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Mr. Maude: I am delighted that the hon. Gentleman raised that. He has referred to a document that was produced before the Chancellor came to the House two weeks ago, to set out what the real state of public finances is. I shall deal with exactly the questions that the hon. Gentleman raises. He might not find it quite so enjoyable when I do.

It is worth reminding ourselves just what the legacy was--not in dry numbers, but in terms of what was said about it. Labour Members may not remember this, because they have short-term memories, but it is worth reminding ourselves of what the International Monetary Fund said in 1996. It stated that


in the UK


    "has been enviable. Since 1992, output growth has rebounded, unemployment declined markedly and inflation been brought down to the lowest levels in a generation. The strong overall performance is a product of sound economic policies--the unfettering of market forces initiated in the 1980s and the medium term and stability oriented cast imparted to fiscal and monetary policies".

That was then, but what about now? Now that the trickle of bad news threatens to turn into a torrent, do not expect to hear so much about it today. If the Chief Secretary talks about it, I predict that it will all turn out to be somebody else's fault.

Let us start by recalling what Labour promised. Let us look at the early pledges. Labour said that it would


that is a good one--


    "strengthen the economy so that interest rates are as low as possible."

Mrs. Helen Brinton (Peterborough): Will the right hon. Gentleman give way?

Mr. Maude: Those are the only pledges that the hon. Lady supported.

29 Jun 1998 : Column 22

What do they mean? What did the Labour manifesto say? In fact, it said:


Then there was that unequivocal promise not to raise taxes. I shall quote directly from the Prime Minister.

Mrs. Brinton: Will the right hon. Gentleman give way?

Mr. Maude: The hon. Lady will probably want an opportunity to listen to the Prime Minister's words. He said:


We are all becoming familiar with the way in which the Prime Minister says the first thing that comes into his mind at the Dispatch Box, whether it is true or not, but what does the Chief Secretary think he meant by those words? Which of those words is in any way ambiguous? Is it "we"? Is it "have"? Is it "no"? Is it "plans"? Is it "increase"? Is it "taxation"? How can the Government claim that that was somehow a non-operative promise? [Interruption.] If any Labour Member wants to explain how that pledge is compatible with the fact that the Government have raised taxes 17 times, I shall give way.

Mrs. Brinton rose--

Mr. Maude: If the hon. Lady wants to intervene on that specific point, I shall give way.

Mrs. Brinton: I thank the right hon. Gentleman for giving way. He seems to have some difficulty in mastering his new brief. Will he explain why, under the Conservative Government, this country suffered the two worst recessions since the second world war and the slowest period of growth?

Mr. Maude: It is nice to know that the pre-programming works. I said to the hon. Lady that I would give way if she was going to talk about the Prime Minister's pledge, which has clearly been broken time and again, but Labour Members do not want to talk about today's economy or the pledges that they made and then broke.

The Government's performance has turned out to be rather different from what the pledges suggested. Inflation has risen, interest rates have risen, the pound has risen, taxes have risen and unemployment has begun to rise. At the same time, the balance of payments has fallen, manufacturing output has fallen, investment growth has fallen, productivity has fallen and savings have fallen. The Government claim that they have cut welfare spending, but every welfare reform that they have introduced has cost more, not less, and will bring more people into welfare. [Interruption.] I hear the sounds of dissent, but Labour Members should look at their plans--every reform will cost more and bring more people into welfare. What a dismal record of failure.

We know what the Chief Secretary will say; he will say, "It's all someone else's fault." The promise on inflation was not only a pledge, but in the Prime Minister's handwriting. It is a pity that the Government have missed that pledge 12 months out of 13. The Government inherited inflation at 2.5 per cent., and it is

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now at 3.2 per cent. That is an increase not of 10 or 20 per cent., but of no less than 28 per cent. We shall be told not to worry, however, as that is someone else's fault--it is the fault of the Bank of England, or of British businesses, which are, we are told, paying their staff too much.

Does the Chief Secretary have any idea how ridiculous he and the Chancellor make themselves when they--who do not have a day's business experience between them--strut around lecturing Britain's most successful companies on how much they should be paying their excellent staff? Do they not understand that, in the real world--not the cloistered world in which they move--people who face an increase in the cost of living because the Government have raised taxes on cars, houses, pensions, mortgages and marriage will ask for more pay? In the Government's never-never land, inflation is the fault of Marks and Spencer, which pays its staff too much.

The Chief Secretary may not have noticed that the Government are railroading through legislation to force many other companies to pay their employees more. We look forward with keen interest to hearing how he will reconcile lecturing Marks and Spencer on paying its people too much with ordering many more companies to pay their staff more.

Mr. Geraint Davies (Croydon, Central) rose--

Mr. Maude: If the hon. Gentleman wants to intervene on that point, I shall give way.

Mr. Davies: On the very point of inflation rates at the factory gate, does the right hon. Gentleman agree that, in terms of RPI(Y)--the underlying inflation rate, which does not take account of taxation and interest rates--the rate is down on average? RPI(Y) was at 3 to 3.5 per cent. between 1995 and 1997, but is now going down.

Mr. Maude: We have actually got someone to talk about what is happening today. The problem is that the hon. Gentleman took the wrong measure. The Government have failed to meet the Chancellor's chosen measure and target, and that is what they have to explain.

So far, we have had six interest rate rises, and the Governor of the Bank of England is predicting another this month, but that is someone else's fault, too. Does not the Chief Secretary realise that, by raising taxes, the Government have increased the cost of living and created pressure on earnings? Does he not understand that, by attacking savings, they boost spending? As interest rates have been pushed higher than they need have been, the pound has reached levels that cause intense pain to manufacturers and exporters.

The Government have committed themselves, in dogmatic principle, to scrapping the pound at the earliest opportunity, but do they have to choose such a painful way of setting about it? Is it surprising that we now hear talk of an ancient phenomenon that I barely recollect from my distant youth in the days of the previous Labour Government--the spectre of stagflation? We all thought that that word had disappeared, but it is reappearing among economic commentators--the spectre of stagflation again stalks the land.

Ms Claire Ward (Watford): Is not the truth that the real reason for the interest rate increases was that the

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previous Government played politics with interest rates and refused to raise them in the last year before the general election to stem inflation, and so forced this Government to take the necessary action and give that power to the Bank of England? Is not the real reason the Tories' failure when they were in government?

Mr. Maude: It is always someone else's fault; it is never the fault of this Government. It has nothing to do with them; they are merely the Government and they merely take the decisions. How have they managed that with the balance of payments figures heading sharply into the red--just the faintest whiff of a balance of payments crisis? With our economy turning down and the European economies starting a gradual recovery, this should have been the time at which the balance of payments turned decisively in our favour, but it is doing the reverse.

What has happened to our export-led recovery? Last week, the Confederation of British Industry figures showed export orders for May and June at their lowest for 15 years. The Government have blown it already--after only a year, they are frittering the legacy away and it is all coming apart. Therefore, it is not surprising that manufacturing is already in recession, with falling production in the past two quarters and jobs lost day after day.


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