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Mr. Kenneth Clarke : The hon. Gentleman is replying with abuse to the perfectly sensible questions asked by my hon. Friends. He has expressed an interest in taking this country back into the ERM. It is therefore perfectly sensible of my hon. Friend the Member for Colchester, North (Mr. Jenkin) to ask him what his inflation target is. Does he have one ? Is the Government's too high or too low ? What is his view of public spending ? Is it too high or too low ? What is his view of the monetary framework ? Does he agree with it or does he have a framework of his own ? The hon. Gentleman cannot get away with light-weight stuff and not answer fundamental questions.
Mr. Brown : The first person to whom the right hon. and learned Gentleman should address those questions is the Chief Secretary, with whom he is in fundamental disagreement over economic policy. Should anybody believe what the Chancellor says ? In his election manifesto he said :
"Only the Conservatives believe in keeping taxation down. Only the Conservatives will keep the country's finances on a sound footing." Who will believe him when this country has a £50 billion borrowing requirement ?
Mr. Nigel Forman (Carshalton and Wallington) : Before the hon. Gentleman becomes too cavalier and entertaining with the truth, will he take his mind back to a point that he made at the beginning of his speech-- something that he said rather hurriedly ? He claimed that real personal disposable income was falling. If he had read the background document to the debate, he would know from paragraph 1.26 that in fact it is rising by 1 per cent. this year and is forecast to rise by 2.5 per cent. next year. Would he kindly get his facts right ?
Mr. Brown : The fact is that the majority of taxpayers will be hit by an average £500 tax increase as a result of the Government's policies. Millions of people will find that their wages are held back and their living standards will fall because of the Chancellor's economic policy. The hon. Gentleman may think that he can deny that, but he should have listened to his constituents during the local and European elections because they said that they were not prepared to accept that.
Mr. John Butterfill (Bournemouth, West) : When the hon. Gentleman looks at long-term interest rates, does it ever occur to him that the closer we get to a general election, the closer seems to be the correlation between long-term interest rates and levels of support for the Labour party in the opinion polls ?
Mr. Brown : I shall refresh the minds of hon. Members on what the hon. Gentleman said in his election manifesto-- [Interruption.] The country deserves to be reminded of what he said at the general election, which was :
"Reduced taxation gives choice and provides the vital boost our economy needs."
What is the boost to the economy from the biggest tax rises in history ? Perhaps that is why no one took the hon. Gentleman seriously when he said :
"Everyone knows someone who has been helped by John Butterfill."
Mr. Anthony Coombs (Wyre Forest) : The hon. Gentleman is fond of quoting other people. Would he like to quote one of his own prognostications on the economy ? On 17 March last year, just before the Budget, he said that he had only one Budget forecast--that unemployment would rise this month, next month and for months thereafter. Since that time, unemployment has fallen by no less than 250,000. Was his forecast just incompetence or are his economic policies divorced from reality ?
Mr. Brown : I remind the hon. Gentleman that I was quoting the Government's Budget forecast of what would happen to unemployment-- [Interruption.] Yes, I was. I was quoting the Budget forecast in the Red Book, which I shall be happy to quote again any time the hon. Gentleman wishes to raise the matter with me. I ask him one question : if things are so good, why do the latest unemployment figures show 73,000 fewer people in employment in the first three months of this year ? Why, during the past six months, have there been more than 100,000 fewer people in the working population ? Does not that make the hon. Gentleman think that he should look rather more carefully at the figures that he is given by the Government ?
Several hon. Members rose
Mr. Brown : The hon. Gentleman cannot have studied the research done in both Europe and America. The research from America shows that a minimum wage can actually help employment prospects in the economy. A minimum wage makes firms more efficient. It means that there is less turnover of labour. Indeed, the American Labour Secretary--the Chancellor would be well advised to listen to him rather than simply suggesting that the policies pursued in America are hostile to those pursued in Britain--is considering raising the minimum wage, so confident is he about the employment prospects created by doing so. Mr. Budgen rose
Column 53Conservative Members a chance to put across their wares in advance of the reshuffle. I have given them an opportunity to sell themselves to the Prime Minister. The fact that they have failed to do so is no fault of mine.
