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Here we are, 18 or so months since the passage of the Bill that introduced the Maastricht treaty, yet we are still in the dark about the Government's policy with regard to their future role in Europe. Having upset one group of supporters, will the Prime Minister now side with those whom, just a short time ago, he kicked out of the parliamentary party?
We know that, come what may, we shall not have a serious debate on how we should address the real problems in the economy of Britain, to enable people who have suffered most from the Government's economic policies to prosper. We shall debate the issue in order to ensure that the Government can again secure a majority, having lost the backing of other supporters in the House. The Prime Minister's motives, as ever, are about how he can stitch something together for the benefit of his own party, rather than about how he can tackle the real problems in the economy.
On Wednesday, will the Government support some developments in the real economy for which the Labour party has been arguing, including working towards full employment? Unfortunately, this debate is taking place without our knowing the answer. We are debating Government policy as reflected in the Red Book. From it, we know that there are serious problems in the real economy.
The Budget that we are asked to approve and to send to Europe confirms the Government's determination to press forward with tax increases, which will mean that a typical family will pay £800 a year more in taxes since the Government were elected in 1992. I seem to remember more than one clear statement from the Prime Minister, promising that there would be no tax increases after the election. The British people have learnt just how little they can trust the Prime Minister's word on taxes. Their pressure led to the Government being defeated on the most unfair of their tax increases, the increase in VAT on fuel.
It is interesting to note that the goals in article 2 of the Maastricht treaty include
"sustainable and non-inflationary growth respecting the environment."
The Government had to throw out what they claimed was their "green tax"-- not that any of us ever agreed that that was what it was. They had to throw out the measure to impose VAT on fuel, and the Minister has not said tonight how he will satisfy the need to respect the environment.
What does the hon. Lady think is the purpose of the proposed landfill tax, if it is not to respect the environment? The same applies to the increase in duties on fuel. Surely those are important environmental measures.
Ms Armstrong: We still have a long way to go before we find out precisely what the Government's intentions are in regard to the landfill tax, and when it will be introduced. As for the fuel tax, I believe that it will partly
Column 795deter people from using their cars, but it does not begin to deal with the need to control emissions from cars and the use of fuel. I admit that I am making a rather snide point, in that the Government were defeated on the fuel tax issue; but we must deal with realities, and the reality is that the Government were defeated. It was they who claimed that the imposition of VAT on domestic fuel was a great move towards meeting their commitments. I always doubted that, and the Government's failure to address the issue after their defeat confirms that it was never anything of the sort.
Mr. Bruce Grocott (The Wrekin): A noteworthy feature of the interventions so far is that Conservative Members are apparently still very enthusiastic about imposing a 17.5 per cent. VAT rate on fuel. Presumably that tax promise will figure prominently in the Conservative manifesto preceding the next general election.
Ms Armstrong: My hon. Friend is right, but he applies logic to the way in which the Government will proceed; I am not sure that they ever proceed in an honest and logical way when it comes to admitting their taxation intentions to the electorate.
The Budget failed to include measures that would lead to medium and long- term growth. What is trumpeted as success by Conservative Members is soon shown to be extremely fragile. Total investment is still below its level in 1990, before the recession.
Manufacturing investment in plant and machinery is nearly 30 per cent. below its quarterly level at the start of 1990. British firms must now seek to compete with 30 per cent. less investment per worker than in Germany or France, and 65 per cent. less than in Japan. The Chancellor could and should have done more in his Budget to stimulate investment in industry, and that is the message that we should have given to the European Community.
The Bank of England pointed out in its February report that "capacity constraints are becoming more widespread in industry . . . This will increase inflationary risks unless productive capacity increases."
Some people may be wondering why we quote the Bank of England today, but its predictions are normally very reliable.
The Treasury and Civil Service Select Committee has also raised the problem.
Mr. Jenkin: I am grateful to the hon. Lady for giving way and giving me the opportunity to give her another little rest. I am a little confused about the position that she is expanding. First, she voted for the Maastricht treaty Bill. That suggested that she approved of the convergence criteria. Now the hon. Lady says that she wants full employment to be an economic policy, although that is not one of the convergence criteria. Then she criticises the Government's tax-raising policies even though they are
Column 796necessary to meet the convergence criteria. If we did not raise taxes in the way that the Red Book sets out, we would fail in our obligations to meet the convergence criteria. Is the hon. Lady in favour of the convergence criteria or does she think that they are too deflationary?
