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Mr. Heald : I will not, because I have only 10 minutes. If the hon. Member for Cambridge (Mrs. Campbell) wants to intervene, however, I shall return the compliment she paid me.
The hon. Member for Birkenhead (Mr. Field) wrote an article in The Guardian on Monday which contained one or two statements with which I entirely agreed. It is right that politicians on both sides of the House should have full employment as their goal. I do not necessarily agree with the hon. Gentleman about the way in which to set about that, but I agreed with some of his comments.
He is right to say that getting interest rates down is important, and I hope that he recognises what has been achieved in that direction over the past few months. He is right to say that mortgage interest tax relief should be reduced, as the Chancellor has announced. The hon. Gentleman would go further, but he has made a useful contribution to the debate. He is right to say that it is necessary to widen the VAT base or to increase VAT. Again, I have no argument with that. He is right to say that we should encourage realism in wage bargaining and that the future of this country depends on growth. He is also right to say that that is the province of the private sector and of individual firms.
When I went through the article, I thought, "Gosh, there will be something here soon with which I shall not agree." I sometimes wish that such sensible and thoughtful contributions to the debate came from Labour Front- Bench spokesmen rather than from Back-Bench Members.
Mr. Frank Field : Will the hon. Gentleman give way ?
Mr. Heald : No. The hon. Member for Cambridge can be the hon. Member's proxy. I owe her one-- [Laughter.]
Mrs. Anne Campbell : I am grateful to the hon. Gentleman for giving way. Perhaps he will tell us whether he will vote with us at the end of our debate.
Mr. Heald : I was rather hoping that the hon. Member for Birkenhead would vote with us. One of the problems
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with the Opposition is that Front-Bench spokesmen come forward with one policy and Back-Bench Members with another. I am reminded of last Friday.Mr. Duncan-Smith : What policy?
Mr. Heald : I am not saying that there is one policy ; there are at least three or four. Last Friday, the Labour party proposed to cut defence spending by £7 billion. My constituents rely on defence expenditure for their export industries, so they do not welcome that proposal at all.
There are three ways in which full employment can be achieved. The first is a range of employment measures, and I welcome the announcements in the Budget. My constituents have written to me and I have a letter here. The letter makes a number of points, including the point that people who are unemployed should be given the opportunity to start up in business. I welcome the extra 10,000 business start-up scheme places which have been made available. The second measure suggested by my constituent, who wrote his letter before the Budget, is a scheme under which the unemployed are given vouchers, which they could take to their future employers. I support such a measure for the long-term unemployed. I welcome the workstart pilot scheme, which will achieve just that.
My constituent went on to say that many socially useful jobs could be done by the unemployed. The community action programme and TEC challenge give people the opportunity to do such tasks. Although I believe that, over a period of years, growth will be the main answer to unemployment, it would be wrong for the Government not to take measures such as they have taken to help people now. Taken together with the meaasures announced in the autumn statement, 600,000 people now have more hope than they had some months ago.
I agree with what my hon. Friend the Member for Chingford (Mr. Duncan- Smith) said about the role of entrepreneurs in creating growth. It is vital that business men should lead the way in establishing businesses which succeed for Britain. In looking at what has happened in the past 10 or 15 years, we should recognise that businesses have specialised more, and that we have businesses in Britain which can take on the best in the world and succeed. We should not always run Britain down and pretend that that is not the case.
Such businesses are capable of challenging the three major trends in the world economy which need to be addressed, and, because they have become efficient and productive, they can meet the challenge of the newly industrialised countries. The efficiency of our businesses, the clustering of businesses in western Europe, their good connections in the far east, the type of help that was announced in the Budget under the export credits guarantee scheme and the help of our Foreign Office, which has so many trade missions across the world, will allow our companies to take on the challenge of the newly industrialised countries.
It is wrong to say that the impact of new technology will be death for jobs and that that is the end of the story. The impact of new technology has made the companies which have introduced it more efficient and productive than before. Some of the businesses which have lost a great deal of labour in the past 10 or 15 years are those which are now capable of exporting products for Britain and taking on the best in the world.
