The Rt. Hon. Sir John Major KG CH

Tag: 1989

  • Mr Major’s Written Parliamentary Answer on Cash Limits – 31 October 1989

    Below is the text of Mr Major’s written Parliamentary Answer on Cash Limits on 31st October 1989.

    Mr. Nicholas Bennett To ask the Chancellor of the Exchequer whether there will be any changes to the Treasury’s cash and running costs limits in 1989–90.

    Mr. Major Subject to parliamentary approval of the necessary supplementary estimate, the cash limit for class XIX, vote 11 will be increased by £1,004,000 from £55,779.000 to £56,783,000.

    This increase reflects the take-up of entitlement to carry forward under-spending in 1988–89 under the end of year flexibility arrangements, as I announced on 20 July 1989 at columns 258–62. The full entitlement of £661,000 on capital expenditure is taken up together with £223,000 of the £302,000 entitlement on running costs. Additionally, it reflects an increase in expenditure of £35,000 by the History of Parliament Trust to meet the costs of additional research staff. These increases will be charged to the Reserve and will not therefore add to the planned total of public expenditure.

    There is also an increase in provision of £85,000 to meet the setting-up costs at Chessington computer centre prior to the take-on of new payroll work, which will be offset by corresponding decreases in running costs limits of other Departments, as well as an increase to meet the increased costs of services provided by the Government Actuary’s Department, which will be offset by a corresponding payment from the Government Actuary’s Department vote (class XIX, vote 4).

    As a result, the running costs limit of Her Majesty’s Treasury will be increased by £308,000 from £74,944,000 to £75,252,000.

  • Mr Major’s Comments During the Economic Policy Debate – 31 October 1989

    The text of Mr Major’s comments during the Economic Policy debate, made on 31st October 1989 in the House of Commons.

    Mr. Speaker I must announce to the House that I have selected the amendment in the name of the Prime Minister. In view of the number of right hon. and hon. Members who wish to participate, I propose to put a limit on speeches of 10 minutes between 7 and 9 o’clock.

    Mr. Dick Douglas (Dunfermline, West) On a point of order, Mr. Speaker. I hesitate to interrupt the flow of remarks, but when you impose that stricture, will you take cognisance of the fact that on recent occasions Front Bench spokesmen have consumed large proportions of the time allocated? Therefore, if Back Benchers are properly to be constrained by your ruling, Mr. Speaker, the same strictures should apply to Front Bench spokesmen.

    Mr. Speaker As the House knows, I have no authority at the moment to limit the length of speeches made by Front Bench spokesmen. Nevertheless, I hope that what the hon. Gentleman has said will be borne in mind today.

    Mr. John Smith (Monklands, East) I beg to move, That this House condemns the continuing confusion and disarray in the content and conduct of government economic policy; notes with deep concern the absence of full agreement on economic policy between the Prime Minister and the former Chancellor of the Exchequer; and deplores the continuing commitment to high interest rates which are causing such harm to industry and to the people of Britain. Since we last discussed economic policy in the House only a week ago, there have been some changes – some changes in the team. It was only a few weeks ago that the Chancellor of the Duchy of Lancaster – the chairman of the Conservative party – gave us the theme for the period to the next election. In his speech – the speech before Agincourt – he said: We must work together as a team. A team in the Cabinet: a team in Government. That was at the beginning of his speech. More attention appears to have been taken of an ominously prophetic quotation towards the end of his speech – in his peroration. He said: He which hath no stomach to this fight, Let him depart. We know that there has been a departure – the departure of the former Chancellor. He departed because he found it impossible to work in a team in which the captain does not support the leading player. In his resignation letter, the right hon. Member for Blaby (Mr. Lawson) said: The successful conduct of economic policy is possible only if there is, and is seen to be, full agreement between the Prime Minister and the Chancellor of the Exchequer.

    We should do the right hon. Gentleman the credit of accepting completely what he said. Although his letter was short, it contained a terse but electric message: no Chancellor can carry out his arduous duties without the full support of the Prime Minister. In the case of the right hon. Gentleman, that support was withheld because of a preference for a part-time unelected adviser who spent only a minority of his time in this country. We are invited to believe – if we are to accept some of the curious answers given in the Prime Minister’s Walden interview on Sunday – that the right hon. Member for Blaby resigned because his head had apparently been turned by tittle-tattle got up by the press and that in that confused condition he had unaccountably and quite irrationally abandoned an unassailable position to leave the Government for no good reason.

