Category: 1989

Below is the text of Mr Major’s written Parliamentary Answer on Charities on 30th November 1989.

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Mr. Ashley To ask the Chancellor of the Exchequer on how many occasions since 1959 Governments have borrowed money from a charitable trust.

Mr. Major I regret that this information is not available. When the Government borrow they do so mainly through the issue of securities, which may be bought by charitable trusts, either directly or in the market. The extent of such purchases is not known.

Below is the text of Mr Major’s written Parliamentary Answer on Private Medical Insurance on 30th November 1989.

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Mr. Denzil Davies To ask the Chancellor of the Exchequer how much private medical insurance tax relief will cost in a full year.

Mr. Major About £40 million in 1990–91.

Below is the text of Mr Major’s written Parliamentary Answer on Jacques Delors on 30th November 1989.

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Mr. Rogers To ask the Chancellor of the Exchequer when he last had discussions with Mr. Jacques Delors.

Mr. Major I last met Mr. Delors on 13 November.

Below is the text of Mr Major’s response on EC Meetings held on 30th November 1989 in the House of Commons.

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Mr. Adley To ask the Chancellor of the Exchequer when he next intends to meet his European Economic Community counterparts; and what he expects to discuss.

The Chancellor of the Exchequer (Mr. John Major) The next meeting of the Council of Economic and Finance Ministers will be held in Brussels on 18 December 1989. Its agenda has not yet been determined.

Mr. Adley Is my right hon. Friend aware that everyone in the House will wish to congratulate him on this, his first appearance at the Dispatch Box at Question Time? All Conservative Members wish him 100 per cent. success in what he sets out to achieve.

Will my right hon. Friend confirm that within the Finance Ministries of the EEC countries different criteria are used to assess rail investment proposals in their state railway systems? Is he aware that our Treasury demands a higher rate of return yet pays lower regard to environmental and congestion factors than any other Finance Ministry in Europe? Is he aware, for example, that France spends twice as much as us on its railways and West Germany three times as much? Will he therefore, in concert with his colleagues, prepare a report so that we can factually assess railway investment decisions?

Mr. Major I am grateful for my hon. Friend’s opening remarks. Our rail investment programme is large, as he knows. The required rate of return is 8 per cent. in the United Kingdom, and it certainly varies in different parts of Europe, but the precise details of EEC countries’ rates of requirement are unknown to me. I should need to check them and write to my hon. Friend.

Mr. Allen The Chancellor will be aware that Members on all sides of the House, and the public, are concerned about war widows’ pensions. When he meets his counterparts in Europe, will he take time to discuss with them their arrangements for war widows’ pensions? Without committing himself today, will he listen to them with an open mind and bring before this House proposals for fair pensions for all war widows?

Mr. Major I admire the hon. Gentleman’s ingenuity in raising that important matter on this question. I discuss a large number of matters with my Finance Minister colleagues in Europe, but the issue to which he referred is more a matter for discussion within the Government.

Mr. Tim Smith Is my right hon. Friend aware that the CBI favours early membership of the exchange rate mechanism of the European monetary system because it believes that that will lead to more stable exchange rates and lower interest rates? Does my right hon. Friend share my hope that the two conditions that the Government have laid down – lower inflation and the abolition of exchange controls within the Community – will have been met in a year’s time?

Mr. Major Quite apart from the two conditions that my hon. Friend mentioned, other important matters need to be determined before we think it right for sterling to enter the exchange rate mechanism. I certainly hope to see lower inflation in this country and throughout Europe in a year’s time.

Mrs. Beckett When the Chancellor next meets his counterparts in Europe I suppose that he may discuss with them what his exchange rate policy is. Will he therefore tell the House what it is today?

Mr. Major First, I welcome the hon. Lady to her first Question Time in her new position.

I shall continue to take account of the exchange rate, along with other monetary indicators, when setting interest rates. That has been and remains our policy.

Below is the text of Mr Major’s written Parliamentary Answer on the National Loans Fund on 28th November 1989.

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Mr. Jack To ask the Chancellor of the Exchequer when he intends to use the power taken in the Finance Act 1989 to enable the Government to use the National Loans Fund money to acquire gilt-edged stock held in the issue department of the Bank of England for immediate cancellation.

Mr. Major The first use of this power will be made on 6 December, when £4.5 billion of stock will be acquired from the issue department for immediate cancellation. The Bank of England will today be issuing a separate notice giving precise details of the stock to be cancelled.

The text of Mr Major’s comments during the Economy debate, made on 28th November 1989 in the House of Commons.

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Mr. Speaker Before I call the right hon. and learned Member for Monklands, East (Mr. Smith), I must announce that I have selected the amendment in the name of the Leader of the Opposition. I have also selected, for a second Division, later in the evening, the amendment in the name of the right hon. Member for Yeovil (Mr. Ashdown).

Mr. Anthony Nelson (Chichester) On a point of order, Mr. Speaker.

Mr. Speaker Order. I am still on my feet.

There is great demand to take part in this debate, which is the final day of the debate on the Queen’s Speech, so I propose to put a 10 minute limit on speeches made between 6 pm and 8 pm but, as I have said on previous days, I hope that those called before and after that time will stick broadly to that limit.

Mr. Nelson On a point of order, Mr. Speaker. May I revert to the point of order made by my hon. Friend the Member for Gainsborough and Horncastle (Mr. Leigh), as this is a matter of interest to the House? When an amendment calling for full-blooded Socialism, withdrawal from Northern Ireland and the repeal of all trade union legislation has been tabled, is it not right, as the eyes of the country are upon the splits in the Labour party, and as the amendment appears to have precedents, that the House should be given an opportunity to vote on it and the country should be given an opportunity to see the division in the Labour party?

Several Hon. Members rose –

Mr. Speaker Order. Let me deal with one point of order at a time. The order in which amendments appear on the Order Paper is immaterial to my selection, which I have already announced.

Mr. Eric S. Heifer (Liverpool, Walton) On a point of order, Mr. Speaker. While I understand the efforts being made by Conservative Members to suggest that there are splits in the Labour party, I must say that some of us would welcome the opportunity to vote on what we believe.

Mr. Speaker I have not selected that amendment.

Several Hon. Members rose –

Mr. Speaker I hope that this is not a continuation of this spurious point of order, because – [HON. MEMBERS: “It is not spurious.”] I have announced my selection, and I cannot go back on it.

Mr. David Wilshire (Spelthorne) On a point of order, Mr. Speaker. May I ask you to reconsider that selection, in view of the comments of the hon. Member for Liverpool, Walton (Mr. Heller)? Should not the public have the right to know how many other Opposition Members are full-blown Socialists?

Mr. Speaker Let us get on with the debate; then no doubt we shall all hear.

Mr. Barry Field (Isle of Wight) On a point of order, Mr. Speaker. You are most jealous in guarding the rights of Back Benchers. It has come to the House’s attention and that of the nation that the hon. Member for Liverpool, Walton (Mr. Heller) feels compelled not to stand at the next general election –

Mr. Speaker Order. I have already dealt with this matter and announced my selection. Arguments on this issue can be advanced when we get to the debate.

