House of Commons Hansard Debates for 9 Jun 1993

Column 327

property, much of it unoccupied for over a year? There are still substantial savings to be made at the Ministry of Defence, particularly in the procurement programme.

Since district health authorities are now simply purchasing authorities, why do we not cut out two thirds of them by amalgamating them into new single authorities and cut out regional health authorities altogether? What is the point of them?

We shall have a problem in the next century, with more people living longer and fewer people to support them. I know that the Labour party is looking at this matter with great care. We also need a national insurance system which is properly funded. Why do we not therefore abolish the upper earnings limit and have a graduated scheme against which contributors could make separate provision for all kinds of benefit outside and in addition to the state sector? We need to encourage people to provide for themselves in sickness and in old age, over and above what the state can do.

There is a case for increasing the rate of corporation tax. If capital gains tax were reduced, the yield would increase substantially and the assets themselves be put to better use. I wish my right hon. and learned Friend well in the difficult task that lies before him. There are no easy solutions. We must remember that we cannot be immune from the pressures of the world economy. The best that we can do is get ourselves into a competitive position and remain there. Low inflation is the key to the low long-term interest rates and sustained economic growth that we all wish to see. 6.43 pm

Mr. Ronnie Campbell (Blyth Valley) : A lot of water has gone under the bridge since 1979, and we should look back to that time and see what has happened since then.

When the former Chancellor, the right, hon. Member for Kingston upon Thames (Mr. Lamont), said that it all began in 1988, he was right, because at that time we had a slashing of taxes--not all wrong, by the way, especially with the top rate of tax--and some of the figures, which were staggering then, are even more staggering when we read them now. With that Budget, the richest 1 per cent. were getting away with £30,000 a year less tax than they had paid in 1979--a loss to the Treasury of £8.6 billion in that year. As my hon. Friend the Member for Bolsover (Mr. Skinner) said in an intervention not long ago, the accrued sum is £26 billion over the past 10 years. The richest 5 per cent. were saving £9,000 a year under that Budget--a loss to the Treasury of £12.5 billion.

I am trying to put in perspective where the money went and where the recession started. As the ex-Chancellor said, it started there. Yet we were giving sums of money of this size to the richest 5 per cent. and the richest 1 per cent. in the country. Now we hear that there is a loophole in directors' pay. We read that John Birt, the BBC director-general, has been able to have his salary paid through a private company, which means that he does not pay his contributions or his taxes to the Exchequer. That has happened not just with people like Birt ; it is happening with a lot of executives. Many directors are having their money paid through private companies and fiddling the taxpayers and the Treasury.

We have had this "fast buck" economy for some years, and during that time the number of jobs in manufacturing

Column 328

industry has fallen from 7.1 million in 1979 to 4.5 million in 1992. That means that manufacturing industry has been halved since this Government came to power. People want to know why the Treasury is not getting enough money. It is because the Government have destroyed half the country's manufacturing industry--and those are the Government's own figures, not mine. The figures can be obtained from the Library.

The United Kingdom trade deficit in manufactured goods will reach £17 million compared with £5.5 billion surplus when the Government came into office. There was a surplus when they came in ; now we are £17 billion in the red. That shows the calibre of this Government. At present, the unemployment figure is 3 million or perhaps 4 million. It is 3 million officially, but it is 4 million if we add in the 18 fiddles that the Government have used during their time in office to get the unemployment figures down. One million of those on the dole are under 25--the Government's own figures, not mine.

We have seen the collapse of DAF, with no intervention from the Government. Thousands of jobs in DAF have gone. In the mining industry 15,000 jobs are going. We see 7,000 jobs going in British Aerospace 10,000 jobs in British Shipbuilders and Swan Hunter, 6,000 jobs in Imperial Chemical Industries, 7,500 jobs in Guest, Keen and Nettlefold and 11,000 jobs in the car industry.

We live in a low-wage economy where, because wages are being driven down, the British workers' wages are already 18 per cent. lower than those of their counterparts in France. British workers are 30 per cent. down on their counterparts in the Netherlands and 42 per cent. down on their counterparts in Germany. Their wages have been driven down by the Government year after year. British workers work longer hours than any of their counterparts in Europe, and get fewer holidays than anyone in Europe does.