    The truth – as the former Chancellor told us – was that he was entitled to expect “full agreement” on economic policy and proper support. In this curious Government. he neither got it nor was seen to receive it, and not unnaturally he went – a victim of the confusion and disarray which is, in my submission, the inevitable consequence of the subversion of Cabinet government in which the Prime Minister has been engaged for the past 10 years.

    There are two crucial areas of economic policy in which the acute divisions of policy are all too sadly evident and destructive of the public interest. Those are the approach to the possible accession of Britain to the exchange rate mechanism of the EMS and domestic economic policy, particularly in relation to the management of the exchange rate. For some time, the official stance has been that the Government would join the ERM when the time was right.

    The Deputy Prime Minister restated that in an important speech on Saturday night. He said: Thus the position that we took in Madrid – one which the Prime Minister, Nigel Lawson and I all agreed – was the right one. We said ‘yes’ we want the existing EMS to be strengthened, ‘yes’ Britain should join and will join the exchange rate mechanism. We defined the conditions that would make the time right: Liberalisation of capital movements in the Community, headway in the battle against inflation – itself the crucial objective – and substantial progress on the single market. He added: We committed ourselves to stage one of the Delors report. As we all know, that envisages all member states participating in the exchange rate mechanism.

    The right hon. and learned Gentleman went on: That was the position in June. As the Prime Minister, Nigel Lawson and I have repeatedly stressed in the House of Commons, it remains the position now. It is of the highest importance that Her Majesty’s Government is seen to remain committed to that position, clearly and in good faith. He added for emphasis: It is important – not just for the credibility of our common European commitment but for the economic health and political strength of Britain”. Note how important he envisages good faith – crucial to our economic health and our political strength.

    I dare say that that speech in any normal situation would not have attracted as much notice as it did, as many observers would have believed it to be a perhaps enthusiastic, but certainly not inaccurate, statement of what Government policy was thought to be. The Deputy Prime Minister, however, must have felt some twinge that it might be more significant. He apparently consulted the new Foreign Secretary and the new Chancellor of the Exchequer, but he did not consult the Prime Minister; nor did he issue the speech through his Government office or even through the Conservative party news service. He issued it on plain, unheaded notepaper.

    I hazard the guess that the right hon. and learned Gentleman did not consult the Prime Minister or use official or party channels because he did not wish there to be any impediment to the delivery of his message. His instincts were probably correct because, not long before he had spoken the words at 9pm on Saturday night, on Saturday afternoon the Prime Minister had recorded the interview on the Walden programme, which we saw on television on Sunday.

    As we all know, that interview was an event of enormous political significance, a revelation of the Prime Minister’s style and approach to the problems of government, as an example of which it could not be bettered. It will be as indispensable to historians as it is to those of us who view these matters in a more contemporary frame. But it is also acutely relevant to the Prime Minister’s, and therefore the Government’s approach to accession to the exchange rate mechanism.

    At first the Prime Minister appeared to take the normal line: We shall join the European Monetary System on the conditions we laid down in Madrid. There was nothing fudged about them” – curiously, no one alleged that there was anything fudged about them – they were quite clear. Let us recollect that the Deputy Prime Minister had told us – and he was Foreign Secretary at the time – that there were three conditions: liberalisation of capital movements, progress on reducing inflation and substantial progress – no more than that – on the single market.

    That was not enough for the Prime Minister. On she went, throughout almost the entire second section of her interview, expanding conditions and extending time scales with gay abandon. Not only are exchange controls to be removed, but investment requirements on pension funds and insurance funds in all member states have to go. What is called – [Interruption]. Hold on. What is called liberal economics – with a small “I”; I suppose that we might call it Manchester school liberal economics – must be practised in all countries. A “higgledy-piggledy” system in which no one else plays by the rules must be transformed.

    It can all be summed up by saying that, if all the other member states have adopted Thatcherite policies and the Prime Minister has personally inspected them all, looked to see that all the economic fingernails are clean, we might, just might, consider joining the exchange rate mechanism.