Mr. Budgen rose
Mr. Budgen : Would the hon. Gentleman be good enough to answer one question in an untrivial way ? What would an incoming Labour Government do about the ERM ? Do they intend to go back into it as quickly as possible ?
The difference between the Conservative party and ourselves is that we believe in the principle of managed exchange rates. We do not see any virtue in a free-floating exchange rate with speculative forces being left to decide the fate of the economy. As for our eventual policy on the ERM, we have always proposed necessary changes to its operation. There needs to be a far better means of dealing with the problems of speculation ; a regional industrial policy throughout Europe ; joining at the right rate ; and a growth policy pursued by the European Community. That is completely different from the policy pursued by the Conservative Government, to the detriment of the British economy.
Mr. Ian Taylor (Esher) rose
At the heart of the debate is one central truth that the Chancellor has failed to acknowledge--that Britain's growth rate throughout the 1990s will average only 1.6 per cent., which is lower than in the first 15 years of Conservative government. It will be Europe's lowest, with the exception of Turkey and Greece. We have a long-term growth rate that is just half what we achieved in the 30 years after the war.
If the test of the success of Conservative policies that the Chancellor tried to promote in his speech is to be met, there would have to be a far higher sustainable growth rate over the longer term than the right hon. and learned Gentleman's policies will produce. I shall argue that the Government's policies are not only inefficient but unfair--that the Government are not only incompetent but unjust. They have done nothing to rectify the huge investment, technology and skills gaps in our capacity, which caused the last recession and will undoubtedly cause the next. They are the Government of unfairness and injustice.
Column 54Not only is the gap between those at the top and those at the bottom growing substantially, and faster, than at any time this century ; not only have the bottom 10 per cent. in our country seen, according to the Government's own statistics, a fall in their living standards ; not only are 4 million children in our country, according to figures issued last week, condemned to poverty under this Government : the whole burden of sacrifice under the Government's policies is being borne by low-income and middle-income Britain--those least able to afford it.
The Government have already shamefully misled the blind, the deaf and the handicapped over the Civil Rights (Disabled Persons) Bill. The target for further savings-- and I appeal to the Chancellor-- should not be the poor and their housing benefit, the unemployed and their mortgage relief, or those injured or disabled at work who are to lose Government help with industrial injury benefit. It should be the tax loopholes, the anomalies, the evasions and the avoidances that the Government have tolerated over the past 15 years. If the Chancellor wants to take a measure of his competence in economic policy, let him re-read what he said in the Budget statement only a few months ago--that the test of the credibility of his framework on economic monetary policy would be what would happen to long-term interest rates, which were at their lowest for 25 years. Within a few weeks of his making that statement, long-term interest rates had risen by 22 per cent. They are 4 per cent. in Japan and 6 per cent. in America but 8 per cent. in Britain. If the Chancellor has decided that his credibility comes from low long-term interest rates, as he told us in the Budget, where is his credibility now that our long-term interest rates are just about the highest in Europe ? The Chancellor is condemned by his own words, and he is never to be trusted begin.
Of course, credibility and consistency was never the Chancellor's strongest suit. Let us remember what he said at the election : "Great cuts in public spending on the vital services or higher rates of personal taxation, that is not necessary."
There was a cut of some 50,000 in the civil service last week; there have been tax rises, which he himself estimates are the equivalent of 7p in the pound; and despite all his promises, there have been the biggest cuts in public spending for years.
The Government promised in their election manifesto that they would increase transport spending. They are now cutting it by 24 per cent. in real terms. They promised that they would
"continue to increase police numbers"
and wage a war on drugs, but are freezing police numbers, axing drug strategy teams, cutting Home Office spending by £70 million a year and betraying the law-abiding citizen.
The Government said that their commitment to the environment was not to be doubted, yet they cut environmental spending by 18 per cent. They said that the railways could play a bigger part in responding to Britain's growing transport needs, yet they cut the external financing limit by 20 per cent.