Mr. John Smith (Monklands, East) I beg to move, at the end of the Question, to add: But humbly regret that the Gracious Speech seeks to continue economic policies which have caused the largest balance of payments deficit in our history, the highest interest rates among the leading industrial nations, and the highest rate of inflation of the principal countries in the European Community; and call on the Government to adopt a strategy for the regeneration of British Industry, and in particular its manufacturing sector, based on a commitment to regional economic development, support for the introduction of new technology through the promotion of research and development, and a sustained investment in education and training to reverse the appalling skills deficit which continually undermines the prospects of economic recovery. I should like to begin with a word of apology to the Chancellor of the Exchequer. In all the flurry of events consequent upon the resignation of the former Chancellor and the ups and downs of recent weeks, I fear that I omitted formally to congratulate him on his accession to his new, and most recent, high office. It occurred to me today that I could and should put that omission right in the first economic debate in this Session of Parliament. So I extend my congratulations to him.

There is another reason why I should take the opportunity now. Events on the Government Benches continue to move apace. The hon. Member for Clwyd, North-West (Sir A. Meyer) is clearly a force for glasnost and has caused an outbreak of what I can only describe as democratic fervour in the Conservative party, and it seems to be as heady a brew there as it is in eastern Europe.

After glasnost, as we know, comes perestroika. That opening of the political Pandora’s box can afflict even those who thought that they were previously unassailable. So I can understand the feeling of nervousness and uncertainty that is evident in the behaviour of Conservative Members.

So concerned are they by the political as well as the economic events, that the Prime Minister has sought to reassure them that the election will not be held next year or even the year after that.

Mr. David Winnick (Walsall, North) Or at all.

Mr. Smith Even the Prime Minister, despite some confusion about her own ambitions – to which I heard a reference from my hon. Friend the Member for Walsall, North (Mr. Winnick) – and which has left most of us bewildered, will have to face the electorate, and however reluctantly, at the latest in 1992.

These are all signs of a Government who have lost the confidence of the people and are running scared. They have lost the confidence of the people because of the economic situation which they have created. At the end of 10 years of Thatcherism, we have, at £20 billion, the highest balance of payments deficit in our economic history, we have a rate of inflation higher than any of our European competitors, and we have the highest interest rates among the leading industrial nations.

Mr. Tim Devlin (Stockton, South) In view of what the right hon. and learned Gentleman has been saying, may I ask how he explains recent polling evidence that, even when the Conservative party is in the doldrums, more people have confidence in it to solve the nation’s economic problems than they have in the Labour party?

Mr. Smith The hon. Gentleman makes a highly selective interpretation of some parts of polling data. I hope that he will take fully on board the fact that the latest poll I saw showed the Labour party 13 points ahead of the Conservative party in the estimation of public opinion. That might just weigh with him in his consideration of events.

The Government have lost the confidence of the people, and, what is worse, we seem set to enter the 1990s, as the Autumn Statement makes painfully clear, with the prospect of low growth, rising unemployment, falling investment and, even after all that, a balance of payments deficit at the end of the year predicted at £15 billion.

Those who might have hoped for early relief from the burden of high interest rates, including the millions of people who are locked in mortgage misery, will note with concern from the Autumn Statement that it appears, as City and press commentators have noted, that the Government assume that interest rates will remain at about their present level for at least the year ahead.

The Chancellor says that next year will not be easy. Does he think that 1989 was easy? Does he think that people found it easy to find £70, £80, £90, £100 extra each month to pay for the homes in which they live? Sadly, the millions in mortgage misery are paying the price of the Government’s failed economic policies.

There is little recognition in the Gracious Speech of the true nature of Britain’s economic situation. Last year the Gracious Speech told us that the Government’s policies would “bear down on inflation”. The Government went on to assure us that the problem was only a “temporary blip” on the path to zero inflation. A year later, we see what credence we can attach to such glib denials of reality.

But, then, complacency is the hallmark of this Government, and nowhere more so than in their persistent refusal to recognise the gravity of the balance of trade deficit, which has been deteriorating steadily throughout the decade. It may have been masked in the early years by the windfall benefits of North sea oil – a bounty of £78 billion, which the Government have never properly acknowledged – but relentlessly, as the Government’s neglect of manufacturing industry was perpetuated, the deficit has grown, until 1989 we find ourselves with a record level of £20 billion in the balance of payments.

Each year, it has been under-estimated by a complacent Government heedless of the consequences of their policy. They were heedless, too, of the warnings given years ago about what would happen if they persisted. It has been a commonplace in the speeches from Opposition Members that the neglect of manufacturing industry would lead inexorably to balance of payments problems. I shall remind the Government that the same message was given to them from another source and from another place. Just over four years ago in 1985 – significantly half way through the present decade – the House of Lords Select Committee on Overseas Trade in a special report warned the Government of the neglect of Britain’s manufacturing industries.

The report said: Unless the climate is changed so that steps can be taken to enlarge the manufacturing base, combat import penetration, and stimulate the export of manufactured goods, as oil revenues diminish, the country will experience adverse effects”. It went on to identify as among those adverse effects: an adverse balance of payments deficit of such proportions that severely deflationary measures will be needed. It predicted the risk of the economy stagnating and inflation rising, driven up by a falling exchange rate. Seldom has there been such a chillingly accurate prediction.

Mr. Julian Brazier (Canterbury) Will the right hon. Gentleman give way?

Mr. Smith Let me finish this point.

It unfolded in anticipation the reality of Britain’s economy today. So let us have no excuse from the Government that they have been somehow blown off course by unexpected events or adventitious circumstance. They did not listen then, just as they do not listen now.

The Government’s reaction to the considered and careful reasoning of the Select Committee was given by the former Chancellor the right hon. Member for Blaby (Mr. Lawson) in his Mansion house speech of 1985. Not one to mince his words, the former Chancellor rounded on their Lordships and said: The Government wholly rejects the mixture of special pleading dressed up as analysis and assertion masquerading as evidence which led the Committee to its doom-laden conclusion. The style and manner of that attack will be familiar to students of the Government. All criticism is gracelessly repelled and all critics immoderately abused. They are always ready to ignore the messages and shoot the messengers.

The House is well able to judge who was right, in the light of the outturn of events. The Government ignored the threat to manufacturing industry and under-estimated and dismissed the balance of payments consequences. We now know that the House of Lords Select Committee was devastatingly accurate and the Government were completely wrong. We are experiencing an adverse balance of payments deficit of record proportions – the highest in our economic history. Are not interest rates at 15 per cent. a severely deflating measure? The economy is stagnating. Leaving oil aside, it was forecast to grow in the Autumn Statement by only three quarters of 1 per cent. next year. Inflation is rising – it has risen to a six-year peak – and the exchange rate has fallen by 10 per cent. against the basket of currencies since the beginning of the year. Those are precisely the forecasts made by the House of Lords Select Committee in 1985.

One might have thought that a Government would have been chastened by such an experience, but there is no sign that any lessons have been learnt.

Mr. Brazier rose –

Mr. Smith I will give way to the hon. Gentleman in the hope that at least one Conservative Member might have picked up the point.

Mr. Brazier The right hon. Gentleman has mentioned the rate of inflation four times already in his speech. Will he tell the House whether at any time in the future he expects the rate of inflation to reach the average level that it was under the previous Labour Government?

Mr. Smith I thought that it might occur to Conservative Members to make such a point. It occurred to me also when I was reading the Prime Minister’s contribution during the Gracious Speech debate. On 21 November the Prime Minister said: When growth has been too fast, inflation re-emerges. It emerged in 1973 and it has re-emerged now.” – [Official Report, 21 November 1989; Vol 162, c. 28.] The House should note the significance of that. Inflation emerged in 1973, before the 1974 Labour Government were elected. It was there with the Barber boom, just as it is here with the Lawson boom.

