House of Commons Hansard Debates for 12 Jul 1995

Column 968

I would appreciate your clarification, Madam Speaker, that while they are entitled to open and close their debate, they are perfectly free to catch your eye, as five successive Conservative Back- Bench Members did yesterday. Is not the real reason for their absence that they were just not interested in the debate, and does that not show an appalling lack of gratitude for your championing of the rights of Back- Bench Members?

Madam Speaker: All Members know that, if they wish to intervene at any time on someone else's speech, it is for the Member who has the floor to decide whether to give way. Quite a number of Members wished to speak in both the debates that were sponsored yesterday by the Liberal Democrats.

Perhaps we might get on. I have an inordinately long list of Members who wish to speak in the debate today, and I shall have to limit speeches by Back Benchers to 10 minutes.

Mr. Luff: Further to that point of order, Madam Speaker.

Madam Speaker: Order. It was not a point of order for the Chair. We have enough business without petty points of order from all parts of the House. We have business to conduct

BILL PRESENTED

Fair Employment (Duty on Northern Ireland Departments)

Mr. Michael Connarty presented a Bill to make it a duty of every Northern Ireland Department to promote equality of opportunity: And the same was read the First time; and ordered to be read a Second time upon 14 July, and to be printed. [Bill 163.]

Column 969

Youth Service

4.43 pm

Mr. Peter Kilfoyle (Liverpool, Walton): I beg to move,

That leave be given to bring in a Bill to establish the Youth Service on a statutory basis.

I seek leave to bring in the Bill in the full knowledge that hon. Members in all parts of the House have, over a long time, sought to bring in such a measure to establish the youth service in such a way. The reason seems self -evident. It is that the youth service is an extremely cost-effective way to deal with the many problems that young people face.

That great watershed, the Education Act 1944, set in motion a train that was reinforced by a number of reports commissioned by the Government. They were the McNair report, the Jackson report and the Fletcher report. Interestingly, when we reached about 1957, the Albemarle committee was set up in response, ironically enough, to the Notting Hill riots. Its work added substance to a national consensus towards establishing the youth service on a statutory basis. Sadly, in recent years the youth service has shown a marked decline. I would argue that Government action has subverted its role. It is also interesting that the last time that there appeared to be a major Government interest in youth service provision was after the 1981 riots. I hope that it will not take another round of riots before we interest the Government again in the state of the youth service and the lack of resources it faces.

The youth service most certainly faces a lack of resources. I mentioned that it was a cost-effective service. The cost works out at roughly £10 per annum per youngster who uses it. More than 5 million people use the youth service. Those 5 million young people who are actively in contact with the service are serviced by only 6,000 full-time youth workers in England, Scotland and Wales combined. They are assisted by thousands of part-timers, and more than 2 million volunteers who give of their time and energy. Those people obviously recognise the value of the work that is done, not only in the local government sector but--the vast majority--in the voluntary sector. If nothing else, both the voluntary and the statutory sectors recognise the community of interest they have in having the youth service placed on a statutory basis. There are now fewer full-time youth workers than in 1978. The voluntary sector has suffered in the same way in terms of Government cuts. NABC-Clubs for Young People, a charity, has reported that its funding from central Government has fallen by 40 per cent. Its funding from local government has fallen by 10 per cent.

The reason is not too hard to divine. As the youth service is not on a statutory basis, when Government cuts are forced through in education throughout the land, it is always one of the first services to suffer. I would argue that that is untenable, given the situation our young people face today.

Column 970

I remind the House that 750,000 young people between the ages of 16 and 24 are outside work, outside education, outside training, outside benefits and outside Government statistics. Those 750,000 people are our own disappeared, disengaged and alienated section of the population. If that does not trigger a response from Members of Parliament and Conservative Members in particular, they should remember that, at the last general election, 2.5 million first-time voters--the self-same young people--did not bother to exercise the franchise. That was almost 47 per cent. of the total.

We talk about the alienation of our young people from the political process. It is not too hard to see why they are alienated, given that they are in a changing world, facing different problems from those that the vast majority of hon. Members on both sides of the House knew when they were young.

