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Mr. Geoffrey Clifton-Brown (Cirencester and Tewkesbury) : Would the hon. Gentleman increase or
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reduce public expenditure if he were delivering the Budget? If he would increase it, what taxes would he raise to pay for it? If he would reduce it, what public services would he cut?Mr. Brown : The hon. Gentleman does not seem aware of what is happening in this country. Public spending bills have risen in the past three years chiefly because of what has happened to unemployment, which is costing £9,000 per person. Any sensible person with a strategy to reduce the deficit and to get the economy moving again would cut unemployment--so much is clear. If the Government had any sense of priorities for the tax system, they would not impose VAT on pensioners' fuel. They would close the well known tax loopholes and anomalies that have been opened up over the past 14 years by themselves, prey as they have been to the financial interests in this country.
I have a number of questions for the Chancellor today
Mr. A. J. Beith (Berwick-upon-Tweed) : Before the hon. Gentleman gets to those questions, may I ask him whether he is satisfied that there are measures that could affect a significant reduction in unemployment but which can be achieved without any extra taxation or extra borrowing?
Mr. Brown : Of course there are--I was coming to that before I concluded my speech.
Let me tell the Chancellor what any Government could do tomorrow. They could rebate national insurance to employers who take on the long-term unemployed. They could introduce energy-efficiency measures to insulate people's homes and to get people back to work. They could release local authorities' capital receipts to allow them to build homes using the resources that they have accumulated.
To pay for these things, a Government could not go ahead with the plan to abolish stamp duty on shares--£1 billion would come to the Exchequer from that. Secondly, they could impose the windfall tax that we have proposed on the privatised utilities. Thirdly, they should bridge the gap in corporation tax receipts, of £1 billion. Fourthly, they should close down the business expansion scheme today and save millions of pounds before 31 December. That money currently gives top-rate taxpayers allowances for using repossessed homes as tax shelters to defray their tax bills. The Government could close the loophole in advanced corporation tax, which would raise large sums of money. I refer to enhanced share issues being granted instead of dividends.
That series of measures would raise hundreds of millions of pounds, and eventually billions. The Government could implement them to reduce the deficit and to deal with our problems of unemployment. Given what has been said about the public spending reviews into which the Government have entered, is it now the Chancellor's policy to consider abolishing statutory sick pay contributions from the Government, thereby leaving employees at the mercy of their employers, afraid to be ill and eventually running the risk of being sacked simply for being ill? If that is the right hon. and learned Gentleman's policy, how is it that he regards it as a higher
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priority than pursuing the offshore and onshore trusts which defray tax bills to the tune of millions by not paying a proper share of tax?Is the right hon. and learned Gentleman considering--the review has made this clear--the ultimate transferral of industrial injuries benefit to employers? Or will he face up to the fact that companies such as Hanson Trust pay only half their proper share of taxation, using offshore tax loopholes to avoid paying? In this way they have saved themselves millions of pounds over the past few years, and they continue to do so.
What exactly are the Chancellor's priorities? Is it the right hon. and learned Gentleman's priority to target the sick, invalids, the unemployed-- or will he now target the tax avoiders and evaders who have been defraying their tax bills at the expense of us all?
Mr. Graham Riddick (Colne Valley) : Having signed the European socialist manifesto, why will not the hon. Gentleman implement a mandatory 35-hour week?
Mr. Brown : The hon. Gentleman should do his homework. That is not in the manifesto. The Government, on the other hand, should be ashamed of not supporting the 48-hour week directive from Brussels. People are now back to having no wage protection and less and less protection at work.
I want to tell the Chancellor about the context in which he intends to formulate his Budget. No one is in any serious doubt that we are dealing with the problems of economic decline and social failure. A million children are being taught in classrooms built before the first world war. As a proportion of their age group, more young people are in higher education in Taiwan than in Britain. A third of our hospital wards were built in the days of the charity and voluntary hospitals. A million people live in slums. Rail investment is being slashed, and public investment in infrastructure is about to be cut again. The state of Britain, in short, is deteriorating because the Government do not believe that they have a responsibility to the community or to public services.
