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Mr. Kenneth Clarke: That is the best composition so far. The Opposition are having great fun spoofing the
British press with the document that they claim contains our policy. The hon. Gentleman has now said that I have blamed other people for problems with the public finances. I have been a Member for 20-odd years, and no Government have ever failed to alter their forecasts. A Labour Government would alter their forecasts, and that is why Parliament wants forecasts every six months.
The Labour party is bereft of policy and criticism, and has built a ridiculous pyramid of claims that I blamed someone else for a crisis. That is complete nonsense. Can we hear a policy from the Government? [Interruption.] I mean the Opposition. Would they implement any different policies that might contribute to the situation that they have described?
Mr. Smith:
Yes, we would act for a strong economy; yes, we would increase productive investment; yes, we would get people back to work; and yes, we would bring borrowing down. During what must surely be the weakest intervention the Chancellor has ever made, I saw the right hon. Member for Wokingham (Mr. Redwood) smiling as he saw his prospective opponent for the Tory leadership handle so poorly my attacks on his borrowing record.
Mr. Redwood
indicated dissent.
Mr. Smith:
The Chancellor showed how defensive he is by intervening about the leaked document.
Mr. Clarke:
It is not a Treasury document.
Mr. Smith:
It is a Treasury document. The Chancellor blamed officials, but he got the forecasts wrong, and they are produced in his name. He answers the parliamentary questions, and it is not good enough for the Government to blame the boffins, any more than it is good enough for the Chancellor to blame the kids in the Treasury for something for which he should take responsibility. If the Government do not intend to privatise the welfare state, why set up a meeting with leading insurance companies to discuss privatising the welfare state? Why did that meeting take place today?
We are not surprised when the Chancellor takes no responsibility for the fact that the country has its lowest share of world trade this century. We are not surprised when the Chancellor accepts no responsibility for the disgraceful levels of youth and long-term unemployment, and has no new ideas to do anything about that. But if the Chancellor will not accept responsibility for the documents being produced in his Treasury, that replicate pamphlets pumped out by his party's No Turning Back group, he should resign, and take the Government with him.
People want a Government whom they can trust; they want a Government who will deliver on the action for investment, skills, welfare to work and fairness, which is needed for sustainable growth, sound public finances and quality services. That is what people want in the place of the confidence tricks, wishful thinking, buck passing and broken promises of the Chancellor and his discredited and divided party.
The Chief Secretary to the Treasury (Mr. William Waldegrave):
It is difficult for me to comment on the speech of the right hon. Member for Dunfermline, East (Mr. Brown), because I cannot find anything to comment on. He referred to the great conspiracy of the insurance industry--as far as I can make out, we are searching for this great conspiracy everywhere, and we have not yet found it.
The meeting that took place today was one of a series of meetings between the Department of Trade and Industry and the six big insurance companies--they have been taking place for years. The meetings were initiated by the Deputy Prime Minister when he was the President of the Board of Trade. They talk about the competitiveness of the insurance industry, which is a sensible thing for them to talk about.
We published a Green Paper about this--perhaps the right hon. Gentleman did not read it--and about our plans for partnership schemes for long-term care. That is a sensible thing for us to talk to the insurance industry about. That issue took up about nine tenths of the right hon. Gentleman's long speech, and his argument in that regard falls.
It is a pleasure to listen to the hon. Member for Brent, East (Mr. Livingstone) in his new mode. He talked about the serious contribution of the international bond markets--he never talked like that in the old days. However, he made one mistake in relation to business investment and Britain's performance on business investment--a mistake that was repeated by several Labour Members. Since 1979, the United Kingdom's ratio of business investment to gross domestic product has been marginally higher than that of Germany, France and Italy--the other European states in the G7. Of the G7 countries, only Japan has had a higher ratio than the United Kingdom since 1979, which is something to be proud of.
The right hon. Member for Dunfermline, East actually made a policy statement--albeit a small policy statement--and it was the first policy statement that we have ever heard from him. He endorsed my right hon. and learned Friend's cut of ¼ per cent. in interest rates. It is the first time that he has made any comment whatsoever on these matters. It was a small policy, but it was the best that he could do. However, it is not entirely clear whether the right hon. Gentleman endorsed all the other interest rate cuts that led up to it.
The right hon. Gentleman was not in the Chamber when his hon. Friend the Member for Dudley, West (Mr. Pearson) said that there was a grave danger of inflation, and that, if anything, interest rates should go up. This ¼ per cent. policy is already the source of a Labour split.