Let us think back to our own years in that age group. The majority of people in the House were in that age group in the 1950s, 1960s and 1970s. In those days, there was open access to education. One could look for a job of whatever sort. They were the halcyon days of apprenticeships for huge numbers of our young people. They were days when people felt engaged. They had hopes and aspirations that were achievable.

That has sadly changed. A whole group of people are shown in survey after survey to have no inclination towards what we would call orthodox society. They are turning their backs on it, for the simple reason that they perceive that we have turned our backs on them. There is one vital difference between the experiences that we all had and those of young people today. They do not have recognisable rites of passage or know that there is a flow to their lives with regular markers that they can follow, such as going into the work force as an apprentice and getting qualified, having access to education, knowing that at the end of it one can get a job or access to something as simple as benefits. Many of our young people-- about 160,000 16 and 17-year-olds alone--have been taken completely out of the benefits net.

One of the few agencies that is actively involved with engaging young people in a debate about their interests and future is the youth service. It deserves all the support and encouragement we can give it. We have to say to young people, even if it is by proxy through support for a statutory basis to the youth service, that we are concerned about delivering to them. After all, they are our future. We only steward the country for their generation and for generations to come. Our stewardship is failing them badly. Question put and agreed to.

Bill ordered to be brought in by Mr. Peter Kilfoyle,Mr. Greg Pope, Mr. Alun Michael, Mrs. Jane Kennedy,Mr. John Heppell, Mr. David Jamieson, Ms Ann Coffey,Mr. Keith Vaz, Mr. Kevin Hughes, Mr. David Hanson,Mr. Tony Lloyd and Mr. Mike Hall.

Youth Service

Mr. Kilfoyle accordingly presented a Bill to establish the Youth Service on a statutory basis: And the same was read the First time; and ordered to be read a Second time upon Friday 14 July, and to be printed. [Bill 164.]

Column 971

The Economy

[Relevant document: The Minutes of Evidence taken before the Treasury and Civil Service Committee on Wednesday 5th July and Thursday 6th July (House of Commons Papers Nos. 650-ii and iii.]

Mr. Deputy Speaker (Sir Geoffrey Lofthouse): I have to inform the House that Madam Speaker has selected the amendment standing in the name of the Leader of the Opposition.

4.51 pm

The Chancellor of the Exchequer (Mr. Kenneth Clarke): I beg to move,

That this House welcomes the publication of the Government's latest forecast, which shows growth continuing at a steady and sustainable rate, inflation remaining low, exports rising and Government borrowing falling; and recognises that this favourable outlook for the economy is a result of the Government's firm commitment to the healthy and sustainable recovery of a modern and competitive industrial economy.

On Monday, Welsh Labour and Liberal Members failed to turn up at Welsh Question Time. I can only assume that they could not think of anything that they wished to say or ask. I am rather surprised that the hon. Member for Dunfermline, East (Mr. Brown) has turned up this afternoon, because he can never think of anything to say that resembles an economic policy. In fact, he comes to debates only when he has to. Once a year at the Budget, and once a year for the summer economic forecast, he hears me describe the progress of the recovery and I set out the encouraging framework for the year ahead. The hon. Gentleman gets up, tells us a few jokes, gives us a few grumbles and platitudes and then he is away again.

All the parliamentary days that the Opposition have allocated to them during the year are problems for the Labour party. It has to cast around for subjects that it wishes to raise. Never once in my time as Chancellor of the Exchequer has it asked for a debate on the British economy. This is a debating Chamber, but so far I have had two years of debating with a tartan Trappist monk.

Why can that be? Why has the hon. Gentleman suddenly become such a diffident shadow Chancellor? The summer forecasts, which we are debating because they are statutorily produced at this time of year, show why. They show that the British economy is doing well and that it will carry on doing well. Anything that is good news for Britain is very bad news for the Labour party.

With every quarter that goes by, this country creates more wealth and more jobs and wins more export markets. The day steadily gets nearer when most people will appreciate from their daily lives that this healthy recovery is delivering rising living standards, more secure employment and more secure family finances.

How can the hon. Gentleman make a speech as shadow Chancellor when he cannot even say whether he agrees with me on interest rates? How can he face the House when he does not have an inflation target? How can he criticise the public finances when he will not say whether public borrowing is too high or too low? He only sets himself a borrowing target that is about as rubbery as an elastic band.

Mr. Alan Milburn (Darlington): Will the Chancellor give way?