Perhaps the biggest humiliation of all is the channel tunnel, which will operate from September. But the channel tunnel rail link was first announced in 1987, reannounced in 1989 and repromised in 1991. While the French now have their rail link open, ours has not even begun. It is not even at the planning stage. It is not even a
Column 55route. There is not even the legislation to make it happen. The best chance that we have of completing it is not this century but the next, in 2003.
As President Mitterrand said, the channel tunnel opens up two worlds of travel : high-speed rail from Paris to Calais at 200 mph, then a chance to have a leisurely look at the English countryside. Now we know what the Prime Minister means when he talks about a multi-speed and multi-track Europe--not the wrong kind of leaves on the track, but the wrong kind of Government in office. That is the problem.
Sir Anthony Grant (Cambridgeshire, South-West) rose
What does the Prime Minister say to all that ? I happened to hear from journalists what he was telling the 1922 Committee at its usual rallying meeting for the summer. It was a speech that even had the hon. Member for Luton, North (Mr. Carlisle), the potential rival in a leadership contest, saying that it merited a stay of execution. There is no question--for the moment at least--of the Prime Minister having to close the stable door after the stalking horse has bolted, because the stalking horse is in the stable for now. But it might still get angry and break the door down.
What did the Prime Minister say in a few trenchant phrases, each one characteristically hitting the nail firmly on the thumb ? He said that much of the past two years have been memorable for the wrong reasons. He said :
"We have missed a few tricks in recent months and years. Our message has been too diffuse. We need to concentrate better." "Missed a few tricks," he said : Iraqi guns, Pergau dam, Asil Nadir, BCCI, tax rises, the Civil Rights (Disabled Persons) Bill, Post Office privatisation, "back to basics", black Wednesday, the small matter of a few parliamentary questions. Or is he thinking of other disasters that have not yet come to light ? I think that
"Our message has been too diffuse"
is a euphemism for virtual civil war in the Conservative party. I think that
"We need to concentrate better"
is probably a reference to fewer consultancies, no more inscribed gold watches, more time in research--less time with one's researchers--tabling more parliamentary questions, but only for constituents, and free at the point of delivery.
As the Prime Minister said, the message needs to be repeated and repeated so that when people hear the word "Conservative" they know what his party stands for and why. I have a message for the Prime Minister. The message has got across. The country knows only too well what Conservatives stand for, they know why, and they know what they want to do with them.
So what does the Prime Minister do now ? Is there to be a shift in policy after the disasters of their European campaign, which started badly then fell away ? Not a change in direction ; heavens no! That would involve a choice of direction on the part of the Prime Minister. What we have is the ritual annual reshuffle, where the choice of talent is so limited that even the Secretary of State for the Environment looks secure and passes, in these sorry times, for a safe pair of hands.
Column 56It is a reshuffle in which not even the President of the Board of Trade, only Lord Archer, wants to be Conservative party chairman--in which nobody wants the only man who wants the job that nobody wants. I feel sorry for Lord Archer. He is the victim of a new and strange discrimination, for when has the talent for fiction and the knowledge of the wilder shores of finance ever been a disqualification for the post of Conservative party chairman ? It is a reshuffle that brings the Chancellor a huge dilemma, which he must be turning over in his mind as he sits next to the Chief Secretary to the Treasury. Mr. Kenneth Clarke rose
What is the consequence of the Chancellor driving the last monetarist out of the Treasury temple ? Would he prefer to see him as a departmental head, in a stronger position, ready to take him on for the eventual succession ? Or would he rather keep him where he is, to keep an eye on him and what he is doing ? The Chief Secretary--the last standard bearer of the new right inside the Treasury ; the ghost of monetarism past ; the still, small voice of Thatcherism ; the insistent, insidious, whispering voice of the new right's agenda, for ever one pace behind the Chancellor wherever he goes, hissing his own message behind his back. Would the Chancellor prefer him inside the Treasury hissing out, or outside the Treasury hissing in ? The Government can change Ministers, the Cabinet, the Conservative party chairman, the presentation, the front men and the ad men, but those changes will add up to nothing, because the Prime Minister is incapable of giving this country the change of direction and strategy that it needs.