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I believe that growth will come from that change in technology. The newly industrialised countries may be competitors, but they also provide markets for Britain. If we have the new technologies in place, we will be productive and efficient, and we shall be able to go into the new markets which are opening up around the world. That will create growth and new jobs.In Britain, we must face the fact that there is a battle in Europe for inward investment and for the investment of our own companies in our country. The evidence given to the Employment Select Committee in the past few months, when it was investigating the issue, has shown that we must treat competition for investment as European competition. Companies with investment to make look to see whether Britain is at the centre of Europe. I believe that it should be and I hope that the Maastricht treaty will soon be in place so that we can move forward.
Companies want a willing and capable work force. We have that and good industrial relations and improved training. I wish to make two more points, Mr. Deputy Speaker.
Mr. Deputy Speaker : Order. I call Mr. Geoffrey Hoon.
7.33 pm
Mr. Geoffrey Hoon (Ashfield) : I am delighted to follow the hon. Member for Hertfordshire, North (Mr. Heald). He has clearly come a long way since our days studying law together. Certainly he was a lot less weighty in those days, had much more hair and was a good deal more radical.
The Budget must be measured against one crucial test--whether it will encourage or increase confidence. Confidence is crucial in any recovery. People must have confidence in their employment prospects and their ability to maintain their present employment and standard of living. A typical family or household must have confidence in its ability to pay its bills, rent or mortgage.
People will obviously have welcomed recent cuts in exchange rates after such a long period of sustained high repayment rates. However, as yet there is only patchy evidence that interest rate cuts are leading the country out of recession. Instead of spending on new goods and homes, families and individuals are seeking to restore stability in their finances by repaying debt such as hire purchase commitments, credit card debts, mortgage commitments, and debts built up when the Government encouraged spending before the general elections of 1987 and 1992.
Moreover, in considering the confidence of a typical family or household, it is necessary to consider the impact of the tax increases announced in the Budget. Disposable income for almost every family in the country will be significantly reduced.
From April 1994, a married couple with one earner will have to pay more than £7.50 a week more if that earning amounts to more than £14, 000 per year. If it amounts to £19,000 per year, they will have to pay £8.50 a week more. If it amounts to £28,000 a year, they will have to pay £13 a week more. That is a significant reduction in people's ability to spend their way out of recession, if that is what the Government are aiming at.
Above all, the fear of unemployment will remain the key factor which will limit confidence. In December 1992, the Trades Union Congress commissioned an independent
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poll of working adults. It established that 45 per cent. of people in work thought that it was very or fairly likely that there would be job losses at their workplace in 1993. That is hardly surprising, given the present state of the economy.The British economy is in the deepest and longest recession since the war. It has been in recession since the second quarter of 1990. It has had three years of decline. Unemployment has increased in that period from 1.8 million to 3 million. There has been an increase in unemployment in each and every month since the right hon. Member for Huntingdon (Mr. Major) became Prime Minister.
More than 1,000 jobs have been lost every day over and above the unemployment which existed at the time of the general election. We have a lack of confidence throughout the economy. Investment is down 13.3 per cent. since 1989. It is just 17 per cent. of the gross domestic product. That is 3.5 per cent. below the Organisation for Economic Co-operation and Development average, and 13 points below the rate in Japan. The 1992 rate was 17 per cent. below the rate for 1989 and 6 per cent. lower than in 1979. The result has been unemployment across the range of economic activity.
In the year to September 1992, 260,000 jobs were lost in manufacturing industry ; 320,000 jobs were lost in services ; 90,000 jobs were lost in construction. The pit closure programme may add another 80,000 jobs to those totals. An unknown but perhaps comparable number of jobs may be lost in the public sector. Recent large-scale redundancies have all too often been in the very areas and industries which we shall need if any recovery is to be permantent and sustained into the next century. There have been high-tech redundancies at Rolls-Royce, GEC and IBM. Like the Government- inspired recession of the early 1980s, this Government- inspired recession is precisely in the areas we desperately need if Britain is to remain competitive into the next century.
What strategy do the Government reveal in the Budget to deal with the recession? What solution do they propose in the longer term? What overall economic strategy is revealed by analysing the Chancellor's Budget? It seems to me that the Government's policy is still based on a single club. Admittedly, it is a different club : instead of the interest rate policy pursued until black Wednesday in September, our economic policy is apparently based on chronic and persistent devaluation.