Column 972

Mr. Clarke: It is a little early. I usually give way frequently and shall do so in due course if Mr. Deputy Speaker allows it.

Mr. Gordon Brown (Dunfermline, East): On the precise matter of the borrowing target, given that the Prime Minister said in 1988 that he would balance the Budget every year, will the Chancellor tell us the first year when he will be able to balance the Budget--is it this century or the next?

Mr. Clarke: There is a forecast which shows that we are well on course to balance in the medium term. Recalling the Red Book, I think that we show balance in about 1998-99, or something of that kind. We are certainly on course towards balance in the medium term. Mr. Brown rose --

Mr. Clarke: I shall give way again in a moment. In the two years in which the hon. Gentleman has failed to raise the subject of the British economy in the House, he has seen us cut the forecast borrowing requirement, from £50 billion when I took office, to £23.5 billion next year. We have halved it. We are reducing public borrowing and controlling public spending despite all the hon. Gentleman's votes against us. We are well on course to balance in the medium term.

Mr. Brown: Given that the Government have broken all their promises on tax and are now breaking their promises on spending, will the Chancellor confirm that he is breaking the promise made on the balanced Budget? The Prime Minister said that the Budget would balance every year. Will the Chancellor tell us in which year the Budget will balance, and confirm that in 1998-99 there is a deficit of £5 billion in the Budget forecast and that he is wrong?

Mr. Clarke: It is my recollection that the Government's policy--in contrast to the Opposition, who have not had one--is to move towards balance in the medium term. That is all I can recall. I do not recall the 1988 quotation and I do not rely on the hon. Gentleman's recollection of it. We have always made it clear that we believe in balancing the public finances over the medium term. It has always seemed to me obvious that public finances go into deficit in times of recession and recover at the top of the cycle. We are on course for that. Indeed, we have been controlling public borrowing very effectively for the past two years in the teeth of the votes and opposition of the hon. Member for Dunfermline, East.

Mr. Milburn: Will the Chancellor give way?

Mr. Clarke: No, I must press on to the summer economic forecast, which is what we are debating and which the hon. Member for Dunfermline, East must have forced himself to read. No doubt he read it through tears and while concentrating ground his teeth, because the summer economic forecast shows that 1994 was an excellent year for the British economy. Output grew by around 4 per cent., which was faster than in any other major European economy; inflation had its best run since the early 1960s; exports grew by more than 8 per cent.; and unemployment fell by more than a third of a million in 1994 alone.

Column 973

The combination of healthy growth, low inflation, strong exports, rising incomes and employment and a falling budget deficit is set, as the forecast shows, to continue in the years ahead. These are the best economic prospects for future growth and prosperity that I have seen in my career in politics.

Partly due to the policy measures that I have put in place, growth has slowed to a more sustainable rate this year. That is deliberate and desirable. The British people want greater economic security and they want to be sure that this time growth will last. The Government are working hard to deliver an economic recovery on which the public can rely-- [Interruption.] I shall return to the amendment signed by the hon. Member for Bolsover (Mr. Skinner) and his economic policy in a moment. I was delighted to see it on the Order Paper and I shall give it its fair measure of attention when I get there.

The hon. Member for Bolsover has far more by way of clear economic policy than members of the shadow Front Bench. The contrast between the two is interesting and enlightening. Although it was not called, I propose to speak to the hon. Gentleman's amendment if I can do so and remain in order.

Mr. Tony Marlow (Northampton, North) rose --

Hon. Members: Give way to him.

Mr. Clarke: I shall give way to the hon. Gentleman--my hon. Friend-- in a moment. Surrounded by a range of opinions on this subject, the Government are delivering a healthy economic recovery, which will not be derailed by inflation, as it so regularly has been in the past.

Mr. Marlow: My right hon. and learned Friend knows that the list of wonderful and desirable things he is talking about could well be affected by whether at some stage the United Kingdom joins the single currency. There was a vote last week in the Conservative party and 89 of his colleagues signified their support for a platform of no single currency. Does not that mean that there is no possibility in the near future that a Conservative Government could ever seek to put a single currency before the British people? If so, would not it be wise to advise the Europeans that there is not going to be a single currency in Britain? [Interruption.]

