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The second argument that is frequently mentioned is based on business surveys. Astonishingly, the most prominently mentioned of those is the dreadful purchasing managers' index. As a former statistician, I ask, how could anyone take an index that has operated for as short a time as three years--it has been in existence for less than half an economic cycle--as a serious measure showing which way the economy is going?

The third and final major argument concerns the capacity issue. As a monetarist, I am always inclined to be slightly suspicious of the capacity argument, because I believe that inflation is principally a monetary phenomenon, but capacity issues are, anyway, principally concentrated in manufacturing. Whereas the service sector is 60 per cent. of the economy, manufacturing is only about 20 per cent., and new capacity can be put in more quickly than it used to be a few years ago. We have a good level of manufacture of investment goods. Plenty of empty business property remains available. Factories can be equipped and brought on stream much more quickly than they used to be, and the greater use of shifts, and so on, can assist in doing that. The current recovery is quite different from previous economic recoveries. I have put my money where my mouth is; instead of buying lottery tickets, I decided to invest a bit of the Brazier finances on a bet that we shall not need to increase interest rates as fast as the markets believe that we should.

The current recovery is different from the previous one. It is a healthy recovery; it is an export-led recovery; it is an investment-led recovery, and this is an excellent Budget to cap it. 6.53 pm

Mr. William O'Brien (Normanton): I do not intend to follow the hon. Member for Canterbury (Mr. Brazier) along the monetary theme that he developed, because many of my constituents do not have enough money to talk about betting on interest rates; they have problems finding the means to afford a reasonable standard of living. I was interested to hear the Chancellor of the Exchequer say that he intended to lift the personal allowances for tax payments on some pensioners. Obviously, I shall wait with interest to discover how that will affect pensioners throughout the country, especially in my constituency.

Earlier this year, I received a letter from a pensioner couple who advised me that they were getting

"a rent rise of £3 in April".

That was the result of the Government's insistence that councils increased their rents greatly in excess of inflation--and I am speaking of properties for which people pay much more than the economic rent. At one time, Conservative Members used to say that people should pay an economic rent. Council house rents greatly exceed economic rents.

The couple advised me:

"At the same time our pensions are going up approximately £2.20p, so we shall be 80p worse off"--

that is 80p worse off before value added tax was added to energy costs--

"as the prats in the government say we get £4 a week interest on every £1,000 over £3,000, that is 25 PER CENT",

for which reason they receive less housing benefit than they should.

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I wonder what the attitude of Conservative Members will be to that development, whereby pensioners who have savings to help them through their retirement are being told that on every £1,000 savings exceeding £3,000 it is estimated, for benefit purposes, that they receive 25 per cent. interest. Only fools would say that that is a fact, but that is what happens as regards interest payments on pensioners' savings.

I wish that the Chancellor would listen to some of the problems that many of the retired people throughout the country experience. Recently, a chap called Hunter, who lives in Sharlston in my constituency--you must know the district quite well, Mr. Deputy Speaker--came to my surgery. He received an increase in his British Coal pension of £1.55 per week. His housing benefit was reduced by £1.09 and his council tax by 50p per week. That pensioner, after receiving his pension increase, is £4 per week worse off. He also suffers from the increase in VAT on fuel.

I also know of a widow whose state pension increased by 15p per week. Her housing benefit was reduced by 26p per week. The lady says that that has happened for years--the increase in pension has been absorbed by the reduction in housing benefit. The Government's policy of reducing housing benefit when pensions increase is adversely affecting a substantial number of people who are on pensions and who rely on pension increases to try to improve their standard of living.

A family of three live in the area of Ossett in my constituency. The father and son are disabled; the son is physically disabled and incontinent. The mother and wife has to be the carer, looking after the two other members of her family. The son reached the age of 25. He has a mental age of eight, but the family lost £4 per week in housing benefit because he reached the age of 25. Government rules say that housing benefit is cut when a lodger reaches the age of 25, because Ministers allege that that person makes a contribution to the household.

There is no question of tolerance in such a position. There is nothing in the Budget to help the families whom I have described. There is nothing to help them to avoid the poverty trap. We are talking of the most vulnerable people in society--the mentally and physically disabled--yet the Government attack them by reducing their income and their benefits. During the Chancellor's lengthy speech, he made no mention of any help for them.