It is not only that: Conservative Members conveniently ignored the oil price throughout the entire 1970s. They also conveniently ignore the fact that they have had almost the lowest commodity prices on record throughout the 1980s. Above all, since the Prime Minister, whom most of her colleagues follow slavishly, has given the clue that all this happened in 1973, her colleagues should amend their scripts accordingly.

Mr. David Clelland (Tyne Bridge) Will my right hon. and learned Friend help the hon. Member for Canterbury (Mr. Brazier) to further his education by telling him that, when the Conservative Government headed by the right hon. Member for Old Bexley and Sidcup (Mr. Heath) came to power in 1970, the rate of inflation was 5.9 per cent. and that, when they retired in 1974, it was 13.1 per cent. and rising fast?

Mr. Smith I am grateful to my hon. Friend. A great deal of education is required about the history of inflation in this country; if for no other reason, this debate is helpful in that respect.

Mr. Tim Smith (Beaconsfield) Why does the right hon. and learned Gentleman continue to criticise the performance of British manufacturing industry when its profitability is higher than it has been for 25 years, its investment has risen by 40 per cent. and its productivity has risen by 20 per cent. over the past three years, when manufacturing exports are up by 11 per cent. on the figure a year ago and by 40 per cent. in comparison with 1985 – the year to which the right hon. and learned Gentleman referred? Why does he continue to run down British manufacturing industry?

Mr. Smith I do not want to run down what is left of British manufacturing industry; I want to run down the Government who put such obstacles in its way. It might have occurred to the hon. Gentleman that there is something regrettably wrong with the situation in this country –

Mr. Philip Oppenheim (Amber Valley) Will the right hon. and learned Gentleman give way?

Mr. Smith I cannot give way to the hon. Gentleman when I am answering another hon. Member. The hon. Gentleman should expect me to answer his colleague properly before he tries to intervene.

The hon. Member for Beaconsfield (Mr. Smith) knows perfectly well that there must be something wrong with our manufacturing sector. Many of the leading figures point out constantly that the present size of our balance of trade deficit is a major factor in the highest balance of payments deficit in our history.

Mr. Oppenheim rose –

Mr. Bill Walker (Tayside, North) As the right hon. and learned Gentleman is a Scottish Member like me, he will realise that one of the major exporting industries in the United Kingdom is the whisky industry, which today is doing better than it has ever done. He will be aware that the distilleries that closed under the Labour Government are now reopening. He will also realise that the £1,000 million-worth of exports by the Scottish whisky industry is a record. That is what is happening under this Government. Perhaps he can explain how it can do that if the Government are so wrong.

Mr. Smith The hon. Gentleman puts a fetching point to me. I am unlikely to disagree with anyone who seeks to find solace in whisky, especially as it is, as the hon. Gentleman stresses, such a genuinely important industry and an important contributor to our balance of payments and to employment in the United Kingdom. I wish it every success. However, I regret that, over the full scope of the manufacturing sector, in far too many areas, we are in a trade deficit which should not have been allowed to occur.

Mr. Oppenheim rose –

Mr. Gerald Howarth (Cannock and Burntwood) rose –

Mr. Smith I will give way once more, and then perhaps I might be allowed to proceed with my speech.

Mr. Howarth Does the right hon. and learned Gentleman agree that the trade deficit is accounted for in large measure by the individual spending decisions of our fellow citizens? Does the Labour party plan to introduce import controls across the board or is the right hon. and learned Gentleman content simply to tell his right hon. and hon. Friends that they should stop buying French cars and do as I do and drive a British car?

Mr. Smith I do not know whether the hon. Gentleman wants to be congratulated on his personal purchasing decision. However, it will not do for the Government to try to shuffle off the responsibility for the balance of payments deficit on to private individuals. In far too many areas, people who want to buy British cannot because there are no British goods available because our manufacturing sector has become so small that there is very little in the way of choice: there are no British goods in the shops to combat imports. In the interests of choice, apart from economic success, the hon. Member for Cannock and Burntwood (Mr. Howarth) should be supporting the policies advocated by the Labour party.

Of course, even after all that experience, Government economic policy is still characterised by complacency and confusion. Despite resignations and reshuffles, the Government’s economic policy remains obscure and muddled. In ringing tones in the public expenditure debate on 9 February, the present Chancellor said: the first economic duty of government is to safeguard the value of the currency”. – [Official Report, 9 February 1989; Vol. 146, c. 1154.] [HON. MEMBERS: “Hear, hear.”] “Hear, hear,” I hear from Conservative Members sitting behind the Chancellor. On the day the Chancellor spoke, on 9 February, sterling was DM3.27; now, it is DM2.80. No wonder there is scepticism about the Government’s commitment to the policy which the Chancellor has articulated on their behalf.

The markets have known all along, and still believe, that the Prime Minister, schooled by Sir Alan Walters, does not want to manage the exchange rate at all, on the view that one cannot buck the market.

Mr. Quentin Davies (Stamford and Spalding) Will the right hon. and learned Gentleman give way?

Mr. Smith I have repeatedly given way to Conservative Members. I must make some progress.

Mr. Davies rose –

Mr. Smith I will not give way to the Member for Stamford and Spalding (Mr. Davies). I have made it crystal clear, and I make it clear again, that I do not intend to give way to the hon. Gentleman at present. Perhaps if he will remain in his seat I could make some progress in this debate. Many hon. Members want to speak and I should not take too much time.

The same degree of confusion appears to extend to the other first duty of Government – the control of inflation. One wonders why the new Chancellor has been so coy about accepting that inflation should be his judge and jury. On at least two occasions he has reminded us that those were not his words – perhaps a case of “Read his lips, don’t read mine.” The Government’s problem is their loss of credibility over the whole range of their economic policy. They once professed to have a medium-term strategy. Hon. Members remember the heady days when we were told that the MTFS would provide a stable financial climate for business and that stability was to be brought to the disordered world of our finances so that virtuous businesses could plan ahead with confidence.

Earlier this year, the new Chancellor, the then Chief Secretary, sought to explain the policy to small business men. He said: Government policy now operates in a medium-term framework, which gives individuals the confidence to plan ahead. He was speaking on 24 May, the very day when interest rates rose to 14 per cent. He omitted to warn them of that increase or the subsequent increase to 15 per cent. in October. So much for the confidence-inspiring medium-term financial strategy. It is no more than an addiction to rising interest rates.

The Government still peddle the myth of an economic miracle and will resort to any device to attempt to wish away economic reality. When the balance of payments monthly deficit first began to exceed £1 billion, at Prime Minister’s Question Time the Prime Minister herself dismissed the figures as a “freak”. But as, in month after month ever since, the average monthly deficit was significantly above £ 1 billion, a new explanation for the freaks had to be found. The device which the Government hit upon would have pleased Lewis Carroll – stand the problem on its head and declare it to be a success. The deficit was not a problem at all. Indeed, it was but a sign of success.

Into the fray went the present Chancellor, again as Chief Secretary. On 27 April 1989, in a speech to the American Chamber of Commerce, rather than attribute the deficit to the consumer boom, an error into which many other commentators appear to have fallen, he declared: the main reason for the balance of payments deficit is the dramatic surge in investment. We have often heard such arguments since. For example, British industry is merely pausing to re-equip itself for the next great leap forward.