    I observe in passing that the Prime Minister has noticed that Thatcherism has not crossed the English channel – how fortunate they are – and nor is it likely to do so. Why on earth would the other Community countries want to import the equivalent of a £20 billion balance of payments deficit and rates of inflation and interest rates much higher than obtain in their countries? But the clear message that the Prime Minister is giving is that, so long as she is Prime Minister – and that is until the next general election – Britain will not join the exchange rate mechanism.

    Mr. Tony Marlow (Northampton, North) The right hon. and learned Gentleman deservedly has a high reputation. Would he care to enhance that reputation by putting on one side the humour and tittle-tattle and telling the House which of the Government’s conditions precedent to joining the ERM – conditions that have been set out at various times by the Government and on Sunday by the Prime Minister – the Labour party accepts and with which it disagrees?

    Mr. Smith The hon. Gentleman knows well that we have repeatedly set out the conditions – [HON. MEMBERS: “Answer.”] He knows perfectly well that time and again we have proposed that Britain should join the ERM on certain prudent conditions which the Labour party – [HON. MEMBERS: “Answer.”] The difference between the two sides of the House is that we are clear about what those conditions are, whereas the Government side – [Interruption].

    Several Hon. Members rose – [Interruption]

    Mr. Speaker Order. The right hon. and learned Member for Monklands, East (Mr. Smith) is clearly not giving way.

    Mr. Smith We do not know, on the Government side, what the conditions are, or what time scales are in operation.

    Mr. Robin Maxwell-Hyslop (Tiverton) Answer the question.

    Mr. Smith I can understand why the Conservative party wants to – [Interruption].

    Mr. Speaker Order. There is great pressure to speak in the debate. Hon. Members should allow the right hon. and learned Gentleman to get on with his speech.

    Mr. Neil Hamilton (Tatton) rose –

    Mr. Cranley Onslow (Woking) rose –

    Mr. Smith The fundamental problem – [HON. MEMBERS: “Answer.”]

    Mr. Speaker Order. The House knows the rules.

    Several Hon. Members rose –

    Mr. Speaker Order. I say to the Government Benches that if the right hon. and learned Gentleman does not give way, hon. Members who are attempting to intervene must resume their seats.

    Mr Maxwell-Hyslop Further to that point of order, Mr. Speaker.

    Mr. Speaker Order. There was no point of order. I was reinforcing a ruling.

    Mr. Maxwell-Hyslop Further to the point that was raised with you, Mr. Speaker. May I ask if it is not a fact –

    Mr. Speaker Order. No point of order was raised with me. I rose to say, and I repeat, that if the right hon. and learned Member for Monklands, East does not give way, hon. Members who are standing must resume their seats.

    Mr. Maxwell-Hyslop On a point of order, Mr. Speaker. The right hon. and learned Member for Monklands East (Mr. Smith) gave way. Questions were asked and certain answers were given – [Interruption]. You know as well as I do, Mr. Speaker, that if a Front Bench spokesman – [HON. MEMBERS: “Sit Down.”]

    Mr. Speaker Order. The hon. Member for Tiverton (Mr. Maxwell-Hyslop) has been in the House for a long time and knows as well as I do that I am not responsible for questions that are asked, provided they are in order, and answers that are given, provided they also are in order.

    Mr. Maxwell-Hyslop Further to my point of order, Mr. Speaker – [Interruption].

    Mr. Speaker Order. [HON. MEMBERS: “Name him.”] I will hear what the hon. Gentleman has to say if it is a point order, but not if it is a point of argument.

    Mr. Maxwell-Hyslop I assure you that I rise on a point of order, Mr. Speaker – [Interruption].

    Mr. Speaker Order.

    Mr. Maxwell-Hyslop I will continue when you can hear me, Mr. Speaker. We are all aware that if an hon. Member is speaking and gives way and is asked a question – [Interruption]. I will wait until you can hear me, Mr. Speaker.

    Mr. Speaker Order. I get the drift of the point that the hon. Gentleman is making. It does not appear to be a matter of order for me. I suggest that we get on now.

    Mr. Maxwell-Hyslop rose –

    Mr. Speaker Order. I ask the hon. Gentleman to sit down.

    Mr. Maxwell-Hyslop rose –

    Mr. Speaker Order. For the final time, I ask the hon. Member for Tiverton (Mr. Maxwell-Hyslop) to resume his seat.