Yet everyone knows that measures could be taken immediately not only to create jobs but to improve public services and
infrastructure. Before he took his job, the Chancellor said that the Government were in a dreadful hole. He said that they had no medium-term view ; no agenda for two or three years ahead. He said that they had to come to an agreement about how to present such an agenda in a way that gave the Government's followers back a sense of purpose. Where is the Government's purpose? Where is the new agenda, apart from the rhetoric of "back to basics"? Where is the medium-term view?
Little wonder that, a few months later, when asked on 20 September whether the Government were still in a dreadful hole, the Chancellor said that they were. Since then, when has the dynamism and drive been shown? Where is the new energy, the new industrial policy that we need ; where is the new deal for the unemployed? Have the Government dropped rail privatisation, or their proposals to extend VAT? The truth is that they have no long-term strategy, no real purpose, no medium-term or long-term view. There is no leadership, no new programme, in the Gracious Speech. There is no new purpose : for that, we will need a new Government.
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4.47 pmThe Chancellor of the Exchequer (Mr. Kenneth Clarke) : The first decision I had to take on the first day I took up my new office as Chancellor was to take absolutely no notice of any advice that I would get from the hon. Member for Dunfermline, East (Mr. Brown). I intend to stick to that decision. It was extremely difficult to find any coherent advice in his speech today or any clues about what the Labour party's policy towards the problems that we face might be. Given that the Opposition can choose the subject matter in our Queen's Speech debate, it was rather silly to choose a debate on the economy just five days before the Budget as there is no way a Chancellor or any other Minister can give the House any hints about what might or might not be in the Budget. It was silly also because some Oppositions might have been able to fill in the time by explaining what their own Budget propositions would be, by giving me advice, by setting out with clarity how the Labour party would grasp the present situation. We have just heard nothing of the kind. We have heard some good jokes, some bad jokes and material that was scratched about for in the most unlikely places.
The hon. Member for Dunfermline East leaves lying in front of him a most impressive pile of books. I was rather impressed by that when I saw it. I thought, "It is a pity that he has not given me notice of his authorities. He has been studying the way forward from our present position." I looked at them and could not make up my mind whether they were the House of Lords debates or whether they were statutes bound. In any event they are merely there to make it easier for him to read photostats of sales of raffle tickets in Hornchurch, which he was using as his principal authority to attack the Government.
As to what he said, as well as what he did not say, occasionally he touched on what he and his right hon. and hon. Friends in office might do if they were confronted by the current situation in the country. Every time he opened his mouth and went into one of those lists for which he is rightly renowned, every item in the list seemed to me to cost public money. It is difficult to keep a running score, with the hon. Gentleman's rapid fire delivery of great long lists of great measures that he would take. By forgoing tax and spending money, he had got through £12 billion by the end of his third sentence. From there on, I abandoned any attempt to keep pace with it. When the hon. Gentleman gets up to speak on economic policy, he speaks like one of those till rolls coming out of a supermarket, with list upon list of high-spending commitments into which the Labour party would launch to tackle the economic problems of the day. He was given a further chance. My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Clifton-Brown) asked him an extremely relevant and pertinent question, but it was not a very difficult question. It was not a difficult question when it was followed up by the right hon. Member for Berwick-upon-Tweed (Mr. Beith) on behalf of the Liberal party.
Is the hon. Gentleman putting forward what he is proposing on the basis that he will increase spending or not, or that he will increase taxation or not? That is not a difficult question, I would have thought, for a shadow Chancellor who might have been thinking of his own shadow Budget, five days before the Budget. A crowded House heard that he was utterly incapable of giving an
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answer to that question, except that he went rattling off again, shortly thereafter, into a list of measures which began to include public spending commitments again.Dr. John Reid (Motherwell, North) : As to simple questions and till rolls, who created the £50 billion deficit that confronts us?
