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Mr. Mandelson: I am grateful to my hon. Friend. I hope that such a visit will be possible before long. As he will realise, I am extremely concerned about the effect of the decision to which he refers on the employees and their families. I shall deal a little later with the action that the Government are taking to help precisely the individuals and localities that are being hit. As for the assisted area map, my hon. Friend will know that we are currently reviewing it. We have consulted many local authorities, and will consult Members of Parliament. My hon. Friend the Minister for Small Firms, Trade and Industry will be doing that.
I was talking about the world recession. No one disputes the fact that there is a serious downturn and that there will be job losses. The question is how much we will suffer from it.
Mr. John Hayes (South Holland and The Deepings):
Will the Secretary of State give way?
It is important to understand the weaknesses in the domestic economy--weaknesses that we inherited, and with which the world downturn is making it more complicated to deal. The fact is that we needed to slow down the economy because it was in danger of overheating. It was expanding at an unsustainable rate. Everyone knows that we could not carry on like that if we wanted a platform of economic stability on which we could build sustainable jobs and wealth.
If people are in any doubt about that, they have only to remember where Tory policies landed us in the early 1990s. Of course, the right hon. Member for Wokingham does not like to be reminded of that. He is currently in denial mode, disowning the Tories' record in government as he continues to nurse his rather lukewarm leadership ambitions.
Let us go back to the early 1990s. Before then, the Tory Government had cheerfully and irresponsibly let go of the reins, sidestepping necessary decisions on interest rates, public spending and taxation. We all know the result--an unsustainable boom--but only the Tories have failed to learn the lesson.
The Tories then had to slam on the brakes, plunging the economy into recession. Interest rates jumped to 15 per cent., business cash balances were drained, and many businesses went to the wall. Manufacturing output collapsed, and, in total, 1.8 million jobs were lost. In other words, we went from boom to bust as a result of the policies pursued by the very people who now have the audacity to lecture us about our management of the British economy.
We cannot afford to make such mistakes again. That is why since coming to office we have taken decisive action to get inflation under control, to reduce Government borrowing and to put the public finances on a sound footing, and that is why we are now in a strong position to withstand the worst of this difficult time in the world economy.
No one can be sure that we have seen the end of the crisis in Asia and elsewhere, but the best judgment that the Government can make is that we can and will avoid recession in the United Kingdom.
I have no doubt that the Opposition will find that very disappointing because they are never known to put national interest above party interest. They are absolutely crying out for recession. It is clear from their every utterance that they pray for it, they revel in it and they see it as their only route to political salvation. They care not a jot about the consequences for people's work and people's jobs. It is all propaganda to them.
Thankfully, independent economic forecasters do not wish to play that game. Almost all forecasts show modest growth next year. The International Monetary Fund forecast is close to that of the pre-Budget report. [Interruption.] It is an important matter. I suggest that Opposition Members listen to the economic argument that I am making, as I might be able to tell them something that they did not know or refused to acknowledge.
Mr. Graham Brady (Altrincham and Sale, West)
rose--
Mr. Mandelson:
I shall give way in a moment.
I know that no politician should place excessive weight on one set of economic forecasts, but equally I am determined that the Tories' wilful pessimism on the economy should not translate into wish fulfilment in its implications for the rest of us and for the British economy.
We should be giving British businesses the benefit of the best and most informed judgment that we can make. We should be talking up the efforts of British businesses and giving them support to ride out the storm, not making the waves rise higher and fall even harder as the Opposition are doing, wantonly and irresponsibly. Perhaps the hon. Gentleman will correct the impression that his right hon. Friend gave.
Mr. Hayes:
Rather than this diatribe, would not the right hon. Gentleman do better to emulate the Minister of Agriculture, Fisheries and Food who a few days ago addressed the House in a mood of contrition and humility? Would not a degree of humility and contrition go some way towards satisfying people who have lost their jobs in
Mr. Mandelson:
The hon. Gentleman, in speaking about humility and contrition, might address the record of the previous Government and the loss of 1.8 million jobs in the British economy as a result of their policies. As for what we are doing about it, I am trying to explain that.
To the extent that it is possible to make any sense of the analysis by the right hon. Member for Wokingham this afternoon--if his outpouring of false assertion, contradiction and lack of logic could be dignified by such a word--and in his previous speeches and statements, all of which I have taken seriously and read carefully, including his article in The Times today, he was trying to make two arguments.
The right hon. Gentleman argued first that the Government's public spending policy is keeping interest rates high, and, secondly, that our policies on taxes and social costs have worsened the business environment--we heard a little more about that this afternoon. He is wrong on both counts.
First, let me deal with public spending. I was glad to hear the right hon. Gentleman give the Government credit for sticking to our predecessors' spending limits for the first two years. However, generous acknowledgement of our prudence is rather difficult to square with his simultaneous charge that our new three-year spending plans explain why interest rates have risen under Labour. I find that difficult to follow.
One has only to look at the connection that the right hon. Gentleman is trying to make between interest rates and what he calls our extravagant investment in the health service and education and our extravagant expenditure to help children in need and pensioners. Without exception, all the increases in interest rates that the Bank has announced took place well before the Chancellor's announcement in the summer. So what is the connection? Where is the link between our spending plans and the increases in interest rates, which, as the right hon. Gentleman will acknowledge, are now coming down?
Mr. Redwood:
The Secretary of State will have to try to read a little better than that. I made it clear in my article that the extent to which the Government deviated from our plans in their first two years in office was damaging. For example, welfare to work, which we opposed, was an expensive, failed programme, and was one of the reasons why expenditure was higher than under the Conservatives. The Bank explicitly mentioned in its recent comments on the economy both the minimum wage, which was known to be coming in from the early days of the Government, and the expenditure plans. Will the Secretary of State now read those minutes, and understand their influence on the Bank of England?
Mr. Mandelson:
I have read the minutes, I have talked to the Governor of the Bank of England, and I have met members of the Monetary Policy Committee; and not one of them has once criticised the Government's setting of the national minimum wage. They have made no argument at all that it will have the adverse impact that the right hon. Gentleman describes. However, he has not told me in his intervention about the connection that he claims between the level of interest rates and our public spending plans.
Nor is it clear to me what alternative interest rate policy the right hon. Gentleman believes Britain should have followed. Would he have interest rates lower and take risks with inflation? Is that his policy? Is he saying that we should keep interest rates down to keep the exchange rate down? That was Nigel Lawson's policy in the late 1980s. Does he want a re-run of that? I really do not think so.
The right hon. Gentleman's second line of argument is that the Government's policies are worsening the business environment in the United Kingdom. He quotes a very big number for the increases in business taxes. I have looked carefully at that figure. I take very seriously any claim that we are unreasonably and inappropriately increasing the burden on British business and increasing costs unnecessarily, so I looked very carefully at how he reached such a gargantuan figure. I discovered that he mixed together the windfall tax, which was one off and restricted to the privatised utilities, with various other measures which either affect pension funds rather than companies or are measures to tackle tax avoidance, which I assume he would not wish to condone.
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