Ms Armstrong: The hon. Gentleman has always shown confusion. He abstained in the votes on the Maastricht treaty. I did not. He continues to claim to support the Government while opposing them on their central policies. The Labour party has always said that it wants much of the real economy to be tackled in a way that the Government are not doing and that unless that happens, the convergence criteria will not be sustainable. We have made that argument consistently and we shall continue to make it.
The Government simply fail to tackle the real problems in our economy. Those problems will increase precisely because of what the Bank of England talked about--lack of capacity. It is true that in Britain there is a lack of capacity in industry after the recession. Investment is below even what it was before the recession. It is lower now than in 1979.
Mr. Andrew Britton, one of the specialist advisers to the Chancellor, told the Treasury and Civil Service Select Committee: "a lot of the capacity which one might imagine would be there because of the recession has actually been lost".
That was in the Committee's report on the 1994 Budget. In other words, too many firms closed and the capacity for growth is not there. Consequently, Mr. Britton thought that the economy could "only grow above trend for a couple of years."
Lack of capacity for growth is also reflected in the rising problem of skill shortages. One would have thought that, having initially negotiated the terms of the Maastricht treaty, the Government would at least tackle skill shortages during the recession. But no. The figures on training are frightening. The Red Book reflects real cuts in the training budget. The training statistics bulletin demonstrates graphically that neglect. The numbers of people involved in training in and out of work declined. Most worryingly, the worst figures were among those without any qualifications and among 16 to 24-year-olds. Out of 23 countries in the Organisation for Economic Co-operation and Development, the United Kingdom has the second lowest proportion of 18-year-olds in full-time education. The country with the lowest proportion is Turkey.
In its November inflation report, the Bank of England said: "At present, skill shortages are not so acute as to pose a major threat of wage inflation . . . there is some evidence of skill shortages and settlements may be edging upwards."
Again, the Bank of England recognises that there are real problems in our economy, which will affect the Government's projections for growth and which already cause real problems in parts of the country. That is another reason why the feelgood factor that people talk about simply is not happening. Living standards are simply not improving to match people's expectations. Having weathered the recession, people believed that they would begin to experience the benefits of having paid so dearly for Government economic policies in the past few years. Far from it: if we include housing costs in the
Column 797projections for this year, the average family will lose about £10 per week, so the Budget will cause real problems for real people. Public sector investment has been cut, as well as private sector investment. The Red Book tells us that it will be cut by 9 per cent., but that will be compensated for--so we are told--by a promise of a £5 billion investment in the private finance initiative. In the past two years, only £0.5 billion has been invested in that initiative and only 12 of the 96 projects announced have got started.
Out of all the Group of Seven countries, only the United States had a lower level of Government investment as a proportion of gross domestic product between 1980 and 1990 than the United Kingdom. The fact that the Government are spending not on investment, but on paying for the costs of unemployment, is what makes the Labour party so angry. When we realise that the percentage of public spending spent on benefit has risen from 22 per cent. to 31 per cent. and many more people are dependent on benefit now than in 1979, we know just how far Government policies have failed.
This debate gives us another opportunity to make the Government face their responsibility for the economy. They have failed the country on the economy and they have failed to ensure that people are able to get off benefit and into work--the Budget gave so little opportunity to push that aspect and to make it work. The jobs that the Government estimate will be created by their return-to-work measures will be more than compensated for by the number lost because of the changes and cuts in public expenditure that they announced. When the Government get round to investing and using investment as a tool to encourage real growth, we shall be able to have much more confidence in the future of the economy. We do not have that confidence. We do not believe that we can take
"note with approval of the Government's assessment as set out in . . . the Financial Statement and Budget Report"
and we will, therefore, divide the House at the end of the debate. 10.42 pm
Mr. John Wilkinson (Ruislip-Northwood): I thought that my hon. Friend the Paymaster General was unnecessarily laconic in his opening remarks. He was, of course, following the precedent of his predecessor, my right hon. Friend the Secretary of State for National Heritage, who spoke for only four minutes in the debate last year. I think that my hon. Friend spoke for about the same time, which was an unusually modest contribution, as we are asked to approve a motion that suggests
"That this House takes note with approval of the Government's assessment as set out in chapters 4, 5 and 6"
of the Red Book.
Normally, when the Government are pleased with their achievements they do not demonstrate such false modesty. If they are being modest tonight, it is perhaps because they have something to hide. If they have something to hide, it is not the technicalities of the motion, which are clear, as much as the inference in them, which is plain because it is set out in statute form in the European Communities (Amendment) Act 1993.
