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Mr. Andrew Miller (Ellesmere Port and Neston): Before the Chancellor leaves the subject of the interview, will he tell us whether he is sympathetic to his predecessor's view that a single currency would inevitably lead to a single European Government?
Mr. Clarke: If I may return to the subject of the British economy--
Mr. Gordon Brown (Dunfermline, East): I thank the Chancellor for giving way: I see that another of his hon. Friends, the hon. Member for Chingford (Mr. Duncan Smith), wishes to intervene on the European issue.
Does the Chancellor still believe that those who support the idea of a referendum on a single European currency are--as he told "Newsnight" two years ago--"slightly up the creek"? Does he support those who favour such a referendum, or not? Yes or no?
Mr. Clarke:
I cannot really complain about the hon. Gentleman wanting to turn to the issue of Europe. I can only say that, whenever we mention the British economy--even when I last faced him, in Aberdeen--it is the last thing on earth he wants to talk about, and he welcomes any opportunity to change the subject. As for quotations, I prefer to see what I have said in full and in context. I tend to find that partial quotation--even by my hon. Friends, let alone by my opponents--of what I sometimes say on these subjects is extremely misleading.
I should like to get back to the subject we are debating.
Mr. Brown:
Will the hon. Gentleman give way?
Mr. Brown:
With respect, the Chancellor has changed the subject and refused to answer the question. I should be very happy to quote in full what he said on "Newsnight" on that day, but will he answer the question whether he supports a referendum on the single currency--yes or no?
Mr. Clarke:
The Prime Minister has made it extremely clear that, if and when we ever face the choice of whether to join a single currency, a referendum is one of the things that could be considered at the time. That has been my view. The hon. Gentleman knows that that is my view--I have repeated it very frequently. A referendum on the single currency has nothing to do with a debate on the British economy.
I will therefore, with your permission, Madam Speaker--
Mr. Clarke:
No; really, my own Back Benchers do it better. I have indulged the hon. Gentleman and my hon. Friend.
Madam Speaker:
Order. I cannot have two hon. Members on their feet--[Interruption.] I presume that the Chancellor is giving way?
Mr. Clarke:
No, Madam Speaker--I was deferring to you.
Madam Speaker:
I am simply telling the House that I cannot have two hon. Members speaking at the same time.
Mr. Clarke:
To get back to the point, let me remind hon. Members from both sides of the House of last year's Budget, which contains a summation of what I have just described. I was able to reduce taxes by £3 billion in total, leaving the British people with more of what they earn and save. I kept the total of public spending under firm control to pay for those tax cuts, but I was still able to spend more on the public services that people care about: the health service, education and the police service.
That combination of tax cuts, cuts in public spending to pay for them and increased resources for the national health service, schools and the police service is a combination that only good government can deliver.
The experience of this recovery demonstrates the British economy's potential.
Mr. Malcolm Bruce (Gordon):
Does the Chancellor recall that, on David Frost's programme, in September 1994, he said that he would not favour an income tax cut if borrowing was in excess of £30 billion? With borrowing now forecast to be in excess of £30 billion, does he think that he was right to cut taxes?
Mr. Clarke:
I am always delighted to find that my words are followed with such close and rapt attention.
My policy for three years has been to get public borrowing under control and to move towards balance in the medium term. The Red Book in front of the hon. Member for Gordon clearly shows that we are on course to achieve that. Of course we had to spend to finance the tax cuts I made this year, and we did so--which is why the Labour party had no opinion on the subject at all.The hon. Gentlemen voted for tax increases in the face of all that, but, as far as I am aware, in order to spend the revenue raised by those tax increases rather than to cut borrowing.
The combination of those policies has also put us on course to achieve what I believe is the sole object of economic policy: increased prosperity, falling unemployment and the prospect of creating a healthy enterprise economy.
Mr. Dennis Skinner (Bolsover):
Will the right hon. and learned Gentleman give way?
Mr. Clarke:
I shall in a moment.
We are enhancing the British economy's potential. The Government's liberalising, free-market reforms in the past 16 years have transformed the British economy into a flexible success story. I have a quotation to support that. Last year's OECD survey of the United Kingdom said that our
That is what the Government have put into place, and that is what we are debating today.
Mr. Gordon Brown:
Does the right hon. and learned Gentleman also agree with the OECD that Britain has slipped from 13th to 18th place in the world prosperity league?
Will he now answer a question on public spending that has been put to him in the past but which he has failed to answer? The Prime Minister has said that he wants to get public spending as a share of national income down to35 per cent., but the Chancellor is quoted in The Daily Telegraph as saying that 40 per cent. is the maximum. Does he support the Prime Minister's figure--yes or no?
Mr. Clarke:
If I am allowed time, and if there are not too many interventions, I propose to deal with all this rubbish about league tables at a suitable and later point in my speech. These bogus tables give a misleading impression of British economic performance since 1979--clean contrary to the everyday experience of people old enough to remember what things were like before 1979. That certainly deserves an answer, and I hope that the hon. Gentleman will allow me to give him one later.
I have set a target--it remains the Government's target--of reducing the proportion of GDP taken by the state to below 40 per cent. In my interviews, and in those given by the Prime Minister, we have made it clear that we would like to go beyond that, if that proves possible. No one in the Government has ever set a target of 35 per cent.; we are reducing the figure to 40 per cent.
The proposition is a straightforward one: in any given year, when the totality of Government spending grows by less than the growth of the economy, the proportion taken by the state falls. No party in the United Kingdom--or even in western Europe--could succeed in this endeavour as well as we have over the past few years.
I am proud of our economic performance during the recovery, but I am also optimistic about our prospects.I am confident that the British economy will defy its detractors and have yet another good year in 1996. [Interruption.] I should like to outline the solid reasons behind my confidence when I assert my 3 per cent. growth forecast--which I heard someone on the Liberal Bench questioning a moment ago.
I believe that 1996 will be a good year, first, because I expect investment growth to pick up this year as firms expand their capacity. The conditions for firms to invest have rarely been better. The hon. Member for Dunfermline, East has been going on about his meaningless strategy for investment--never as yet explained--for the past three years. We now have the conditions that stimulate investment, however.
Inflation is low and stable, providing the environment that business needs when making long-term decisions. Company balance sheets are in good shape, with profits up by about 6 per cent. over the past year. Because we have inflation under control, I have been able to reduce interest rates to historically low levels. That is the right strategy for investment, and its effects will flow through in 1996.
Secondly, in 1996 I also expect an upturn in the growth of consumer spending. This year, increased consumer spending will be the main source of growth in the economy. I estimate--it is only an estimate--that it will be up by 3.5 per cent. on last year. Consumers will be able to pay for the extra spending. People will see the effects of the Government's policies, which are putting an extra £9 a week in the average family's pay packet, after tax and inflation.
On top of that increase in disposable income, every household has just benefited from a £54 reduction in its electricity bill as a result of the sale of the national grid. On top of that, mortgage rates are now at their lowest for 30 years. Mortgage payments for average borrowers are about £150 a month less than they were in 1990.
"sweeping structural reforms . . . are yielding dividends in a more flexible, competitive and less inflation prone economy."
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