The Government have a terrible record. Over the years, they have had £100 billion from North sea oil and the sale of the nationalised industries. I shall repeat that, in case the Chief Secretary did not get it : the Government have had £100 billion from North sea oil and the sale of the nationalised industries. That is a colossal amount of money.

What did the Government do with that money? There was the fiasco of the poll tax, to begin with. We have seen what has happened to the poll tax. Time after time the Government were warned about what would happen, but they took no notice of anyone. This Government's attitude is arrogant. They dismiss the views of everyone. Even today the Government display an arrogant attitude towards the health service and education. They will listen to no one.

The Chief Secretary was one of the architects of the poll tax. And what did the poll tax cost the taxpayers? Tory arrogance cost them £19 billion, which amounts to £400 for every man, woman and child. The poll tax should stick round their necks for the rest of their lives. The people of Britain should make sure that they are not allowed to do anything like that again.

What about black Wednesday? Because the Government could not make up their mind, because they were at odds with each other, that one day cost the taxpayer at least £5 billion. The Chancellor and the Prime Minister could not make up their minds about whether to stay in the exchange rate mechanism or to come out of it, so taxpayers lost £5 billion in one day. The Government

Column 329

are supposed to be running the economy for the people of this country. I reckon that they are running it for themselves. What have the Government done to local government in the past few years? They say that local government is not efficient, but if the things that I have just mentioned had been done by local government, either local government would have been surcharged or local government people would have been put in gaol. The Government have taken £23 billion from local government. I do not doubt that, when they sit round the table trying to get rid of the £50 billion deficit, local government will yet again be the target.

One Minister said in the newspapers--he would not be named, so I cannot name him--that local government is an easy option because the Government can cut local government and not get the blame ; the local authorities, which are mainly Labour, get the blame for doing the cutting ; the Government just withdraw the grants. That is true. I bet that when the Government get round to cutting, local government will be hammered and will be cut to pieces.

The Government are spending £50 billion more than they receive in taxes. Half the country, of course, are fiddling their taxes, just like the executives who, as I said earlier, are paid through private companies and avoid paying their taxes. The Government will have to raise taxes, but they will not tax the rich more--the banks and big business. The poor and working people will be taxed more. Prescription charges have already been increased by 13 per cent. in one smash go to bolster the health service, which is crumbling before our very eyes. The idea has been put forward that people should pay when they go into hospital and that they should also pay to see their doctor. It is also suggested that people should pay for using our roads. Student fees may go up even more. It is all on the table for the Government to decide. And all of it will be down to the poor, not to the rich. It is time that the Government taxed the rich more instead of taking more money away from the poor. It was not the poor who brought in the poll tax, or the likes of it.

Britain was once the workshop of the world. It has been reduced to an unimportant, third-rate, capitalist power off the shores of Europe. It is a fast-buck economy. Factories are closing, pits are closing and shipyards are being brought to their knees. The Government have closed everything, just like a matchbox or a deck of cards. Millions of people have been thrown out of work, their lives and hopes shattered by the free play of market forces. Mysterious speculators, City gents, members of boards of directors or big monopolies and the banks cheerfully sell millions of pounds to make even more millions of pounds.

There are only two choices. Either we serve the interests of the wealthy and the powerful, or we serve the interests of the millions of workers of this country, as well as the interests of the unemployed, the homeless, the old, and even the middle class. They face ruin under this unjust, outmoded system. There is no third option. The Tory principles are simple : rob the poor and the needy and give to the rich and the greedy.

Column 330

6.55 pm

Sir Thomas Arnold (Hazel Grove) : I join my right hon. and hon. Friends in congratulating the Chancellor of the Exchequer on his appointment, although I wish that the circumstances of his appointment had been somewhat different.

At the opening of this Parliament, the Queen's Speech included the sentence that the Government

"will set policy in the medium term to ensure that the United Kingdom meets the convergence criteria set out in the Maastricht treaty".--[ Official Report, 6 May 1992 ; Vol. 207, c. 51.] I took that to be the economic strategy of the Government at the time. Therefore, I welcome very much indeed the extremely sceptical remarks that the Prime Minister addressed to the House this afternoon on the subject of the exchange rate mechanism and therefore, by extension and implication, some of our responsibilities under the Maastricht treaty.

