alternative to the Tories." I think that those were his words. He told us that "their jobs," referring to employees in the defence industry, "are going to be lost, whatever we do." I do not know whether he has told that to his hon. Friend the Member for Barrow and Furness (Mr. Hutton), who was with us briefly. The hon. Member for Brent, East also told

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us "Yeltsin is no more democratic than Pinochet" and that there were more democrats in the Russian Parliament. We miss that sort of robust debating style, which we used to enjoy when Michael Foot was Leader of the Opposition. It was back today, and we have had a wonderful day.

Mr. Nicholas Brown : Speak for yourself.

Mr. Leigh : I hope that the Hansard reporters picked up that sedentary remark. Conservative Members have enjoyed the debate, anyway.

For the second time this week, Opposition Members have offered the Government a welcome opportunity to explain our approach to transforming Britain's underlying industrial performance and the fact--which the Opposition cannot deny, in the welter of facts that we have been given today--that our productivity, output and exports have grown substantially since the Government came to office in the late 1970s. It was a time when Governments tried to manage demand instead of encouraging efficiency and enterprise. As my hon. Friend the Member for Colchester, North (Mr. Jenkin) reminded us, even then that approach was becoming discredited. My hon. Friend also reminded us that even a Labour Prime Minister said that that option no longer existed. However, I noted what the hon. Member for Dagenham said about that. Obviously that is his point of view.

We recall that, at that time, unions were obsessed by demarcation disputes and hindered the introduction of new technology and modern working practices, that social goals had priority over industrial regeneration and that massive subsidies cushioned state-owned industries from competition. As my hon. Friend the Member for Sevenoaks (Mr. Wolfson) reminded us in his excellent speech, an industrial welfare state grew up that sapped the spirit of British enterprise which had given us a worldwide industrial lead in the 19th century. Public spending ballooned out of control, as this motion and the left wing of the Labour party invite us to allow again. Taxes rose higher and higher, stifling the incentive to work harder. No wonder that the United Kingdom's share of world trade continued on its downward path.

I remind the hon. Member for Brent, East that we were running a visible trade deficit in 1975. Not surprisingly, in the 1960s and the 1970s we continued to sit at the bottom of the EC output and productivity growth leagues.

As my hon. Friend the Member for Stamford and Spalding (Mr. Davies) reminded us, we had to change things. No one else seemed to want or dared to tackle vested interests, but we were prepared to do so. From the early 1980s, the Government have rejected the easy road of inaction and muddling through. As my hon. Friends have reminded us today, we have transformed the environment for business activity. We have carried out the policies that my hon. Friend the Member for Aylesbury (Mr. Lidington) urges us to do in the second motion on the Order Paper and which he urged us to do in his speech. His motion refers, as he did in his speech, to creating a climate of low inflation, low taxation, deregulation and free trade. I will deal with all those points in my speech.

Industry's response has been remarkable. I salute our manufacturers for the way in which they have grasped the new opportunities. I believe that they have given a real testament to their confidence in our policies, for since 1981--the trough of the last recession--United Kingdom

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manufacturing output has risen by over a fifth, manufacturing investment has grown by a third and manufacturing productivity has grown by two thirds.

Dr. Berry : Can the Minister explain why he chose to start not with 1985 or 1983, as his colleagues did, but with 1981? What is wrong with 1979 when this Government came to office?

Mr. Leigh : If one is trying to establish credible economic statistics, surely it is wiser to compare the trough of one recession with the trough of another recession. That is why I referred to 1981.

In the 1980s, United Kingdom productivity grew faster than in all other major industrialised countries, after decades at the bottom of that particular league.

Dr. Lynne Jones rose --

Mr. Leigh : I shall give way in a moment to the hon. Lady. Perhaps she will allow me to plough on a little, after which she can intervene.

