House of Commons Hansard Debates for 17 Jul 1996 (pt 36)

Mr. Spring indicated dissent.

Mr. Davies: The hon. Gentleman shakes his head. I do not know how he knows these things; perhaps he can cook the books. Public debt is on an increasing trend.

In its forecasts, the Treasury has managed to reduce the 6 per cent. figure to 5 per cent. for the fiscal year 1995-96. I do not know what the general Government financial deficit for the 1996 calendar year will be, but I am fairly sure that it will be between 5 and 6 per cent.

A reduction from 6 per cent. to 3 per cent. will require reductions in public expenditure of about £18 billion. A reduction from 5 per cent. will require reductions of about £12 billion. Ernst and Young, the Item Club of forecasters, basing its forecast on Treasury models, concluded that joining the single currency would cost 500,000 jobs. That is an optimistic assessment based on optimistic Treasury figures.

We are talking about enormous reductions in public expenditure or increases in taxation. Reducing the figure from 6 to 3 per cent. would require an increase in income tax of 7p in the pound, or an increase in VAT of 6 to 7 per cent. I accept that the figures may change, but they will not be much below 5 per cent. That is the price that Britain will pay if it signs up to a single currency.

Of one thing we can be sure: the price of signing up to a single currency will not be paid by tax increases. Throughout Europe, public expenditure is being cut, with consequential reductions in growth, to enable countries to sign up to a single currency.

The price of a single currency will be paid not by the chattering classes, by the Director General of the CBI, who almost every week makes a speech in its favour, or by Mr. John Monks, who apparently is General Secretary of the TUC and who also makes a speech in its favour every week and seemingly is quite happy to send his members in the vanguard and in the first wave over the top into the Passchendaele of a single currency--but by cuts in public expenditure.

Surprise surprise: it will be paid by cuts in the welfare state and in social security. It will be paid by the unemployed, the disabled and the poor people of Europe,

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not by the chattering classes--not by the European political and bureaucratic elite, among whom I include the British.

Whatever happens to the single currency, my right hon. Friends will inherit from the Government a legacy of profligate public finances and public debt. It will not be the first time that, sadly, a Labour Government will have to clear up the mess left by the party of sound money. I do not envy them their task.

6.46 pm

Mr. Ray Whitney (Wycombe): It is a great pleasure to follow the right hon. Gentleman because he is one of the authentic voices of old Labour; the place would not be the same without him. His speech was a happy and interesting contrast to the rather less easy to define voice and visage of new Labour on its Front Bench.

The right hon. Gentleman, in his genial way, seems to have let the past 20 years of economic experience pass him by--the economic experience of not only this country but of virtually every country in the world that has come to understand the workings of the market economy and the benefits that it can bring. He is happily ensconced in his ferocious antipathy to any sensible co-operation with our European neighbours and in his own happy neo-Keynesian world, which he never wants to leave and in which he is comfortable.

That contrasts with the other function that the right hon. Gentleman serves--as a memento of the unhappy days of the last Labour Government, at which time I think I am right in saying that he graced an important office in the Treasury. In those days, the Chancellor did not go to Brussels to debate the general Government financial deficit--under which it will be decided whether our economy meets the severe Maastricht criteria, or, as I would put it, whether we are in the Premier league--but went cap in hand to the International Monetary Fund for a bail-out operation. The right hon. Gentleman's then boss, Lord Healey, turned around at the airport and rushed back to Great George street because of the chaos and mess in the British economy that had been identified by the IMF. For the right hon. Gentleman to suggest that Labour Governments have to clear up after Conservative Governments is, to put it at its mildest, standing truth on its head. But at least the right hon. Gentleman had a few facts and figures to offer, which was in extraordinarily marked contrast to his right hon. Friend the shadow Chancellor.

I came to today's debate filled with hope that at long last we would have a glimmer of Labour's economic policy. During recent years, we have grown accustomed to the shadow Chancellor being completely trounced, hit out of the ground, by my right hon. and learned Friend the Chancellor, because he has no figures to offer and no solutions to put forward. But for two reasons I thought that this afternoon there was a chance that that situation would change.

First, the general election gets ever nearer, and surely one of these fine days we must hear something from the shadow Chancellor about his own policies. Occasionally, something peeps out, such as the 10p income tax or the removal of child benefit from 16 to 18-year-olds, but then they are pushed back in the box again because they prove unpalatable and unsaleable not only to the general public but to his right hon. and hon. Friends in the constituency Labour party.

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But I thought that this afternoon we would have something. I was also looking forward to the benefit of the gurus. We hear a lot these days about how, at long last, the Labour party has found some intellectual holy grail, and we have Mr. Kay, Mr. Gray and Mr. Hutton, and even the hon. Member for Hartlepool (Mr. Mandelson) who, allegedly, had had an intellectual input into the new Labour party.

But when one analyses it, it is an intellectual input dated circa 1965 which seems to have remained impervious to the experience that we have all had during the last 30 years. It has been rediscovered at the dinner parties of Islington and has seeped through to the Leader of the Opposition and, I had hoped at some remove, to the shadow Chancellor. But not a bit of it. We had no analysis from any of those gurus, and no reference to them at all.

The high falutin' economic theory which the shadow Chancellor discovered a few months ago was forgotten. Now, hurrah hurrah, we are back to a document produced by a grade 7 officer in the Treasury for a particular purpose which, as far as I understand, was something to do with Treasury staffing in the early years of the next century. We heard absolutely nothing at all about the Labour party's policies.

It has been a dangerous afternoon for the shadow Chancellor. He is fortunate that the debate has been so poorly attended, particularly by Opposition Members. Had they been here when the right hon. Gentleman was speaking, his chances in the shadow Cabinet elections would have been seriously dented. On the basis of his performance this afternoon, it would have been entirely merited that his career prospects should have suffered a severe setback. Time after time we asked questions about his figures for the PSBR, interest rates, public spending and all the rest, but answer came there none. Those questions were consistently evaded.

But the input of a Labour Government is becoming increasingly clear day by day. Everyone is now beginning to understand that the minimum wage, at whatever rate it is set, will cause serious trouble. It will either cause serious economic trouble because it will be set at a rate which will cause severe problems for employers and certainly increase unemployment by hundreds of thousands, if not a million more, or it will cause trouble because it is set so low that the Labour party's friends in the trade unions will make trouble.

Little bits are also leaking out about the reintroduction of the special "rights" of trade unions, such as the right of secondary picketing, and all those things, quite apart from the pledges on public spending. Those harsh commitments which Labour would try to realise if it ever took office would be disastrous for Britain's public finances. Of course, borrowing should be lower but any suggestion that the Labour party has any idea about how to improve the borrowing situation is sheer poppycock.

This has been an extraordinarily bad afternoon for the Labour party, but it has been a good afternoon for the country because it will have given the electors--if we still have a few ladies and gentlemen of the press here to report it--at least some idea of the Labour party's total bankruptcy, which seems starker as the days go by.