Later this year the Government will come forward with another Queen's Speech. I hope that at that time they will feel able to restate what was said this afternoon : that there is no intention of going back into the ERM in the foreseeable future. Personally, I should like the Government to go further and to state now, if at all possible--I address this remark specifically to the Chief Secretary since he is sitting on the Treasury Bench--that there will be no attempt to re-enter the ERM during the lifetime of this Parliament. That would, I believe, greatly reassure my right hon. and hon. Friends and would send a signal to the markets and other commentators about the Government's specific intentions.

There is still the suspicion in some quarters that the Government intend to set policy in such a way as to enable us in due course to rejoin the ERM. Although it was helpful and certainly of great use in bringing down inflation, membership of the ERM led to the imposition of conditions and restraints on our economy that ultimately proved unacceptable, not just to the markets but to sentiment in this House.

I do not believe that we can return to the position where the economy is required to answer the demands of policy rather than the other way round. I hope that henceforth the Government's economic strategy will be not to set policy in the medium term by meeting the convergence criteria set out in the Maastricht treaty--the phrase to which I have already referred--but to set about promoting the recovery that I believe is now under way.

The amendment to the Opposition motion begins by saying that the Government

"welcomes the widespread indications of economic recovery in the United Kingdom at a time when many other major economies are in deepening recession".

I agree with that statement. I agree also with my right hon. Friend the Member for Worthing (Sir T. Higgins), who said that the state of the economy remains fragile. Some of the indications are very healthy, but there is still a long way to go. Conditions in the north of England are better in many respects than they are in parts of the south-east and the south-west.

I hope that my right hon. and learned Friend the Chancellor of the Exchequer will not be put off from promoting a policy for recovery and expansion by too many fears about inflation. I entirely agree with my right hon. Friend the Member for Horsham (Sir P. Hordern) that we must learn from the lessons of the early 1970s and

Column 331

we must not repeat those mistakes. Nor should we forget that, in the early 1980s, with the development of the medium-term financial strategy, a framework for policy was established that was tailored to the domestic monetary needs of the British economy. That is surely what we should be doing again.

There are some worrying signs that the growth in money and credit has not been as robust as it should be if the recovery is to take firm roots. In terms of both broad money and narrow money--to take two of the Government's indicators, monitoring ranges, targets, or whatever they are called--there have been some signs that perhaps more needs to be done.

It may be sensible for the Government to loosen monetary policy, while seeking to tackle the deficit by tightening fiscal policy. I would see nothing wrong with that. The Budget was not so long ago that we can know for sure how the economy will move as a result of the measures taken at the time, and, should it become apparent later this year that some tightening of fiscal policy is required, I would support that, and I support the remarks of my right hon. Friend the Member for Shropshire, North (Mr. Biffen).

We should not take too much of an ideological view of those matters any more than we should take an ideological view of monetary policy. If it becomes clear that cutting interest rates is a good way of providing some further stimulus, it should be considered. It should, nevertheless, be within a framework that sets out a discipline and the Government's plans for the growth of money in line with the domestic needs of the economy.

It is to that theme that I return in conclusion. The Government must do everything possible during the rest of this Session and in the next Session to ensure that the economy reponds to our domestic needs. They should put aside any thought of re-entering the ERM during the lifetime of this Parliament and should not set policy by the extremely stringent, tough demands of the convergence criteria of the Maastricht treaty because that will not work and will only hinder recovery.

7.2 pm

Mr. Barry Jones (Alyn and Deeside) : I thought that my right hon. and learned Friend the Leader of the Opposition left the Chamber the victor of this afternoon's debate. He precisely, and often quite humorously, pulverised the Government's record.

The House today heard speeches from the former Chancellor and the Prime Minister. In effect, we may have heard not just one resignation speech but two. I listened to the former Chancellor's resignation speech. I have never heard the word "loyalty" used to such devastating effect--with contempt, with reproach, with anger. He skewered the Prime Minister on that word. It was one of the most dramatic moments that the House has witnessed, even compared with the personal statement made by Lord Howe about the then Prime Minister, Margaret Thatcher. I thought that I heard the former Chancellor complain that, in Cabinet and elsewhere, the Prime Minister had bullied him in his work at the Treasury.

