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7.28 pm

Mr. Geoffrey Robinson (Coventry, North-West): I shall not follow the hon. Member for Ryedale (Mr. Greenway) down his ever-lengthening wish list, and I shudder to think what his ideas would cost. Suffice it to say, scrapping capital gains tax and inheritance tax could cost £4.6 billion by the end of the century.

Before coming to the substance of today's aspect of the Gracious Speech, I want to refer in passing to the Asylum and Immigration Bill and a lady from the Philippines whom I am representing jointly in the House with the hon. Member for Warwick and Leamington (Sir D. Smith) and other hon. Members. Her name is Mrs. Teresita Bentley, whose permission to stay in this country was refused by the Home Secretary. I hope that the Bill will not prejudice her position and that the Home Secretary will look favourably on the representations that we have made.

We heard today from the Chancellor an attempt to redate the period of office of the Tory Government. Some time ago, my hon. Friends will recall, 1983 was taken as the start of the period of Tory government. That was the most propitious date that the Government could find at that time. They have been forced to change that. They now take 1981 as the start. They still refuse to take the obvious starting point of 1979, when they first came to office.

Whatever the Chancellor says, when one looks at the bare facts, the Tories' record is not one of great success, certainly not in the terms in which they have asked us to judge their performance. We did not set that standard. It was set by the former Chancellor, Lord Howe. He said that we must be judged against the relative performance of comparable countries' economies.

The Chancellor made the point, fairly enough, that growth was a key criterion. In terms of growth, we are 13th out of the 18 G7 and EC countries. That is not much to write home about. The Chancellor referred to jobs. There are 400,000 fewer jobs now than at the time of the election in 1979. I am sure that the whole House sincerely welcomes the recent period of declining unemployment. It is good that we have had such a period. However, the simple fact is that unemployment remains 400,000 higher than it was when the Conservatives took office.

In terms of employment creation, we are 20th out of the 24 OECD countries. In terms of male unemployment, we are fourth highest of the 15 EC countries. Since 1979, unemployment in Britain has been above the average for major industrial nations, the EU countries and the OECD countries. It is still above the average of the OECD countries, even after the welcome period of decline in the overall level. In terms of investment, we are still 21st in the league. Of the OECD countries, only Turkey has

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fewer 18-year-olds in education than Britain. That is not a particularly sparkling economic achievement on the part of the Government.

Let us take the precise factor on which the Government have set out to redress the balance and improve the position that they inherited--that is, taxation. There, too, their performance is poor. However, before I deal with taxation, I should like to deal with the vexed question from which the Chancellor sought to distract our attention. Why have we slipped from 13th to 18th in the league of GDP per head and purchasing power parities since the Conservative Government came to office? I am pleased to tell the House that I am aided in my argument by access to a Conservative research department brief prepared by Mr. James Walsh for the Queen's Speech debate on 22 November 1995.

The Chancellor diligently exploited the points in Mr. Walsh's brief. Mr. Walsh wrote:

He does not tell us why. He went on to say:

    "Labour's league table is another example of their cynicism: they don't care how spurious their figures are as long as they show Britain in a poor light."
How can we reckon Mr. Walsh's chances of promotion if he is prepared to say that, when the chart that we used was produced by the Government and signed by half the Cabinet--the Prime Minister, the Deputy Prime Minister, the Chancellor and all the rest of them? It showed precisely the figures that we have given. It was not some chart tucked away at the back of the document in some obscure appendix. It was given prime position on page 13 of the Government's key document.

Far from the table being an irrelevant consideration, it is the most relevant of all the considerations. It shows income per head, which, in its summation, tells us about all the other aspects of policy. It is true that productivity has increased. We welcome that, but unless it leads to an increase in output per head, it is of only relative value. The total output of the economy as a whole expressed per head and in terms of purchasing power parities is a measure of the Government's success. By that standard, they are found woefully wanting.