It is not Labour Members who should take pride in the fact that we are having this debate tonight but the minority on the Conservative Benches, who turned the arithmetic
Column 798round to ensure that, at least for one and a half hours every year, we debate the progress of Her Majesty's Government in meeting the convergence criteria set out in the Maastricht treaty.
As my hon. Friend the Minister alluded to those criteria, it is worth reminding ourselves what they are. He referred to article 103, the first paragraph of which says:
"Member States shall regard their economic policies as a matter of common concern and shall co-ordinate them within the Council". This is yet further proof of something which we knew all too well--that there has been a steady erosion of sovereignty and a transfer of authority over our economic management, not least in budget deficits and the ratio of Government debt to gross domestic product.
Mr. Andrew Rowe (Mid-Kent): On this day of all days, when the failure of a relatively small British bank has sent ripples through the entire global economy, is my hon. Friend suggesting that it is easy to isolate our economy from all the other economies?
Mr. Wilkinson: My hon. Friend makes a jump in rationality that defies belief. I was sticking to the motion on the Order Paper and the exact reference criteria set down in the treaty: the 3 per cent. PSBR to GDP ratio and the 60 per cent. Government debt to GDP ratio, which are clearly established in the relevant protocol. I did not refer to the global economy or discuss the inter-relationship between one financial centre and another but was dealing with the motion on the Order Paper. You, Mr. Deputy Speaker, will agree that, in this short debate, that is quite enough.
Mr. Deputy Speaker (Mr. Geoffrey Lofthouse): Order. That is not necessary. The other day I deliberately pointed out that good manners seem to be leaving the House. There is no need whatever for insults in these debates. On reflection, perhaps the hon. Gentleman will withdraw that remark.
Paragraph 3 says:
"In order to ensure closer co-ordination of the economic performances of the Member States, the Council shall on the basis of reports submitted by the Commission monitor economic developments in each of the Member States".
This bears out exactly what I was saying. Inasmuch as the Commission has powers, if those relevant criteria are not met, to impose sanctions on countries that do not fulfil those obligations, I should have thought that it was, at the very least, a democratic requirement that this House should have an opportunity to debate the Government's performance in fulfilling those criteria.
Column 799The Red Book makes it perfectly plain that, in the coming financial year, the United Kingdom will meet exactly the criteria of PSBR to Government debt and, compared with Italy, Spain, Greece and even Belgium, has a far tougher fiscal stance and maintains a far lower ratio of Government borrowing to GDP. The fact that we do so much better, as the Red Book makes clear, shows the difficulty of achieving convergence and the quantity of funds that will have to be disbursed from well- performing economies, such as our own and those of France and Germany, to redress these imbalances of economic performance. Those transfers of resources will be a cost to our people, as we saw during the passage of the European Communities (Finance) Bill in November.
The Government should come clean about the objectives behind the convergence process. They can rightly take pride in reasserting fiscal and budgetary discipline and I share with them wholehearted approval for what they have achieved in that regard to date. The qualities of fiscal and budgetary discipline are meritorious in their own right but not in relation to a process of supervision and, potentially, ultimate control to be exercised by the Commission and then the Council of the European Union. I do not think it appropriate either that the European Parliament should be a reference body to whom the defaulting nation's performance will be reported, as is provided for under the terms of the Maastricht treaty.
That said, I will not disapprove or vote against the motion. The Government, by passing those parts of the treaty, have accepted the objectives of convergence as they relate to economic and monetary union. Although we have a technical derogation by virtue of our opt-out, nevertheless we have accepted the disciplines that are germane to economic and monetary union, regardless of whether they fulfil the circumstances of our economy at any one time. At the moment, they do and I am delighted that we have made such progress. I hope that my hon. Friend the Minister will answer those points when he replies and that his right hon. Friend the Prime Minister will do so at greater length on Wednesday afternoon.
Mr. Malcolm Bruce (Gordon): In a sense, that was an extraordinary speech. The hon. Member for Ruislip-Northwood (Mr. Wilkinson) aspires to some form of splendid isolation, but he concluded his speech by congratulating the Government on being on course for convergence and said, "Please God, let it never happen." That reflects some inconsistency in his argument.