The United Kingdom is doing very well in overseas markets, too. We export a quarter of what we produce. Despite the recession, United Kingdom export volume, excluding oil and erratics, is at an all-time record. In the last quarter, it was up 5.5 per cent. on the previous year, despite the world slowdown. As a result, the United Kingdom's share of world trade has at last stabilised after three decades of decline. Export volumes are expected to increase further this year. Small firms, the lifeblood of the economy, have shared in this revival. I shall now give way to the hon. Lady.

Dr. Lynne Jones : Surely the Minister ought to grasp the basic mathematics--that a large percentage of a small figure is still a small figure? If Japan, for instance, were to increase its exports of cars to this country 1 per cent. and we were to achieve a similar increase in our exports, we should have to increase them by 10 per cent. Surely the Government ought to tackle that issue.

Mr. Leigh : What the hon. Lady and her hon. Friends continually fail to grasp is that if we look at all the economic statistics--at productivity, which has increased by two thirds, and at exports, output and investment--they show a rapid rise in the 1980s. They all show us outperforming our competitors in France and Germany. Mr. Gould rose --

Mr. Leigh : I see that the hon. Gentleman wishes to intervene.

Mr. Gould : I have been trying to understand one small aspect of the Minister's case. He suggests that the 1980s was a decade of great economic achievement. Why, as he has just made clear, have his Government--uniquely, as far as I am aware--the luxury of being able to compare the trough of one recession with the trough of another in the same term of government? How did that happen?

Mr. Leigh : Of course, the hon. Gentleman forgets our inheritance in 1979. He forgets that up to 1981, we had four years of any average inflation rate of 15 per cent. He forgets that we were a strike-ridden country, with virtually no confidence in our industries. All those underlying structural weakenesses of the British economy had to be addressed, and were successfully addressed by the former Prime Minister.

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The hon. Member for Bath (Mr. Foster)--the only Member of the Liberal party who has spoken in the debate, but who, sadly, has now left--made a special play for small businesses. I remind him that by the end of 1990, about 400,000 more businesses were operating in the United Kingdom than in 1979. British business has shown every confidence in our policies, just as we have had every confidence in its ability to respond. As the climate for business in Britain became more attractive, business overseas started to notice the remarkable and radical changes that we had made and came here in droves. [Interruption.] It is all very well for Opposition Members to laugh, but we have the No. 1 record for inward investment in Europe. In 1991, the United Kingdom accounted for 36 per cent. of the stock of United States investment and 40 per cent. of Japanese investment in the EC. The United Kingdom remains the preferred location for foreign investment in the EC.

Ms Abbott : Ministers speak increasingly of inward investment nowadays. Is not one of the reasons why we attract so much inward investment the fact that we speak the English language, which has nothing to do with Government policy? Is not that inward investment problematic in two ways? First, it is predicated on low wages--only 44 per cent. of wages in Germany--which cannot be a long-term basis for our being competitive. Secondly, many components are imported. Although our exports of Japanese cars and televisions are increasing, we have a huge trade deficit because we are an assembly point. The value-added component construction is carried out overseas.

Mr. Leigh : The hon. Lady is right to say that many aspects influence the decisions of potential inward investors and that language comes into it. But there are other factors, such as the skill of the work force, the technology that is available in a locality--for instance, particularly in the lowlands of Scotland, which has an unrivalled record in attracting inward investment--the infrastructure and the Government's economic policies, which reassure the inward investor that he will not be unduly hassled by social controls, that he will pay relatively low taxes and that he will be free to get on and run his business. However, the hon. Lady tries to explain away our record of attracting inward investment, the fact remains that it is there. The Labour party experiences great difficulty in explaining why we have been so successful in attracting inward investment.

Inward investment has helped to reinvigorate key United Kingdom sectors such as vehicles, office equipment and chemicals. It has brought to Britain the latest technology and the best international management practice and has offered tough competition for our companies to measure up to.