Mr. Clarke : Every country in the developed world is in recession-- [Interruption.] If one looks through the western developed economies --the United States, Germany, France, Italy, to the United Kingdom--one finds that a protracted recession has cut Government revenues, increased Government expenditure and caused a problem of public sector borrowing which all Governments in the developed world are having to tackle. Apparently, if we had a Labour Government it would be tackled by £12 billion worth of extra public spending by the end of the third sentence of the Chancellor's Budget speech. Several hon. Members rose --
Mr. Clarke : I will give way as generously as the hon. Gentleman did if I am allowed to make a little more progress.
Let me just turn to the paucity of any response to that. It is no good trying to pretend that a £50 billion public sector borrowing requirement is not relevant to the view that the principal Opposition party has to take about our present position. [Interruption.] It is no good laughing at it when it is mentioned, or pretending that if we had a Labour Government in the European Union we somehow would not confront the problem which all the other member states are confronting and all are having to tackle.
It is not good enough to come back with answers based on photostats of election addresses in Dudley and the sort of tatty material that the hon. Gentleman used and, in the middle of what could have been a statesmanlike shadow Budget, actually to resort to making criticisms about our party elections, to which I personally am not party--I do not have a vote. The hon. Gentleman treads on some delicate ground. We have not had our party elections yet. We know that the Labour party has had party elections. It is clear that, to get northern and Scottish members of the Labour movement to vote for women, one has to give them no choice. That is what was revealed the last time they had internal party elections. [Interruption.]
Mr. Deputy Speaker (Mr. Geoffrey Lofthouse) : Order. I am finding it very difficult to hear what the Chancellor has to say and I am sure that many other people are trying to do so. The House must now settle down. Chancellor of the Exchequer.
Mr. Clarke : Let me move on to the subject matter of the debate. Having just dealt with the one point that was trying to be made out of those election addresses for Dudley, the question of where taxation plays a part in where we are now, the hon. Gentleman plainly retreads the same speech when he comes here. Much of it he must have delivered on the stump of the last election, and much of it after the last election, trying to re- fight the last election. He had a shadow Budget at the last election--or, more to the point, the right hon. and learned Member for Monklands, East (Mr. Smith) had a shadow Budget. Under that Budget, every person earning £25,000 a year in this country would have paid £2,050 more a year in taxation. The reason was that the Labour party was fighting
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the last election on the basis of hugely expensive spending promises--promises about pensions and about child benefit--all of which were designed to win votes. I will not re-fight the last election beyond that, but it is time the Labour party discovered what its policy is, addressed the issues which confront the nation and stopped trying to re-fight the last election on the basis of total mythology about the respective spending plans of both parties and the taxation consequences which might have followed its being elected.Mr. Tony Banks (Newham, North-East) rose
Mr. Clarke : I will turn next to the current economic situation, but first I give way to the hon. Gentleman.
Mr. Banks : Does the Chancellor of the Exchequer accept that if he had to re-fight the last general election, in view of what has happened since, the Conservative party would be destroyed? What other word would he use to describe a party which says during an election campaign that it will not extend VAT and that it will not increase national insurance contributions, and then after the general election does precisely that? What word would he use to describe such a party?
Mr. Clarke : If we fought the last election against a Labour party with the high-spending and high-taxing manifesto that it has now scrapped and tried to forget, we would win again. We would win more forcefully when people could see the real economic problems that confront the country. We have not broken any of our manifesto commitments in the last election, and it is quite wrong to go scratching around for cyclostat material from candidates in the black country to try to prove the contrary.
Mr. Gordon Brown rose--
Mr. Clarke : I will give way, but the hon. Gentleman, having heard that I intend to move on to the present economic situation, is obviously now trying to prevent me getting there.
Mr. Brown : The difference between us and the Conservatives at the last election is that we told the truth and they did not. Will the Chancellor now tell the public : does he accept that the Conservatives promised not to increase taxes, and will he apologise for breaking those promises?
Mr. Clarke : We gave no commitment whatever to say that we would never increase taxation. It is descending--as the hon. Gentleman did in his speech--to the most puerile politics to claim that the Conservative party has ever said that in no Budget, at no time, will we ever increase any taxation. We have not said that. It is quite clear to anyone who objectively studies the present position, let alone the past position, of the political parties that in any circumstances a Conservative Government would have lower taxation than a Labour Government would have, tackling the same position, precisely because, every time they confront even a £50 billion borrowing requirement, Labour Front-Bench Members are quite incapable of stopping themselves just spending public money as the answer to every question.