The Prime Minister's speech was tragic. Many Labour Members thought that it was a speech of parliamentary suicide which dwelt over-long, and foolishly, on an apprently hypnotic Leader of the Opposition. The

Column 332

parliamentary by-election in the constituency of Christchurch may almost be a plebiscite on the future of the Prime Minister. The right hon. Gentleman used a boxing metaphor. He may have seen the show at the Mermaid theatre, which is devoted to the life and times of the greatest, Muhammad Ali, whose autograph I once obtained in these precincts on a copy of Hansard. Muhammad Ali did go one fight too far. I encountered Ali in the Central Lobby only weeks after his disastrous fight with Larry Holmes and clearly, with the benefit of hindsight, he should not have embarked on that fight. Larry Holmes had once been just his sparring partner. To continue the metaphor, at the Dispatch Box today, we saw a Prime Minister who was not just lethargic and dispirited but, almost by the process of government and leadership, or the need to give that quality, punch-drunk.

I was disappointed at the Prime Minister's comments. I wanted him to say that he believed in the primacy of manufacturing industry. I wanted him to show the House and the nation at large that he had policies and a programme to restore the economic and industrial greatness of our nation. There was not a clue of that, no sign of that and no determination to provide that leadership, that vision and that policy.

Like my hon. Friend the Member for Blyth Valley (Mr. Campbell), who made a powerful speech, I ask myself, where has the £100 billion of North sea oil revenue gone? Why was it not invested in manufacturing industry? Why did the steel, chemical and textile industries contract? Why did our collieries and shipyards close? Why are our businesses going bankrupt? Why is our economy coming apart at the seams? Those where the questions that the Prime Minister should have addressed and, albeit in the bear-pit of the Chamber this afternoon, he should have attempted to give the country and hon. Members the answers.

A dilemma has arisen in my constituency and some of my constituents are in a predicament. Corporate Jets, part of British Aerospace, was recently sold. My constituents are perplexed and angry. British Aerospace owned that company until a week ago, and 600 of my constituents who work there awoke one morning last week to find that the production process and, in effect, they themselves had been sold to an American company. British Aerospace is our nation's largest employer, but it decided to sell the executive jet--an aeroplane that can fly the Atlantic and is arguably the best of its kind in the world--to an American competitor. That is symptomatic of what is wrong with Britain's industrial policy.

My constituents want to know whether the President of the Board of Trade knew that British Aerospace was going to sell Corporate Jets, whose great executive jet can beat the competition throughout the world. They want to know whether the Prime Minister knew that Corporate Jets was going to be sold. They want to know whether, as employees of an American company, they have an industrial future and whether they will continue to produce that wonderful aeroplane for more than three years. They look to the Government for a guarantee. Speeches must, of necessity, be brief. I believe that the nation needs a strong regional policy. It wants investment in manufacturing industry, more apprenticeships and investment in schools and skills training. We need investment in manufacturing industry to sustain what is left of the welfare state. The nation does not want

Column 333

dispiriting diversions such as that caused by the Asil Nadir scandal or the cynicism and menace of the Matrix Churchill case. It wants Cabinet leadership which has the nation interest at heart. We have today seen evidence that the Conservative party can no longer give the nation the leadership it needs.

7.10 pm

Mr. John Townend (Bridlington) : I was most disappointed by the leader of the Opposition's speech. It was a brilliant, witty and humorous speech worthy of the music hall, but it had no real content. The right hon. and learned Gentleman showed himself to be wholly devoid of the necessary attributes one looks for in a Prime Minister. Having admitted that we have a public sector deficit of £50 billion, and when asked whether he would deal with it by reducing public expenditure or increasing taxation, he stood at the Dispatch Box and said that he would deal with it by reducing unemployment. That is fatuous. If unemployment goes down, the deficit will of course also go down but, even if unemployment were nil, we would still have a deficit because only half of the deficit is due to the recession. The rest is structural. By his answer, the right hon. and learned Gentleman showed that he is barren of ideas and knowledge and wholly incapable of being Prime Minister.

I begin my main speech by saying how sad I was to learn of the previous Chancellor's departure. I worked with him as Chairman of the Back-Bench finance committee, and I am sure that history will be kinder to him than the media and some of his colleagues. He knows that I disagreed with his policy in the summer of last year but since white Wednesday, as I call it, he put in place the right policies for recovery : low interest rates, a competitive pound and low inflation. He had a healthy scepticism for the exchange rate mechanism and, if he were honest, he thought that a single currency was for the birds. He was determined to do all in his power to cut spending and reduce the deficit. His Budgets were innovative and elegant, and he introduced two great reforms which will come to be appreciated in time.