    Mr. Smith It is a great pity that the House is not currently being televised, so that the whole nation could observe the organised wrecking tactics used by the Conservative party against the Opposition. [Interruption].

    Sir William Clark (Croydon, South) rose –

    Mr. Speaker Order. I repeat to the House – [Interruption]. Leave it to me, please. There is great pressure to speak today. I ask the House to listen without interruption. to what the right hon. Member for Monklands, East (Mr. Smith) is saying.

    Mr. Smith The hon. Member for Northampton, North (Mr. Marlow) asked me about our conditions. Perhaps I may be allowed the opportunity which I have been trying to take for some time, of addressing that question, despite deliberate wrecking tactics from Conservative Members. The conditions applied by the Government will frustrate our efforts to join the exchange rate mechanism. The conditions that the Labour party attaches, apart from the important question of joining at the effective rate, are that there should be adequate swap arrangements between the central banks, that there must be a well-organised regional policy within the Community, and that the thrust of the economic policies within the Community should be for growth and not for deflation.

    That approach has not only been approved by the other countries in Europe, but was substantially approved by the resolution of the European Parliament last week, for which the Conservative MEPs voted. Those MEPs, of course, have a problem in the European Parliament: no other MEPs will have them as part of their group. They feel a little detached from the Conservative party on this side of the Channel. No wonder! Perhaps “semi-detached” is an expression that may carry more menace for them.

    In her interview, the Prime Minister’s clear message was that she had no intention of joining the exchange rate mechanism. She said of the timing that there had to be major changes by our errant partners – all the people who do not play by the rules and who are up to all kinds of dirty tricks. She said: Now all that should happen during … what is called the Delors first stage, the first stage coming towards monetary union. I hope it will but other countries have to catch up a long way before it happens. As she knows, there is no time limit to stage I of the Delors plan and she knows that the deadline for the single market is 1 January 1993. In so far as she claims that her conditions relate to completion of the single market, it would hardly be likely that she could make the judgment on their performance – a crucial part of her approach – before 1 January 1993. Let us remember that the last date for the next general election is June 1992.

    I submit that the only reasonable conclusion to be drawn from that seminal interview is that there is no question of the Prime Minister agreeing to join the exchange rate mechanism before the next election. That position is hopelessly at odds with the view of the Deputy Prime Minister. Is it the Prime Minister’s policy that the Government do not anticipate joining the exchange rate mechanism? Is that the view of the Deputy Prime Minister, the Foreign Secretary or the new Chancellor of the Exchequer? The new Chancellor has an opportunity today to spell out his policy. If he does not, I fear that confusion will remain.

    Let me remind the House of that crucial sentence in the speech of the Deputy Prime Minister: It is of the highest importance that Her Majesty’s Government is seen to remain committed to that position clearly and in good faith. The Prime Minister’s response may be clearer than the Deputy Prime Minister anticipated. However, does he believe that it can conceivably accord with the good faith that he believes to be of the highest importance and which is so important to our economy and our political strength? If it does not, can he accept what the former Chancellor could not – that a Government policy is undermined, and seen to be undermined, by the Prime Minister on national television?

    When the Deputy Prime Minister refers to good faith, I believe that he has in mind good faith within the Government – rare though such a commodity must be – and good faith in relation to the other member states in the Community. It is worth reflecting on what those member states thought when they considered the patronising tone of the Prime Minister’s Walden interview. We can rest assured that there is one person who will not be worried by that. If the Prime Minister can feel sorry for all 48 other countries of the Commonwealth, why bother about a mere 11 in the European Community?

    I referred earlier to divisions on domestic economic policy. To be fair, I believe that all members of the Government began with much the same position. In those early days, when monetarism was unchallenged within their ranks, the belief was firm that the exchange rate could be left to the market and that just controlling the money supply would keep inflation in check. Even the former Chancellor was in line then.

    In a famous reply on 3 July 1980, when asked by my hon. Friend the Member for Liverpool, Riverside (Mr. Parry) what mechanism existed for medium or long-term alteration of the exchange rate, the former Chancellor replied simply, “Market forces.” That was the era of free floating when it was said that there was no stable or reliable relationship between interest rates and the exchange rate.” – [Official Report, 4 November 1980; Vol. 991, c. 537.] However, the former Chancellor learned by hard experience. He saw the irrational and wild oscillation in the exchange rates and began to move towards the position that he had adopted by the time of his resignation – that is, managing the exchange rate and participating in international agreements to stabilise exchange rates among the G7 nations through the Plaza and Louvre accords.