I move from the not so grand contributions of Labour Members to the debate, to the contributions of Government Members.
Mr. Pearson:
Will the Minister give way?
Mr. Waldegrave:
No, the hon. Member has already made his speech. The debate should return to the realities of the economy.
As has been said, unemployment has fallen today by 14,300, bringing it to the lowest rate for five years. My hon. Friends the Members for Colchester, North (Mr. Jenkin) and for Bosworth (Mr. Tredinnick) said that the unemployment rate is falling to a satisfactory level, especially among younger workers. According to the European Union standard basis, unemployment in Britain is 8.3 per cent. It is 8.9 per cent. in Germany, 11.6 per cent. in France, and 12.1 per cent. in Italy. The European Union average is 10.8 per cent., and we are well below that. We have seen a fall of about 830,000 in claimant unemployment since December 1992. Earnings growth fell today to 3.5 per cent., demonstrating once again the underlying strength of our economy.
Mr. MacShane:
Will the Minister give way?
Mr. Waldegrave:
No. The hon. Gentleman made a short and eccentric speech, and that is enough for now.
I pay tribute to the hon. Member for Motherwell, South (Dr. Bray), who said, sadly, that it was his last contribution to the annual debate. He made a characteristically thoughtful and interesting speech about forecasting, which is his perennial expertise. I shall draw the attention of my right hon. and learned Friend to the interesting points he raised.
The second fundamental of the economy is inflation. Retail prices index inflation in the year to June was 2.1 per cent.--a decrease from 2.2 per cent. in May. Producer input prices fell by 2 per cent. over the same period, and producer output prices rose by about 2.6 per cent, giving us another month of the best inflation performance for about 50 years.
We are below the European Union average for unemployment, and we are now also below its average for inflation. According to the EU comparative measure, it averages 2.8 per cent, and our performance is below that at 2.7 per cent. I do not think that there have been many years--it certainly did not occur under the last Labour Government--when we beat the European averages for both unemployment and inflation. We should be proud of that achievement. The hon. Member for York (Mr. Bayley) referred to inflation under the last Labour Government, which averaged 15.9 per cent. That was higher than the European Union average for the same period.
The third fundamental of the economy is growth. It was 4 per cent. in 1994, 2½ per cent. in 1995 and 2½ per cent. again this year, and it is projected to be 3.25 per cent. next year. The panel of independent forecasters believes that gross domestic product growth is liable to be close to 3 per cent. next year, and others think that it may be higher. Over the cycle, we have the ritual 1.9 per cent. average growth rate since 1979. Everyone knows that that is the wrong measure. When we measure cycle to cycle, we find that only Japan beats us on growth rate.
The fourth fundamental of the economy is the household sector. It is understood that living standards are rising. Real personal disposable income rose by 2½ per cent. this year, and it will be about 3 per cent. next year. My hon. Friend the Member for Wyre Forest (Mr. Coombs) referred to several powerful independent voices, and reminded us how well the economic
fundamentals are performing. He quoted George Simpson, who is a very good industrialist, and I agree with his comments.
My hon. Friends the Members for Bury St. Edmunds (Mr. Spring) and for Milton Keynes, South-West (Mr. Legg) referred to the recovery in the housing market and its effect on negative equity. There was welcome news from the Woolwich today, which announced that negative equity fell by about 40 per cent in the second quarter of this year. That means that it has fallen by half in the last two quarters. They are very good figures. Its economist, Mr. Ellis, said that the steadily improving confidence, underpinned by stronger disposable earnings growth, lower interest rates and highly affordable housing, should ensure that the housing market recovery is sustainable. That is welcome news.
We are performing better than the EU average on inflation and unemployment. Our current account deficit is entirely sustainable, as my hon. Friends the Members for Wycombe (Mr. Whitney) and for Beaconsfield (Mr. Smith), the latter in a characteristically excellent speech, said.
That fact is recognised also by Labour supporters. Lord Desai, writing in The New Statesman in March, said:
"Inflation is not only low by the standards of the past 30 years, but is going down."
He was proved right. He also said that unemployment is falling, and continued:
"Come election time, the economy may very well not be the strong card that Labour thought it would be".
When those remarks were drawn to the attention of the right hon. Member for Dunfermline, East on the "Today" programme, his only response was to attack poor Lord Desai for being a Lord. That is not entirely his fault, as the Labour party made him a Lord. So, in the circumstances, that seemed a rather unfair ad hominem argument.
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