Below is the text of Mr Major’s written Parliamentary Answer on Economic Performance on 7th June 1990.
Mr. Robertson To ask the Chancellor of the Exchequer when he last met the Governor of the Bank of England to discuss United Kingdom economic performance.
Mr. Major I meet the Governor of the Bank of England from time to time to discuss a variety of matters.
Below is the text of Mr Major’s written Parliamentary Answer on Inflation on 7th June 1990.
Mr. Adley To ask the Chancellor of the Exchequer if he will estimate the contribution made by wage and salary increases to inflation.
Mr. Major Excessive wage settlements threaten job prospects rather than sustained higher inflation.
Below is the text of Mr Major’s written Parliamentary Answer on Interest Rates on 7th June 1990.
Mr. Benn To ask the Chancellor of the Exchequer when he will next meet the Governor of the Bank of England to discuss interest rate policy.
Mr. Major I meet the Governor of the Bank of England from time to time to discuss a variety of matters.
Below is the text of Mr Major’s response on the European Monetary System made on 7th June 1990 in the House of Commons.
Dr. Moonie To ask the Chancellor of the Exchequer if he will make a statement on progress on the Madrid conditions for joining the exchange rate mechanism.
Mr. Wallace To ask the Chancellor of the Exchequer which of the Madrid conditions concerning the United Kingdom entry into the exchange rate mechanism of the European monetary system have yet to be fulfilled.
Mr. Bell To ask the Chancellor of the Exchequer when he expects that the conditions for the pound sterling’s participation in the exchange rate mechanism of the European monetary system will be fulfilled.
Mr. Major A good deal of progress has been made in a number of conditions for membership of the exchange rate mechanism, but they have not yet all been met.
Dr. Moonie Will the Chancellor tell us which condition is likely to be satisfied first: a satisfactory reduction in our underlying rate of inflation or the achievement of a level playing field through the abandonment of subsidies by our European competitors?
Mr. Major Significant progress has been made in recent months on a number of the external elements that we require before joining the exchange rate mechanism. We have made our position on domestic inflation perfectly clear and I stand by that.
Mr. Wallace At a recent press conference the Chancellor seemed to suggest that our underlying rate of inflation was much closer to Community averages than a proper statistical approach would reveal. Was he using that figure to try to persuade the Prime Minister that we really should be joining the exchange rate mechanism, and on those grounds should Opposition Members keep quiet about the statistical flaws in his figures?
Mr. Major It is always a distinct help to the Government if Opposition Members keep quiet, whichever part of the Opposition they may represent. In the remarks to which the hon. Gentleman referred, I was drawing attention to the fact that the British rate of inflation appears misleadingly unreasonable compared with those of our European partners simply because we contain within our inflation rate that which other countries do not, and it was in response to a question about that matter that I made the remarks to which the hon. Gentleman refers.
Mr. Bell When we enter the exchange rate mechanism, as the Chancellor of the Exchequer proposes to do in the summer, will he go in on the tight band of 2½ per cent. or on the broader band of 6 per cent? Will he share his views on that with the House?
Mr. Major I can neither confirm the date that the hon. Gentleman surreptitiously slipped into his question as an assumption, nor enlighten him on his substantive point.
Mr. Ian Stewart Will my right hon. Friend assure us that, regardless of the specific matters spelt out in the Madrid conditions, he will not contemplate the entry of sterling into the exchange rate mechanism until he regards it as fully compatible with the needs of domestic monetary policy and, in particular, that he will not do so at any time when it might mean that interest rates would have to be lowered more or more quickly than is necessary for the proper control of monetary conditions and the reduction of inflation?
Mr. Major I am acutely conscious of the point to which my right hon. Friend rightly draws attention. The aim of joining the exchange rate mechanism is to support the policy to reduce inflation, not to damage it, and from that, my right hon. Friend will be aware of our policy.
Mr. Budgen Will my right hon. Friend confirm that entry into the exchange rate mechanism is stage one of the Delors proposals? The Delors proposals are supported by all the Commission’s bureaucrats and by all the nation states of Europe, with the exception of ourselves. Paragraph 39 asserts that entry into the first stage shall be taken as acceptance of all subsequent stages.