The people whom I have described have to pay the increase in VAT on fuel charges. Indeed, they will suffer the most from that increase. Age Concern, in a parliamentary briefing, said that it believed that

"VAT on fuel should not be increased to 17.5 per cent. But, if the increase goes ahead, we are concerned with the way the compensation package will be implemented."

Every hon. Member should share that concern.

The Government promised to compensate people on benefit for the increase in VAT. On 27 October, I put a question to the Paymaster General, who replied:

"The House decided to implement VAT on fuel bills in two stages. It did so in the knowledge that a generous compensation package gives extra help to all pensioners and widows, disabled people"--[ Official Report , 27 October 1994; Vol. 248, c. 994.]--

who qualify.

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In the main, it is those who are in receipt of income support who qualify. Ministers--in this case, the Paymaster General--give misleading information. They seem to be under the impression that all pensioners receive the hand-out to compensate for VAT on fuel. That is not the case. When the Secretary of State for Social Security speaks in the Budget debates, he should clarify the position for those who are denied the extra benefit to compensate for VAT on fuel.

My right hon. Friend the Leader of the Opposition analysed the increase proposed by the Chancellor and showed that in real terms it would amount to about 10p a week for a single pensioner. I hope that there will be an opportunity for hon. Members to vote on such a pernicious tax. It shows beyond any shadow of doubt that those who will suffer and be hurt the most will be those who can ill afford the extra cost imposed by the Government.

The Chancellor missed the opportunity offered by the Budget to redress the problems faced by many pensioners. It is not just the cut in housing benefit or the VAT on fuel bills--in the early years of the Conservative Government, following the 1979 election, the Government took away the concessionary television licence from a substantial number of pensioners. That concession had been promoted by the Labour Government. I hope that Ministers will deal with that problem.

Mr. David Evans (Welwyn Hatfield): Does the hon. Gentleman recall that the last Labour Government failed to pay the pensioners' Christmas bonus in two of their last four years in power?

Mr. O'Brien: I remind the hon. Gentleman that since 1979 this Government have not increased the Christmas bonus by the rate of inflation and are therefore denying pensioners £55.70. I shall take no lectures from the hon. Gentleman on the matter, because the bonus is £10 now and it was £10 some 15 years ago. Had it been uprated in line with inflation, it would now be worth £65.70.

I also remind the hon. Gentleman that in 1979 a single pensioner received a pension of £23.30 per week. In 1994, he is receiving £57.60 per week. Had the pension been uprated in line with inflation, it would now be worth £76.70. The hon. Gentleman should remember that pensioners have not been robbed just of their pension. He voted for VAT on fuel; he supported the withdrawal of concessionary television licences; and he supported the reduction of housing benefit. If he has any shame, he should feel ashamed of what has happened to pensioners since the Government came to power. When the opportunity arises for the hon. Gentleman and others to support the pensioners on the question of VAT on fuel, I hope they will join us in voting down the proposed increase. Last night, I presented a petition on behalf of 1,000 of my constituents asking the House to vote down the increase to 17.5 per cent. next April. I hope that my constituents who signed that petition will receive the support of the House to stop the VAT increase.

Because of the Government's policies, in 1994 local housing authorities are making a profit, for the first time, for the Government from housing rents. Local authorities pay net housing subsidies to the Treasury. The Government have a new tax--on council house rents. We are all aware that the Government have increased rents well above the rate of inflation.

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Now, council house and housing association rents are not economic rents but what we term "market rents". But the people who set the market rents are the Ministers who stand at the Government Dispatch Box. Councils are told what rent increases they must make, not because those increases will pay for other benefits for council house tenants but because the Government will benefit from them. It is another tax that people have to endure because of Government policy. Again, the Chancellor had the opportunity to redress that situation and to be fair and honest with tenants about the levying of rents and housing benefits. For tenants not on housing benefit, the increase in rents above the rate of inflation is totally unfair. It is undemocratic because those people have no vote on the rent increases. For tenants on housing benefit, a rent increase above the rate of inflation drives them further into the poverty trap and becomes a greater and more serious problem. For tenants on a partial rebate, the rate of taxation is probably higher than in any other sector of the community.