Mr. Deputy Speaker: Order. Before the Chancellor answers, the House must settle down. I remind hon. Members that interventions are supposed to be brief and to the point.

Mr. Clarke: I shall stick to the summer economic forecast. We have come here to debate the summer economic forecast, yet those on the Opposition Front Bench have nothing to say, Opposition Back Benchers wish to put forward a very socialist programme and my hon. Friend the Member for Northampton, North (Mr. Marlow) brings up one subject, regardless of what we are debating, on each and every occasion. Judgments about the single currency will be made in the interests of the British economy and in the best judgment of the House if and when the issue arises. At the moment we have a strong, steady recovery, which must be sustained.

Column 974

The Treasury summer economic forecast shows that we remain on course to deliver sustainable growth. There is no need to react too strongly to the recent slowdown in activity. The reason why I am confident that this is merely a change of pace on a continuing running recovery is that the fundamentals of the economy are now in such sound shape. We expect the economy to grow by around 3 per cent. this year and by 2 per cent. next year. That growth will continue to be led by exports, supported by business investment. We expect the current account balance to continue to narrow from £2 billion in 1995 to £1 billion in 1996.

One important feature of the recovery has been that inflation has stayed low as the recovery has matured. Underlying inflation has now been below 3 per cent. for the past 20 months. That is the best performance on inflation that this country has seen since 1961. We expect underlying inflation to rise temporarily to around 3 per cent. by the end of this year, as some of the effects of the recent depreciation of sterling and the worldwide increase in commodity prices feed through into the price change. We then expect inflation to fall back to 2 per cent. by the end of 1996.

The forecast also shows that Government borrowing is on a clear downward path. We expect the public sector borrowing requirement to have halved between 1993-94 and 1995-96 and to fall to £16 billion--just 2 per cent. of gross domestic product--in 1996-97. Mr. Malcolm Bruce (Gordon) rose --

Mr. Clarke: Britain's budget deficit is falling faster than that of any other major European country.

Several hon. Members rose --

Mr. Clarke: I think that the hon. Member for Gordon (Mr. Bruce) was first.

Mr. Bruce: I appreciate the fact that the Chancellor wished to finish that point. Does he believe that the forecast of a public sector borrowing requirement of £16 billion for next year would be a favourable background against which to cut taxes, or that he should be continuing to fulfil the golden rule of achieving a balanced budget?

Mr. Clarke: I have always refused to set a figure at which we would cut taxes and a figure at which we would increase them. Budget judgments are far more complex than that. However, it is absolutely essential that public sector borrowing is on course to achieve the balance over the medium term, which is the Government's clear target. Other than that, it is not as straightforward as the hon. Gentleman states, or merely a matter of saying that the PSBR is a particular figure this year and that taxes go up or down.

Mr. Milburn: Will the Chancellor explain why the summer forecast has revised the PSBR upwards from £21 billion to £23 billion? Will he answer the question asked by my hon. Friend the Member for Dunfermline, East (Mr. Brown), the shadow Chancellor: on which date does he expect there to be a balanced budget?

Mr. Clarke: I have explained to the Treasury and Civil Service Committee why we have revised the figure up slightly. The tax take is somewhat lower than we expected for a variety of reasons, including our success with inflation. When wage inflation and other inflation is kept

Column 975

down, the tax take is reduced. It is an irony that, on the margins, low inflation is bad for the PSBR. Our taxes are affected by a low level of inflation, but we set the spending budgets of the Departments in cash so that they spend up to the cash figure set on higher estimates of inflation. That is why we have changed the figure.

Mr. Milburn: What about the target?

Mr. Clarke: The target is to move towards balance over the medium term. I do not believe that, some time in 1988, we made a different promise. I seriously doubt that, but I shall check.

Mr. Gordon Brown: On balancing the budget and tax cuts, will the right hon. and learned Gentleman confirm the following statement in the Conservative party economic brief for this debate? It states: "The Prime Minister has announced that it is his objective to reduce capital and inheritance taxes, and if possible, abolish them altogether."

Is it the Government's policy to abolish capital gains tax and inheritance tax at a cost of £3 billion?