Mr. Kenneth Clarke : The debate began with the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) suggesting that we should have two days of economic debate, because we had not discussed the economy since November. The hon. Member for Dunfermline, East (Mr. Brown) went through the motions of pretending that he had been champing at the bit to talk about the British economy since Christmas. He spent 10 minutes not talking about the subject at all. Our monetary policy is clear. Can we take it that he has confirmed this afternoon that he has no views on the British economy, no economic policy, and no interest in debating the subject at all ?
Mr. Brown : I will give hon. Members an answer. What this country needs is a long-term strategy for the renewal and rebuilding of the economy. That strategy involves rebuilding the capacity of the British economy. That demands four things.
Mr. Brown : The hon. Lady asks how. I am about to tell her. The first of the four is investment in people and employment opportunity. That is why Conservative Members should accept Labour's proposal for a university for industry as one of a number of measures for the training revolution. Secondly, the strategy involves solving the long-term problem of investment in industry. The Chancellor himself cannot be happy with a situation in
Column 57which, as he had to report in the spring statement, there are few signs of investment in business picking up in the way that it should.
We must consider three measures to solve the problem of business investment. The first is action to reduce the cost of capital for small businesses. The second is to set up a regional development agency that will work with the banks and financial institutions in helping medium-sized businesses. The third is long-term investment agreements that will enable financial institutions and industrial companies to make decisions on a long -term basis instead of being forced to respond to the short-term speculative needs of the City. The third thing
Mr. Brown : Conservative Members ask me to set out the guidelines of the policy and then try to interrupt. They do not like what they are hearing because it is what they should have done long ago. The third thing that the strategy involves is solving the problems of low investment in our social and economic fabric, as instanced by the failure not only to build the channel tunnel rail link but to deal with the problems of the London underground and the train system up and down the country. That is why our task force for private-public partnership takes the issue far beyond what any Treasury Minister is prepared to contemplate.
Lastly, we need action in Europe as a whole to keep interest rates down and co-ordinate measures for growth and investment. Our economic agenda for Britain, unlike the Government's, is an agenda for fairness and opportunity for millions of people. Our fairness agenda is about employment opportunity. It is about an emergency employment programme to get people back to work and end the self-satisfied complacency of a Chancellor who talks about action and then refuses to take the action that is necessary. It is about increasing people's earning power by giving them the skills to enable them to get the best job that they are capable of doing.
Our fairness agenda is about rebuilding the welfare state so that people have the financial independence that is necessary, particularly to women, who can be given the opportunity to work if they are provided with child care. It is about tackling vested interests--entrenched private interests in our community such as banks, financial institutions and the privatised utilities, which often overcharge people for excess profits that cannot be justified. It is about a system of progressive taxation. It is about opportunity for millions that the Government have had 15 years to offer and have failed to give the people of Britain.
When we come to this debate in the House, it is right that we should put the Government on trial. The question that people are asking throughout the country is why the Government have failed in their election promises--why they have failed to offer the prosperity that they promised would come the day after the election was over. I shall deal now with the specific matter of Conservative policy on the future of taxation. What is the Chancellor's policy for tax cutting, as he calls it ? The average family is paying £500 more in taxes--the biggest tax rise in history.
Column 58After all the evidence of tax rises, does the Chancellor admit that he misled and betrayed people ? Does he apologise ? Does he confess the mistakes he made ? Will he try to do better ?
No longer able to say that they are cutting tax ; no longer even promising to cut tax and with no record in achieving cuts in tax--taxation is higher now than it was when Labour left office--with no specific Budget proposals to cut tax ; and with the Chancellor unable even to repeat the promise that he used to make that the Conservative party was a low-tax party in the medium term, what do the Conservatives say now ? All they can say is that they have an instinct for low taxes.
Mr. Kenneth Clarke : The hon. Gentleman asked me a question. He quoted me saying things at the election that were remarkably similar to what I said in my speech today. Of course we will cut taxation, but the key is to get public spending and borrowing under control. The hon. Gentleman shows no sign that he recognises that. Which taxes would he cut ? What would he spend while he was cutting taxes ? He comes out with a lot of waffle that might have beaten the hon. Member for Sedgefield (Mr. Blair) in the leadership contest but would not beat anyone else in terms of content of economic policies.