That argument cuts no ice with the Opposition. To refute it in detail, I quote the analysis prepared by the City firm, Greenwell Montagu Research, entitled “The UK and Its Love of Imports: How the Deficit Arose”, which was published in May of this year. In a detailed study of the composition of the balance of trade, meticulously analysing imports in each category of goods under the standard international trade classification, it concluded: The deterioration in the trade deficit is across virtually all categories of goods. It is certainly not true that the deterioration is due, as the Chancellor” – that is, the former Chancellor – would have us believe, to an investment boom. Greenwell Montagu Research showed that true investment goods, which it defines as categories 71 to 74 in the standard trade industrial classification, which means power generating machinery, specialised industrial machinery, metal working machinery and general industrial machinery, have accounted for a little over £3 billion of the £25 billion deterioration in the trade account since 1981. Just as the claim that the deficit has been caused by an investment boom is bogus, so is the claim that the rise in business investment has transformed the capacity of the British economy, and especially of its manufacturing sector. The truth about the Government’s claim is that they constantly seek to obscure the facts about manufacturing investment with hype about business investment – we hear it every day of the week. The real increase in investment is overwhelmingly concentrated in the service sector. There has been greater investment in retail distribution, in banking, insurance, finance and related services. In contrast, manufacturing investment is only marginally higher than the level inherited by the Government 10 years ago, in 1979. Imagine that – manufacturing investment is hardly higher today than it was 10 years ago.

The fundamental point that the House of Lords Select Committee on Overseas Trade begged the Government to appreciate but which they have constantly failed to appreciate, is that manufacturing is not only the basic wealth creator in this country, but also the crucially internationally tradeable sector of the economy. I remind the House that, at page 82 of its report, the House of Lords Select Committee stated: service industry cannot substitute for manufacturing because many services are dependent on manufacturing and only 20 per cent. of services are tradable overseas”. The same point was made in an important article on the United Kingdom’s investment record, which was published in the Financial Times on the 8th of this month by Mr. Andrew Glyn, an economist at Corpus Christi college, Oxford. He stated: it would be fantasy to believe that finance and business services can take over from manufacturing and generate the foreign exchange necessary to pay the import bill”. In this House, however, we are more accustomed to hearing of fantasies rather than facts when Government economic policy is being justified. What else but a sense of fantasy could have led the former Chancellor to claim in the Budget debate of 1988 that Britain was experiencing an economic miracle similar to that enjoyed by Japan and previously experienced by West Germany?

The first thing that needs to be done is to abandon such illusions. We need a fresh start. Rather than seeking, to maintain the pretence of a busted medium-term financial strategy, we need to build a medium-term industrial strategy that will modernise and expand Britain’s manufacturing capacity, so that by wealth creation we can secure the prosperity of the nation and provide the public services that are so vital to the community’s quality of life.

Such a strategy must encompass the whole nation. Britain cannot afford the north-south divide or, to put it another way, cannot operate properly by cramming so much of our economic activity in the overcrowded and congested south-east, to the prejudice and harm of the rest of the nation, as well as of the south-east itself. Therefore, a vigorous and determined regional policy is required, not only in the interests of fairness, but to deploy the under-used resources and the unemployed people who have potentially so much to contribute to the process of wealth creation –

Mr. Ian Bruce (Dorset, South) rose –

Mr. Edward Leigh (Gainsborough and Horncastle) rose –

Mr. Smith Some of the Conservative Members making interventions from sedentary positions would be better employed listening to some of these obvious truths about the British economy. They do not like the truth, but in this free Parliament they are going to get it, whether they like it or not. I give way to the hon. Member for Gainsborough and Horncastle (Mr. Leigh).

Mr. Leigh The right hon. Gentleman has talked about making a fresh start, so may I help him by referring him to the four new taxes proposed in the Labour party’s policy document? I refer to the two local taxes that already appear to have been dropped, and to the payroll tax, as well as to the tax on unearned income. As two of the taxes have already been dropped, may I take it that the battlecry of the Labour party is no longer “Meet the Challenge: Make the Change”, but “Dodge the Issue: Ditch our Tax”?

Mr. Smith The hon. Gentleman has spent a long time rehearsing that intervention; perhaps the kindest thing I can say is that it needs a little more rehearsal.

Mr. Quentin Davies rose –

Mr. Smith Perhaps the hon. Gentleman will allow me to answer the point raised by the hon. Member for Gainsborough and Horncastle (Mr. Leigh). A lesson in courtesy would not go amiss among some Conservative Members – not so much to me as to their hon. Friends who have been so good as to ask me a question.

The hon. Member for Gainsborough and Horncastle has a sauce to talk about new taxes. What is the new tax afflicting our people from one end of the country to the other? It is the poll tax. Those of us with constituencies in the northern part of the kingdom, in Scotland, know only too well what lies in store for the people of England and Wales. I am being kind in restricting my comments to the poll tax, as what amount to a water tax and an electricity tax will also come the people’s way as a result of the privatisations.

Mr. Ian Bruce rose –

Mr. Smith No, I shall not give way.

We cannot be content with the range of our manufacturing activity. In too many areas, as is being increasingly recognised, Britain has either no presence or one that is too weak to make a real impact in the competition of export markets or in competition with imports at home. That is the very point to which the hon. Member for Cannock and Burntwood (Mr. Howarth) inadvertently drew attention in a previous intervention. Let us remember that we have a deficit of more than £2 billion in information technology industries alone.

It is the unavoidable responsibility of Government, as recognised by so many of our competitors, to work in partnership with industry to see that Britain is properly placed to develop the new products and the new processes on which we may have to depend in the fiercely competitive markets of the 1990s.

The neglect of research and development, and particularly the neglect of product development, must end. Above all, we need a wholly new commitment to education and training. For 10 years, our system of industrial training has been in relentless decline. Modern economies are talent-based, and success in the 1990s will go to the countries that can mobilise the skills of their people – all their people.

That is why the French train three times more people to craft-level qualifications than is done in the United Kingdom. Each year, the Germans train 600,000 young people on three-year industrial courses offering vocational qualifications at the end. In Britain, employment training is under-subscribed by one third and, on average, offers a six-month training period only with, at best, just credits towards vocational qualifications. According to the British Chambers of Commerce, skills shortages now affect 46 per cent. of manufacturing businesses in the United Kingdom.

In the face of those facts, how can anyone argue that training is satisfactory in Britain today? How can the Government justify the public expenditure programme that they recently brought to the House, which cuts the amounts available for training in industry?

If we set ourselves the ambition, we could create the best educated and trained work force in western Europe. I believe that the nation would respond to a Government who drove forward to achieve such an ambition.

Sir Peter Hordern (Horsham) rose –

Mr. Smith I hope that the hon. Gentleman will forgive me, but I shall not give way; I am about to conclude.

Sadly, that ambition will not be achieved under an Administration whose vision is so limited and whose concept of the future is so hopelessly flawed by their restricting ideology and their policy failures.

The Gracious Speech shows that little has been learnt either about the challenges of the 1990s or the failures of Thatcherism in the 1980s. Britain needs not just a change of Prime Minister: it needs a Labour Government.

The Chancellor of the Exchequer (Mr. John Major) I am grateful to the right hon. and learned Member for Monklands, East (Mr. Smith) for his kind opening remarks. May I take this first opportunity to welcome warmly the hon. Members for Derby, South (Mrs. Beckett) and for Brent, South (Mr. Boateng) to the Opposition Treasury team? I am sure that the right hon. and learned Gentleman will miss his hon. Friend the Member for Monklands, East –

Mr. John Smith For Dunfermline, East (Mr. Brown).