Does the hon. Member for Newcastle upon Tyne, East (Mr. Brown) support our commitment to inward investment, because we have received conflicting signals, such as from the hon. Member for Selly Oak, who seemed to pour cold water on inward investment, from what is stated in the motion and from what was said at the TUC? We want an unequivocal welcome and acceptance for potential inward investors from the hon. Member for Newcastle upon Tyne, East, which would do a tremendous amount for our economy. My right hon. Friend the

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President of the Board of Trade asked the same question in our debate earlier this week and, again, we heard the mealy-mouthed response that is always given.

We look forward to hearing from the hon. Gentleman because inward investment is associated with thousands of jobs, which would otherwise go elsewhere in Europe. Is that what the motion means by "the need to develop the domestic productive economy"?

If so, our policies will no doubt be endorsed by both sides of the House.

What caused the transformation? Our policies dealt with all the factors affecting our industrial performance. For example, people around the world have now forgotten the British

disease--strikes--because we reformed the unions, making them more democratic and accountable. As a result, in 1991 we had the fewest days lost through strikes since records began a century ago. We restored to managers a renewed confidence to manage. We lowered tax rates substantially for businesses and for individuals. We cut corporation tax from 52 per cent. in 1984 to 33 per cent. now--that is the lowest rate in the European Community or the G7 countries--so companies were left with more to invest. We reduced the basic rate of income tax from 33 to 25 per cent. People have found that extra effort brought extra rewards, as my hon. Friend the Member for Aylesbury reminded the House.

Mr. Jenkin : I wish to draw my hon. Friend's attention to a firm in my constituency, which could benefit from further encouragement, through the tax system, to invest in research and development. We do not allow expenditure on near-to-market research and development to be offset against tax. It must be capitalised and, effectively, companies pay tax on the amount before they are able to invest it. Could my hon. Friend draw the problem of the family-run, surgical equipment manufacturer, which exports a substantial amount of its production, to the attention of my right hon. Friend the Chancellor of the Exchequer, if not before this Budget, for a future Budget?

Mr. Leigh : I shall certainly draw that issue to my right hon. Friend's attention. We are close to the Budget, so I am not sure whether it would be wise for me to comment now. If he can change his statement even at this late stage, he might do so. Who knows?

Dr. Lynne Jones : Is the Minister not aware that many manufacturers and the Engineering Employers Federation have said that the Government's tax policies have been antagonistic to industrial investment? He referred to the reduction in corporation tax but did not mention the fact that, at the same time, there has been a reduction in tax allowances for investment. The Government gave to those companies that were not investing in manufacturing the same tax advantages as the companies on which we depend to invest for the future. That does not help industry.

Mr. Leigh : If the hon. Lady thinks that her proposals in the motion are not antagonistic to investment and industrial confidence, I do not know what world she is living in.

I have much more to say, but I must get a move on or all the excellent work that I have done in preparing for the debate will have to be curtailed so that other hon. Members can participate.

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I conclude by saying a few words about what we have heard from Labour Members today. They spoke of the damage that they believe the Government have done to the economy, so I shall respond by saying how much damage Labour is doing to the economy, even in opposition, and how much more damage it would have done if it had not been humiliated by a record fourth election defeat.

In the past 14 years, Labour has had a problem getting anyone to listen to it about the economy. We should all be grateful for that. However, one group is listening to Labour. It is not the unions, which do not have to listen as they tell Labour what to say in the first place. The people who cannot help hearing what Labour is saying, because it is saying it so loudly and so often, are the foreign business men thinking of investing in Britain, the potential foreign investors whom the Labour party is doing its damnedest to deter and discourage. That is pure madness.

Labour cannot keep its mouth shut, as we have seen and heard today. The minute a Labour Member got up to speak, the words just slipped out. None of them could help it. They said, "Britain can't do this", "Britain can't do that", and "We are a low-tech economy." That is not the image of Britain or of British industry which I see when I travel around as a DTI Minister, but such words slip naturally from Labour Members' lips. Perhaps talking Britain down is an involuntary reaction of Labour Members ; some sort of congenital disease or socialist sickness that has spread to the past masters of doom and gloom on Labour's Front Bench.