In September, the pound was worth DM2.95. The Chancellor was apparently happy with that level. It is now 20 per cent. below that level, and the Government have not said how far they are willing to allow the pound to fall.
What has changed since September? Was the Chancellor right before September or is he right now? In effect, the pound is in free fall. Compared to its value in 1980, the purchasing power of the pound is just 45p, according to the calculations made by Barclays bank. Howard Davies, the director general of the Confederation of British Industry, who is not someone I quote regularly, said recently :
"Half the world thinks we are now hooked on a policy of competitive devaluation, which is dangerous and could be self-fulfilling." What are the consequences of that policy? In the short term, British goods are certainly more competitive--no one can argue against that--but how long will they remain
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so? Inflationary pressures will be increased by continued devaluation and will raise the price of imported goods and services, which account for about 30 per cent. of our national consumption. How quickly the increases will feed through into the economy remains a matter for debate. For the moment, the market is so fragile that there is a significant element of discounting, but experience suggests that, as prices become firmer, the full inflationary effects of devaluation will begin. Increases in inflation are likely to offset devaluation in three to five years.It seems that the 20 per cent. devaluation since September may take as long as five years to increase inflation by 20 percentage points above what it would otherwise have been. How will the Government fit that in with their medium-term inflation target of between 1 and 4 per cent.? They have no mechanism or strategy for achieving that target, other than a continuation of the present recession, or perhaps a return to their previous policy of raising interest rates. Essentially, the Government are staggering from one economic policy to the next, as they stagger from one economic crisis to the next. This country needs stability and confidence, which are crucial to recovery. We need interest rate and currency stability, as they are an important starting point for any economic policy. That would allow families to plan carefully and thoughtfully for their futures, knowing how much they have to spend and what their expenditure is worth.
Precisely the same considerations apply to businesses, which want stability to plan economic strategy. If they are exporting, they want to know what contracts are worth at the time that they sign them, and that those prices will remain consistent in the longer term. The Government must assist in the creation of that stability by encouraging investment in industrial capacity and the skills of our people. They must finance research and development, and help marketing and design.
Conservative Members have been asking Opposition Members to set out what should be the objective of economic policy. The primary objective was set out by the Government in 1944 in a White Paper entitled "Economic Policy" : the maintenance of a high and stable level of employment. That is something that we should be seeking to establish.
A fundamental change in the Government's attitude is the most important factor in creating a high and stable level of employment. The Government must recognise that they have a crucial role to play in establishing the right conditions to allow that stability. It is a case not of picking winners, as the hon. Member for Chingford (Mr. Duncan-Smith) suggested, but of creating the right conditions. The Government are fond of citing illustrations--there have been a number in this debate--of Japanese companies investing in the United Kingdom. Instead, why do they not cite the fact that the Japanese Government are prepared to spend £40 billion on a reflationary programme to ensure that Japan remains competitive? That is the sort of stability, strategy and imagination we need, and there is little evidence of it in the Chancellor's Budget.
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7.43 pmMr. Nigel Evans (Ribble Valley) : I am delighted to follow the hon. Member for Ashfield (Mr. Hoon) who, unfortunately--unlike my hon. Friend the Member for Hertfordshire, North (Mr. Heald)--was hardly radical enough.
I am conscious of the extremely difficult task facing the Chancellor of the Exchequer and our industrialised partners because of the problems caused by a deep world recession. The Chancellor has the task of introducing a Budget to assist a sustainable recovery without strangling it at birth and he achieved that with admirable skill on Tuesday.
As well as having a small business I am vice-chairman of the Small Business Bureau. Many small businesses have weathered the current recession with great difficulty, but with resilience. I am conscious of the fresh start- ups, which have been referred to today. Since 1979, there has been a net increase of more than 30,000 new small businesses starting up in the north- west. In 1991, there were 1,500 start-ups.
There are almost 3 million small businesses in this country and on Tuesday, when the Chancellor referred to them as "leading the growth", he was absolutely right. They employ one third of all private sector employees. Small businesses took on 1 million extra employees during the 1980s, forcing the pace and driving the expansion and profitability of UK plc. In the 1990s, we must look to them to create the jobs necessary to help to expand our gross domestic product and profitability and to reduce social security liability and bring dignity to those seeking work. We must remember that half of the people who become unemployed find work within three months. We must look to them to create jobs to raise the total tax intake to pay for our record amounts of essential spending on education, schools, welfare, health care, law and order and spending in other important areas.