Mr. Major I beg the hon. Gentleman’s pardon. The right hon. and learned Gentleman and his hon. Friend are perhaps the two most famous men to come out of Scotland since Burke and Hare, and it is perhaps understandable that I mixed them up. I know that the right hon. and learned Gentleman will miss his hon. Friend. Above all he will miss him because his hon. Friend has gone to shadow the Department that the right hon. and learned Gentleman regards as the real heart of economic policy. Some time ago, when the right hon. and learned Gentleman was the Opposition spokesman on trade and industry, he said: the Treasury has been too dominant in the whole area of economic and industrial policy. What has been lacking is an important economic department based on the Department of Trade and Industry. The right hon. and learned Gentleman has not yet retracted that. His hon. Friend the Member for Dunfermline, East is now the Opposition spokesman on trade and industry, and presumably the right hon. and learned Gentleman, who is the shadow Chancellor, is subordinate to him.

Although the right hon. and learned Member for Monklands, East may wish to downgrade his role, the shadow team remains as interesting as ever. In that context, I shall turn to the hon. Member for Derby, South (Mrs. Beckett), who has recently joined that team. She has spent a considerable part of her career distancing herself with some clarity from precisely the policies that the right hon. and learned Gentleman so frequently advocates. Hon. Members will recall that, not long ago, the hon. Lady said: None of the arguments for staying in the EEC can be sustained. As I understand it, that is not the position of the right hon. and learned Gentleman. The hon. Lady also said that the EEC was a prime obstacle to the policies that the Labour party wants. There is no doubt that the hon. Lady will bring variety to the Opposition Front Bench. While the right hon. and learned Gentleman tours European capitals, the hon. Lady will remain at home planning our exit from the Community.

Ms. Hilary Armstrong (Durham, North-West) Perhaps the Chancellor has found himself in the wrong place. The Pre-School Playgroups Association is meeting in the Dining Room.

Mr. Major In that case, I am surprised to find the hon. Lady here.

The right hon. and learned Member for Monklands, East had a great deal to say about the problems that we face. Much of his speech requires an answer and I shall deal specifically with that. He had little or nothing to say about a practical and worthwhile solution. He undervalued our industrial performance and said little to acknowledge the improvements that have been made in recent years. He does not help his party or anyone else by playing down the achievements of business and industry in recent years.

The right hon. and learned Gentleman conveniently overlooks the fact that total investment is at an all-time high and that an additional 69,000 businesses have been created in the first 10 months of this year alone. He did not acknowledge at all the fact that 2,750,000 more people are in work than six years ago – the greatest creation of jobs by a considerable amount of any nation in the European Community. Perhaps the right hon. and learned Gentleman does not wish to give the Government credit for that. I understand that, but he might offer some credit to the business men and the people who have created that success in the last few years.

Mr. Robert Sheldon (Ashton-under-Lyne) When the previous Chancellor of the Exchequer departed from office, we were informed that the policies would remain unchanged. Since then, the effective rate of the pound has declined by 4 per cent. Is that a continuation of policy?

Mr. Major The central core of our policy has been, and remains, our intention to hear down on inflation and to reduce it as speedily as possible. That is precisely the policy that I shall continue to follow, for I share the view of my right hon. Friend the Member for Blaby (Mr. Lawson) that inflation is now higher than we wish it to be. It is imperative that we use every mechanism at our disposal to bring inflation down: that was my right hon. Friend’s policy, and it will remain my policy.

Mr. Nelson My right hon. Friend will know that, day on day, exchange rate variations – even those in the European currencies in relation to the pound – are becoming quite substantial. As many of those depreciations must inevitably feed into the rate of domestic inflation, I wonder whether my right hon. Friend feels that we would have been worse off or better off over the past two days had we been full members of the exchange rate. In my view, there can be no doubt of the answer: we would have been better off.

Mr. Major At present, that is, I think, unprovable. The fact is that we are not a member of the EMS, and we shall not become a member until the conditions set out at the Madrid summit by my right hon. Friend the Prime Minister are met. There is no doubt that we shall join then, but there is much to be done before that day arrives – not all of it by this Government.

Mr. Tony Banks (Newham, North-West) I am grateful to the right hon. Gentleman for giving way. We ex-Lambeth councillors must stick together.

Opposition Members genuinely want to see the good side, but if it is so good, why – after 10 years – is our inflation rate higher than that of any of our major European competitors, and why have we the highest balance of payments deficit on manufactured goods? We merely want to know why that has come about.

Mr. Major I am surprised that the hon. Gentleman should think that that constitutes ex-Lambeth councillors sticking together. The differentials between the performance of this country and that of the rest of Europe have narrowed dramatically between 1979 and now. Over the past 10 years, we have experienced a higher compound year-on-year growth than any other nation in the European Community. That is a matter of undoubted fact, which the hon. Gentleman may care to bear in mind.

Mr. Geoffrey Robinson (Coventry, North-West) Is the Chancellor not aware that that growth has come from imports and service industries? Does he not realise that, far from being the enemy of manufacturing industry, the Opposition are its greatest supporter?

Is the right hon. Gentleman not aware that the whole problem arises from the attitude of his predecessor, who said that he could see no difference between a job in service industry and one in manufacturing industry, and who could not perceive that service industry was largely dependent on manufacturing industry? That attitude has bred a culture of maximum short-term gain, in which the spivs of the City are against long-term investment in our manufacturing industry. That is what is wrong with the Government’s outlook, and until they correct it, manufacturing industry will decline yet further.

Mr. Major I think that the hon. Gentleman has a cheek. He should remember that Jaguar is a good deal better off today than it was when he was running it some years ago. The figures that I quoted were for output growth, in which we have a better record than any of our partners in the European Community. The hon. Gentleman should not seek to downgrade that record.

Mr. Ian Bruce Does my right hon. Friend remember that, in the 1970s, when faced with the problem of high wage inflation in the economy and difficulties with the balance of trade, the Labour party – the friend of manufacturing – decided that the way out was to increase employers’ national insurance, with the iniquitous employers’ national insurance surcharge? Does he believe that that would be the right way in which to proceed today, or does he agree that it was responsible for sending our manufacturing competitiveness spiralling downwards?

Mr. Major I recall those historical sins of the Labour party. More relevantly, however, I also recall that – for all that Labour Members say about manufacturing industry – manufacturing output fell between 1974 and 1979. Against that background, the right hon. Gentleman should perhaps be a little less forceful in his criticism of the present Government for the changes that have taken place in the wider economy.

Mr. Stuart Bell (Middlesbrough) Before he leaves the subject of the exchange rate and interest rates, let me remind the Chancellor that his right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath) coined the phrase, “the sole golf club in the Chancellor’s bag”. The Chancellor said in reply to an earlier question that he would use every possible mechanism in relation to the exchange rate. Is he saying that the “single club” policy has now been discarded? Are there now other mechanisms with which to control the exchange rate? Is the right hon. Gentleman prepared to allow it to continue to fall, and, if not, what preventive measures does he propose?

Mr. Major If the hon. Gentleman had listened carefully to what I said in the Autumn Statement, he would know that I made it absolutely clear that we shall maintain a firm monetary and fiscal policy to bear down on inflation. I believe, and there should be no doubt about it, that we need to bear down on and to reduce inflation, which I shall try to do. He may not understand the impact of a firm monetary and fiscal policy, but I shall deal with that and other matters later for him.

Mr. A. E. P. Duffy (Sheffield, Attercliffe) rose –

Mr. Keith Vaz (Leicester, East) rose –

Mr. Major If hon. Members will forgive me, I should like to make progress. I have given way generously.