Anyone who has been involved with the DTI in the past couple of years has seen it all before : the hon. Member for Dunfermline, East (Mr. Brown), who could wipe the smile off one's face at 100 paces, and the hon. Member for Glasgow, Garscadden (Mr. Dewar), who would find it difficult to be happy even if he won the pools. We were hoping for a little more jollity from the hon. Members for Dagenham and for Brent, East but, unfortunately, we did not get it. Perhaps the hon. Member for Newcastle upon Tyne, East will oblige. Labour's answer to the problems that the recession has brought was revealed last week in its party political broadcast. I hope that in your busy life, Madam Deputy Speaker, you had a chance to see it. It was an expensive production. Who knows how many staff at Walworth road lost their jobs to pay for it? It was an extremely expensive way in which to say, "Things are terrible. Somebody ought to do something about it, but don't ask us. We don't have a clue." I see Opposition Members laughing--they believe that too.

Labour does not believe in policies any more, as the hon. Member for Brent, East reminded us ; it just believes in sound bites. That is precisely what the hon. Gentleman told us this morning. In the party political broadcast, Labour did not offer us a single policy to get us out of recession. It was just motherhood and apple pie--more motherhood than a maternity ward and more apple pie than Mr. Kipling.

No wonder Labour was singing the blues in that television broadcast. Labour's absurd and damaging policies and ideas have been comprehensively rejected across the globe. As my hon. Friends have reminded us today, those policies are sinking in France, scuppered in Spain and scrapped in Sweden. Even in the United States, President Clinton, whom many Opposition Members seek to emulate--not, I hasten to add, the hon. Members for

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Brent, East and for Dagenham--is urging the need for responsible fiscal policies and cuts in health spending, and not for more increases in spending.

Labour still does not seem to have caught on. It is a long time since the political boatman cried, "Come in Labour, your time is up." Yet Labour still refuses to listen. Labour Members are still out there, defiantly paddling away when everyone else has gone home without them. Poor old Labour, stuck in the middle of a lake and pretending to have a good time, whistling the old tunes to keep its spirits up all the time. Night time approaches ; will Labour never see the light?

Britain is on its way back and the Labour party knows it. Labour Members cannot stand it because good news for Britain is bad news for Labour. Labour's pious words about the need for recovery carry about as much conviction as Woody Allen taking up a new career as a child minder. Labour is desperate for the recession to carry on as long as possible because it knows that if the economy goes up, its opinion poll ratings will go down.

Why does Labour find it so difficult to hail the £1 billion contract won by GEC to build one of the world's largest power stations in Hong Kong or the £448 million contract won by Thames Water to build a new water plant in Turkey--all in the past few months? Is it so difficult for Labour to welcome the fact that half the firms in Europe's top 50 are British or to celebrate the transformation that has taken place in our motor industry, the backbone of British manufacturing strength?

No one would be more pleased than I to see Labour organising rallies around the country, not to spread its message of doom and gloom, but to encourage firms to make the most of the huge advantages of having the lowest interest rates in Europe, the lowest level of inflation for 25 years and the lowest level of business taxation not just in Europe, but across the industrialised world. We are beginning to see why the Labour party finds it difficult to come up with anything positive. Labour knows that recovery would not have been possible if it had been elected. It is no longer just Conservative Members who say that. Labour's own Front-Bench Members are admitting that as well. Let us think about it for a minute.

Before the election, Labour told us that it had a package that would bring recovery and that within four weeks, it would be in the Treasury implementing its shadow Budget for recovery. The hon. Member for Newcastle upon Tyne, East was going to be there. As we all know, the business men and voters of Britain had other ideas and Labour Members were left to languish on the Opposition Benches for four more years.

What have Labour Members been up to these past 11 months, when they have not been talking Britain down, that is? Have they been consolidating the measures that they said would deliver recovery or fine-tuning the policies that the Leader of the Opposition said would win them the election? As we have been reminded today, what has happened is just the opposite. Labour Members have been shedding their election policies like a moulting cat. No sensible business man believed that Labour would achieve recovery through the largest tax increase in history. That was what lay behind the shallow promises of the shadow Budget.