Mr. Clarke: I heard the Prime Minister last give that long-term objective in a recent speech. In the longer term, I know that the Prime Minister believes that it should be reasonable to get rid of capital gains tax and inheritance tax as well. Inheritance tax is extremely uneven in the way that it falls. Capital gains tax in this country bears quite heavily on some forms of investment, but the Prime Minister has given no sort of commitment about when we might achieve such an ambitious objective. [Interruption.] I heard the speech, unlike the hon. Member for Dunfermline, East. The Prime Minister set out those objectives as a long- term aim for the Conservative party.

Mr. Brown: It is becoming very revealing that the Prime Minister is announcing the Chancellor's decisions in advance of the Chancellor, but will the right hon. and learned Gentleman further confirm that it is now the Government's policy to tax executive share options as income? Having resisted it in three separate Budget statements, but given that it is now being supported by the Tory members of the Employment Select Committee and- -I understand--by the Deputy Prime Minister, will the right hon. and learned Gentleman admit that he has been wrong and that it is now the Government's policy to tax executive share options as income and get millions of pounds into the Exchequer as a result?

Mr. Clarke: For a shadow spokesman who has not got a tax policy and cannot even say whether he thinks that taxes are too high or too low, the hon. Gentleman really must not mess about with his press cuttings in that way, trying to find interventions to make in a debate such as this. On share options, he must wait for the Greenbury committee report. [Interruption.] It was this Government who invited the setting up of the Greenbury committee and this Government who invited it to make recommendations. At the right time, we shall respond to Greenbury. Today, we are talking about a summer economic forecast, about which, for all the reasons that I have just been setting out, the hon. Gentleman does not want to talk. He is trying to change the subject from the British economy.

Column 976

Several hon. Members rose --

Mr. Clarke: No, I am not giving way.

Mr. Brown rose --

Mr. Clarke: I will of course give way to the Opposition Front-Bench spokesman, but not for faffing about trying to get soundbites out of this morning's newspapers. I would like him eventually to address the strong and healthy economic recovery on which he has no comment and for which he has no alternative policy.

Mr. Brown: It appears that the Government's tax policy has been handed over, not only from the Chancellor to the Prime Minister, but to the Greenbury committee. Does the right hon. and learned Gentleman support the principle of taxing executive share options as income? Has he now changed his mind?

Mr. Clarke: The Government are a low-taxation Government. We believe that the economy is more efficient as a low-taxation economy. We have already introduced the lowest corporate taxes in the world, we have a long- term aim of tackling inheritance tax and capital gains tax, we have committed ourselves to considering the Greenbury committee's response and everybody knows that we shall continue to reduce taxation as and when we can afford it and when it is in the best interests of the economy, which is in stark contrast to the total silence on the subject from the hon. Gentleman.

Mr. Doug Henderson (Newcastle upon Tyne, North): Will the Chancellor give way?

Mr. Clarke: I have given way far too often. I shall be criticised shortly for having given way too much.

Sir Michael Grylls (Surrey, North-West): Will my right hon. and learned Friend give way?

Mr. Clarke: I shall in a moment. This debate is becoming a dialogue with a man so unwilling to give a speech on the subject before us that he is praying for 10 o'clock tonight and trying to find other things to talk about.

I have just described an extremely healthy economy. Why are we having this debate, except for an opportunity for the hon. Member for Dunfermline, East to try to follow up his morning's reading of the newspapers? One of the curious complaints that some people make about this recovery is that it is too virtuous. They say that, because it is led by manufacturing and exports, the British people have not felt any immediate impact on their spending pattern, and they say that because it is free of inflation, people with heavy debts are not seeing their debts eroded by a fall in the value of the pound. All that tedious political chat about the feel-good factor at the end of last year has not made anybody believe the sort of rubbish that I have just been describing. The well-being of the people depends on wealth being created by a successful and competitive industrial economy. Secure prosperity cannot be created for families by short-term fiscal gimmicks or by letting prices and incomes rip. First, we must allow the economy to create the wealth and then the economy will distribute it. It is a virtuous recovery and virtue brings its rewards in confidence, security and prosperity for people once they are satisfied that the Government will deliver sustained performance.

Column 977

The strength of the British economy at the moment has not come about by chance. We now have the potential to enjoy the elusive goal of sustained, low-inflation growth because the Government have followed a determined and purposeful path. We have pursued the long-term interests of British industry and therefore of the British people.