First, our method of devising the Budget always seemed ludicrous. We did not decide how much we had to spend. Instead, every Ministry decided how much it wanted, we added it all up and then decided how we could finance the total. The previous Chancellor changed the system--the Budget will now be worked out from the top down instead from the bottom up.

My right hon. Friend's second innovation was to bring the fixing of taxes and the dealing with public expenditure together at the time of the Budget. That is a first-class reform, which will start this year. It must be a bitter blow that he was not allowed to present it. The new Chancellor, whom I congratulate on his appointment, faces two very important tasks. The first is to ensure that the recovery which, as some of my hon. Friends have said, is not yet strong--indeed, in some areas it is virtually non-existent or fragile--continues to strengthen. As other European economies go into an even deeper decline, and as the American economy falters, there is a danger that Britain's recovery could slow down.

The new Chancellor should do everything possible to ensure that that does not happen. I suggest that he uses the

Column 334

freedom of a floating pound to lower interest rates as necessary and to slacken the monetary stance. If need be, he should at the same time tighten the fiscal stance, but I shall deal with that in a moment.

My initial worry about the new Chancellor was that, after white Wednesday, he was one of those who wanted to rejoin the ERM at an early date. However, he has recently expressed the view that it is unlikely that we shall rejoin during this Parliament. I hope that it is a real conversion rather than a diplomatic one. I should like to think that it proves that he now supports a floating exchange rate. If he confirms that, many of my colleagues will breathe a sigh of relief.

The second vital task facing the Chancellor is, of course, the reduction of the public deficit which will this year rise to £50 billion--more than 8 per cent. of gross domestic product. If the Chancellor succeeds in his first task of obtaining higher growth, it will go some way to solving the deficit problem. If, however, he fails, and if the recovery grinds to a halt, the deficit will get worse. Even if he is successful, other action will be needed. The big debate in the House and in our party is whether we should reduce the deficit by increasing taxation or reducing public expenditure. In his last Budget, the former Chancellor presented a package of tax increases worth £10 billion. I must tell the new Chancellor bluntly that he should turn his attention to what I admit is the difficult task of reducing public expenditure and forget any idea of increasing income tax, especially the standard rate.

The Tory party won the election for two basic reasons. First, the British public preferred the Prime Minister to the former Leader of the Opposition. Secondly, they believed that we would take less out of their pay packets than the Labour party, and that Labour was the party of spending and taxation. We should heed the warning of George Bush's experience across the Atlantic. He said, "Watch my lips." The people watched his lips, and he did not do what he had promised. As we know, he lost the election. If we go into the next election with direct tax rates higher than those at the previous election, we shall lose all credibility. We shall be finished, and there will be no significant difference between us and the Labour party.

We are already committed to the proportion of GDP taken by taxes rising from 34.5 per cent. this year to 37 per cent in 1997-98. That compares with only 29 per cent. in the United States and 31 per cent. in Japan and Switzerland. There is no alternative to cutting public expenditure.

I accept that there will be difficulties. I have heard it said that we cannot cut overseas aid because 20 Conservative Back Benchers will not vote for it and that we cannot touch social security because a further 15 would not accept that. Everyone favours cutting Government expenditure in the generality but not in the particular. I must tell my Back-Bench colleagues- -I am sorry that there are not more of them here--that cuts will have to be made across the board and everyone's pet service is likely to be affected.

The alternative--there is only one--would be a massive--I stress that word- -increase in taxation which many Conservative Members would not stand for and which the country would not accept. When the package is proposed, it must be accepted as a whole. We cannot choose from it a la carte--we cannot allow people to say that they like one part but not another.

Column 335

The increase in public spending is a major cause of our deficit. I wish to put the matter in context, because many people believe that the deficit was caused mainly by the recession. In the past four years, public sector spending went up by no less than £30 billion in real terms. In the four years to 1991, it went up in real terms by £3 billion. Since 1988-89, public spending increased from 39.25 per cent. of GDP to 45.5 per cent. of GDP this year, an increase of 6.25 per cent.