Since the Budget, Opposition Members with their negative rhetoric have given this country no hope. The most that can be said of the Leader of the Opposition's offering was that his speech was mercifully short. But it was short in all the wrong areas--short in ideas, in vision and in solutions to the economic problems facing the industrial west. His speech was full of pomp and platitudes and empty of content.
This afternoon I waited three and a half hours to hear policies from Opposition Members, but we have not heard one policy from them. We have as much hope of hearing policies from Opposition Members as we have of hearing a genuine welcome for the reduction of 22,000 in the unemployment figures today. It is not so much a case of holding our breath to listen for that welcome, but of holding our noses because there is a funny lingering smell in the Chamber today. The Opposition, who seem to speak about creating jobs, by their actions and promises would do the opposite. The Opposition would impose a minimum wage, inflict on us the social chapter and saddle us with an employment training tax, all of which would increase unemployment. Last Friday in the Chamber I listened to some Opposition Members talking about cutting defence expenditure. British Aerospace is in my constituency and I can tell Opposition Members that I shall fight hard to ensure that we maintain those jobs in my constituency and neighbouring constituencies.
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The business aspects of the Budget have been welcomed by many leading industrialists, but I do not have time to name them this evening. The hon. Member for Cambridge (Mrs. Campbell), who is not in the Chamber, described the £1 billion kick-start as mere tinkering. I have a list of 10 suggestions from the Chancellor. If I had the time I would talk about all of them, but I will pick some of the juicier suggestions made last Tuesday. First, there is the onslaught on red tape, which strangles many of our small businesses. I am delighted that action has been taken to ensure that that is cut away. It does not matter where the red tape comes from--whether from Brussels, Westminster or local authorities--it needs to be cut.On the review of statutory audits, which act as a tax on many small businesses, I am delighted that action is to be taken to consider ways to remove that from many of them. The increase in the value added tax threshold will release many small businesses from registration and allow Customs and Excise officers discretion in the way they deal with many small businesses who have problems filling in some of the extensive forms required for their VAT returns. That measure will also cut to six months the time that many small businesses have to wait before claiming VAT back on some of their bad debts. That is extremely helpful. I hope that the Chancellor will be able to ensure in future Budgets that some larger businesses will pay smaller businesses well within time.
The freezing of the unified business rate is welcome 800,000 small businesses will be welcomed, to the tune of £320 million. That will ensure that some left-wing councils are not allowed to heap misery on small businesses, because their UBR will be frozen to manageable levels and to levels that they will know.
The fact that 100 per cent. of the capital gains tax that would be charged on selling a business can now be reinvested in new businesses will create the new jobs that we all want. The increase in the small firms loan guarantee scheme to £250,000 will give small businesses the opportunity to get the money that they need from banks to expand and create extra jobs. I also welcome the other tax changes that will assist small businesses.
It is excellent that today the unemployment rate has fallen by 4, 100 in the north-west.
Mr. Andrew Mackinlay (Thurrock) : It has not fallen in the south- east.
Mr. Evans : Even so, we must welcome that fall in unemployment. I accept that the unemployment rate may be volatile in the months to come, but today's fall in unemployment shows that we are moving in the right direction.
One of the new schemes announced in the Budget will allow those who have been unemployed for longer than two years to be employed. The money that would have gone to them in income support will be used by their employers to subsidise their wage. I hope that we shall be able to attract one such pilot scheme to the north-west, because many constituencies--not my own, which has one of the lowest unemployment rates in England--would find such schemes attractive.
I was delighted to hear from the Government today that they will ensure that those on low incomes will be protected against the imposition of VAT on domestic fuel
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bills. I hope that we shall also be able to assist those who just fail to be entitled to income support--for example, some of our pensioners on fixed incomes who have been extremely careful throughout their working lives to save money. I hope that they will be given some assistance.The extension of the 20p income tax rate from £2,500 to £3,000 is excellent news. An extra 1 million people will now be paying only 20p in the pound on their income. That still represents just one fifth of the working population, however, and I hope that as a result of future Budgets we shall be able to extend that rate to many others. Many people still remember the basic rate of 33p set by a Labour Government, and they will not forget it.