Insofar as the right hon. and learned Member for Monklands, East addressed what I believe to be the principal problem that we face – inflation – he simply attacked the methods that we are using to curb it, without suggesting any practical alternative. He attacked the medicine but, alas, neglected the disease. He did not overcome his chronic reluctance to reveal his policies in any detail, although I shall be able to help him with that later, as I have now had the opportunity to read with some care the Labour party’s policy review.

The burden of the right hon. and learned Gentleman’s speech was that, over the past 10 years, little or nothing has been achieved, and that nothing has changed in our economic performance. If that genuinely is his view – I doubt that it is – he has a selective memory. Ten years ago, we had an economy in which the market was strangled by regulations and controls. There was a large, hopelessly inefficient and loss-making nationalised industry sector. There were controls on prices, dividends, and pay. There were controls on how much the average holidaymaker could take abroad, which had to be stamped in his passport before he could go abroad. All those controls have gone. At that time, they had control of just about everything, except inflation, borrowing and debt, which were uncontrolled by the Labour Government.

We have moved from that, which is why I reiterate, without qualification, what I said in the Autumn Statement – that the British economy enters the 1990s incomparably stronger than it entered the 1980s, and nothing can hide that reality.

Mr. Tony Benn (Chesterfield) I am listening intently to what the Chancellor is saying. Will he say what the time scale would be for the reduction or disappearance of the balance of payments deficit if present policies, which he supports, are followed? In the end, that will be an important factor. Will he give his estimate of how long it will be before that deficit disappears?

Mr. Major I share the right hon. Gentleman’s wish to see the trade gap diminish, and I made that clear some time ago. It has not been the fashion of the Government or their predecessors to forecast the trade gap beyond a year. I made a clear forecast in the Autumn Statement of what I think will happen to the trade gap next year. I forecast that it would fall from this year’s level of £20 billion to £15 billion. I shall make a further forecast in next year’s Autumn Statement, but at present it would not be productive to go further than that.

Over recent years, economic growth in this country has been good in historical terms and by international comparisons. Throughout the 1980s, it has been faster in the United Kingdom than in all the other European Community countries.

I do not hide for a second the short-term difficulties that we face, but the policies to deal with them have been put in place and remain in place. The problem that confronts us is to get inflation down. At present, it is too high, and bringing it down will not be easy. Inflation tends to be stubborn, and that will take time. The path from one month to the next will not necessarily be smooth. It may be erratic, not least because of the effect of including mortgage interest payments in the retail price index. For example, next month the recent increase in mortgage interest rates may be reflected in an unnecessarily high retail price index figure.

Mr. A. J. Beith (Berwick-upon-Tweed) The Chancellor has turned to the very point that I wanted to ask him about. It is surely no use for him to complain about the statistical problems of including mortgage interest rates in the retail price index when cost-push inflation is led by pressure for wage increases from people whose mortgages have rocketed at such a rate, because of high interest rates, that they must plead for higher incomes. Given that position, how can the right hon. Gentleman hope to conquer inflation with a high interest rate policy? Why is he not looking for the sort of external disciplines, such as the exchange rate mechanism, that would enable him to get interest rates down?

Mr. Major The hon. Gentleman misstates what we have said previously about the RPI. We have said that it is an unreasonable comparator between this country’s inflation rate and those of other countries which, with the exception of Canada and Eire, do not include anything remotely approximating to mortgage interest rates in their retail price indexes. That means that the comparative figure looks noticeably worse in this country simply because of the separate methods of calculation.

Mr. Vaz rose –

Mr. Harry Ewing (Falkirk, East) rose –

Mr. Major I have given way quite generously and a large number of hon. Members wish to catch your eye, Mr. Speaker, so I fear that I shall not give way.

To bring inflation down, we are clear that a firm monetary and fiscal stance remains necessary. We have one in place, and we will keep it in place. I expect to do that for some time. That will be so, because the only way to bring inflation down is to keep policy tight, which means keeping interest rates high as long as we need to do so and taking account of a range of monetary indicators, including the exchange rate. That is not a popular message but, in my judgment, it is essential.

Tight monetary policy should also contribute to a narrowing of the trade gap, by slowing the excessive growth of demand. Of course, to reduce the deficit, our exporters need to do well too, and the signs on this front are far more encouraging than they have been for a considerable time. In 1989 so far, our manufacturing exports have been up 11 per cent. on the same period a year earlier. It now looks as though the United Kingdom’s share of world trade will have risen in 1989, which is the clearest possible demonstration that British industry can compete and is competing successfully in world markets. I expect further strong growth in exports next year and a slowing in imports as home demand continues to respond to the tight policy which we now have in place.

I must say bluntly that there is no known easy way to get inflation down. I have carefully considered the potential alternatives to high interest rates, but the more I have looked at them, the less convincing they have become. Nothing illustrated this more clearly than the difficulties that the Labour party had when it flirted with the fashionable idea of reintroducing credit controls. When Labour did so –

Mr. Neil Kinnock (Islwyn) We are not flirting.

Mr. Major The Leader of the Opposition says that Labour is not flirting with that idea. The hon. Member for Derby, South (Mrs. Beckett) said on television that the Labour party had not made up its mind about the issue. I am pleased to hear that the Leader of the Opposition is in favour of credit controls. I am delighted to hear him confirm that.

Mr. Kinnock The Chancellor said a moment or two ago that there was no known alternative to his policy of trying to squash out demand by very high interest rates. There is a known alternative, which permits a country to control the amount of credit extended in order to bring down demand without hammering industry by pushing up costs, and belting every home buyer. Why does not the right hon. Gentleman try one of the known ways that will not harm the economy in the way that his policies will?

Mr. Major The right hon. Gentleman clearly does not understand that making credit scarce puts up the price of credit; it does not bring it down. He also does not understand that he has just described the classic way to create the mortgage queue so beloved of the Labour party.

When the Labour party considered credit controls, it was far from clear what it meant by them. The hon. Member for Dunfermline, East, who, alas, is not with us at present, told us that we could not have credit cards – at precisely the moment that the Labour party introduced its own credit card. The Labour party clearly does not understand that little personal borrowing is done on credit cards, so that would not work.

Scarcely was that interview over than the hon. Member for Dagenham (Mr. Gould) popped up to tell us that the Labour party did not intend to concentrate on credit cards, but wanted to restrict new mortgages. A little thought persuaded Labour Members that such a policy would be unpopular – as it would be – so the right hon. and learned Member for Monklands, East entered the fray to say that he did not mean to do anything about credit cards or mortgages – or anything else, as far as I can see. Instead, he would apply a little moral pressure by having a quiet drink with his friends in the City. So much for a brief flirtation with policy.

The truth is that credit controls are not the right answer. Not only were they unfair, inefficient and damaging to industry when they were last used, but in today’s competitive and open markets – and especially in the absence of exchange controls – they simply could not work. Artificial controls on bank lending would not work. We tried them before and they failed.

Mr. Kinnock rose –

Mr. Major The right hon. Gentleman might find it wise to wait a minute.

Such controls would be even more ineffective in today’s open and deregulated markets.

We are not alone in drawing that conclusion. The United States and Germany have rarely, if ever, relied on credit controls such as we have had. Italy and France have moved to eliminate their controls recently, and even Denmark and Sweden, which traditionally have highly regulated economies, are ridding themselves of credit controls.

Perhaps the most interesting case is that of Australia, which has a Labour Government. If they thought that credit controls could work, they would certainly have introduced them rather than face the present 20 per cent. interest rates. But as their Labour Finance Minister explained to me only last week, they have quite logically concluded that credit controls are a non-starter and they will have nothing to do with them. Only the British Labour party still lives in the 1960s and wants solutions that have been tried before, and have failed.