The debate is likely to be an annual event, which probably should be a little depressing to the House. The wording of the motion could have been a little more felicitous, because all that is required is that the Government seek the House's approval to submit progress reports on our economic convergence criteria. Section 5 of the European Communities (Amendment) Act 1993, however, also asks for a report on the social and environmental goals set. Although I appreciate that it is not the Treasury's job to set those goals, the motion contains no reference to the Government having any intention to do so.
Column 800I remind the House that section 5 stemmed from an amendment tabled by the Labour party, of which the Liberal Democrats did not approve, but which the Government, rather astonishingly, accepted. Having done so, the Government should fulfil the section's terms. They have done two things to make that somewhat difficult. They have shown no regard for the full text of the Act. I am not sure what the implications of their defiance of an Act, which they accepted, amounts to. I suppose it requires someone to take them to court for a judicial review. Where is the social and environmental report, which was required by the Act? Will the Government provide it? Secondly, why are we being asked to note the Government's assessment "with approval", which requires everyone to endorse the Government's economic policy? Many of us wish the Government to strive to fulfil the spirit of the Maastricht treaty, unlike the hon. Member for Ruislip-Northwood, but that does not necessarily mean that the Government's policies by definition will eventually lead in that direction. Tearing a few pages out of the Red Book, throwing them down on the Floor of the House and in effect saying, "This is our economic strategy; please support it," does not show willingness to accept the letter or the spirit of the Act.
Interestingly, the Government talk about the opt-out that they have secured and the current success of their convergence criteria but do not appear to come to grips with the fact that our ability to opt in may be seriously questioned, not merely whether we can meet the convergence criteria, which we have not done yet and may still have difficulty in doing. If we met those criteria, the capability of the British economy to cope with the strains that a single currency would provide may bring our ability to opt in into question.
I say that personally and as a representative of a party that wants monetary union but believes that the Government have not really set their mind to the implications with anything like the rigour that is necessary. In those circumstances, we would have welcomed a fuller explanation, not simply of where we were, but of where we were going and the way in which we were going to get there.
Mr. Austin Mitchell (Great Grimsby): If the hon. Gentleman has those doubts about the economy's capability to fit into monetary union, why, two or three years ago, was the Liberal party chanting, "Move to the narrower bands of the exchange rate mechanism now"?
Mr. Bruce: Had the Government moved to the position that we took at the time that we said, they would not have finished up in a mess. [Interruption.] What happened--which also reinforces the case for a politically independent central bank--was that Lord Lawson did the most damaging thing that any Government could do: he joined the exchange rate mechanism at the worst possible moment, at the worst possible exchange rate and for the worst possible reason, which was to obtain a standing ovation at the Conservative party conference the next day. That is no way to run the economy and, sadly, the Government have failed to recognise that a commitment to a single currency--even in principle, never mind with or without an opt-out--requires an extremely rigorous economic policy, which the Government have shown no real application to deliver.
Column 801To finish that specific argument, which is only parenthetical but which I wish to make absolutely clear, I should say that it remains the opinion of the Liberal Democrats, and my personal opinion, that Britain should be taking a positive role in the development of closer political and economic union in the European Union and the development of a single currency. There is no doubt that the expertise that we have in the country should be used, but before we have even begun to opt in we have weakened our bargaining position and undermined our ability to shape the rules and regulations under which a single currency will be developed.
As a consequence, there is a real danger that the Government, having left the position open, may find that the British economy is not strong enough to sustain membership of monetary union because they have not applied themselves now. I earnestly hoped that the Minister would explain in much more rigorous terms how we shall ensure that the British economy invests strongly enough, organises strongly enough and accepts the cultural changes necessary to ensure that the choice of opting in and opting out was a real choice, based on a real understanding of the needs of the British economy.
Mr. Butterfill: The hon. Gentleman complains that the Government are not pursuing policies that create strong growth in the economy and are not ensuring rigorous application of fiscal standards. Will he explain why the Liberal party consistently votes for increased public expenditure in almost every Division, yet failed to vote for, and indeed voted against, increases in taxation?
Mr. Bruce: That simply is not true. I remind the hon. Gentleman that it was the Liberal Democrats, and myself in person, who voted against the cost of electricity privatisation and the £7 billion of debt write-off that would have passed through the House on the nod until I spoke against the money resolution. I am not prepared to take lectures from Conservative Members who are selective about when they oppose public expenditure. If the Barings rescue had required public money, Conservative Members might have agreed to it because of their need to support their friends in the City. Their opposition of public expenditure is selective, and I do not accept the justification behind the hon. Gentleman's intervention.