The Government are found equally wanting on the question of tax. The tax burden and the tax share of national income in the economy rose between 1979 and 1995, from almost 35 per cent. to more than 37 per cent. Ominously, it is the Government's own forecast that it will rise even higher, to more than 38 per cent. During the 16 years in which the Conservatives have been in office, the tax burden has averaged 37 per cent., compared with the previous averages of 36 and 34 per cent. under Labour Governments.

A typical British family now pays more in direct tax and indirect tax than when the Conservative Government took office. That brings us to the most recent period of government by the Conservative party. The Chancellor tried his best to explain how, with a burgeoning prospective budget deficit of £50 billion, the Government could find it in them to make the statements that they did just before the previous election, which they had to reverse within the year.

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We know that the increases in taxation that the Government have implemented come out at 7p in the pound, or getting on for £800 per family. Whatever the Government do, there is no way in which they can make good that enormous impost of taxation on the British people. What is the Conservatives' reaction? We have just heard the reaction of the hon. Member for Ryedale. The reaction to the fact that ordinary families are paying more tax than ever and that tax takes a higher percentage than ever of the income of working people across the board-- not only the least well-off, but all those on average or even double average income--is to propose doing yet again something that will benefit only the very well-off at the top of the pack.

The Government want to abolish inheritance tax and capital gains tax at a cost of £4.6 billion by the end of the century. The Government's response to the increase in the tax burden for all those who really need help is shameful. There is a similar failure on investment. In the Budget, the Chancellor intends to cut capital spending yet again. He says that it will be made up by the private finance initiative. As we know from the preceding Chancellor, the PFI was meant to achieve an increase in public expenditure, not to replace Government expenditure. So we have the prospect of a further rundown in the quality of our infrastructure. I think that all hon. Members will agree that a singular failure of successive Governments is that they have cut capital spending on the improvement of services. What we should be doing is increasing that investment.

I shall now examine the Labour party's approach to the economy. It is wrong for Conservative Members to say that we are not beginning to evolve the policies that we shall put into practice when we form the next Administration. I do not agree with what the Liberal Democrats do. It is not appropriate to come up with a draft alternative Budget. That is not a job for the Opposition, whoever is in opposition at the time. What we must present are the policies that we intend to adopt and fill out in the period leading up to the general election.

In terms of investment, we have already proposed doubling first-year allowances. That is a modest proposal, and I think that other Labour Members will agree with me that we could do something more than that. It is the one proven measure that really--

Mr. Deputy Speaker: Order. Time is up.

7.38 pm

Mr. Barry Legg (Milton Keynes, South-West): May I begin my remarks by welcoming my hon. Friend the Member for Ryedale (Mr. Greenway) back to the House. It is good to see him back in the House after his illness, and it was particularly good to see him give such a vigorous speech. I think that we were all greatly encouraged by his performance.

I should like to comment on one or two other speeches that we have heard this evening. We have had an eminently sensible speech from the right hon. Member for Lagan Valley (Mr. Molyneaux). He made some very sensible comments about the balance of fiscal and monetary policy, and he made some even more interesting comments about how long he sees this Parliament lasting--some 18 months or so. Indeed, those might be the most significant comments that we hear in the Chamber this evening.

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I also endorse the speech of my right hon. Friend the Member for Worthing (Sir T. Higgins). We will probably have three economic debates in less than three weeks. This one is less than a week from the Budget, which we will debate for a week from next Tuesday and shortly after that will be the Second Reading of the Finance Bill. Then we will probably have to wait until July for a further economic debate. The House authorities should consider the balance of our debates so that they can be held in a sensible way during the year.

This debate, which the Opposition have chosen, is too late to influence next week's Budget. I am sure that it has been set, but I hope that the Chancellor will be able to bring more confidence to the British economy when he addresses the House next Tuesday, and impress on people how good our economic prospects are. They are extremely good indeed. There is abundant scope for tighter public expenditure. During the past few months, many of my parliamentary colleagues have set out how that can be achieved, especially my hon. Friend the Member for Bridlington (Mr. Townend) and my right hon. Friend the Member for Wokingham (Mr. Redwood). There is plenty of scope for carefully controlling public expenditure and finding further savings. Consequent on firm control of public expenditure, there is scope for tax reductions.