Mr. Spencer Batiste (Elmet) Does my right hon. Friend agree that the only net beneficiaries in an attempt to introduce credit controls would be the European banks, which would take a significant market share away from British banks?

Mr. Major My hon. Friend is entirely right. Perhaps that is part of the new-found Europeanism of the Leader of the Opposition.

The simple fact is that we need to discourage borrowing and to encourage saving, and there is no ducking that. Nothing does that more effectively than interest rates. Our policies are right and, in my judgment, the only policies that we can pursue satisfactorily. There is no simple alternative. We need to be patient for a while, but there is no doubt that the policy is working. The evidence is mounting: retail sales have slowed considerably, the housing market has cooled down and the money supply, although just outside its target range, has slowed from earlier in the year. In short, there is comprehensive evidence that the policy is working, and I see no reason to change it.

Mr. Duffy If, as the Chancellor has said, the policy is working, how does he explain the gloomy forecast of the Confederation of British Industry yesterday that, with investment slumping, the economy hovers on the brink of two years of recession? How does such a forecast encourage any of us to believe that the narrow manufacturing base, which was the burden of the concern of my right hon. and learned Friend the Member for Monklands, East (Mr. Smith), will be expanded? Unless that happens, we cannot narrow the trade gap.

Mr. Major There are several points to make on that matter. First, I gave a perfectly clear-cut response in the Autumn Statement, and I advise the hon. Gentleman to read it. Secondly, the manufacturing base has flourished and will continue to do so, providing that we are able to achieve and maintain firm control of inflation, as we are determined to do.

Mr. Vaz Will the Chancellor of the Exchequer give way?

Mr. Major No. If the hon. Gentleman will forgive me, I have been over-generous in giving way.

I shall not set interest rates higher than necessary for longer than necessary, but nor do I intend to reduce them until that can be safely done without risk to inflation. To do so would simply lengthen the time before we can return to the steady and sustainable growth that we are determined to have in the 1990s.

Nor will there be any backsliding whatever from the sound fiscal policies which have been the characteristic of this Government, throughout its 10 years in office. In case anyone misinterprets, I say that not as a Budget hint but simply to reinforce the fact that, like both my predecessors, I favour a tight fiscal position, both as an essential buttress against inflation, and because of the innate desirability of reducing Government debt rather than adding to it and leaving the next generation to repay it. Our policies mean that, by the end of the current financial year, we shall have made debt repayments of £30 billion in the space of just three years.

The advantages of our strong fiscal position are self-evident and important for the future. The latest public expenditure plans, which I presented to the House just two weeks ago, show debt interest payments running at £18 billion a year. Had we continued borrowing at the rate that we inherited in 1979, that annual burden would have been, not £18 billion but more like £30 billion a year, a saving of £12 billion. That is a conservative estimate of the saving that we have made. It may have been a great deal larger.

We have saved more than half the total amount that we spend on the Health Service every year – or, to put it another way, more than the combined budgets of the Department of Trade and Industry, the Department of Employment, the Ministry of Agriculture, and the Department of Transport. That is the scale of the improvement to our public finances of the policies that we have followed in the past 10 years.

Mr. Vaz rose –

Mr. Graham Allen (Nottingham, North) rose –

Mr. Dennis Skinner (Bolsover) rose –

Mr. Major With the possible exception of Japan, no large nation in the world can match the current strength of our public finances.

Mr. Allen The Chancellor of the Exchequer talks as if he has just assumed his responsibilities, as indeed he has. Is he aware that there has been a Conservative Government for 10 years, at the end of which we have the highest inflation rate in industrialised Europe, rising interest rates, which will probably rise further in the near future, the largest trade deficit of any industrialised country and the highest inflation of any G7 country? Does he agree with the right hon. Member for Blaby (Mr. Lawson), who is no longer with us, that inflation should be the judge and jury of this Conservative Government?

Mr. Major The hon. Gentleman left out many items from his catalogue. We have had the highest growth of investment, the highest growth of debt repayment, the highest rate of growth in the European Community and much else besides. He should not join his right hon. and hon. Friends in playing down what industry and commerce have achieved.

Mr. Vaz Will the Chancellor give way?

Mr. Major No. I shall not give way.

The fact that so much has been achieved and that we have such a strong fiscal position explains precisely why we could increase by £2.6 billion the resources of the National Health Service for the coming year, why we shall double spending on national roads by 1993, why we can afford an extra £250 million for a new initiative to tackle homelessness, and why we can spend a further £500 million on resources for higher education, not to mention the £1.5 billion extra for capital spending by central Government and public corporations – a remarkable increase in real terms of 10 per cent. on the current year.

Mr. Winnick rose –

Mr. Major As a result, it is now clear for all to see that the services that people want and the investment that builds for the future are safe with this Government as they never were under Labour in the 1970s.

Mr. D. N. Campbell-Savours (Workington) rose –

Madam Deputy Speaker (Miss Betty Boothroyd) Order. The Chancellor of the Exchequer has said that he is not prepared to give way.

Mr. Major With his usual fairness, the hon. Gentleman will appreciate that I have given way generously in the past few minutes.

Equally importantly, we have been able to increase spending on priority areas, while sticking absolutely to the ratio of public expenditure planned and determined over a year ago. Public expenditure control is firm and will remain so, now and in future.

But impressive as our public-sector record is, it is not the whole story of the economy. Not only is the public sector preparing for the future, the private sector is doing so, too. In the past decade, total investment has grown much faster than previously. In the 1960s and 1970s, we were at the bottom of the growth league. In the 1980s we have been at the top of the European investment league. Business investment has also grown more than twice as fast in the 1980s as it did in the 1970s. Last year it stood at £58 billion – a record level of 14.75 per cent. of national income – and it has risen further this year.

There is yet a further point. There is no point in investing in plant and machinery to produce goods that nobody wants to buy. We learned that in the past. In the 1970s, much of the investment that actually took place was driven not by genuine commercial considerations but by tax avoidance. But since the changes in corporation tax in 1984, that has ceased and investment has increased, not to exploit tax breaks but to reap genuine commercial opportunities and to earn real profits.

If anyone doubts the importance of considering the quality of investment as well as the quantity they should reassure themselves by examining investment in eastern Europe. In countries such as Poland, Bulgaria, Romania and the Soviet Union, investment accounts for around a quarter or more of national income, significantly more than in this country or other advanced industrial countries. But has it been successful? Has it made a real contribution to the welfare and success of these economies? The lesson is – the Labour party should learn it – that inefficient investment for its own sake gets one nowhere; that is why the quality of our investment is so important to our success.

Business today is in far better shape than it was ten years ago. It is far better able to tackle – [Interruption]. Opposition Members do not like it, but they know that it is much better. After a decade of rising productivity and rising profitability, industry is far more able to handle a tougher year in 1990, and, beyond that, to face the next decade with confidence.

In the 1990s, the economic environment will be very different from that of the 1960s, 1970s and 1980s. We should see the completion of a single market in Europe. Demand from eastern Europe – for so long suppressed – should increase dramatically. They will need modern machinery and consumer goods. All those developments represent genuine opportunities for British industry and commerce. I have no doubt whatever that the revival in British enterprise puts us in an ideal position to exploit future challenges, but our objectives will remain the same: sustainable growth, stable prices, lower taxes and better public services. I have no doubt that these are achievable and deliverable in the 1990s.