So much for all those accusations of public expenditure cuts. On those figures the Government could be accused of being profligate. I feel that the Government made a big mistake in not grasping the nettle in the public spending round last year. If they had started earlier, the problem would have begun to be solved earlier. I shall take a few moments to make suggestions about where savings could be made. It is easy to say, "Cut spending," but not so easy to say where the cuts should be made. During the recession every business in the country has had to cut its costs and slim down its work force. Whole layers of management have been abolished. Barclays bank, for example, has got rid of 6,000 people. But in the bloated public sector no such exercise haes that used to be in the public sector but have now been privatised--British Telecom, British Gas, the electricity companies and so on--we see enormous differences. Those privatised industries have cut costs significantly and reduced their labour forces, yet they have increased efficiency. Under British Telecom the telephone service is infinitely better than it used to be, and BT now has 33,000 fewer employees. This year the British Airports Authority has reduced its work force by 19.5 per cent. and PowerGen has reduced its work force by 20 per cent.

If local government--excluding teachers--and the civil service did only half what the private sector has done, billions of pounds would be saved. Indeed, if they reduced manning levels by only 5 per cent.--private companies have had to do much more--they would save 2 per cent.

There was a lot of laughter when my hon. Friend the Member for Littleborough and Saddleworth (Mr. Dickens) mentioned overseas aid. But we are spending more than £2 billion on overseas aid. That is very worthy, and if we had the money I should support it. However, not only do we have a Budget deficit : we have a large balance of payments deficit. We are borrowing foreigners' money to give to other foreigners, and we shall have to repay the loan with interest. In our present straitened circumstances we could easily knock £0.5 billion off aid.

The fact that expenditure per head on major services is significantly higher in Scotland, Wales and Northern Ireland than it is in England is kept rather quiet. The local government grant per head in Scotland is 50 per cent. more than in England. In Scottish schools we spend almost 50 per cent. more per pupil, and on health we spend more than 30 per cent. more per head in Scotland than in England.

I found the figures for the north of England, because it always used to be said that spending was lower in England because England has wealthy areas in the south. But the figures for Scotland are significantly higher than those for the north of England. That is not fair and we cannot afford it. We should move progressively to a system in which the amount spent per head in all the countries of the kingdom

Column 336

is roughly the same. Our English children have the right to have the same spent on their education as is spent on the education of the Welsh, the Scots and the Irish.

Ms Glenda Jackson (Hampstead and Highgate) : Do the people in Scotland, Wales and Northern Ireland pay a different rate of income tax from that paid in England ?

Mr. Townend : The hon. Lady makes a relevant point. No, they do not. We all pay the same tax, so it is unfair that over the years excessive sums have been spent in Wales and Northern Ireland. There is one exception for Northern Ireland : I accept the need for higher expenditure on law and order there.

We must examine the social security budget, however hard it is to do so. We are not the only country that is having that problem. Germany is having it ; the Germans are having to consider their swollen social security budget, and France is having the same problem. We are spending £60 billion a year. Anybody who deals with social security will tell us that more and more people are playing the system and abusing it.

Mr. Alan Duncan (Rutland and Melton) : We are spending £80 billion.

Mr. Townend : I accept that I made an error. When we are spending £80 billion there is always room for significant increases in efficiency in absolute rather than in percentage terms, and for cutting out waste. The number of people claiming invalidity benefit has doubled in 10 years. I hardly think that the health of the nation has declined by 50 per cent. during that period. We must consider whether some benefits should be taxed, and whether they should be universal or targeted.

Central Government support for local authorities accounts for another £60 billion a year. Increases in local government grants should be limited to the level of inflation for non-wage costs and to 1.5 per cent. for wage costs. Many hon. Members will accept that there is still an enormous amount of waste in many local authorities, especially in some of the Labour-controlled authorities.

I support strong defence, but do we need to incur the cost of keeping troops in Germany now that the communist threat has declined? Would it not be cheaper to bring them back to this country? We should save not only on our budget but on our balance of payments deficit.If we are to be the policemen of Europe, with our troops in Bosnia doing the work of Europe, is it right that wealthy countries such as Germany and some of the Scandinavian countries do not contribute? If we are sending our troops should not those countries make financial contributions, as happened in the Gulf war?