The shadow Chancellor has now admitted in The Guardian that perhaps

"further increases in taxation would be mistaken."

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The Leader of the Opposition has gone further. Speaking in Paris--talking Britain down again--he said that he thought that it was "economic madness to contemplate increases in taxation on ordinary taxpayers."

That statement has been severely criticised today.

I have recently completed a series of regional seminars and have talked to more than 200 companies--real companies. I find so much to be proud of in this country--so much entrepreneurial flair, inventiveness, sheer competitive spirit, enthusiasm and success. The House of Commons delights in cynicism and even despair, as has been evident this morning. Let us take pride in our country and in our world-beating industries--chemicals, pharmaceuticals and high technology.

As I have toured industry and met industrialists during my two years in my present job, I have found people calling on the Government not to pick winners but to back winners. That is what we are doing. We have been asked to help spread good technology and best practice around industry and better exploit our scientific and academic excellence. That is what we are doing at the Department of Trade and Industry. Commerce works as effectively as water flowing down hills as long as we do not seek to dam its creative entrepreneurial energies but, rather, to promote and encourage them. We in Britain have so many advantages--our unique geographical position as an entrepot between Europe and the Americas, our commitment to free trade and our championship of it in Europe, our language and our inventiveness. In partnership with industry, we shall lead Europe out of recession with lower inflation, with lower taxation and with lower labour costs than our competitors--and with a competitive currency. As socialists struggle to find not so much a new identity as any identity, our approach will succeed.

Let us then raise the banner of confidence in this country--as my hon. Friends have done today--and resist Labour Members' efforts to haul it down. Let Labour do its worst ; we shall do our best. 1.51 pm

Mr. Nicholas Brown (Newcastle upon Tyne, East) : It is a little ambitious of the Minister to seek to take credit on behalf of the Conservative party for Britain's unique geographical position. He has had a unique opportunity to defend the Government's record on the management of the economy, yet his peroration seems to have run away with the rest of his speech. He spent most of his time not attacking the Labour party for what it had done in the past--he left that to his Back Benchers--but attacking the Labour party for what he believed it would have done in the future had it won the general election. The motion before us is specific. It refers to the Government's conduct of economic policy. The Minister is here today to defend that conduct, and it is significant that he manifestly failed to do so. Two main themes emerged from Conservative Members' speeches : first, the Labour Government had been bad for the country and were probably responsible for all our present ills--overlooking the fact that Labour went out of office in 1979 ; secondly, if one was looking for good news Conservative Members could forecast good news, though could not actually tell us any good news but only forecasts of good news. The hon. Member for Stamford and Spalding (Mr. Davies) was the exception.

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He managed to redefine the evidence so that it could be presented as good news. I have to tell him that it could not plausibly be presented as such.

I congratulate my hon. Friend the Member for Birmingham, Selly Oak (Dr. Jones) on initiating a stimulating and vigorous debate which has given the Government the opportunity to fulfil a responsibility that they have been shirking since Christmas--to come to the House to defend their economic policies. It is because Treasury Ministers have been shirking that responsibility since Christmas that I was somewhat surprised that a Department of Trade and Industry Minister should have shirked it again today. The evidence tells against him. The current recession, which inspired today's debate, has been the longest in the post-war period. We have now had some 10 quarters--two and a half years--of negative economic growth. It has been not only the longest but the most severe recession that Britain has endured for a long time.

The Organisation for Economic Co-operation and Development estimates that the output gap, the difference between actual and trend gross domestic product, suggests a waste of between 6 and 7 per cent. of GDP. As a measure of unproductive capacity and waste of resources in the economy, we are being advised that the results of the present recession absolutely dwarf those of previous recessions. Even the particularly severe downturns of 1974-75 and 1980-81 saw output gaps of 3 per cent., which is less than half the current level.