I do not believe for a second that the enterprise that has been revived under this Government will evaporate just because interest rates are high for the time being. What would destroy enterprise would be a return to the policies that failed so dismally when the Labour party introduced them.

Mr. Campbell-Savours rose –

Madam Deputy Speaker Order. The Chancellor has made his position clear, and it must be respected.

Mr. Major A return to the past is precisely what the Labour party is offering in its policy document, “Meet the Challenge, Make the Change”. It is subtitled: “A New Agenda for Britain”, although the introduction by the Leader of the Opposition rather spoils that. He admits that, far from a new agenda, we have looked back to gain inspiration from the great accomplishments of the past. Mercifully, he does not tell us which accomplishments, but he is accurate to say that his party has looked back – straight back to the policies of the Wilson Government.

The right hon. and learned Member for Monklands, East is shy about his policy document. He rarely mentions it – very wisely. I have read it and know why he rarely mentions it. It promises a “power house” designed to develop a new proactive role providing continuity, consistency and commitment. Would the right hon. and learned Gentleman care to tell us what that gobbledegook means?

Mr. Campbell-Savours rose –

Mr. Allen rose –

Mr. Major No, I will not give way.

Mr. Campbell-Savours rose –

Madam Deputy Speaker Order. The hon. Gentleman should not persist when the Chancellor has made his position known.

Mr. Major rose –

Mr. Campbell-Savours rose –

Madam Deputy Speaker Order. I am requiring hon. Gentlemen to resume their seats.

Mr. Major I am sorry that the hon. Gentleman is so upset, but if he listens he may learn something.

All hon. Members will be reassured when they learn that this brand new policy document says that its –

Mr. Andrew Faulds (Warley, East) Tell us about the pound.

Mr. Major Good gracious: fresh from his triumph as Carver Doone, the hon. Gentleman interrupts us again, having woken from his slumbers.

The policy document says –

Mr. Faulds Tell us about the pound.

Mr. Major I think that the hon. Gentleman’s mechanism has got stuck. Perhaps the hon. Member for Hackney, North and Stoke Newington (Ms. Abbott), who is sitting beside him, could rewind him and he would move on.

The policy document states –

Mr. Faulds Tell us about the pound.

Mr. Major That was one of the worst auditions that I have ever heard.

The document tells us that its task will not be to pick winners. Losers, perhaps, as before. Instead of a Department of Economic Affairs, Labour now promises A new Department of Trade and Industry, which will have an equal, if not superior, status to that of the Treasury. Instead of a national plan, Labour will now treat us to a “medium term industrial strategy”. Instead of George Brown, we shall have Gordon Brown; otherwise, it is all the same.

Mr. Bell On a point of order, Madam Deputy Speaker. We are considering the Queen’s Speech and this is the Government’s defence of their record. Could you direct the Chancellor of the Exchequer to defend the Government’s record?

Madam Deputy Speaker That has nothing to do with the Chair.

Mr. Major A few minutes ago, the right hon. and learned Gentleman told us –

Mr. Harry Ewing On a point of order, Madam Deputy Speaker. This is a serious matter. Millions of people are worrying how they can meet the expenditure of Christmas as well as their mortgage payments and every other item of expenditure in their household budget, yet the Chancellor is –

Madam Deputy Speaker Order. The hon. Gentleman is a considerable parliamentarian, and he knows that that is not a point of order for me.

Mr. Major A few minutes ago, as the House will recollect, the right hon. and learned Gentleman said that the country needed a Labour Government.

Mr. Skinner Hear, hear.

Mr. Major Perhaps I should say that again, to see if there is more support on the Labour Benches next time.

It is entirely reasonable to examine the policies of this putative Opposition. If they will not tell us about those policies, we must tell people what their policies are, whether they like it or not. There are further nostalgic references to Wilsonian policies. There will be an investment bank.

Mr. Faulds What is the right hon. Gentleman’s next job?

Mr. Major I promise I shall not understudy anything that the hon. Gentleman has in mind.

Mr. Ted Rowlands (Merthyr Tydfil and Rhymney) On a point of order, Madam Deputy Speaker. I wish to raise with you what is clearly emerging as a hat trick post-television. That is that Ministers endeavour to speak until live television finishes. In the light of that –

Madam Deputy Speaker Order.

Mr. Rowlands In the light of that –

Madam Deputy Speaker Order. I am on my feet. I am prepared to deal with the point of order, which I am sure I have understood. The length of the Chancellor’s speech has nothing to do with the Chair. He should be allowed to make progress. If there were fewer interruptions, he could do so.

Mr. Rowlands Further to that point of order, Madam Deputy Speaker. This is a procedural point. In the light of that evidence, is it not time for the Procedure Select Committee to look at the length of ministerial speeches?

Madam Deputy Speaker If the hon. Gentleman feels that this matter should be raised with the Select Committee on Procedure, he has the answer in his own hands. I suggest that he raises the matter with that Committee.

Mr. Major Perhaps the Procedure Committee could look at organised disruption while it is about it. In the last film in which I saw the hon. Member for Warley, East (Mr. Faulds), he played the part of a mounted Boer, and he played it well.

Mr. Campbell-Savours Will the Chancellor give way?

Mr. Major I have given way frequently, and I shall not give way to the hon. Gentleman.

We are offered “new investment products”, but what will they be? If they are any good, why do they need an investment bank? Labour does not tell us. Anyway, I thought from the policy document that Labour was not going to pick winners. Apart from the policy being nonsense, it is nostalgia in a big way – nostalgia for the National Enterprise Board and the Industrial Reorganisation Corporation, both of which made a distinguished contribution to the near-fatal collapse of the British motor car industry. The whole policy echoes the past – the Meriden co-operative, Messrs. Solemn and Binding and the social contract. No wonder Labour members are trying to disrupt these proceedings. They do not like this. It is no wonder that the Leader of the Opposition wrote: We have looked back to gain inspiration from the great accomplishments of the past. Back is certainly true, inspiration I am not sure about, and accomplishments is surely wrong by any reasonable judgment.

We have a decade of solid, clear-cut achievement behind us. By contrast, Labour holds the record of failure – whether it is failure to make British industry successful, failure to bring prosperity to the regions, failure to reduce unemployment or failure to control inflation. We on this side of the House have policies that will work for the future. Labour has policies that failed in the past. Between them, there is only one choice to be made, and I invite the House to make it.

Below is the text of Mr Major’s written Parliamentary Answer on Mortgage Tax Relief on 15th November 1989.

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Mr. Denzil Davies To ask the Chancellor of the Exchequer what is the estimated cost in the present fiscal year of mortgage tax relief at the higher rate of income tax.

Mr. Major [holding answer 13 November 1989]: The estimated cost in 1989–90 of mortgage tax relief at excess over the basic rate of income tax is £430. This estimate is based on a projection of the 1986–87 survey of personal incomes and is therefore provisional.

Mr. Denzil Davies To ask the Chancellor of the Exchequer what would be the additional cost to the Exchequer, in a full year, assuming mortgage interest rates of 14.5 per cent. and at present tax rates, of increasing the mortgage interest income tax relief from a ceiling of £30,000 to a ceiling of £45,000.

Mr. Major [holding answer 13 November 1989]: The direct revenue cost in a full year, at 1989–90 levels and assuming mortgage interest rates of 14.5 per cent. throughout the year, of increasing the ceiling for mortgage interest relief from £30,000 to £45,000 is estimated to be about £900 million. This estimate makes no allowance for any consequential changes to the distribution of outstanding mortgages.