Let me move on--
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Mr. Brown : On that question, so that we can clear it up, the Prime Minister was asked whether he gave the same pledge that Mrs. Thatcher did in 1987 :
"that you will not extend the scope of VAT to children's clothes, gas and electricity and food?"
The Prime Minister replied :
"I have made the pledge in the past. I have made it clear." Is that not the breaking of promises?
Mr. Clarke : During the campaign, the Labour party made the strong assertion that it had costed our programme and we would have to raise the basic rate of VAT. That was spurious then and it continues to be spurious. I advise the hon. Gentleman to move on and to think about policy. He should stop fighting the last election because Labour lost it fairly and squarely. Indeed, it deserved to lose it because, while our aim was to come out of recession, Labour made hugely expensive promises that would have meant huge increases in taxation. It is obvious that, even now, it is still not prepared to forswear those increases.
Let us now move on to deal with something with which, to my astonishment, the hon. Gentleman did not deal--Britiain's current economic position. He did not deal with that because it is now much more encouraging than in any other major economy in the European Union. I have been in opposition ; I am one of those veteran Members who recalls the time when the Conservative party was in opposition. I understand the difficulty of having an Opposition day to debate the economy at a time when it is clearly recovering and getting better-- [Interruption.] Labour Members are expressing disbelief.
Mr. Michael Connarty (Falkirk, East) : At the Engineering Employers Federation briefing in October, which I attended, its director said that the upturn was over. He said that it would be funny if it were not so serious, but that it was serious and not very funny. A few days later, he was then mysteriously asked to resign. Is the Chancellor not willing to face the fact that people in manufacturing do not think that there is an upturn? Indeed, they think that there is a downturn.
Mr. Clarke : No one could accuse me of over-selling the present recovery. I agree with the sensible prevailing view that there is a recovery, but that it is fragile and needs to be stronger. If the leader of the EEF and the hon. Gentleman both believe that the recovery is over, it is my opinion that they are talking nonsense. Indeed, I do not know whether the EEF has been quoted accurately. I shall quote an unlikely source, the editor of The Sunday Times -- [Interruption.] Andrew Neil is an old friend of mine, but he and I are hardly in political agreement on a large number of issues. However, he pointed out this week :
"Britain stands on the brink of a new era of growth and prosperity, built on a competitive exchange rate, the supply side reforms of the 1980s and the fact that alone in Europe, managers and workers here have grasped the realities of economic survival of the 1990s and beyond."
Let us examine what reality lies behind that. Unemployment has fallen by almost 140,000 since January. It has fallen in seven of the past nine months. That is not happening anywhere else in Europe. It is happening in Britain only because we have a more flexible labour market than existed before the Government came to power. That is why there is increased employment and falling unemployment so early in the recovery.
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Dame Elaine Kellett-Bowman (Lancaster) : Does my right hon. and learned Friend rejoice in the fact that the latest fall in unemployment, which was much larger than expected, will save the Government £180 million a year in unemployment benefit--not to mention all the tax that those affected will now be paying?
Mr. Clarke : My hon. Friend is right. One of the principal reasons, although not the only reason, why we have such a large borrowing requirement is that recession reduces the take from corporation tax, income tax and other revenue, while putting up expenditure--in particular, on unemployment. One way in which a recovery can be strengthened is that, with the falls in unemployment currently being achieved in Britain, forecast expenditure on unemployment will drop and we shall move into the early stages of what could become a virtuous cycle--if we behave sensibly, which is more than we can expect from the Opposition.
The hon. Member for Dunfermline, East did not mention inflation. In his torrent of words, "inflation" did not cross his lips. Inflation has been below 2 per cent. in each of the past 10 months--something which had not happened since 1960. It has remained below the European average every month since August 1991. This month, headline inflation stands at the spectacularly low figure of 1.4 per cent. There are some good reasons for that. Pay is now under control and whole economy unit wage costs are down 1 per cent. in the year ending the second quarter of 1993. That is the largest fall since records began in 1960. Despite low inflation, however, consumer spending is rising. Retail sales are at record levels, even higher than at the top of the cycle when we last had good times. Car sales in October were up 17 per cent. on a year earlier.