I have never been so worried about the state of the economy in my country. If I express those fears on my behalf and on behalf of my Opposition colleagues, that does not mean that we are talking Britain down. There is a tendency among Conservative Members to assume that the interests of the country and those of the Conservative party are the same. They are not. It is perfectly legitimate to express fears for the country in which we all live and to attack the Conservative party at the same time. I believe that the economy will not and cannot recover all the output that has been lost over the past two and a half years. The present recession has a permanent, enduring and negative effect on the size of the economy. The growth path has not just been through a cycle ; it has shifted permanently lower. Firms faced with such a large fall in output and such a sustained recession are cutting capacity instead of waiting for an elusive recovery. Firms have gone bankrupt. Others have scaled back, not just temporarily but by scrapping and not mothballing unused productive potential. The latest growth forecast figures were available to the House this morning. The Minister will be particularly interested in what those figures reveal. We now know that the percentage change in GDP since the beginning of the recession in the second quarter of 1990 is 3.5 per cent. in the negative. In terms of billion pounds per year in 1992-93 rates, that is a loss of £21 billion.

That is the range of the problem confronting us. The Minister claimed that the Government had transformed the business environment. I should like to tell the House how Trade Indemnity--the United Kingdom's leading independent credit insurer, as it tells us--believes the business environment has been transformed. According to Trade Indemnity, 30 per cent. of United Kingdom firms are now working at half capacity and there appears to be

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no evidence of recovery in the United Kingdom economy. It says that construction failures rose 9 per cent. quarter on quarter and that service industry failures rose by 6 per cent. quarter on quarter. It also says that business failures in the northern region, the region which Conservative Members often claim somehow survives the recession more satisfactorily than other regions, rose by 19 per cent. quarter on quarter, providing the worst figures in the country. According to Trade Indemnity, prospects for the economy still appear weak and the danger of United Kingdom businesses being unprepared for the upturn in the economy is severe.

On 16 February, Peat, Marwick McLintock announced that there was an 8.2 per cent. rise in liquidations between 1991 and 1992. That is the scale of the problem. The Minister should have addressed that problem, but he did not. It is the Labour party's contention that the root cause of our problem is the failure to take investment seriously. I must tell Conservative Members that that is not something which divides this side of the House but something which we have in common : we believe in investment in our nation's industrial base and in the potential skills and abilities of our fellow citizens.

The Government should be leading the effort to rebuild our industrial base and to renew our public services, but they deliberately and wilfully march off in the opposite direction as though recession were somehow good for the national soul. As that former Chancellor who left the present Prime Minister with the unenviable heritage of 15 per cent. interest rates and 11 per cent. inflation once said, "If it isn't hurting, it isn't working." As the Prime Minister invites us to consider his inheritance when he became Prime Minister, it seems only fair that we should consider the inheritance of the present Chancellor when he assumed that post. Just because no one on either side of the House has said anything favourable about the present Chancellor in this debate, that does not mean that he does not have the same right as the Prime Minister to complain about his inheritance.

If no one else will stand up for the Chancellor I suppose that it falls to me to do so--because he has a defence. As my hon. Friend the Member for Dagenham (Mr. Gould) said, the Chancellor did not choose the rate at which we entered the exchange rate mechanism ; nor did he choose the timing, which was just before the annual meeting of that key factor in the management of international economic affairs, the Conservative party conference. The present Chancellor did not impose ruinously high interest rates on British industry ; nor did he maintain them for such a long time ; he was only the Chief Secretary at the time and, as the present Chief Secretary would no doubt confirm, that means that he should not be blamed at all. The Chancellor's defence should be to say loud and clear, "I think that you have to consider, first, my inheritance as Chancellor : we had 15 per cent. interest rates and inflation was just under 11 per cent.--what to do, what to do?"