The Chancellor of the Exchequer missed a golden opportunity today. He could have helped millions of people who are in the poverty trap, losing housing benefit and have no way of escaping the policies that the Government introduced. Local authorities and housing associations face tremendous difficulty in improving their properties and providing affordable housing. Because of the Government's restrictions, they may not spend their money to develop new housing and improve the housing stock. Some council houses have only one electric plug in the kitchen. Local authorities want to improve on that and carry out improvements, but because of the policies outlined by the Government, they are denied the opportunity to do so. The Chancellor of the Exchequer referred to the home energy efficiency scheme, yet in properties in some local authorities, the heating is provided by boilers, and by other means, that are 20 years old. Those local authorities want to take out those old boilers to improve their heating efficiency, yet, because of Government policy, that is not permitted. Therefore, in addition to VAT on energy, many people are living in houses that are uneconomical because of the heating system.

I put it to the Ministers on the Treasury Bench that what we have witnessed today is an opportunity lost. The Chancellor of the Exchequer had the golden opportunity to bring into practice some of the policies that would have helped the people to whom I have referred.

Mr. Roger Stott (Wigan): My hon. Friend is talking about local authorities and local government. If he just casts his eye around the Chamber this evening, he will see behind him our hon. Friend the Member for Coventry, South-East (Mr. Cunningham), the former leader of Coventry city council. In front, he will see our hon. Friend the Member for Sheffield, Attercliffe, (Mr. Betts), the former leader of Sheffield city council. On the Whips' Bench, he will see our hon. Friend the Member for Bootle (Mr. Benton), who was leader of his council. Will my hon. Friend just think for one moment about all the local authorities that dispose of their waste and put it in a big hole? The Chancellor of the Exchequer will tax every

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local authority in Britain that actually empties every dustbin. No local authorities incinerate their waste; they put it in a big hole.

Mr. Deputy Speaker (Mr. Geoffrey Lofthouse): Order. Interventions are supposed to be brief and to the point.

Mr. Stott: For the first time in 15 years.

Mr. O'Brien: I appreciate the point made by my hon. Friend. The fact that we are threatened with a tax on waste for landfill sites in 1996 has not gone unnoticed. The Chancellor said that a consultative document would be published on that matter. We are waiting with bated breath to see what is in it.

It is true that we will witness a further tax on people who have no alternative but to have their waste disposed of by their local authorities. The Secretary of State for the Environment, in a written answer to a question which I tabled, said that no assistance is given by his Department to people who want to dispose of recycled materials. He said that it was for the market to decide.

As I said earlier, market rents do not help people on low incomes. They do not help the people whom I want the Minister to help. I hope that he will take that into consideration when he replies, and I hope that some amendments will be made to help the people who will suffer worst under this Budget.

7.15 pm

Mr. Charles Hendry (High Peak): I congratulate my right hon. and learned Friend on introducing a Budget for growth, recovery and sound finance.

It is profoundly depressing to listen to Opposition Members simply regurgitating old ideas from the past. We recognise that the debate must be very difficult for them, because, increasingly, they are not allowed to talk about policies: their leader cannot decide whether he wants to have them or not. He will have one policy on one day and will trim and change it the next, according to what he thinks may be popular with the electorate. Opposition Members are left like some old record stuck in a groove, regurgitating the ideas that they have peddled in the past.

Mr. Bill Etherington (Sunderland, North): Will the hon. Gentleman give way?

Mr. Hendry: I should like to make progress, but I will certainly give way later.

We heard from the hon. Member for Hackney, North and Stoke Newington (Ms Abbott)--sadly, she could not remain to hear the speech that followed her own--about how the housing recovery will not happen. It must be difficult for her to find things to be gloomy about these days. Not long ago, Opposition Members were telling us that the recovery would not happen and that it would not last. They then told us that inflation would not come down and that it would not stay down. They then told us that the trade deficit would not fall as we came out of recession. They kept on telling us that unemployment would not come down. They increasingly find that they are short of things to complain about.

Mr. Etherington: I hope that the hon. Gentleman appreciates that it is even more depressing for Opposition

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Members to hear Conservative Members constantly reiterate the benefits of policies which have failed for most of this century but which we keep on getting.