It is absolutely no good the Opposition dismissing all that. They cannot ignore the fact that, if we had taken various items of their advice, it is highly unlikely that the British recovery, which puts us ahead of the field in coming out of recession, would have occurred or been maintained.
Mr. William Cash (Stafford) : I congratulate my right hon. and learned Friend on the award that he received yesterday. Will he add to the catalogue of reasons why the recovery is getting better the fact that Britain has left the exchange rate mechanism? In the light of remarks that he made--I hope off the cuff--at a news conference at the Confederation of British Industry, will he make it crystal clear that his enthusiasm for European economic and monetary union--and, by implication, the ERM--is not something in which he really believes? If we were to return to the ERM, we would lose all the benefits that he has just described.
Mr. Clarke : With respect to my hon. Friend, the argument that the recovery started because we left the ERM is simply mythology. It is clear that the recovery that we are now enjoying began 18 months ago, a long time before Britain left the ERM. One reason why we are enjoying such a strong recovery and why we have done well both before and after leaving the ERM is our great success in bringing down inflation and lowering interest rates. When we lost the discipline of the ERM, my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont) wisely replaced it with the discipline and the monetary policy that we are now imposing upon ourselves. Successive reductions in inflation have helped.
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What I have just described has preserved our competitive position. The changed climate in this country means that although we have had a devaluation of the currency and reductions in both inflation and interest rates, we have also had good management, successful control of costs and, in particular, unit wage costs being kept down so that Britain has been able to keep its competitive edge. All of that is apparent in a variety of other areas, although listening to the speech of the hon. Member for Dunfermline, East we would never know that.Industry is doing better despite an exceptionally difficult exporting climate in our principal markets within the European Union. Exoductivity record this year is extremely good. Our industrial relations remain good, with industrial disputes at their lowest level since records began.
There is also the monetary position. I have said that I always ignore-- although, of course, I listen to it with respect--the advice of the hon. Member for Dunfermline, East. His main advice, day in and day out, is to reduce interest rates. Day in and day out, he advised each of my predecessors to reduce interest rates. I do not know whether he would ever raise interest rates in any circumstances, but it seems unlikely. Even when inflation was running at 8 per cent. three years ago, he wanted to reduce interest rates. It is his automatic approach to life.
I did not take the hon. Gentleman's advice and, consequently, monetary conditions in Britain have enabled me to reduce interest rates to the lowest level in the European Union. Taking all the available factors into account and paying regard to the monetary policy set out by my right hon. Friend the Member for Kingston upon Thames, which I have followed, I was able to lower interest rates to 5.5 per cent. That was announced by the Governor of the Bank of England on Tuesday. It is the lowest rate of interest since 1977. When interest rate cuts since October 1990 are passed on, they will reduce the interest bill of companies in the country by almost £12 billion a year and it will reduce the monthly payments of the average mortgage payer by £170 a month. Sound money is worth real money to real people. The effect of what we have been able to do has been to stimulate the recovery to which my hon. Friend the Member for Stafford (Mr. Cash) referred.
Having listened to two minutes of the speech of the hon. Member for Dunfermline, East, it is obvious that none of that would have been achieved if we had a reckless, high-spending, spending one's way out of trouble, high- taxation Government in power with Labour politicians who do not even mention the word "inflation" in any dissertation that they give on economic policy.
Mr. Beith : Why does not the Chancellor seize the opportunity to lock in that monetary discipline and make himself the first Chancellor to recognise the merits of an independent central bank while still in office, rather than waiting until he has left it?
