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9.6 pm
Mr. Bernard Jenkin (Colchester, North): I am grateful for the opportunity to catch your eye, Mr. Deputy Speaker, at this late stage of the debate, particularly as I have not had the privilege of being present in its early stages due to my duties elsewhere in the House, in particular on the Select Committee on Social Security.
I am mystified when I hear Opposition Members urge the Government to achieve the Maastricht deficit criteria, as if there was anything less relevant to the real lives and anxieties of business men and individuals throughout the country. Nothing is more calculated to destroy the credibility of public policy than imposing those artificial debt criteria on the economies of Europe when it is entirely inappropriate.
A more appropriate subject for discussion is what business men in my constituency raise with me when I discuss the current business climate. They talk about a steady increase in business confidence and a steady improvement in the business climate, which is borne out by their experience and by the unemployment in my constituency. Since unemployment peaked in December 1992, unemployment in my constituency has fallen by 43 per cent.
If there is one measure that is a testament to the success of Government policy in recent times, it is that dramatic fall in the rate of unemployment. We know that unemployment in the United Kingdom is now substantially below the average of our European competitors. That is strong testament to the success of Government policy in recent years.
I want to relate to the House one brief anecdote from the run-up to last year's Budget. We had a presentation in my constituency by a Midland bank economist. He said, "Ladies and gentlemen, when you hear the Chancellor of the Exchequer telling you that we have the most benign economic circumstances for a generation, I am terribly sorry to tell you he is telling the truth." That not only gave me great comfort, but as the message went around the country, it gave great confidence to British business.
The opportunity that we now have, as we consider the "Summer Economic Forecast" and the run-up to the next Budget, is not as fraught with difficulty as some would have us believe. The deficit that the Government must fund is certainly a matter of concern, but while deficits have to be funded, the overall economy must be the
priority. We would do well to learn from what Ronald Reagan achieved for the American economy in the 1980s. The fact is that Reaganomics works. It got a bad reputation because Congress refused to cut public expenditure in the light of President Reagan's defence expenditure priorities.
The key element of Reaganomics was that tax reform led to substantial improvement of Government revenues. That is the opportunity that we should grasp. If we have the courage to reform taxation by, for example, reducing substantially the rates of inheritance tax and capital gains tax, we will reap the benefit of extra tax yields and be able to reduce the Government's deficit accordingly. Timidity and the conventional economic forecasts that tend to be produced by the kids in the Treasury are not a reliable guide to the likely outturn of such reforms. I congratulate my right hon. and learned Friend the Chancellor on showing suitable cynicism about what some of his officials produce. He should show the same sort of cynicism to their traditional view of cuts in the rate of capital gains tax. Such cuts will not reduce revenues, but increase them.
We must bear in mind the threats to the benign economic circumstances that we enjoy today. I despair when Opposition spokesmen talk about what they believe to be the frittering away of oil revenues and privatisation proceeds. They demonstrate a fourth-form understanding of economic dynamics in a modern, industrial economy. The proceeds of privatisation and oil revenues have been put to good use not only in increasing the rate of investment but in substantially restructuring the economy so that industries which had previously been a great burden on the British taxpayer and a drag on economic growth have become part of the dynamic of the British economy. They add not only to economic growth, but to the Government's revenues. We used to pay more than £50 million a week in subsidies to the industries that we privatised. Now, they yield £50 million a week for the Government in dividends and tax revenues. We should celebrate such a turnround, but the Opposition do not understand it. Such fourth-form economics is a threat to our future.
The Opposition do not appreciate other threats, such as the growth of social security expenditure, which the Government have been struggling to control. As a member of the Social Security Committee, I am well aware of its growth under the Government. However, in recent years, we have had an excellent Secretary of State and successive Chief Secretaries to the Treasury who have fought to control the rate of its growth so that it is now below the rate of economic growth. That is the key point. Social security expenditure is now growing at a lower rate than the trend rate of economic growth.
The Labour party criticises the Government for the growth in social security expenditure, but that opposition should be juxtaposed with the fact that it has opposed every measure that we have proposed. Perhaps the Opposition were relieved to lose the Division earlier this week on the restoration of benefits to bogus asylum seekers. The amount may have been insignificant--it was £300 million and growing--but nothing better demonstrates the Opposition's unfitness to govern than
their failure to understand that such measures are absolutely necessary to control social security expenditure.
I want to refer to the research conducted by my hon. Friend the Member for Dover (Mr. Shaw) into unfunded liabilities, which are another threat to the United Kingdom's economic growth. It is most important that we continue to fund the future liabilities that we have taken on as a Government for future pensions. The progressive capitalisation of the state earnings-related pension scheme by opting out, and perhaps the progressive capitalisation of occupational pension schemes, but most particularly the rigorous control of that pension liability, is important and compares extremely favourably with our continental competitors. Their unfunded pension liabilities represent significant proportions of their future gross domestic product, and a considerable threat to the stability of any future single currency. Perhaps they represent the strongest argument for Britain not to participate in a single currency.
Germany's, unfunded pension liabilities, discounted to a present day price, represent 122 per cent. of its GDP. It is ridiculous that Britain should merge its currency with Germany to share that liability when we have gone so far to structure our economy so that our liability is properly funded. The danger of pursuing blindly the Maastricht criteria and the instincts continually exhibited by the Opposition demonstrates the key threats to our economy.
Mr. Denis MacShane (Rotherham):
In the two and a half minutes left to me, I have something to say.
The Chancellor made a vigorous speech, but I think he will go down in history as the Chancellor of decline, because no index which places our nation in comparison with others shows that we have moved up under his stewardship. He is also the Chancellor of incompetence, because of his absurd handling of the public sector borrowing requirement--an impossible concept to get over to the person in the street--which is now utterly out of control. If he had been the financial director of any plc he would have been dismissed months ago.
He is also the Chancellor of mediocrity, because of his failure to reform our tax system, which is not appropriate to the needs of our economy in the modern world. No new serious ideas have been proposed, except to increase the burden of taxation on the British people. Conservative Members may have seen the report published last week, which showed that the Government take a greater part of the pay of salaried employees than their counterparts in France or Germany. The 22 new taxes imposed since 1992 have had their impact.
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