In all Departments there are savings to be made, but in the past, when savings have been made, they have been used to improve and develop services. I quite understand that, but I suggest to my right hon. Friend the Chief Secretary that in the present difficult situation any savings should go back to pay off the deficit. The Chief Secretary has a thankless task, and he needs the unstinting support of the new Chancellor and of the Prime Minister to force spending Ministers to reduce their demands. I am sure that he will get that support. All three of those Ministers will need the 100 per cent. support of Conservative Members, and they will get it. We need it if we are to have any chance of winning the next election.

Column 337

If we fail, and we do not deal with the deficit problem, we shall have difficulty in funding it. Eventually interest rates will be forced up, and if that happens while the recovery is still fragile the recovery will be set back. But if we deal with the deficit, and if we have the courage to grasp the nettle and to deal with the problem of public spending, having solved the problem of inflation and achieved a competitive pound and low interest rates, we shall get the economy of this country going, so that in four years' time we shall win yet another election victory.

7.26 pm

Mr. William Ross (Londonderry, East) : I have listened with interest to many of the speeches made in the debate, and not least to the remarks of the hon. Member for Bridlington (Mr. Townend). I am sure that, when the hon. Gentleman was speaking about education expenditure in Northern Ireland, Scotland and Wales, he noted that by general consent the education establishment in Scotland and Northern Ireland produces somewhat better results than are produced in England. I welcome his implied commitment to raising expenditure on education in England so as to achieve the same satisfactory results as we achieve in Northern Ireland and in Scotland. I cannot speak for Wales ; I shall leave that to a citizen of that part of the United Kingdom.

This interesting debate has produced a lot of material for the press and the other news media. However, I must confess that both the motion and the amendment are lacking in content and deal only in generalities in a way that does not tell us much. Amusing as the speech by the Leader of the Opposition was, neither his speech nor that of the Prime Minister told us much more. We are left with little to vote for, but we may find something to vote against. That may be negative, but in that it is rather like much of what is now going on in the governance of the country.

The real problem facing us all is the £50 billion deficit in the budget. I do not believe that Ministers can welcome that. The House will recall that the Government have increased public expenditure over recent years ; the hon. Member for Bridlington drew attention to that fact. Much of the increase took place just after the departure of Baroness Thatcher from the Front Bench. The increases in expenditure were considerable.

Never mind the current deficit ; let us look for a moment at what the result of that will be if it continues at anything like the projected figure over the next few years. The total public debt will double in a very short time, and that will lead to huge increases in interest charges to service that debt. Much of the debt is not used for productive purposes. The money is simply spent on social security, education and other matters, and any return from those will be very long in coming.

Once the public debt rises to those proportions, the most intense pressure will be put on interest charges. There is no way that the Government, or the Opposition, can escape that. It is therefore essential that the reduction of the deficit is the first priority of the Government. The question that has to be answered but which has not been answered--those on the Opposition Front Bench have not given much of an answer either--is how to reduce the deficit. The recurring statements from hon. Members of all

Column 338

parties to the effect that we are not to rejoin the ERM make a blooming good start. I am glad that nearly every hon. Member now seems to agree with the members of my party, who never wanted to be in it and who stated their opinion clearly all the way down the line.

Mr. Austin Mitchell (Great Grimsby) : Hear, hear.

Mr. Ross : I am glad that I have the support of the hon. Member for Great Grimsby (Mr. Mitchell), although those on his Front Bench do not share his very sensible views on the matter.

That position on the ERM is a good start, but it is not the end of it. The Government understand that they have to raise taxes and a number of speakers have touched on that today. One speaker drew attention to something that I never could understand : why do the Government take three or four bites at the same bitter lemon? They tell us that they are to impose VAT on fuel next year, and they get bad publicity. They will get another dose of bad publicity next April when the 8 per cent. increase takes place. And they will get a third dose when the 17.5 per cent. increase is completed the following year. If they are to do something nasty to people, they should do it once and get it over and done with. However, if the Government want to bring continuing pain on themselves, that is their worry and not mine.

My objection to the imposition of VAT on fuel is twofold. First, the increase will bear heavily on the lower paid. There will always be people who will be severely hurt by the measure, no matter how much the Government raise social security payments to cover the unemployed and the poorer sections of the community. My second point is more far-reaching : the Government have cleared the way for further increases and changes in the scope of VAT. Having once breached the zero VAT rule that has prevailed for many years, they may go on and start slapping VAT on other items in future years. That is something that no hon. Member would wish to contemplate. If the Government want cash, they should do as I suggested in my speech on the Budget--increase income tax. It is flexible, it provides instant money and, as soon as the economic conditions allow, it could be easily reduced again. The VAT increase will be very difficult to get rid of once it has been imposed.