Mr. Clarke : My joke the other day may have been misunderstood. There are some financial journalists in front of whom one should never make jokes. I do not wish to break the tradition of my predecessors by pronouncing on that subject while in office. I have made it clear--I hope that the right hon. Gentleman will support me on the point
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--that decisions on interest rates are made on the grounds of monetary policy in conjunction with the Governor of the Bank of England, who now handles the operational end of those activities, precisely on the basis that we have set out.We considered broad money, narrow money, asset values and exchange rate activity before I decided that we could reduce interest rates by 0.5 per cent. in the past week. I made that announcement nine days before the Budget precisely because I did not wish anyone to think that the judgment of interest rates was affected by my equivalent of the knockabout political rubbish that we have just heard from the hon. Member for Dunfermline, East. It is a step in the direction taken by the right hon. Member for Berwick- upon-Tweed (Mr. Beith), but I warn him that there are much bigger and more serious matters of parliamentary accountability to be addressed before anybody makes a decision one way or another about the independence of a central bank.
I remind the Opposition of our more serious economic achievements, on which everybody in the House should be concentrating on building. We are especially keen in the area of the manufacturing industrial base. At the moment, as we sustain the recovery, our performance in that area is better than any of our major competitors. Over the past year, industrial production fell by nearly 2 per cent. in Italy, by 3 per cent. in France, by 4 per cent. in Japan and by 7 per cent. in Germany, but in the United Kingdom it rose by almost 3 per cent. Our performance coming out of the recession is based on many things that the Government have done over the past 14 years and it is plainly necessary to keep to the instinctual policies of the Conservative party if we are to keep that good comparative performance. Having listened to today's debate, nobody in their right mind would contemplate the reckless step of putting the Labour party back into any kind of responsible office dealing with such an important and delicate situation as the revival of our industrial economy.
Mr. Tony Marlow (Northampton, North) : Would my right hon. and learned Friend agree that leaving the exchange rate mechanism has had an effect on the recovery and, if so, has that effect been beneficial or negative? Given the lessons that we have learnt since leaving the ERM and the occurrence of other events in Europe, would my right hon. and learned Friend say how those lessons will affect rejoining the ERM and, if we are to rejoin it, what benefits shall we receive from doing so?
Mr. Clarke : Leaving the ERM has had some beneficial effects, although I do not agree with the proposition of my hon. Friend the Member for Stafford that the recovery somehow started when or because we left it. We were driven out and the whole mechanism was given wider bands 12 months later because of the totally different conditions that prevailed in Germany compared with those in the rest of the Community.
I will concede to my hon. Friend the Member for Northampton, North (Mr. Marlow), with whom I have had many interesting debates on the European question, that those differing circumstances in Germany and the wise policies that were being pursued by the Bundesbank to deal with the German domestic conditions were imposing
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higher interest rates on the United Kingdom, France and other western European countries than our monetary conditions could justify. That began in the summer before we were driven out of the ERM and had a damaging effect on the performance of our economy. When we left the ERM, it would have been disastrous if our monetary policy were decided by a seat-of-the-pants response, in response to newspaper headlines or if it were in the hands of anybody like the hon. Member for Dunfermline, East who always wants to lower interest rates. That is why finding ourselves outside the ERM, which I have always supported because I thought that it was a discipline for monetary policy in the country that helped us to get inflation and interest rates down, it was right of my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont) rapidly to put in place a British domestic monetary framework by which we have successfully proceeded.When I take part in European discussions now, I say that it is wrong to go back to get fresh blueprints for fresh versions of the ERM out of the drawer since those events have taken place. I still believe in exchange rate stability. That is best when pursued by convergence and sensible economic policies that produce similar economic circumstances in the different member states, as we are now doing.
I am surprised that I keep being asked about an aim of economic and monetary union. I made my first speech in the House in favour of it in 1971 or 1972 and have not changed my views. I have always thought, as have the Government, that the timetable for economic and monetary union set out in the Maastricht treaty was nonsense. That is now plain and we should not proceed on any automatic timetable and I do not know when we will ever get back into any process of that kind. [Interruption.] There has to be somebody in the House who puts an interesting question.
Mr. Dennis Skinner (Bolsover) rose--
Mr. Clarke : With respect. I am delighted to see one of the intellectual heavyweights of the Labour party coming to the fore. I remember the hon. Gentleman putting forward his own shadow budget many years ago--and the last time he was totally out of sympathy with his own Front Bench. Now, the Opposition Front Bench could not possibly put together a shadow budget, so I am delighted to hear the authentic voice of the Labour movement.