People who moan about the mess that they have inherited usually go on to demonstrate how things have got better since they took over. Is such a defence open to the Prime Minister and his Chancellor? The United Kingdom's economy has shrunk by 3 per cent. since the Prime Minister took office. That failure to achieve growth has happened under the regime of the Prime Minister who reportedly told The Independent that "growth" was the

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happiest word in the English language. I suppose that we could say that that puts love, sex and money in their place. Each to his own. The hon. Member for Altrincham and Sale (Sir F. Montgomery) spoke about the OECD's forecasts for the five years from 1989 to 1994. The OECD forecasts that the average growth of the G7 economies will be 9 per cent. Over that time, the British economy will have grown by less than 1 per cent. That clearly shows that the problem has a particular and peculiar British dimension that the Government should address. Investment in Britain has collapsed. It fell by 14 per cent. in the past three years and the Government forecast that it will grow by only 0.25 per cent. this year.

Private credit agencies have told us much about business failures. The Conservative party, the party of enterprise, has presided over the destruction of the enterprise for which the Conservatives claim to stand. The United Kingdom recorded 62,000 business failures in 1992, compared with 47,000 in 1991. That is an increase of 31 per cent. on 1991, which itself recorded a rise of 65 per cent. on 1990. The Conservatives are the party of business failure rather than business opportunity.

The housing market has also been hit by the recession. United Kingdom house prices have fallen by 7 per cent. since the recession began, leaving many families trapped in homes that are worth less than their mortgages. In the depths of a recession one would have thought that the balance of payments would give the Government at least some joy and that they could point to some cause for optimism. That is not possible either. The latest figures for December 1992 show the biggest monthly rise in the balance of payments deficit for two and a half years. It is a rise of £1.5 billion, which is up on November and three times the figure for December 1991.

The end of the year figure for 1992 was £12 billion. That is despite cheaper exports and more expensive imports. Given its position on the economic cycle, that figure shows that there is something structurally wrong with our economy. Did the Minister say a word about that? He did not.

Probably the most important issue and certainly the most important for the parliamentary Labour party is what all this means for our people in terms of jobs and the country's employment base. Does any Conservative Member recognise the following quote?

"The scourge of unemployment has afflicted the industrialised world more harshly than at any time for 50 years. Britain has suffered as acutely as any country."

If any Conservative Member would like to intervene to say where that quote comes from, I shall be happy to give way. No one does. It is from the Conservative party manifesto of 1987, the manifesto on which Conservative Members fought the 1987 general election. That, and the subsequent text, gave the clear impression that the Conservative party was to reduce unemployment, but nothing of the sort has happened. Since the Prime Minister took office, unemployment in the United Kingdom has increased by 1,290,300, from 1,704,800 in October 1990 to 2,995,100 in January 1993--an increase of 76 per cent. The unadjusted figures for the same period show an increase of 83 per cent.

Mr. Jenkin : There have been Conservative Governments who have reduced the rate of unemployment, but naturally no Conservative Government have ever promised to abolish the economic cycle. Can the hon. Gentleman draw the attention of the House to a single

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Labour Government who have left office with a lower rate of unemployment than that which they inherited from their predecessors?

Mr. Brown : The hon. Gentleman is trying to apply to me a test that the Minister and other Conservative Members who took part in the debate would not accept for themselves. When they were asked about the periods that they accepted for the statistics that they used in the debate, they would say that a fair starting point was 1985 or 1981. If one examines closely the record of the last Labour Government and makes allowances for the disastrous overhang that they inherited from the Anthony Barber boom regime which preceded them and for the oil crisis, it is fair to conclude that unemployment was being reduced as they left office to just below 1 million. We all know that there was a disastrous upturn when the nature of the Government changed in 1979. The Labour party and the last Labour Government can take some pride in their record on employment, but the Conservative party can take no pride on that issue. Indeed, it seems to be the Conservative view that it should not be an issue for government at all, except as an aspect of policy on inflation. It is noticeable that when the Conservative Government claim to have inflation under control we have massive unemployment and, when they begin to think that they should do something about unemployment, inflation starts to go up again. That has been a persistent problem for the Conservative party in government and I have yet to hear a convincing response from Conservative Members on that issue.