The conditions are now in place for recovery--a recovery made all the easier by the changes announced in the Budget. Lower interest rates, lower inflation, lower wage inflation and competitive exchange rates will lead industry in the right direction. Confidence is returning and I trust that all hon. Members will do their utmost to avoid jeopardising that recovery.
7.52 pm
Mr. Frank Field (Birkenhead) : I welcome the hon. Member for Surrey, North-West (Sir M. Grylls) back to the Chamber because he gently, but firmly, chided the Opposition for not praising success when we see it. I agree that there is something about the British character that likes to wallow in failure and not prize success. Sassoon, writing during the first world war, said that if the English were promoted from the inferno to paradise they would still gather round and talk about the good old days. Because one despises that side of our national character, however, that does not mean that we should go overboard and declare success when there is little to declare. The sense of unreality surrounding the debate comes from the feeling that I get when I listen to Conservative Members.
We have a huge tide of unemployment, which is devastating the lives of those who must bear it. Equally, it is catastrophic for our country. The Budget must be judged on how it will help to achieve four objectives.
First, how will it help those who have suffered worst from unemployment-- those who are literally destitute and sleeping on the streets of many major cities? Secondly, how will it help share the burden of unemployment by getting those in the queue for the longest to the front of it? Thirdly, as the hon. Member for Ribble Valley (Mr. Evans) said, how will it affect confidence and therefore help to return the economy to one of fuller employment, at least to the level that existed before the current recession or slump? Finally, the most important challenge is how the Budget will help to return the economy back to one of full employment.
Beatrice Webb, at the end of her long life, said that the most significant change that she had seen in Britain was the absence of beggars from the streets. Under the Government, however, begging is back in force and, sadly and appallingly, it is one of our growth centres. Those beggars have been made destitute by the rising tide of unemployment. To what extent will the Budget return us to a state where, whatever else is happening, people are not reduced to sheer destitution? The Budget is silent on that.
What will the Budget do to ensure that those who have borne unemployment longest have a chance to get to the front of the queue? The Secretary of State for Employment and others are right to say that some jobs are available. It
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is crucial that those who have been out of work the longest stand the best chance of getting those jobs. Some pilot schemes have been announced by the Government, but one that I have proposed to them is the simplest of all. I hope that it will not only run in one centre, but will be adopted generally. Those who have been out of work for five years, or even 10 years--many of our constituents have been out of work that long--should be able to keep their benefit for a year if they are able to get a job and earn a minimum of between £50 and £60 a week.My proposal is simple, it requires little policing and it would make those who have been in the dole queue the longest that much more attractive to employers. It has the edge over the scheme that the Department of Employment is currently favouring, presumably because of pressure from the Treasury.
One of the advantages of my proposal is that it would save the Exchequer some money, because I believe that the benefit and the wages should be taxable. The cost of unemployment would, therefore, be reduced by a small amount. My proposal would bring people to the front of the queue. It would make them attractive to employers and give them the chance of entry into work. It would give them the chance to hear about jobs and at the end of that trial year they might remain in the labour market.
Even if my scheme did not achieve that, it would allow the rest of the family to work without the loss of any income. It would give them the chance to reduce some of their debts and it would restore some hope to those people who have been crushed by the year upon year upon year burden that they have borne for us as we fight inflation by making people unemployed. On that front, the Government have some credit from the Budget.
Will the Government sustain that credit and will the Budget get the recovery under way? We all hope that the strategy will be successful, but I fear that it will not be. We have a Chancellor who has an extraordinary gift of announcing measures in a way that does least for confidence rather than boost it.
We have had dribbling cuts in interest rates, instead of bold, imaginative moves to try to convince people that we have turned the corner. We are now faced with a VAT increase which will come into force next year, whatever happens. I propose that we should have a VAT increase when unemployment has fallen below a certain level, which would mean that people had an incentive to spend now. That would reverse the increase in the savings ratio, which has bedevilled an immediate recovery.