My hon. Friend the Member for Ryedale was right to say that people need a bit more money in their pockets. Conservative Members believe that people are more likely to make the right decisions with their own money and to exercise their choice over spending that money. We do not believe that the Government by any means have a monopoly of wisdom. That is still a clear distinction between us and Opposition Members.

There is scope for tax reductions next week and we also need some adjustments in monetary policy, with interest rates coming down. I do not say so for political, but for economic reasons. When we see the Red Book next week and the way in which the economy performed in 1995, compared with what was forecast last year, we will see an economy that is growing less strongly. I believe that we will see weaker domestic demand, consumer expenditure, gross domestic product growth and fixed investment than was forecast in last year's Budget.

Significantly, we will also see a much lower GDP deflator--the measure of public sector inflation will be much lower than was forecast this time last year. That is the key reason why the spending totals for next year should be reduced and the reduction should be of the order of £7 billion to £8 billion. That is the degree of scope-- [Laughter.] The hon. Member for Clydesdale (Mr. Hood) may laugh, but he once again demonstrates the ignorance of the Opposition on economic matters. It is an ignorance that stretches from the shadow Chancellor all the way down to the most humble Labour Back Bencher, who is giggling at the moment.

When we see the figures next week, we will realise that the economy has grown less strongly in the past 12 months than was forecast in the last Budget in November 1994. If an economy is growing less strongly and has plenty of potential for further growth, as this one has, lower interest rates are the appropriate mechanism to use. During the year, we have heard arguments from the Governor of the Bank of England that interest rates should be kept high and pushed higher. Those were misjudgments and I am glad that the Chancellor overruled him.

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That also shows that the Bank of England is not yet ready for independence. Before one makes fundamental changes to institutions, one must be confident about those changes, and the Bank of England is not in a state to be independent. For an independent bank to operate successfully, it must have a strong collegiate approach, and the Bank of England is many years away from achieving that.

We do not need to see next week's Budget to realise how strong the deflationary pressures still are in this economy. We only have to look at the results of a major retailer, such as Sainsbury, to find that that company is under tremendous pressure to keep prices down in the high street. Those are competitive pressures.

Look at the latest figures on stock building. Many businesses have built up stocks in the past quarter and have probably done so to a higher level than necessary. If they are to release them into the economy, they will have to be sold at very competitive prices.

We heard a lot of nonsense about the privatised utilities from the shadow Chancellor. The Opposition want to concentrate on one issue, directors' pay, but we must consider how the utilities are operating, and the efficiencies and improvements in productivity that they are achieving.

The shadow Chancellor said that the next electricity privatisation would only result in a £1 billion rebate for the consumer. Under Labour, there would be no rebate because that business, like every other business that has been privatised, would have been retained in the public sector. By releasing those businesses into the private sector, we have provided the mechanism to improve efficiency and productivity. What does that mean at the end of the day? Lower prices for the consumer. That would never have happened under Labour. Those lower prices will continue to come through in our retail price index figures.

Next year we face the prospect of very low inflation levels. I suspect that RPI inflation may well be 1 per cent. What a crowning achievement for the Government to get inflation back to a level that we have not seen for 40 years. That is the prospect that we are holding out to the country. With inflation at that level we could also have significant reductions in interest rates. Low inflation and low interest rates--that is the recipe for economic success in the United Kingdom. They provide the scope for businesses to invest and not the efforts of the shadow Chancellor and his colleagues to build some airy fairy partnership with no economic framework behind it and are positive achievements that will get the economy moving at full steam, and there is plenty of scope for those during the coming year.

There is still only one party that can provide the leadership that this country needs and one party that understands how the economy works. I have no doubt that my right hon. and learned Friend the Chancellor of the Exchequer will present a confident Budget next week, which will lead to firmer control of public expenditure and produce tax reductions and lower interest rates. That is the recipe to ensure that consumers, investors and business men achieve their full potential and that Britain takes all the opportunities in the global economy that are available to it under this Government.

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