Mr. Major My hon. Friend has made assertions about what the purpose of stage one might be and about the extent to which that falls within the Delors plan. The fact that the proposal is supported by what he calls the bureaucrats in Brussels does not in itself make it wrong. We have a series of sound economic reasons for joining the exchange rate mechanism. The Government set out the policy that they would join the exchange rate mechanism when certain conditions were met. That remains the policy and it will be in the interests of this country.
Mr. Tim Smith Now that United Kingdom membership of the exchange rate mechanism has become the fig leaf behind which the Labour party has chosen to hide the private and unpleasant parts of its economic policy, would not we be better advised to join sooner rather than later so that those inadequacies can be exposed to the public for all to see?
Mr. Major If, as my hon. Friend suggests, the exchange rate mechanism will hide the shortcomings of Labour policies, it will need to be a good deal larger than a fig leaf. It is perfectly clear that the conditions that the Labour party has set out under which it would join the exchange rate mechanism make that pledge – –
Mr. Skinner Not all of us in the Labour party.
Mr. Major The hon. Member for Bolsover (Mr. Skinner) is correct. The conditions set out by the Labour Front Bench, without the support of the Labour Back Benches, for joining the exchange rate mechanism are essentially bogus, for the conditions mean that the Labour Front Bench could not enter.
Mr. John Smith In the context of possible entry into the exchange rate mechanism, will the Chancellor tell us whether the sufficiency of any reduction in inflation will be assessed according to the retail prices index or according to the so-called “underlying” rate of inflation? May I have a direct answer, please?
Mr. Major The direct answer, as I have often said, is that the rate of inflation will be assessed on the proximate rate of inflation, which means – –
Mr. John Smith The retail prices index or the underlying rate?
Mr. Major I am coming precisely to the point. The rate of inflation will be assessed not on the RPI, but o n a comparative basis to the measure in which European nations themselves assess inflation. I have repeatedly made that point clear for a long time.
Mr. Nelson Does my right hon. Friend recall that when there were recent rumours that this country was about to become a full member of the exchange rate mechanism, the immediate effect was that the stock market rose, the exchange value of sterling became firmer and money market interest rates fell? In view of that positive response, which should have warmed my right hon. Friend’s heart towards the idea of joining the exchange rate mechanism immediately, will he bear it in mind that if he felt it necessary to take an executive decision, even while the Prime Minister is abroad, to embark on that, he would earn the recognition of a grateful nation?
Mr. Major I have had some attractive offers in my time. I am not entirely sure to what extent my hon. Friend’s offer ranks among them.
I have made it entirely clear to the House now and on previous occasions that I have reached the judgment that, when the conditions that we have set out are met, it will be right for us to join the exchange rate mechanism. We must be aware of the point to which my right hon. Friend the Member for Hertfordshire, North (Mr. Stewart), drew attention some time ago, that the balance of advantage in due course is clearly to enter the exchange rate mechanism, and in due course that is what we shall do.
Below is the text of Mr Major’s response on Income Tax made on 7th June 1990 in the House of Commons.
Mr. Riddick To ask the Chancellor of the Exchequer by how much the basic rate of income tax has been reduced since 1979; and what are his future plans for the rates of income tax.
The Chancellor of the Exchequer (Mr. John Major) The basic rate of income tax has been reduced from 33 per cent. in 1979 to 25 per cent. in 1990. Moreover, the borrowing requirement, which was a deferred tax liability, has given way in the past three years to a Budget surplus. It is our objective to reduce the basic rate of tax to 20p in the pound, but only as soon as it is prudent and sensible to do so.
Mr. Riddick Will my right hon. Friend confirm that every time the Government have reduced the basic rate of income tax, the Labour Opposition and the Liberal Democrats have bitterly opposed the reduction? Is not it the case that had Labour still been in power we would still have a basic rate of 33p in the pound? Will my right hon. Friend confirm that, were he to adopt the policies and commitments in the Labour party’s policy review document, the basic rate of income tax would have to be massively increased for everyone? Has not the Labour party always been the high-tax party and will not it always be?
Mr. Major My hon. Friend makes his point entirely clearly. I am not sure that is wholly true to say that the Liberal Democrats have invariably opposed the tax decreases. I think that there was an occasion when they chose not to do so. My hon. Friend is being generous when he suggests that if a Labour Government were in power at the moment we should have a tax rate of 33p in the pound. It might well be noticeably higher. When, in due course, we get round to the detailed costing that Phillips and Drew has already attempted, we may be able to illustrate that it would be higher.