The fourth test by which we need to judge the Budget is how effective it will be in returning the economy to full employment. I congratulate the hon. Member for Hertfordshire, North (Mr. Heald) who mentioned full employment as an objective. My hon. Friend the Member for Wallasey (Ms Eagle) pointed out that the Department of Employment did not set such an objective in its annual report this year. She also warned that the hon. Member for Hertfordshire, North will probably be taken outside and done over by his colleagues for even mentioning such a heresy as full employment.
In a previous Budget debate, I mentioned that it was crucial for the Government to maintain their stance on the GATT round. Given how dependent our economy is on world trade, the worst that could happen to our constituents who are in work, let alone those who are desperate to work, would be for trade barriers to go up.
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There might be short-term gains, but the long-term costs would be enormous. It is, therefore, important to support the Government on this point.Secondly, there are huge markets in eastern Europe and Russia that do not have much purchasing power. The Marshall plan played an important part in ensuring that western European economies moved toward and maintained full employment after the second world war, and we need to be as economically bold as the Americans were then. That means giving people in these areas the chance to buy our goods and services and cementing friendly relations with them. If we cannot do that for good economic or sound moral reasons, we should do it for strategic reasons.
There has been an outbreak of tribalism in much of Europe. Some of those tribes are hungry ; others possess nuclear weapons. It is now a much more dangerous world than it was before the Berlin wall fell. For reasons of survival, if nothing else, we should take that course.
I want to offer one last idea about full employment. If we are to move back to it, we must begin thinking the unthinkable. There is an employment cartel to which most of us belong. We take measures that make it difficult for those outside it to join. I know that the world is not quite as simple as this, but I suggest that if those of us in work were prepared to accept wage cuts of 12.5 per cent. and those wage cuts were translated into new jobs--assuming all went smoothly--everyone who wanted a job would have one. We desperately need a Government who will pressurise those of us fortunate enough to be in full-time jobs throughout all recent recessions to hand those outside the employment cartel a chance. Unless we are prepared to do that, all that the Budget will do--if it is successful--is push unemployment down, possibly to 2.75 million. That is a worthwhile objective, but many people whose lives have been devastated by unemployment, and who have borne that unemployment for up to 15 or more years, will have no prospect of a job in their lifetimes unless we begin to entertain thoughts the like of which we have not had before or uttered in this Chamber.
8.2 pm
Dr. Liam Fox (Woodspring) : It is a pleasure to follow the hon. Member for Birkenhead (Mr. Field), whose thoughtful style and good grace in recognising good news when he sees it are a great joy. I pay tribute to the good work he has done for many of my constituents who are Maxwell pensioners--it is much appreciated by large numbers of people.
It gives me great pleasure to welcome the Budget, which I regard as excellent, timely and perhaps a little overdue. It gives rise to two questions whether a recovery is under way, and what our long-term strategy for the economy and employment should be. When the Chancellor made his famous remark about the green shoots, I think that he was probably correct. The economic indicators suggested that growth was imminent at that point, but there was one complicating factor--our membership of the exchange rate mechanism. Furthermore, no one could have foreseen the effects of the reunification of Germany and its economic domino repercussions.
I hope for the sake of future generations that we have learnt some powerful lessons from this experience. Currency stability is desirable, but not at any price. Strong currencies do not make strong economies, but strong
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economies can lead to strong currencies if low inflation and the value of money are maintained. When our party came to power in 1979 we used phrases like "honest money", "real value", "honest savings", and so on, far more than we do now, so I was delighted to hear the Chancellor return to using many of those phrases in recent weeks. We have also learnt that Governments cannot fix exchange rates in the modern world. We do not have the cash to enable us to take on the currency markets and win. There is no inherent value in either a strong or a weak currency. It is merely one economic variable ; sometimes a currency at a different level is relevant to a country's economic circumstances. Our currency at present is more realistically valued, I believe. It is false to talk of revaluation and devaluation when it is clear that the markets regard the currency now as slightly undervalued, and as a result of the Budget it is appreciating. The hon. Member for Ashfield (Mr. Hoon) seemed to fail to understand that, just as he failed to understand the fact that unemployment has fallen.The ERM was supposed to be a semi-fixed mechanism with variable exchange rates. That was what the present Prime Minister and Lady Thatcher believed it to be when they took Britain in, but during the time of our membership the system was hijacked and became what was supposed to be the precursor of a single currency. As a result of Labour policies and of our experiences of nationalisation, we above all people should recognise that economic decisions made for political reasons will always end in tears. If we go along with proposals to move to a single currency which does not evolve naturally but is forced on us by means of an artificial political timetable, we shall live to regret it.