Mr. Hendry: The hon. Gentleman, sadly, did not recognise that manufacturing output and exports are now at their highest level. We have the most favourable circumstances in terms of inflation, interest rates and business confidence that I have seen in my lifetime. The hon. Gentleman may be a good number of years older than me, but it is a shame that he has not learnt a bit faster. Conservative Members have to listen to Opposition Members peddling the same old mistruths about how things are bad, yet all round the country we find them getting better.

We listened, too, to the hon. Member for Wrexham (Dr. Marek), who talked about manufacturing industry. How sad, I thought, for businesses in his constituency, which are doing their very best to win new markets, to produce the best goods at the best price and to train their workers, to find their own Member of Parliament talking them down. Why cannot Labour Members be like my hon. Friends the Members for Cheadle (Mr. Day), for Macclesfield (Mr. Winterton) or other hon. Members who fight every inch for their manufacturing industries because they believe in manufacturing and want to help them to do better and win new markets?

We then had to listen to the hon. Member for Normanton (Mr. O'Brien). I fully accept his sincerity, but, as my hon. Friend the Member for Welwyn Hatfield (Mr. Evans) pointed out, the Labour Government not only did not pay the Christmas bonus twice, but did not index it according to inflation. Opposition Members still say that we should have done that.

Ours was not the party that delivered inflation at 27 per cent. and ours was not the party that cheated pensioners of their savings, which became less valuable every year because of the inflation rate. We take no lessons from the Labour party about pensions, given the way in which it has dealt with them.

Mr. William O'Brien rose --

Mr. David Evans rose --

Mr. Hendry: The hon. Member for Normanton has had his opportunity, but I happily give way to my hon. Friend the Member for Welwyn Hatfield.

Mr. Evans: Will my hon. Friend confirm that in 1978, under that lot over there, inflation was running at 27 per cent.? Never mind about pensioners' savings; at that rate, they were devalued.

Mr. Hendry: My hon. Friend is absolutely right.

Every Labour speaker has spoken of Labour's wish to cut £2.3 billion of Government revenue over the next year, but has any of them said how the cut should be paid for?

Mr. O'Brien rose --

Mr. Hendry: Hear me out.

Have Labour Members proposed the imposition of a single tax? Have they proposed the saving of £2.3 billion elsewhere? We know that they will not do so. They are

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merely going for the media soundbite--the little slot on the six o'clock or the nine o'clock news and the opportunity to issue a little press release in their local newspapers. They have not the decency to tell the House how they would make up the shortfall that they would create.

Mrs. Jacqui Lait (Hastings and Rye): I hate to contradict my hon. Friend, but one promise that Labour seems to have made is to tax higher earners. Perhaps my hon. Friend would like to tell us how much income we might expect that to produce. Would it cover the extra spending?

Mr. Hendry: It is always hard to tell. I imagine, however, that if we asked the Leader of the Opposition--who is married to a very high earner --he would be able to give us a good deal of information, and I hope that he will declare an interest when he comes to talk to us about that.

Let me return to the subject of pensioners. I particularly welcome the raising of thresholds for their payment of tax. In my submission to the Treasury, I stressed that I wanted those thresholds raised to make a bigger difference between those who have saved to contribute to their pensions throughout their lives and those on income support. The pensioners whom I find it hardest to talk to are those who have done all we that asked of them--who have saved in order to take up pensions, and who now find that if they had spent the money on an extra holiday or a slightly higher living standard they would be almost as well off. I commend my right hon. and learned Friend's decision to ensure that such people receive the benefits of their savings in their lifetimes.

I also commend the measures to encourage people to return to work. I declare an interest, as an unpaid director of a training charity dealing with young long-term unemployed people. I welcome the initiative to allow a year's break from national insurance contributions for employers of those who have been without work for two years or more, which will make it significantly easier to encourage them back into work and will make it a realistic possibility for them to take jobs.

I am pleased about the expansion of the constructive schemes. It is sad that the hon. Member for Hackney, North and Stoke Newington should describe those measures as gimmicky; they do not seem gimmicky to someone who is on such a scheme--someone who has been unemployed for some time, and then finds that the Government have introduced a scheme designed to help him to gain a new skill, try a new job and find a way back into work. That is not a gimmick; it is someone's life. It is demeaning and condescending in the extreme for Opposition Members to be so cruel and hurtful to people who are doing their best to return to work.