Mr. Beith Will the Chancellor explain what he meant when he said that it was not prudent to achieve his objective of an income tax rate of 20p in the pound this year? Is he admitting that he is using the level of income tax as a tool of economic and fiscal management? Will not all Governments have to do that?
Mr. Major The answer to the hon. Gentleman is that of course I am, as we have done and as I shall continue to do.
Mr. Arbuthnot Is not it right that the Government have greatly increased personal allowances, so taking out of tax many people at the bottom of the income scale? Does not that give the lie to Opposition parties, which suggest that they are the only people who care about those on lower incomes?
Mr. Major That is entirely true. By almost any measure – there are a variety that one can use – there has been a considerable increase in personal allowances at the bottom end of the tax scale. That is desirable. It is a deliberate act of policy and, of course, it has kept many people out of tax who otherwise would have been in the tax net.
Mr. Nicholas Brown This question seems to have been tabled as a direct attack on the Chief Secretary to the Treasury and I hope that the Chancellor will repudiate it. He will recall the Chief Secretary saying on BBC’s “On the Record” on 13 May that the prospect of tax cuts at the moment does not look very good, that these things are always uncertain, but there is very little room for manoeuvre. Will the Chancellor explain to the House why, after 10 years of Conservative Government – a Government who have declared that a further reduction in income tax is their main objective – there is now very little room for manoeuvre? Will he confirm to the House that it is highly unlikely that there ever will be enough room for manoeuvre to enable 24 out of 25 taxpayers to pay income tax at a basic rate of 20p in the pound?
Mr. Major Whatever else may happen in this Session of Parliament, the hon. Gentleman just won the palm for brass-necked cheek in his comments of the past few moments. There is no dislocation whatever between the comments of my right hon. Friend the Chief Secretary and those that I made at the Dispatch Box a few moments ago. One significant difference that is reflected in what the hon. Gentleman chooses to call the tax burden is that this Government tax honestly for their expenditure and do not tax for some, borrow for the rest and leave later generations to repay. When the borrowing requirement of the hon. Gentleman’s party is taken into account, the tax burden in 1979 was sharply higher than it is today.
Mr. Irvine Does my right hon. Friend agree that the Government have shown in the past that reductions in income tax stimulate economic growth and lead to an increase in overall revenue? Will my right hon. Friend take that very much into account when making his tax plans for the future?
Mr. Major I can assure my hon. Friend that it is ever close to my mind that that virtuous relationship exists. As he may know, the top 5 per cent. of taxpayers will pay 30½ per cent. of total income tax this year compared with 24 per cent. in 1978–79 when the top rate of tax could have been as high as 98 per cent.
Below is the text of Mr Major’s written Parliamentary Answer on Child Benefit on 5th June 1990.
Sir Ian Gilmour To ask the Chancellor of the Exchequer how many working families with children receive more in child benefit than they pay in income tax, distinguishing between two and one-parent families.
Mr. Major In 1990–91 an estimated 900,000 families with heads in full or part-time employment will receive more in child benefit than they pay in income tax. Almost half the families have insufficient income to be liable to income tax. A total of 600,000 are two-parent families and 300,000 are single parents. Estimates are based on a projection of the 1987 family expenditure survey and are subject to revision.
Below is the text of Mr Major’s speech to the Edinburgh Chamber of Commerce on Friday 25th May 1990.
CHANCELLOR OF THE EXCHEQUER:
Far too many people have no conception of the health and strength of Scottish business today. But you have in Scotland a very strong and active business community and a growing one, and I am delighted to see it so well represented here today.
Ten years ago – even five – I think few people would have been bold enough to predict the dramatic improvement there been in the prosperity and strength of Scottish businesses. That is understandable, for in many cases it must have been hard to see beyond the short traumas of change to the longer-term rewards. But change had to come and now we can see how it cleared the way for a whole new generation of Scottish entrepreneurs, many of them in new and growing industries such as electronics or financial services. I have no doubt that they in their different fields have the ability to equal and surpass the successes of their predecessors.
This revival of the spirit of enterprise is, of course, a nationwide phenomenon, and in my view it is one of the most important developments of the last ten years. More and more people have seen through that intensely damaging myth that profit was somehow not quite respectable, and that an enterprise society must by definition be a selfish society, and a materialistic one. It is not – and profits are the motor of prosperity. Adam Smith pointed out the folly of that attitude 200 years ago.