Mr. Skinner : Will the Chancellor tell us where is the real economic recovery? In the real world, there are 4 million without jobs. The Government have all but closed down the shipbuilding industry and they are shutting pits every week. People are lying in the streets. Old-age pensioners are dying of hypothermia and yet the Government are proposing to tax them more heavily. A Chancellor of the Exchequer in the real world should be ensuring that the £5.2 billion that has been handed out in tax cuts to the richest 5 per cent. since 1988 should be clawed back and used to build houses for pensioners, to rebuild the welfare state and to put people back to work. That is the real world.
Mr. Clarke : The real world is similar to that to which the hon. Gentleman refers, although he increases the figures. Of course, he is absolutely right to say that we are still facing the problem of there being far too many people
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unemployed. I point out the good news that unemployment is now coming down. It is also true that we must achieve a higher industrial production, I point out that it is rising, unlike any other G7 country. I also appreciate that we must ensure that the wealth- creating economy produces wealth so that we can tackle some of the social problems that we face.We sharply clash, however, on the claim that the Government have done nothing to strengthen the welfare state and the social security system over the past 14 years. I strongly refute that. I am explaining the background against which I shall deliver a constructive Budget next Tuesday that will nurture what I have been describing.
I have not said that there is no problem out there and that everything has recovered. We all meet business men and people working in industry who know that conditions at the moment are very difficult. However, we should not react to that in this country by pretending that there are no first signs of good news and that no recovery is taking place. This country's performance is better than that of our competitors. The circumstances here are more encouraging than those of our competitors. We need a view far more responsible than the view coming from either branch of the Labour movement if we are to move forward from here as we wish.
As I cannot speak about my Budget, I shall continue to speak about the suggestions thrown out to me by the hon. Member for Dunfermline, East. He could not answer the question about the Rio targets. He said that of course he was against VAT on fuel. He did not bother to listen to the questions asked by my hon. Friend the Member for High Peak (Mr. Hendry) or to the quotations that my hon. Friend used, which were very pertinent. He asked why, when the Labour party committed itself at the general election to not putting VAT on exempt and zero-rated goods, it did not mention domestic fuel. Did the Labour party have the kind of thoughts that were also contained in Liberal Democrat policy documents?
Labour's environment spokesman spoke about hitting the Rio targets by a combination of tax and other measures. What taxes, pray, did Labour have in mind for hitting those environmental targets, if not taxes on the fuels which cause the emissions? [Interruption.] It is not Labour Front- Bench Members who stir there. I debated against a Labour environment spokesman recently. Labour environment spokemen take to the hills when we tax them on such a question and when we approach them about a tax which still has the support of Friends of the Earth, but which does not have the support of environment spokesmen from the great Opposition parties, who plainly hinted at exactly what we are doing.
The hon. Member for Dunfermline, East criticised my views on the extent of VAT. I have no idea what the views of the Labour party are on the extent of VAT. My views, as slightly misquoted by the hon. Gentleman, sound like the views of Lord Desai, the Labour spokesman in the House of Lords. The poor chap found himself sacked for saying that we should extend the base of VAT. Never mind, Labour did not really know. He was put back on the Front Bench because the official spokesman for the Labour party does not have to have a view on the extension of VAT. We cannot tie down the Labour party on that or on anything else.
When asked about tax, the hon. Member for Dunfermline, East has one response--loopholes. I hope that he does not try to pay his personal bills with such
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loopholes. He thinks that loopholes would raise billions of pounds to pay for everything he promises. He tries to break down his loopholes which, he claimed at one time, would raise £10 billion. Every Budget we present keeps up with the tax avoidance industry and tries to close loopholes, year in and year out under every Government. Every Chancellor tries to do that.Let us look at the £10 billion referred to by the hon. Member for Dunfermline, East. Some £2 billion of it is what he calls underpayment of corporation tax. What he means is that he intends to put up corporation tax on British business by £2 billion. When one searches the Labour party's policy documents, which are not lying in front of us, one finds that Labour still believes in demand management, although it does not explain how it would operate that. Labour uses phrases such as :
"The public sector must become the engine of growth."