I believe that a recovery is under way, as witness the surge in mortgage demand, the cuts in interest rates and the fall in underlying unemployment. I welcome the fall of 2,900 in the west country--the first fall in unemployment for three years in an area hard hit by changes in the defence industry. Its plight, however, has been nothing to what it would have been if Opposition Members had been allowed to make the cuts of £7 billion about which they told us last Friday. Having supported that proposal for huge defence cuts, they are hardly in a position to tell us about job losses in defence industries in the west country.
The Chancellor was left with a difficult balancing act. If the recovery was indeed under way, when should we increase revenue and balance our public finances? There are Conservative Members who say that raising taxes will not harm the recovery if monetary conditions are right. I have some sympathy with that view, but it takes no account of the fact that confidence has been knocked hard by the length of the recession. The Chancellor was thus absolutely right not to raise taxes this year and to go for a neutral Budget but to increase taxation as economic growth gets fully under way. That is a responsible attitude.
The final confirmation that this was the correct course was given to me by my London cab driver this morning, who said that, although he might not have done well out of the Budget, it was not going to do the recovery any harm--and was not that what counted at the end of the day? Looking around for advice, one can always do worse
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than take a ride in a London taxi. Perhaps some of the drivers would like to stand for safe Labour seats and inject some sense into the Opposition for future Parliaments.Our primary duty is to provide sound money. That was why the Conservative Government were elected in 1979. Tax cuts, low Government spending and low borrowing are at the heart of our philosophy, and every Conservative Member would like to cut taxes and Government spending and borrowing--if all these things were possible in a perfect world. Unlike the Labour party, however, we do not occupy office for short periods at a time. We are a great national party and we have to look to the long term because we tend to be in Government for rather long periods. At the moment we are at the beginning of one of our longer periods. Therefore, it cannot be enough for us to ask ourselves, "What would be a quick fix for the coming year and what will make us popular this year?"
We must look to the longer term with a view to establishing sound Government finances so that the generation coming after us do not have to take on the burden of debt that the Labour Administration left to the incoming Conservative Government. Of course, we repaid that debt to a great extent during the economic growth that took place in the 1980s. The Opposition tell us so often that we have been in office for 14 years and that we are responsible, but during the 1980s the Government repaid a greater amount of national debt than anyone believed was possible. It was the greatest amount ever to be paid back in our history. That is what economic growth and success can enable us to achieve.
The holy grail of a longer-term strategy has always been sustainable non- inflationary growth, but that is not so easy to achieve. Lord Lawson, who was one of the most important reforming Chancellors since the second world war, was wrong to believe that any Chancellor or any Government could perform an economic miracle. The battle against inflation is never won. Inflation, like sin, is always waiting round the corner to tempt anyone who might be susceptible. The battle against inflation must never be stopped. In other words, we must always be on our guard.
If we are to have sustainable growth, the economy must be based more on exports, both of goods and of services, and less on domestic consumer demand. I applaud my right hon. Friend the Chancellor for taking the far- sighted view and taxing consumption rather than income, encouraging exports and providing further supply side reforms. At last we have been presented with a Budget with a vigour and vision reflecting the early Budgets of Lord Howe when he occupied 11 Downing street.
In the late 1980s, we abandoned our monetary targets, we had too much domestic consumption and there was too little export growth, though it must be said that there was a remarkable export performance during the late 1980s. If there is too much domestic demand and too little export growth, we shall be on the road to a balance of payments deficit and inflation. That is why the measures outlined by my right hon. Friend the Chancellor are to be welcomed.