Mr. Peter L. Pike (Burnley) : Is not the reality that income tax, of all taxes, is the fairest as it takes into account ability to pay, and that that is why income tax should be used if the Government need to raise more income?

Mr. Ross : There is a great deal of truth in what the hon. Gentleman says, and that is why I would have favoured it. If Ministers, like the rest of us, had been out in the real world, talking to those who were earning comparatively good salaries and who were concerned about those with no job, they would have found many of those folk willing to pay extra tax in order to relieve the burden that has been created by the Government's mismanagement.

The Government must have a long-term strategy, and if the former Chancellor, the right hon. Member for Kingston upon Thames (Mr. Lamont), is to be believed, there is precious little sign of that around. Part of the original long-term strategy was membership of the ERM. The ex-Chancellor told us that he tried very hard to make

Column 339

it work, and membership of the ERM was the basis of the policy of the Government. Those of us who were against membership have been proved correct in our assessment that fixed exchange rates do not work.

The ERM was, to a large extent, a bomb shelter for the Government. That expression has been used in another context about the Government. But it was a fragile bomb shelter, because its protective strength depended entirely on the Germans paying the price. Once the Germans said that they were no longer paying the price, the bomb shelter crumbled immediately.

We should also consider carefully what the former Chancellor said about the need for courage and determination. He said that he did not believe that the Government had the courage and the determination to carry through the necessary economic policy, and it was for that reason that they needed the ERM. In other words, he is telling the country, the world and the House that the Government lacked the backbone to govern, to take the flak, and to do what was necessary to explain their policies and stick by them.

I wonder how someone who was, until recently, the second most senior Minister in the Government could say that, and could then say that they are still fit to govern. Those may seem harsh words, but the Conservative party must ponder them.

The same frailty of purpose shows when Conservative Members, including the former Chancellor, tell the House that they believe in a central bank. Such a bank would have only one purpose--to act as a bomb shelter for Government decisions. If people stand before the electorate and ask for votes, they then should have the guts to govern. They should have the guts to take responsibility for the economic policy which has to be carried through for the long-term welfare of the community. The promotion of a central bank is an abdication of the responsibility which people seek at elections, and no Government should shelter behind it.

Chancellors of the Exchequer cannot be popular. They are not in office to be popular ; they are there to do what is right. I hope that the new Chancellor will have the strength of purpose to do what is right. I hope also that he will be supported by the Cabinet and by the whole of his party in doing that. We have been told, not only by several speakers in today's debate, that recovery is under way. The Government amendment says that recovery is under way. If that is so, why has a new Chancellor been appointed when the policies of his predecessor--initiated after the brilliant Wednesday in September of last year--were beginning to work? The ex-Chancellor told us why. The pollsters and the news media drove him from office. That is a damning indictment of the strength of the Cabinet and of the Conservative party.

If we are to get out of the deficit in which we find ourselves, largely as a result of the policies pursued by the Treasury in the 1980s, the Government must increase revenue and must cut back public expenditure. They must aim also for much higher growth.

I was never convinced by the view expressed by Conservative Members during the 1980s that it did not really matter what sort of industry there was, and that service industry could replace manufacturing industry. It always seemed to me that manufacturing industry, the production of goods, had a greater depth and strength than could ever be found in service industries. As hon. Members have repeatedly said in such debates over the

Column 340

years, manufacturing industry is the source of wealth of this country. Of course, I believe that it goes further than that. Like Churchill, I would have chosen the open sea rather than Europe when considering where to sell the goods that I produced.

In this debate there is not much comfort for Conservative Front-Bench Members. One cannot but wish them well. We have all had a hard time of it, but there is not much comfort for the Government, the governing party or the country in the days and months ahead. There has not been much comfort in what we have heard from the Opposition, either. It is time to face reality. This is supposed to be the House of the great communicators. It is time to tell people outside what the reality is, what the medicine is and what the long-term hope and vision are. If we do that, folk will take the medicine, once they believe that it is necessary. Up to the present they have neither been told what is necessary nor been convinced by what they are being told.

7.40 pm

Next Section

Home Page