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Mr. William Ross (East Londonderry): Does the hon. Gentleman agree that all that so-called Black Wednesday did was to restore the currency to its true value on the international market?
Mr. Williams: I think so. That allowed us to cut interest rates dramatically, which is how the recovery got under way. The clear danger now is that, the pound having gone back up to Black Wednesday levels, at something like DM2.90, that cannot be sustained.
Mr. Richard Spring (West Suffolk): I am grateful to you, Mr. Deputy Speaker, for giving me the opportunity to speak this evening. The Chancellor of the Exchequer talked about his desire for the British economy to be part of the new fast-changing global economy. Nobody could disagree with those sentiments.
However, the fact is that the Government have been bequeathed a unique dowry--probably never equalled at any time in the history of the 20th century. In contrast to what has happened time and again in previous economic recoveries, we have steady prices, our balance of payments is under control, and we have falling unemployment and a falling public sector borrowing requirement.
I note, for example, that Barclays Economic Review for the second quarter of 1997 sums up the United Kingdom economy thus:
Despite all the hints that we heard in the past few weeks about budgetary black holes, we know that although the Government searched for one they discovered nothing, even when one changed the projections for economic growth rates. There are no discernible inflationary pressures, such as those that characterised earlier economic recoveries. Before the election, we heard time and again about our so-called economic failure and our inability to reduce the Budget deficit or unemployment. Now, suddenly, we hear about the risk of overheating in the economy.
I repeat that the Chancellor's Budget has precious little to do with economic management and everything to do with the politics of the Labour party in government. Those of us who are especially interested in the subject of economics must never forget that, in economics, we are dealing with flesh and blood, with human beings and their hopes and aspirations, not with some kind of abstraction.
When I look at what has happened in my constituency, as elsewhere, and the dramatic transformation in the lives of so many people who live there, the figures speak for themselves. Five years ago, unemployment in Haverhill was 9.5 per cent. Now, it is 4.3 per cent. and falling. In Newmarket, the rate was 6.7 per cent.; now, it is 3.5 per cent. and falling. In the Bury St. Edmunds travel-to-work area, unemployment has fallen from 5.5 to 2.7 per cent.
Those falls in unemployment mean job opportunities and the realisation of hopes and aspirations throughout our country for hundreds of thousands of people--in contrast to what has happened in the other major industrial economies of Europe. When we consider the welfare-to-work programme announced by the Chancellor, we must remember that, according to the labour force survey, since autumn 1992 youth unemployment has fallen well beyond the 250,000 figure that the Chancellor mentioned when he first spoke of his desire to reduce unemployment among young people via a windfall tax.
We must ask ourselves the simple question: why has that happened in the United Kingdom when the performance of other countries has been so poor? What a tragedy for young people under 25 who live in Spain, 42 per cent. of whom are unemployed. In France, 29 per cent. of young people are unemployed, and in Italy, the figure is one in three. Even in Germany, there is a high level of disguised unemployment because of the operation of complex training programmes.
Moreover, the Budget is moving us closer and closer to the European economic and social model, which blindingly obviously is becoming a manifest failure, unable to deliver the economic performance that would mean jobs and prosperity, and the fulfilment of the hopes and aspirations of young people.
The other side of the coin of today's Budget includes the real views and policies of the Labour party. There is stakeholding--we heard nothing about that today--there is the introduction of the minimum wage and the signing of the social chapter, and there are new rights for unions. All of those are utterly irrelevant to the operation of a modern high-technology economy.
Just as many European countries have sought to fudge the criteria for the Maastricht ratification process as we move towards a single currency in continental Europe, so today we saw a fudge in the way in which the reserves were raided to find additional sums for health and education spending. We had a clear foretaste today of Labour's move away from the economic environment that has delivered jobs so successfully in the form of the windfall tax, which clearly discriminates against those companies that have to pay it. The welfare-to-work programme fails fundamentally to address long-term youth unemployment by failing to create enduring opportunities for employment. That is the main criticism of the plan--that, at the end of the day, there is no assurance that those jobs will be secure. All the other component elements of Labour's economic policy will certainly ensure that such opportunities will not be realised over a period of time.
If we look back to the 1950s and 1960s--when the mainstream of intellectual thinking in the Labour party arose--Governments, trade unions and industry across the
continent of Europe were formulating macro-economic policies, and it worked. The national cake grew. In the 1970s, however, we saw the beginning of oil shocks, inflation and the inability of our economy--and those in Europe--to adjust to the new reality of technology. We are seeing a dramatic change in the way our economy and our labour market operate. Labour has totally failed to understand the job creation process or the process of creating the competitive environment which enables jobs and employment to grow.
In the past 10 years, we have seen massive downsizing in large corporations and businesses across the industrialised world. Industry now organises itself in a different way. For example, Japanese car companies have come to this country with considerable success--they have out-sourced their supplies, raised quality and spread their activities around in a different way from the monoliths which operated 20 or 30 years ago. This process of fragmentation has gone on for some time, and the Government's macro-economic, social and economic model is certainly not fitted for it.
In my rural constituency, hundreds of people who are living at home are linked to businesses through the Internet, the fax and modern communications. The fragmentation process means that the Government's proposed model for the next few years will result in a failure to adjust to the high-technology modern structures of our economy which have created jobs successfully. In the next two years, things will begin to fail in this country and the Government will start to destroy the job creation process. Of that, I am absolutely confident. The previous Government were successful in keeping corporate taxation low, creating flexible labour markets and ensuring that rights were not given in a way that meant the right to the dole queue. The result was an unparalleled tidal wave of inward investment in this country.
I welcome the cut in small business corporation tax. In the context of the downsizing in our economy, it is in the smaller and smaller business operations where the jobs of the future will be formed. The small business community feel that it is crucial that their cash flow is improved. Because of exemptions and thresholds, many small businesses do not pay corporation tax at all.
One thing that was depressingly absent from the comments of the Chancellor was any reference to the real concern of many small businesses about what will happen to business taxes under the new Labour Government. During the general election campaign, we pledged to introduce a rateable value exemption of £1,000 for the purposes of the uniform business rate, which would have had a dramatic impact on the cash flows of small businesses. Instead of which, we have been promised the true horror of local business rate taxes. In the 1980s, this meant Labour-controlled, anti-business local authorities driving up business taxes and driving people into bankruptcy and unemployment. It is a matter of regret that that key area of small business activity was not even alluded to by the Chancellor today.
"The incoming Labour Government has inherited a very favourable set of economic circumstances, with output growth strengthening steadily since the middle of last year, the unemployment rate below 6 per cent. and the underlying rate of inflation within the target range of 2½ per cent. or less. Even the public finances have been better than expected, with the Public Sector Borrowing Requirement for the last financial year coming in £3.6 billion below the Treasury's November projection."
We know that the International Monetary Fund, too, has called the performance of the British economy enviable. In the latest Library research paper dated 1 July, the following comment on our Budget outlook appears:
"The generally favourable set of economic indicators described in this Paper need little further explanation. The economy has continued to grow steadily with continued falls in the level of unemployment and historically low levels of inflation and interest rates."
The Budget is therefore something of a fundamental irrelevance. It has nothing to do with the good management of the long-term performance of the British economy, because that was already in place. I pay tribute to my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), who engineered the remarkable economic environment that we now have. It is a precious dowry that the Labour Government are fortunate to have secured from us.
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