The Government, having accepted the amendment to the European Communities (Amendment) Act--an amendment that my party and I did not support, but which the Government accepted from the Opposition--should have recognised that it required more than just a few pages from the Red Book and a vote of confidence in their economic policy. The terms of the Act require a social and environmental report, about which we have heard nothing. We have had no clear sign of whether the Government intend to introduce it.
I want to make it clear to the Minister so that there is no doubt that we do not wish the Government to be placed in a situation where they cannot fulfil their obligations under the Maastricht treaty, which we support. There is a
Column 802duty on them to make a report to meet their treaty obligations, not simply to invite a motion of confidence in terms that do not address the whole issue.
On a constructive note, if this is be an annual event, it would be extremely helpful if the motion were in terms that required endorsement not of Government policy but of their submission of a report on the progress achieved by the British economy. Had that been so tonight, my party and I would have had no hesitation in supporting the Minister. If the Government take that view in future, the Minister will have my support and that of the Liberal Democrats. It is unfortunate that the motion was tabled with a lack of thought. I hope the Minister will understand that the Act contains terms that have not been addressed but which the Government should take seriously.
Mr. Tim Smith (Beaconsfield): At the start of her speech I asked the hon. Member for Durham, North-West (Ms Armstrong) why we were having this debate and she failed to provide an adequate explanation. My hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson) has explained that the object of the exercise is to see to what extent we are complying with the convergence conditions of the Maastricht treaty. I could not understand the motion when I looked at it because it seemed that we were being asked to approve three chapters in the Red Book, which is effectively part of the Budget--the House debated the Budget for four or five days and approved it some months ago. We are now being asked to approve the very same information that is contained in chapters 4, 5 and 6 of the Red Book.
As my hon. Friend said, and as I now understand, the real object of the exercise is to see to what extent we are complying with the convergence criteria, only two of which are relevant. The first is the level of public sector borrowing and the second is total Government debt as a proportion of gross domestic product. I agree with my hon. Friend that the targets of reducing those two levels were justified on their merits. He was not so happy about the idea that we should try to bring about convergence in the European Union. Quite apart from the debate about a single currency, the very concept of trying to achieve convergence is justified on its merits. If we manage to get Government borrowing below 3 per cent. in all member states, we will have a considerably greater degree of exchange rate, inflation and interest rates stability than at present. Those things are all worth while per se; they would be guaranteed if we had a single currency, but the very fact that we are moving towards one will bring about much more stable trading conditions in the EU. I support the concept of convergence criteria. I am not quite as sanguine as my hon. Friend the Member for Ruislip-Northwood is about the progress that we are making. The news release which was published by the Central Statistical Office on 21 February sets out the figures that are to be sent to the Commission; they are not the figures in the Red Book because they have to be adjusted to comply with the European system of integrated accounts. That results in a considerable addition to Government borrowing in terms of the public sector borrowing requirement and shows the following figures, admittedly now historical. The figure for 1992, as a percentage of GDP, is 6.1 per cent. and for the calendar
Column 803year 1993, it is 7.9 per cent. I think that when we get the figures for 1994 we shall see some reduction, but those figures are hardly cause for complacency.
There is not much cause for complacency in the figures for total Government debt as a proportion of GDP. In 1992 Government debt as a proportion of GDP was 41.9 per cent., and it rose to 48.5 per cent. in 1993. That is not far short of a 60 per cent. ceiling. I fully support the Government's determination to reduce the high level of public sector borrowing and to reduce total Government debt as a proportion of GDP over a period of time. The figures in the Red Book show that those objectives will be achieved in four or five years. I am glad that this information will be sent to the European Commission because there is a very interesting table at the back of the Red Book which shows the history of public spending over the past 30 years. It gives the lie to most people's perceptions of public spending. According to the table, in the past 30 years Governments have reduced the level of public spending in real terms in only four years. In three of those years--1968-69, 1976-77 and 1977-78--a Labour Government were in power.
The last Labour Government were responsible for the largest cumulative reduction in public spending. In 1974-75--their first year in office--they cut public spending from £220 billion, in current values, to £205 billion three years later. This Government have increased public spending in every year except 1988-89. We should ensure not only that we cut public spending as a proportion of gross domestic product--
Mr. Smith: The hon. Gentleman is wrong if he thinks that elections are won by increasing the level of public spending; I do not believe that they are. I believe that a healthy economy is one which spends well below 40 per cent. as a proportion of GDP in the public sector so that more wealth is retained in the private sector to enable the real economy--about which the hon. Member for Durham, North-West claims to be concerned--to grow and to provide real jobs.