I want to say a little about the Housing Corporation budget. I am joint chairman of the parliamentary all-party group on homelessness, and I know that any cut in Housing Corporation funding will be viewed with concern, but I think that we should look at the proposal in context. We must take into account a Conservative manifesto commitment to build 153,000 social houses for rent over the three years after the election--a target that will be comfortably met. We must also take into account the lower building costs produced by building companies

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that are anxious to find work, and the lower interest rates which mean that housing associations can borrow from the money markets. We should, however, go further and make it possible for the Housing Corporation to give grants to private developers so that they can build social rented housing as well. Again, I declare an interest as chairman of a company that deals in private rented accommodation--not that it would benefit, but builders should be entitled to put in bids to show that they can build better and more cheaply, and let at lower rents, than many housing associations.

I hope that we shall also encourage housing associations to recycle their money by providing their tenants with a right to buy, and that we shall enable the smaller housing associations to have a bigger slice of the cake: they tend to be leaner, and more directly connected with the issues in their local communities. Above all, we must try to encourage the Housing Corporation to put its funds more directly into refurbishment. There are 700,000 empty houses in the country, and it is ridiculous to claim that every year we need to build 100,000 or 200,000 new houses.

Every time the Government build more houses, Shelter says, "That is not enough: we must have more." If the Government built the 100,000 houses that Shelter wanted last year, Shelter would say, "We did not want 100,000; we really wanted 200,000." Shelter is the only organisation that can call one month of bad figures a trend and, when presented with two years of declining homelessness figures, say that it is still too early to predict the true position. We must enable the Housing Corporation to make better use of existing stock. This Budget is not about short-term solutions; it is about getting the long-term economic structure right. It proposes measures that will build on the recovery that is so clearly already in place. In my constituency, businesses that are working to gain new markets, employ new people and lower our local unemployment rate faster than the national average will welcome many measures in the Budget. They will be delighted by the measures to control the growth of business rates; they will be delighted by the proposed extension of the export credit guarantees; they will be delighted by measures that will help them to employ new people, especially those who have been unemployed for some time; and they will be delighted by my right hon. and learned Friend's commitment to a rescue culture.

For too long, we have been concerned about the fact that the banks seem ready to pull the plug before they have had a chance to see whether businesses might have a long-term viable future. As we emerge from recession, fewer companies will be in that position, but all Conservative Members will welcome the Budget initiative.

This is a Budget for recovery, a Budget for sustained growth and a Budget that my constituents will welcome.

7.27 pm

Mr. Jim Cunningham (Coventry, South-East): I am interested by the litany that I have heard today from Conservative Members. I think, however, that I should begin at the point where the Chancellor began. He said that inflation was last at its current level during a certain World Cup; but, as we know, a Labour Government were in power then.

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Conservative Members have made much of the so-called misdemeanours and mismanagement of Labour Governments. Let me remind them that it was not a Labour Government, but a Tory Government, who created the three-day week. A Tory Government, too, could not manage the OPEC negotiations when oil and petrol prices started to rise.

Mr. Duncan rose --

Mr. Cunningham: I see that the hon. Gentleman is keen to intervene, but a Tory Government were undoubtedly involved. Their actions, certainly in the 1970s, led to a Labour Government eventually having to approach the IMF. Conservative Members keep throwing that at us, but would we not like to return to the days of Labour government in the 1960s and 1970s--the days when only about 300,000 people were unemployed? Would not we like to get back to the days when more houses were being built than ever before--that was considered a terrible record for a Labour Government--and when homelessness was at a minimum? Would not we like to get back to the days when more hospitals were being built and more doctors and nurses were being trained?

Conservative Back Benchers would like to brainwash us into believing that the Government's economic policies are working. I have heard Conservative Members say that this is the right Budget every time this Government have introduced a Budget, yet no Budget has been right.

I want to deal with the areas that concern me and my constituents. Some hon. Members have mentioned invalidity benefit, for which, under the new arrangements, about 200,000 people will not qualify. A vast number of people will lose out on the jobseeker's allowance. More important, if an individual is given a card to go for a job but does not get it, benefits officers can ring the employer to find out how he got on. If the employer says that the individual did not try very hard, he may lose his benefits.