But the simple truth is that the only way to make the improvements in quality of life and public services that we all want to see, and the only way to sustain them, is first to generate the resources to pay for them. You can’t do it by wishful thinking. You can’t do it by piling higher taxes and more regulations on business, because that destroys business and impoverishes the nation. And a poor nation cannot afford anything other than poor public services. No, if we want good services and high living standards as a nation, we have to be able to afford them. We can’t do that without a successful performance from business and industry, and that is one of the principal reasons why business success is so critical for us all.
I know that some of you, inevitably, must be concerned about the health of business today, and worried that the present level of interest rates may put it in jeopardy. That is a natural concern. I understand it. Of course, other things being equal, we would all prefer interest rates to be lower. But the harsh truth is that if interest rates were lower, other things would not be equal. Most notably, so far from reducing inflation and getting it under control, we would see it racing ahead to levels that are simply unacceptable in today’s world – unacceptable in a whole variety of ways.
Perhaps some people may have forgotten the damage inflation does. I do not want all of us to have to relearn it by a painful return to anything like the levels of inflation we saw in the ‘70s. For it is not just the damage inflation does socially – to the weakest in our society, to pensioners and others on fixed incomes. It is also that inflation damages business – indeed it destroys business. It destroys investment, it destroys competitiveness, and it is pure poison to industrial relations.
For all these reasons, inflation must be forced out of the system. But it has not got any easier to do so: if anything, it has become more difficult. One reason for this is that, quite frankly, the economic success we have enjoyed in recent years has engendered a level of confidence amongst both consumers and industry which is hard to rein back. This has been compounded by the increasing shortcomings of our official statistics, which have at times given a less than clear basis for policy decisions.
The consequences of this are well-known. At a crucial period, in the wake of the stock market crash, we did not appreciate fully the buoyancy of the economy, and interest rates were too low for too long – as we can see now, with hindsight. The result is what I have called an inflationary hangover, and that will take us a time to work off. But we must work it off, however long and painful the cure. For business’s sake, particularly. For in all other respects, British industry is well placed to benefit from a decade which offers enormous opportunities for businesses of all kinds. But we will not benefit from those opportunities as we should, if we continue to labour along under an inflation handicap.
But that is the position at the moment: although the RPI overstates the extent of our inflation problem, particularly in comparison with our competitors, that does not alter the fact that inflation is clearly too high, and must be forced down. Our tight policy will do that, and is already turning a whole series of indicators in the right direction. But not enough of them, and as yet not far enough, I am afraid.
The interest rate consequences of that assessment are clear. I am not in the business of overkill; but I can also assure you that I have no intention whatsoever of giving inflation a second chance. So, although there are plenty of signs that the economy is righting itself, there need to be a great deal more before anyone should anticipate interest rates being relaxed.
So what does all this mean for Scotland? Sadly, there are far too many people who are prepared to run down Scotland’s prospects for the future – the old notion that when England sneezes, Scotland catches pneumonia. To my mind, that view is not only outdated, it is extremely patronising. And it is just plain wrong.
For today, in many ways, Scotland has been enjoying better economic fortunes than other parts of the UK. Unemployment has been falling faster in Scotland than in the rest of the UK, and fell again last month. Self-employment, which has been growing very fast throughout the UK, has in recent years grown faster still in Scotland, rising by almost a fifth over the last two years. Business start-ups are buoyant, and all the signs are that output has been growing faster than in the rest of the UK in 1988 and 1989. There is no reason why this cannot continue in the coming years.
There is nothing freakish about this at all. It demonstrates two things very clearly. First, that the improvement in Scotland’s economic fortunes is no nine-day wonder. And second that the interest rate weapon is, as we always maintained, well targeted on the problem we have to tackle. For it was not in Scotland, but in the South East of England that correction was most needed; and because house prices, and hence average mortgages, are so much higher there, that is where the correction will inevitably be focused. Unwelcome as high interest rates are – here, as South of the Border – it should be remembered that they seem to be having far less in the way of unpleasant side-effects for Scotland than many predicted.