The Government aim to reduce public spending to 40 per cent. and below. In the mid-1960s public spending as a percentage of GDP was 36 and 37 per cent. That is the kind of target that we should aim at now.
Mr. Butterfill: When my hon. Friend refers to the cuts in public spending perpetrated by the Labour party, is he thinking particularly of the cuts which the International Monetary Fund ordered it to make to spending on hospitals and the health service generally?
Mr. Smith: Mr. Deputy Speaker, you probably remember when the last Labour Government achieved huge cuts in public spending through massive reductions in capital expenditure. My hon. Friend the Member for Bournemouth, West (Mr. Butterfill) is right: the funding programme for hospitals was cut by 20 per cent. in one year as a result of the intervention of the International Monetary Fund and Mr. Johannes Witteveen, who took over the running of the British economy at that time.
Today we are back on track to reduce public spending and public borrowing, which is the key point as far as the Maastricht criteria are concerned. I believe that that
Column 804reduction is justified on its merits, but I am also glad that we are making progress in complying with our treaty obligations. 11.8 pm
Mr. Austin Mitchell (Great Grimsby): The hon. Member for Beaconsfield (Mr. Smith) does not realise that an economy's ability to bear any level of public spending depends on the health and vigour of that economy. A fast-growing, vigorous economy can bear a much higher proportion of public spending--and would be advised to do so in order to improve the quality of life of most people. It is not the level of public spending as a proportion of GDP--40 per cent., 60 per cent. or whatever it may be--but the underlying strength of the economy that is crucial.
The problem with the convergence criteria that we are discussing tonight is that they are, in effect, deflationary criteria--they are daft and damaging criteria. The nearer the Government come to achieving those criteria, the more they will damage the underlying economic recovery in which the Government take so much pride. The Government were not responsible for that recovery; Mr. George Soros was. Having achieved that, it seems disastrous to clobber the recovery in the way that the Government are, by imposing high interest at double historic rates to fulfil damaging convergence criteria. I am sorry that that was not explained by the Minister, who took pride in the recovery. If he takes pride also in moving nearer to or achieving the convergence criteria, the recovery will be destroyed.
All the criteria are deflationary. It is interesting to hear the Chancellor and members of my Front Bench wishing that there were other convergence criteria, such as real growth, productivity and the underlying strength of the economy. That is fantasy. The convergence criteria in the treaty that must be fulfilled are all deflationary. They all amount to achieving price stability. The more we co-ordinate those criteria in Europe, the more we will co-ordinate deflationary measures that damage our economy.
In the long term, the only way to reduce the public sector deficit is to achieve a rate of growth that generates jobs and brings a return to full employment. That way, more people will be in work to pay more taxes, so more revenue will be generated while less is paid in unemployment and social security benefits. That is the only way to reduce borrowing.
We need this first real burst of sustained growth in the life of this Government. They did not want it but it was forced on them. We need that growth to be boosted. Industry will not invest or expand in the way that the Chancellor and the Governor of the Bank of England are always lecturing about unless industry has a prospect of growth. That means the prospect of sustained competitiveness and lower interest rates.
Every time that the Governor increases interest rates, he damages the economy's prospects and makes investment less likely. He also guarantees that the opportunity for growth that has been thrust on the Government will not be seized.
I am sorry that the Governor's weekend was spoiled by matters that have no bearing on the debate. I wish that he had spoiled more weekends deliberating on the fate of manufacturing companies that have been shedding jobs
Column 805and closing. When the Governor is in a working weekend mode, he should contemplate the effect that he has on the recovery by increasing interest rates to today's high level.
Why is the Chancellor increasing taxes and the Governor increasing interest rates and clobbering demand? Perhaps they want to keep the pound at a higher level than it should be for the purposes of competitiveness, to regain some of the ground that the Chancellor and the Governor thought Britain lost by leaving the exchange rate mechanism. Shadowing the deutschmark is to revert to Lawson policies. That is one explanation for the folly. The other is that the only way to attain the convergence criteria is to deflate demand.
Both processes are damaging, and the Government owe the House an explanation for their actions. Why are they strangling their own recovery? Is it to shadow the deutschmark and to show ourselves to be communautaire, or is to attain the insane convergence criteria? 11.13 pm