Mr. Jenkin : Will the hon. Gentleman give way?

Mr. Brown : I do not wish to eat into the time of other hon. Members who wish to contribute to the debate, but I will give way to the hon. Gentleman a second time.

Mr. Jenkin : I am grateful to the hon. Gentleman. It is fair for the Conservative Government to take credit for the fact that in the United Kingdom a higher proportion of the population are in full-time or part-time work than is the case in virtually any of our European competitors. Will the hon. Gentleman at least give us the credit for that?

Mr. Brown : The hon. Gentleman should come to my surgery on a Saturday morning or a Friday night and explain that to the substantial number of my constituents who are out of work. They do not want to know that other people are in work. They want to know why they cannot have a job. It is not that they do not want to work--they want a job.

Let me say a little more about the sort of jobs that Conservative Members seem to support. There are 29 claimants chasing every vacancy, and regional variations are substantial. The experience of the 1980s tells us that many of the long-term unemployed withdraw from the labour force during a recession and do not find their way back during recoveries. Many of the 1.6 million people who have lost their jobs in the past two and a half years may never return to the labour market. That is a human tragedy and one which is a direct result of the policies that the Government have pursued. The Labour party, in opposition and in government, is committed to bringing that to an end. The enduring cost of the recession in scrapped capital and labour is likely to be about 3 per cent. of GDP or £20 billion a year of lost output.

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Conservative Members have talked about low wages in other economies, such as that of Taiwan, as a cause for the success of those economies. They did not mention Taiwan's massive and intelligent industrial investment. Nor did they mention Taiwan's strong manufacturing base. They did not tell us about Taiwan's strong commitment to education, including industrial education, and to training. There are more students in higher education in Taiwan, as a proportion of the population, than in the United Kingdom. The Conservative party and the Government seem to believe that by keeping British citizens poor the economy will recover. We have heard much from Conservative Members about the importance of keeping wages low. They argue that, somehow, that makes people rich, but I do not follow the argument.

I shall give an example that has been provided by a Conservative party supporting newspaper, the Newcastle Evening Chronicle, in an advertisement for a job. I think that Conservative Members will like my example because it is the sort of job of which they approve. The job is for a chauffeur- handyman to work in a large house in the Gosforth area. The applicant must have a clean driving licence and at least one letterheaded reference relating to a similar job. The job requirements are chauffeuring locally, travelling long distances and looking after the upkeep of the house. He must have some gardening experience and some painting and decorating experience. There will be daily yard sweeping and gravel raking. He will be required to go out to undertake many odd jobs, including walking the dog and purchasing the shopping. The applicant will be expected to wash and valet the cars. There are many more duties. Understandably, a polite and patient manner will be required. The hours from Monday to Friday are 8.30 am to 6.30 pm. The successful applicant must be available to be on call for 24 hours if necessary. The pay is £150 a week. Despite the requirement to be on call for 24 hours, the advertisement states that some overtime might be available. Finally, it is a necessity that the applicant has his own car. I expect that Conservative Members think that that is a good job. The real test is not political ideology but whether any of them would apply for the job. Would any of them undertake it for £150 a week? We know that they would not. At least that job was in the country, which is more than can be said for the jobs of those who run our pensions at the Department of Social Security offices at Longbenton. Apparently the Government are proposing to dismiss those workers--and to have the details of about 22 million pensioners sent by satellite transmission to the Philippines so that workers who are paid about 38p an hour can undertake the work instead. That might lead to a saving of money, but it means the permanent loss of jobs in our economy. Not content with seeing manufacturing jobs go abroad, the Government are planning to see how many service sector jobs can be sent abroad as well. What they expect the economy to consist of and what they expect people to live on once they have done that, they do not tell us. There was an opportunity for the Minister to explain that to us, but he did not take it.

The Government's failure to intervene in just about any area of the economy was starkly demonstrated this morning with the collapse of the Taurus system and the subsequent resignation of the chairman of the stock

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