I want to show how vindictive the Budget really is. Hon. Members have touched on housing benefit. Many families on the poverty line rely on housing benefit. A short time ago, some Conservative Members said that housing benefits were being abused in Coventry. An investigation took place, but in only a few cases could any abuse be demonstrated.

The Government are reneging on their promise to first-time buyers. What happened to the Government's slogan about a home-owning democracy? Many young people who have taken out mortgages over the past two or three years will find themselves confronted once again with another reduction in the help available for mortgage repayment.

Mr. Duncan: Contrary to what the hon. Gentleman has just said, the way in which housing benefit has operated guarantees that private sector rents will rise to meet the level of housing benefit that is set. The greatest guarantee for someone wanting to start on the mortgage ladder is a regime of low interest rates, which we now have amidst the sustainable recovery that my right hon. and learned Friend the Chancellor outlined so well today.

Mr. Cunningham: It is not for me to defend the housing benefit system that the Government introduced, particularly in the context of the abolition of rent controls. The Government abolished rent controls on the basis that

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a fair rent should be charged and that market forces should determine its level. I am showing that the changes will have a regressive effect on the poorer members of society. They will affect many people in my constituency.

Once again, local government will have a sledgehammer taken to it. The Chancellor's speech emphasised the need for efficiency in local government. We all want to encourage efficiency in local government, and some of us do, but before the Government start preaching about efficiency in local government they should become more efficient and set a good example. I have not seen much efficiency from central Government.

The Government have made much of the fact that there will be a 3.5 per cent. increase in funding for the police. Let us look at what they have not funded. They have not put much money into funding for safer cities and they have cut legal aid. I could go on and on. In reality, the Budget must be judged against last year's Budget. It is designed, once again, to make the poorer members of society pay for the Government's follies. It should have been based on need rather than greed. That is how I would sum up the Budget.

7.34 pm

Mr. Graham Riddick (Colne Valley): The headline in a Conservative party brief that I have just looked at suggests, in a rather defensive tone, that this may be a "steady as she goes" Budget. This has indeed been a "steady as she goes" Budget and I welcome that. It is exactly what we need at this stage. I welcome three particular aspects. There was help for the long-term unemployed, more help for small companies--we have done a great deal to help them in recent years--and a continued reduction in the level of public spending and public borrowing.

The experience of the Conservative Government in the early 1990s shows how difficult it is to keep public spending under proper control. We all know that Conservative Governments believe in keeping public spending down. Sadly, we allowed it to go up to unsustainable levels and that is one of the most important reasons why the Government have had some serious economic difficulties in the past few years. The key thing for this Budget was that the recovery should be nurtured and sustained.

The headline in a recent issue of CBI News said:

"Recovery in progress: Do not disturb."

That probably sums up more than anything else what we needed from this Budget and that is exactly what we have got.

The Red Book shows that the Government are forecasting growth of about 4 per cent. in 1994 and of about 3.5 per cent. in 1995. The London Business School has forecast that manufacturing production will grow by an annual average of 4.3 per cent. between 1994 and 1998. That is extremely encouraging and I hope that the forecast is accurate.

Inflation is 2 per cent. now and in his speech my right hon. and learned Friend the Chancellor said that inflation will be going up next year. In years gone by we might

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have expected him to say that it would go up to 5 per cent., 10 per cent. or 15 per cent. What he said was that next year inflation is forecast to rise to 2.5 per cent.

Mr. Jimmy Wray (Glasgow, Provan): Does the hon. Gentleman think that the damage has already been done with inflation? What about the thousands of people who have lost their homes or had to give up their jobs because of inflation? You have had 16 years to deal with inflation and you have inflicted misery and injustice on the people of this country. You will not be forgotten because you are still inflicting that misery with--

Madam Deputy Speaker (Dame Janet Fookes): Order. I remind the hon. Gentleman that he is addressing me.

Mr. Riddick: I know that you are a powerful figure, Madam Deputy Speaker, but I was not aware that you were responsible for all those things.

I accept the admonition of the hon. Member for Glasgow, Provan (Mr. Wray). It is deeply regrettable that we allowed inflation to get out of control and that at its height it reached 11 per cent. However, that contrasts with inflation of about 26 per cent.--

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