Another thing that will be of relative advantage to Scottish businesses is the fact that on average, Scottish manufacturing exports more per employee than the UK average. I am pleased to see from recent Scottish business surveys that the future outlook for exports continues to be optimistic. At a time when home demand is cool, a sustained export drive is just what we need. I hope that firms elsewhere in Britain will emulate your example, and indeed that both you and they will do even better in the years to come.
No one knows better than you do that Scotland has faced some hard times over the last ten years. But in the last few years, the Scottish economy has been reaping the long-term rewards – more jobs than ever before in Scotland’s history, the highest growth rates in 15 years, and a flood of inward investment. I believe that will continue while overseas investors retain confidence in the British Government.
The success story of Scotland is something in which all of us, whether we live in Scotland or not, take pleasure and pride. It is not something the Government will take any risks with. Above all, it is an achievement that we are determined to protect from the destructive power of high inflation. But Governments on their own cannot ensure the success of business. That depends on all of you, and the decisions you make every day as you run your businesses.
This year, some of those decisions will be difficult. It is not going to be an easy year. Indeed, it cannot be, for we need a period of slower growth while we work off our present problems. But the short-term outlook has to be set against the longer term prospects, which are very bright indeed. The ‘90s bring the opening up of two enormous new markets – one, in Western Europe, which we have all been working towards for years; and one in Eastern Europe which has opened up in an utterly unexpected and dramatic fashion. The combination of the two represents an unprecedented opportunity; and it is a powerful reason for everyone in business today to look to the future with confidence, and plan for it. It won’t be easy. We will have to compete for these new markets. But so long as businesses control their costs at this crucial time, so long as they look ahead and make the right investment decisions for the longer-term, then our chances are very good indeed.
You face some ambitious challenges ahead, but you have some considerable achievements behind you. You have every reason for confidence, and every expectation of success.
Below is the text of Mr Major’s written Parliamentary Answer on the Crown Estates Commission on 24th May 1990.
Mr. Kirkwood To ask the Minister of Agriculture, Fisheries and Food if he will introduce legislation to require the Crown Estates Commission to publish minutes of all meetings and publish all working papers which lead to major policy decisions; and if he will make a statement.
Mr. Major I have been asked to reply. No. I am satisfied that the provisions of the Crown Estate Act 1961 provide the necessary level of accountability for the Crown Estate Commissioners.
Below is the text of Mr Major’s written Parliamentary Answer on Pool Betting Duty on 24th May 1990.
Mr. Knapman To ask the Chancellor of the Exchequer when he will cut pool betting duty from 42.5 per cent. to 40 per cent. as proposed in his Budget statement; and if he will make a statement.
Mr. Major In my Budget statement I proposed reducing the rate of pool betting duty from 42.5 per cent. to 40 per cent., subject to review after five years, on condition that the benefit of the reduction is transferred to the Football Trust for use in implementing Lord Justice Taylor’s recommendations for improving comfort and safety for football spectators.
I am glad to say that the Football Trust, the pool promoters and football authorities have entered into binding arrangements which will ensure payment by the pool promoters of the whole of the duty reduction to the Football Trust, for use on capital works at Football League and Scottish Football League grounds and the three national stadiums – Wembley, Hampden Park and Windsor Park, Belfast. In addition, the Football Trust expects to allocate £75 million to professional football over the next 10 years from contributions made to the trust from the Pool Promoters Association’s spot-the-ball competition. Accordingly, I propose to reduce the rate of pool betting duty to 40 per cent. from 28 May 1990. The new rate will apply to bets made at any time by reference to any event taking place on or after 28 May 1990.
The Football Trust has undertaken to account separately for the moneys made available to it by the reduction in pool betting duty; and to produce an annual statement of this separate account, to be audited by an independent auditor whose report will be made available to Government.
We will be introducing a new clause on the Report stage of the Finance Bill seeking to reduce the duty with effect from 28 May 1990.
Below is the text of Mr Major’s written Parliamentary Answer on VAT (Water) on 24th May 1990.
Mr. John Morris To ask the Chancellor of the Exchequer (1) what is the estimated annual cost to industry in Scotland of applying value added tax to water supply from 1 July;
(2) what is the estimated annual cost to industry of applying value added tax to water supply from 1 July;
(3) what is the estimated annual cost to industry in Wales of applying value added tax to water supply from 1 July.
Mr. Major Negligible. VAT to be charged on water supplies to industry after 1 July will, in virtually all cases, be reclaimable as input tax by those affected.