There is no explanation of what that means. Earlier this year, the Opposition spokesmen for education and for employment committed the party to the renationalisation of gas, water and electricity--the great public utilities.
We know that Labour talks about radical changes in the City. One of the novel ideas for the Bank of England, of all institutions--it will never be independent under a Labour Government--is that it should promote industrial investment. It is strange for a Labour Government to channel their intervention through a central bank into direct investment in industry.
Labour is getting close to the Liberal Democrats. I must pardon the Liberal Democrats in some respects, because they gave us their Budget earlier today. We listened to the leader of the Labour party talking to the Trades Union Congress and one could imagine that one was listening to a totally different man from the leader of the Labour party who talked to the Confederation of British Industry. The right hon. and learned Member for Monklands, East is back on the cocktail circuit. He talked about his friendship for business, but when he talked earlier to the TUC, he talked about minimum wages, about statutory trade union recognition and about putting the old inflexibilities back into our labour market--the things from which we should now be getting away.
Mr. Nigel Griffiths (Edinburgh, South) : Does the Chancellor accept that, because so many lies were told by the Tory party to get it into power, the habit of telling lies has caught on and the Tory party is now incapable of telling the truth but continues to tell a pack of lies?
Mr. Clarke : The hon. Member for Edinburgh, South (Mr. Griffiths) gets very exicted. He did not specify which of my various descriptions did not attach accurately to his party or to his party leader.
Mr. Griffiths : Will the Chancellor give way?
Mr. Clarke : I will not give way again. I can give the hon. Gentleman chapter and verse for my quotations from the words of the Labour spokesmen for education and for employment. I looked them up before I quoted them. Time does not permit me to go on to explore the previous occasion when it might have been possible to find out what the economic policy of the Labour party was.
The European socialist manifesto, to which the right hon. and learned Member for Monklands, East signed up last week, makes the position clear. It is said that the commitment to a 35-hour week is not in the manifesto-- [ Hon. Members :-- "Read it out."] The manifesto is said not
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to have a commitment, although the whole tone of the document favours high spending. The manifesto is committed to the social chapter and to costs on employers. It uses the rather telling phrase that the principle of free trade should not interfere with social standards in Europe. I thought that that was a rather dangerous retreat from previous policy. [ Hon. Members :-- "Read it out."] All right. I was doing the House a kindness by saying that I did not have time to go into the European manifesto. Opposition Members can stop smiling ; I have found the relevant passage. I quote : "The principles of Free Trade must not be allowed to undermine social standards in Europe."That is a phrase of which Ross Perot or Mr. Chirac could be proud. Labour has joined the old protectionist tendency in western Europe although the general agreement on tariffs and trade is one of the most vital things affecting our well-being between now and the end of the century.
I do not have time to tax Labour about the European recovery fund, to which it has signed up and to which it keeps referring. That fund is no less than a £77 billion recovery fund--a Euro-megaversion of the Labour party's approach to all such problems.
I have described the present economic situation. As the House knows and as the Opposition knew when they tabled the amendment, that situation must be addressed in next Tuesday's Budget. I am working on my Budget speech and I strongly advise the hon. Member for Dunfermline, East to go away and to work again on his. He cannot give another retread of the speech he has just used.
The principles that we shall adopt--the principles that, in Europe and in this country, will take us back to economic health--are, first, the principles of free trade, of beating the single market in Europe, of getting rid of state aids in Europe, of having a competition policy and of keeping to budget disciplines in our national economies and in Europe as well.
We must aim at conditions of low inflation and at achieving healthy public finances. We must seek to get stable exchange rates based on sensible, national economic policies which produce the right conditions. We must tackle the problem of the competitiveness of our economy, both in the short term and in the long term. That is what the Government will continue to do and part of that will be the Budget measures I shall announce next Tuesday. I shall come back next Tuesday completely untroubled by the prospect of the Opposition having any worthwhile or sensible economic ideas in their head. 5.29 pm
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