Mr. Brown : The Chancellor is now trying to rewrite history. He tries to give the impression that he went to the electorate saying that taxes would go up and then he might bring them down. He actually said :
"Only the Conservatives believe in keeping taxation down. Only the Conservatives will keep the country's finances on a sound footing." What happened after that ? We had the highest public sector borrowing requirement in Britain's history. The Chancellor knows very well that he should apologise to the electorate, admit the mistakes that he made and say that the Government will try to do better. The Chancellor cannot say those things, because he is personally committed to raising VAT.
I have always wondered about the Chancellor's vote in favour of VAT on children's clothes. I have always wondered about the Walden interview in which he said that it would have been far better to put VAT at 17.5 per cent. on fuel in the first year rather than waiting and imposing it at 8 per cent. in the first year. I have always wondered about that strange by- election statement a few months ago in which he said that not to impose VAT on food and fuel was anomalous. Now I know why.
Last summer one of the Chancellor's constituents wrote to him to ask his views on VAT on fuel. The constituent has kindly sent me the letter. In the long letter--the Chancellor tends to elaborate where it is sometimes unnecessary or inadvisable--he said :
"I have always thought that we exempt too many goods and services from VAT in this country. . . . VAT is still imposed on little over half of all sales, which is much more restrictive than the sales tax in most other countries."
No wonder the Chancellor does not sound convincing when he talks about taxation. No wonder the Chancellor's instincts are regarded with suspicion. He does not want to lower taxation. He wants to extend VAT. The issue from now to the next election is whether he will honour or disown his stated commitment to the principle of extending VAT. I think that he will have an uncomfortable few months with the electorate in the run-up to the election.
Mr. Kenneth Clarke : In all the hours of research carried out by Labour headquarters, no one has ever found a quotation from me which is inconsistent with what I have been saying about VAT for years. I repeat that the Conservative party is the only party that believes in low taxation. We believe in achieving it by controlling public spending.
As the hon. Gentleman is making his speech, will he say what are his policies on taxation ? If he would reduce taxation, which taxes would he reduce ? What are his views on public spending ? What are his views on the public spending targets that we have set ? It is utterly pathetic to come out with constituency letters in which I merely state my long-stated and well-known view that, if we were starting again, we might have a lower rate of VAT and fewer exemptions. As he knows, that is not policy now. Does the hon. Gentleman have any policy at all on anything of current concern ?
Mr. Brown : The Chancellor has made it clear that he is in favour of fewer exemptions on VAT. Will he now confirm for the benefit of the House that he is in favour in principle of extending VAT ? Is it to food ? Is it to transport ? Is it to children's clothes ? Is it to books and newspapers ? This is a serious question. Is he in favour of extending VAT to those items ?
Mr. Kenneth Clarke : The hon. Gentleman could find countless occasions on which I have said, as I have probably said ever since that vote 20 years ago which he always cites, that other countries have lower rates of VAT and fewer exemptions. The hon. Gentleman knows that that is not to be taken as a statement of policy intention now. Will he please stop flannelling around in this Blair-like fashion and tell us his views on tax, public spending, borrowing, monetary policy or anything that has anything to do with the debate this afternoon ?
Mr. Brown : The Chancellor of the Exchequer has created the context for many debates that we shall have during the next election campaign. He cannot tell us that he is against the principle of extending VAT to food, to children's clothes, to books and newspapers or to public transport. The record will show that he told the House that he believed that there were far too few exemptions in this country. If that is the case, the Chancellor will live to regret what he wrote to his constituent and what he has said this afternoon. Ministers have recently discovered instincts not only for what they call low taxation, but, if the Chancellor's speech of last week is to be believed, for community, for social cohesion and for full employment. We are asked by the Secretary of State for Employment to believe that the Conservative party, which for 15 years has never had less than 1.5 million people unemployed, and under which 1 million young people are unemployed today, is somehow the party of full employment. Having told us for 15 years that Government could do nothing to affect the employment level in this country, the Conservative party now asks us to believe after 15 days that it is somehow the party of full employment. Having told us for 15 years that there is no such thing as society, it now asks to us believe that it is the party of social cohesion and community.
