Previous SectionIndexHome Page

Mr. David Heathcoat-Amory (Wells) rose--

Mr. Darling: In one moment.

The Tories have already committed themselves to 3p. I shall certainly give way to the guilty man. Although I was not there myself, I understand that, because of a breakdown in relations between the Whips, the right hon. Member for Wells (Mr. Heathcoat-Amory) was dragged back, to appear in his nightgown and hat to participate in an all-night debate. Perhaps that is why he voted for so many spending commitments.

Mr. Heathcoat-Amory: The Chief Secretary was a Committee member, but--as he has just reminded us--he

29 Jun 1998 : Column 38

could not be bothered to turn up. As I was a member and did turn up, may I remind him that, yes, we did vote and speak to reduce the tax rises in the Finance Bill? We make no apology for that. If he wants to characterise that as a tax or expenditure increase, I can only say that he has not understood the content of his own Bill.

Mr. Darling: The right hon. Gentleman still has to deal with the point that, if he votes for measures costing £6 billion, he will have to tell us what taxes would go up to replenish that revenue or, alternatively, what expenditure he wants to cut. However, he cannot do either, because it is a tax-and-spend policy without the tax.

Mr. Gibb: Will the right hon. Gentleman give way?

Mr. Darling: No; I want to make some progress.

When one examines what the Conservatives say on public spending to one audience and what they say about it to another audience, their confusion and contradiction become apparent. The shadow Chancellor wants to move the Conservative party to the right--to make it even more popular than it is today. He seems to be hostile to the welfare state--which, he says,

I believe that the welfare state reinforces those bonds and that compassion.

The shadow Chancellor says that there is no moral content in voting for more public spending. So his colleagues have no moral content? However, although they want to spend more, they will not tell us how they will pay for it. It is all very confused and very contradictory.

As I told the hon. Member for West Worcestershire (Sir M. Spicer) a moment ago, the Government will state our proposals in the not-too-distant future. Step by step, we are implementing our manifesto promises. We are modernising the welfare state; making work pay; reforming the labour market; and promoting enterprise and business success.

We have a fair tax system. As we have seen, today's tax claims by the Tories fall apart when we examine their actions in government and their comments in opposition. Again, the shadow Chancellor said that

The Government are providing investment and reform, and sustainable and affordable public services. We are providing £2.5 billion for education, and £2 billion for the national health service. We are investing in transport. We are taking the tough decisions that are necessary for the future.

We shall publish soon the conclusions of the comprehensive spending review, which will set out the Government's priorities for this Parliament and beyond. It will offer the United Kingdom a new direction, standing in stark contrast to the divisions, confusions and contradictions that represent the Conservative party today.

4.33 pm

Mr. Malcolm Bruce (Gordon): Listening to the shadow Chancellor's opening speech, one rather got the impression that the Tories were not only expecting a

29 Jun 1998 : Column 39

downturn, but positively hoping for one. One really does wonder whether it is the job of the Opposition to try to talk the country into economic problems rather than to help it to get out of them--particularly as, contrary to their motion, the Tories contributed to creating some of the problems that we are now facing.

The Liberal Democrats are not surprised by the current state of the economy. I remind the House that, last July, my right hon. Friend the Member for Yeovil (Mr. Ashdown) warned the Chancellor:

In November 1996, when responding to the last Tory Budget, my right hon. Friend said:

    "Within three months, interest rates will go up . . . if they do not, the only reason will be the fact that the Government have an election coming. Within a year, tax cuts will be reversed, and within 14 to 18 months inflation will be rising sharply again."--[Official Report, 26 November 1996; Vol. 286, c. 183.]

All those predictions have come true.

The principal reason for the present situation, which makes the Tory motion so cynical and absurd, is the decision of the previous Government to keep policy so lax before the general election, as the hon. Member for Watford (Ms Ward) rightly said. The previous Government cut personal taxes in spite of record consumer windfalls, a matter which was discussed in the House and in the Treasury Select Committee, and which the then Chancellor chose to discount. They kept interest rates down in spite of buoyant consumer demand, and they refused to accept the advice of the Bank of England about the risks to inflation.

It seems a long time ago now, but there was regular speculation about the Ken and Eddie show. The argument was about who was right--Ken or Eddie. It is unfortunate that the right hon. and learned Member for Rushcliffe (Mr. Clarke) is not here because at this point, he usually makes an ebullient intervention claiming that he is always right, always has been and always will be. He presumably believes that the Bank of England was always wrong and that the Government were always right.

The fact is that the results of keeping policy too easy two years ago are now coming through in high inflation, wage pressures and capacity constraints. The previous Chancellor was clear that policy worked with a lag, and that the success or otherwise of his policies would have to be judged after the passage of time. Well, time has passed and the results are now clear--Eddie was right and Ken was wrong. The Tory motion draws attention only to the legacy of the party's own policy failure and the bad old days, when interest rate policy was determined by the short-term priorities of politicians and not by the long-term interests of the country.

I find it astonishing that when operationally independent central banks are in place the world over--in almost every country in the free world--it is only the British Conservative party that wants to go back to the political manipulation of interest rates. That gave us entry into the exchange rate mechanism at the wrong moment--Black Wednesday--and the inflationary pressures under the previous Government, yet the Conservative party

29 Jun 1998 : Column 40

wants a return to the right of politicians to meddle in the short-term, day-to-day management of the economy and so damage the national interest.

In this context, the current Chancellor is to be congratulated on giving operational independence to the Bank of England and on his code for fiscal stability which, we hope, will entrench sensible rules for public borrowing. Both those changes should provide greater economic stability, lower inflation, lower interest rates and higher employment. Certainly, that is the justification for putting them in place.

As I argued on behalf of the Liberal Democrats before and during the last general election, long-term interest rates have already fallen directly because of expectations of lower inflation, which has resulted from the operational independence of the central Bank. If we secure lower levels of public borrowing, it means that when shocks to growth do occur--continued steady growth cannot be guaranteed--there is greater flexibility for fiscal policy and less risk of destabilising policy adjustments.

We welcome the changes--not surprisingly, as most of them were in our own manifesto. [Interruption.] They were, and I welcome the fact that the Labour Government have implemented policies that were in our manifesto. Indeed, it demonstrates that it is possible for an Opposition party to be influential. The only thing that was slightly odd was the inability of the Labour party during the election to acknowledge that it intended to do what we had specifically promised, but that does not in any way devalue the fact that we welcome the decision to move forward. Labour Members are happy to tease and challenge us, but, on occasion, it would be nice for the Government to acknowledge that there has been some agreement and congruence of policy, and not to try to manufacture a difference of opinion that does not exist.

As my hon. Friend the Member for Kingston and Surbiton (Mr. Davey) has said, one slightly worrying factor is that, on all the main series of statistics, the Government are clearly trying to manufacture discontinuity so that it will not be possible to monitor the progress of this Government and the performance of their predecessors in a like-for-like way. That is disturbing. They wish to rewrite history and draw a line at 1997.

Mr. Christopher Leslie (Shipley): I know that the hon. Gentleman is trying to stop other people from pointing out differences between the parties, but this is important. May I ask him his opinion? The hon. Member for Kingston and Surbiton (Mr. Davey)--50 per cent. of the Liberal Democrat party representation in the Standing Committee--made an important comment on the Finance Bill. He said that the Liberal Democrats wanted to consider equalising the income tax allowance with the capital gains tax allowance, moving it up to £6,800, which would cost £17.5 billion, equivalent to 8p on the rate of income tax. Is that Liberal Democrat policy?

Next Section

IndexHome Page