The decisions that we have taken are now beginning to deliver real benefits to more and more people. Living standards are forecast to grow by £5 a week for households on average this year, and we forecast that they will rise by rather more than that the following year. Sticking to the policies that have pulled us out of recession can now ensure that living standards will rise not only this year and next year but the year after that and the year after that, and, I trust, for many years to come. That is economic security of the best kind. That is what families, pensioners, home owners, business men and everybody else in Britain today want.

Right hon. and hon. Members have the opportunity today to debate the latest Treasury forecast, and the excellent prospects for the economy and for our people, who expect to benefit from it. But of course forecasting is difficult, and the Government do not claim a monopoly of wisdom in that activity.

The hon. Member for Dunfermline, East used to come to the House with different forecasts of his own. Hon. Members will remember the unemployment forecast that he made in the House following the March 1963 Budget-- [Hon. Members:-- "When?"] I mean, the 1993 Budget. The hon. Gentleman must wish that it had been so long ago, but it was only two years ago that he said:

"I make one Budget forecast--that after the Budget, unemployment will rise this month, next month and for months afterwards."--[ Official Report , 17 March 1993; Vol. 221, c. 289.]

What happened? Unemployment fell that month and the next month, and it carried on falling for months afterwards. It has fallen by more than 600,000 since the hon. Gentleman made that disastrous forecast on behalf of the shadow Treasury team.

It is not fair to say that the hon. Gentleman is never cheerful. He used to smile a little when giving his very gloomy forecasts of disaster for the British economy. In September 1993, even more recently, he said that the balance of payments deficit would worsen over the next two years. What happened? The balance of payments improved; export growth outstripped imports.

The shadow Chancellor can make extremely cheerful forecasts. He was most optimistic about the economic prospects for Mexico. Only last September, in a speech at the National Film Theatre--a suitable setting--he singled out Mexico as a country that had

"pursued the right kind of economic policies".

Only three months later the peso collapsed, the economy went into crisis and the International Monetary Fund was called in to stump up the biggest loan in its history. Perhaps the Mexicans, like the British, appreciate today's silence, the absence of forecasts and of any serious economic commentary by the hon. Gentleman.

However, the hon. Member for Dunfermline, East is capable of being clear about some things. In September 1994, he entirely dismissed his political party's principles and past. He said:

Column 978

"The Old Labour Language--tax, spend and borrow, nationalisation, state planning, isolation, full-time jobs for life for men while women stay at home--are equally inappropriate to the demands of the future as they were to the needs of the past".

So much for the 1983 manifesto, on which the hon. Gentleman and the present leader of the Labour party were first elected to the House. New Labour language is all platitudes and gobbledegook, and it is no longer I alone who says that. On the Order Paper there is an alternative amendment, tabled by the right hon. Member for Chesterfield (Mr. Benn) and 15 other Labour Members. They have set out an alternative Labour party economic policy. [Interruption.] I am sure that that amendment can be spoken to later within the rules of order. It talks about the

"gap between rich and poor . . . and the damage being done . . . under capitalism".

It says that we are

"controlled by market forces which transfer power from the electors and their governments to unaccountable bankers and speculators",

and

"calls for . . . the maintenance of universal benefits" at a dignified level, and

"reforms to restore the rights of local authorities and trade unionists and to liberate the people"--

Mr. Deputy Speaker: Order. That amendment is not the amendment that we are to debate.

Mr. Clarke: I accept your judgment, Mr. Deputy Speaker, but that amendment has a lot more content than the one that we shall debate. Mr. Tony Benn (Chesterfield) rose --

Mr. Clarke: I shall give way in a moment-- [Interruption.] I usually describe Labour Members in the House as sitting in baffled silence like stuffed ducks behind the hon. Member for Dunfermline, East, but now some of the ducks are quacking, and they are setting off in different directions.

I shall give way to the right hon. Member for Chesterfield; he and I are conviction politicians in our different ways. Labour Back Benchers and I agree on one thing: new Labour is a hollow sham--empty, vacuous and devoid of any principle or purpose. Hon. Members on both sides of the House want to hear no more lists of strategies and no more endogenous growth theory. They wish to know what is the economic policy of a party that wants to form a Government.

Mr. Benn rose --

Next Section

Home Page