There has been a continuing fall in interest rates--not a small trickle, as the hon. Member for Birkenhead suggested, but a huge fall in interest rates over a relatively short period, which has provided massive stimulation for business. A realistically valued currency is helping our exporters. In addition, there is the announced increase in export credit. As my right hon. Friend the Chancellor said, there must be a two-pronged attack. Export credit can be
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extremely expensive, so we must try to reduce the subsidies given by our competitors while we expand our own export credit. Recognition must be given both to the Treasury and to the Department of Trade and Industry for the efforts that they have made in that area. Until our subsidies are reduced by our competitors, we must help our domestic industries. That, in effect, is what my right hon. Friend the Chancellor announced when presenting the Budget. We welcome reduced premiums as we welcome the fact that by 1995-96 the allocation of Export Credits Guarantee Department cover for certain markets will have increased by 75 per cent. Those will be important markets such as China, Indonesia, Malaysia and Mexico.We are surely right to continue to press for increasing liberalisation of world trade, and the commitment of my right hon. Friend the Prime Minister to achieve a successful resolution of the current GATT dispute cannot be overestimated. It is extremely important for the entire world--for all developed and developing countries--that we achieve a resolution of the dispute.
My right hon. Friend the Chancellor has recognised that to allow the public sector borrowing requirement to continue on its present path would threaten our long-term non-inflationary objectives. He is undoubtedly correct. However unpopular the moves may be in the short term to correct the course of the PSBR and to ensure that it shrinks as a proportion of gross domestic product in coming years, they must be made. My right hon. Friend is correct to stress that we must export to survive. He is also correct to say that we cannot spend what we do not have and that we need sustainable, non- inflationary, long-term growth. We have a Chancellor with the right philosophy and the right Budget. I urge him to keep faith and to keep us free. 8.14 pm
Mr. Harry Barnes (Derbyshire, North-East) : The hon. Member for Chingford (Mr. Duncan-Smith) took the Opposition to task for not understanding the nature of successful enterprises. Presumably we must have a system in which there is entrepreneurial zip. No doubt profitability must be greatly increased. I suppose that stroppy labour must be pushed down so that businesses can develop vigorous virtues that lead to people standing on their own two feet, or on the feet of others, to make their way in the world.
The arguments that are advanced about the European Community seem, strangely, not to coincide with the philosophy of market economics. In the context of the EC, we are told that there will not be fair competition. Instead, there is to be fixed competition so that 11 nations will operate under the social chapter while we, the United Kingdom, shall be allowed not to be part of it. It seems that the normal rule that everyone starts from the same position is not to apply and that we, the United Kingdom, are to have some special privileges.
If the development of successful enterprise and entrepreneurial zip that the Government have been following for the past 14 years has been doing so well, why are we in such a mess? I am not allowed to explain what the mess is because that would be talking Britain down. I know that the markets will be much concerned with what I say in the House at 8.15 pm, so I must not say anything that is critical of the Government's actions. If I were to
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engage in such criticism, there would no doubt be a further collapse in share values and the strength of the pound. I would be talking Britain down.Accordingly, I shall not explain what all the problems are and I shall not go into the details of unemployment, deprivation and homelessness that others have mentioned. Instead, I shall concentrate on the position in which we find ourselves.
We are told that the public sector borrowing requirement is to increase from £35 billion to £50 billion. At the same time, little has been done to advance the position of the economy. That has been put off until the time when money will begin to be recouped to pay off the debt that will be incurred by increasing the PSBR. Before I develop my argument, perhaps I should say something about growth and development, while cautioning that entrepreneurial zip, private enterprise and the market might not be the be-all and end-all. The Government have siad that they are not to blame for the mess in which we find ourselves because it is the result of the international situation. That, of course, has been influenced considerably by the extension and development of Thatcherite ideals. The entire world was beginning to take up the British revolution in terms of the market, private enterprise and privatisation. Perhaps it was somewhat successful. Indeed, it has been so successful that it has been fed back to us. That has helped to put us in the mess in which we now find ourselves.
The alternative to possessive individualism is collectivism and collective provision. There is the approach that markets should be limited to the places where they operate well. There are, for example, the markets that operate in all or most towns. The system works effectively as the public move from stall to stall. Something approaching perfect competition can operate in those circumstances. That is because the public can check prices between stalls. That system does not operate in the context of monopoly capital and large firms, but it is one which should be nurtured for small businesses. That means that there should be more controls over larger firms and other large influences. We know that there is considerable exploitation if they are allowed to let rip. I am not talking about a command economy or about massive bureaucratic domination within an economy. The corrective is democratic involvement and participation with collective decisions being made about the areas in which improvements and advances should be made.
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