Even though there is evidence, which we heard about earlier this afternoon, that 135,000 people are homeless under this Government ; even though there is evidence to show that 13 million people are on low incomes as a result
Column 60of this Government's policies ; even though all the evidence tells us that there is more poverty, worse poverty and worsening poverty, the Government refuse to do anything about it.
This is the dilemma for Conservative Members as they go away for the summer recess. They do not know whether to attack the Labour party for its support of social cohesion, community, collective action and full employment, or to attempt to occupy the territory themselves. They do not know whether to attack the Labour party for its goal of full employment, or, in the face of evidence, to try to claim it as their own.
I have some sympathy for Conservative Members. What are they to think ? Do they cheer the new cry for full employment, or do they cheer the right wing when it says that full employment is not the responsibility of the Government ? Do they wave their Order Papers at Ministers' appeals for community and collective action, or do they still wave their Order Papers when the right repeats that there is no such thing as society ?
On Europe, do Conservative Members say, "Hear, hear" when the Chancellor supports the principle of economic and monetary union, or do they say "Hear, hear" when the Chief Secretary to the Treasury says that he opposes it ? Do they applaud when the Chancellor champions a single currency, or when the Chief Secretary questions the very principle ? On the welfare state, do they wave their Order Papers when the Chancellor says that he opposes more health charges and opting out of the basic state pension, or do they wave their Order Papers when the Chief Secretary says, "These are just some of the things that have got to be looked at" ?
When they get to the Conservative party conference in the autumn-- Conservative Members had better face up to this problem--do they rise for a standing ovation when the Chancellor says that he does not believe in the minimalist state, or do they give a standing ovation to the Chief Secretary and his No Turning Back group friends when they call for the minimalist state to be implemented ? Do they get to their feet when the Chancellor says, as he has before, "I have always opposed vouchers," and when he admits that we still lag behind our competitors in education, or do they get to their feet for the Chief Secretary when his friends say that they favour vouchers and when he doubts whether so many graduates are needed ?
Do they stand and cheer for some and sit on their hands for others ? In the interests of party unity, does everyone receive a brief, crouching ovation, or do Conservative Members wait for instructions from the new chairman of the Conservative party, whoever may accept that job or from whatever faction he may come ? Will the Prime Minister have to appoint two chairmen of the Conservative party to ensure that all factions are represented ?
What about the Prime Minister in all this ? His one constant desire is to appease whatever faction holds sway, presiding over a rabble of divided factions and appeasing the right. In Churchill's words, the Prime Minister is
"resolved to be irresolute, adamant for drift, solid for fluidity, all powerful for impotence".
Bonar Law said on his leadership of the Conservative party that he was their leader and had to decide which faction to follow. That applies to the Prime Minister.
No amount of hypocrisy on social cohesion, full employment and community, no instincts for taxes, and no amount of papering over the cracks can save the
Column 61Conservative party from its ultimate destiny- -Opposition. It is clear that the party which runs an economy with 2.5 million unemployed, which still cuts the number of people on training schemes and the training and employment budget year after year, and which then tries to pretend that it is the party of full employment, will never be seen by the electorate as anything other than the party of mass unemployment.
The party which pushed up taxes faster and higher than any other Government in history, which has imposed 20 tax rises in two years and which then tries to tell us that it is the party of competence in the running of the economy, will never again be trusted with government. The Conservative party is not only unfit to govern because of its record : it is never to be trusted because of its hypocrisy.
The party which has multiplied the number of people in poverty, which has widened the gap between rich and poor to the worst point this century, which has consigned 4 million children to poverty, which has done nothing and said nothing against the excesses that characterised the privatised board rooms in some of the affairs of the City, and which then tries to pose as the party of community and social cohesion, will be seen by the electorate for what it is : not the party of values but the party of sleaze. It can offer no direction, no strategy and no purpose to this country. It has failed, and it has compounded that failure by its hypocrisy over taxation and the community. For 15 years, its failure has diminished this country and its failure to go simply prolongs the agony. To end the failure, we must soon end the Government.