    On the basis of his experience, the former Chancellor began increasingly to realise the potential value of participating in the exchange rate mechanism. Clearly he moved a long way, but the Prime Minister has not. The lady did not turn. She believed and she still believes, as she has told the House, “You cannot buck the markets.” That was her reason for demolishing the Chancellor’s policy of shadowing the deutschmark. It was also the reason why she summoned Sir Alan Walters back from the United States to be her adviser earlier this year. She apprehended that two issues were coming to the forefront on which, if she did not strengthen her position, she might lose out. Those were the arguments over the exchange rate mechanism and the desirability of seeking to manage the exchange rate.

    The Prime Minister also knew, as she told us eight times on Sunday, that the former Chancellor was “unassailable”. I could hardly believe it when she said that again today during Prime Minister’s Question Time. However, it was precisely because the Prime Minister assessed the Chancellor as unassailable that she set out to undermine him.

    Only the truly innocent believe that Sir Alan Walters was just another adviser – one of those people who advise while Ministers decide. He was more than that. He was a crucial ally of the Prime Minister. In the knowledge of his fierce opposition to joining the exchange rate mechanism, frequently and publicly expressed on both sides of the Atlantic, he was recalled to serve in No. 10. It did not take long for Sir Alan to become the alternative Chancellor, and we know the sad eventual outcome of all that. The new Chancellor will not have Sir Alan around.

    Mr. David Tredinnick (Bosworth) Will the right hon. and learned Gentleman give way?

    Mr. Smith No; I hope that the hon. Gentleman will forgive me.

    If the new Chancellor seeks to develop a policy of which the Prime Minister does not approve, he will encounter the same problems as were encountered by the former Chancellor. The new Chancellor must make up his mind, and he should tell us today whether he follows the previous Chancellor’s policy or whether he takes sides with the Prime Minister and believes that the markets cannot be bucked.

    While the new Chancellor carries out his duties, I urge him to be careful about the Prime Minister’s praises. If she calls him brilliant, he should be wary. If he hears the words, “brilliant, brilliant”, especially if the call is uttered shrilly, he should be worried. If he is ever described as unassailable, he should start to tidy his desk.

    There are echoes of the Westland affair in all this. Once again, there is a serious dispute over a European policy question. The right hon. Member for Henley (Mr. Heseltine) wanted a European solution to the Westland affair. The Prime Minister did not. The right hon. Member for Henley was undermined by the leaking of a Law Officers’ letter – a process assisted by unelected officials in No. 10. Business as usual, one might say.

    In the Westland affair, the Prime Minister lost two Ministers. In the present crisis, she has lost thus far only one, albeit the most senior Minister in her Government. The Deputy Prime Minister, who lost his old job in the reshuffle earlier this year, should take especial care. So should the new Chancellor.

    The new Chancellor’s crucial training for his new post was not so much the two years that he spent as Chief Secretary to the Treasury; rather, it was his three months as Foreign Secretary. After he had negotiated an agreed communiqué with the representatives of the other 48 Commonwealth countries at Kuala Lumpur, his efforts were completely overturned by the Prime Minister’s lengthy denunciation of the views of those very countries.

    As we approach the Council of Europe meeting to be held in Strasbourg in December, the new Chancellor should be especially vigilant; otherwise he might have been Kuala Lumpured in October only to be Strasbourged in December.

    As the new Chancellor faces the task of steering British economic policy over the next year or so, I beg him to abandon the foolish notion that a balance of payments deficit now running at an annual rate approaching £20 billion does not matter provided that it can be financed. We know to our cost the price of such financing – interest rates of 15 per cent. which are doing such deadly damage to business and industry and causing such misery for home owners from one end of the country to the other.

    Sooner or later – I earnestly hope that it will be sooner – the balance of payments deficit must begin to be reduced. In debate after debate, and only last Tuesday, Labour Members have urged the urgent need for an industrial strategy to begin the task of refashioning and rebuilding manufacturing industry. Manufacturing industry is the indispensable wealth creator and the crucially international tradeable part of our economy.

    It is interesting that, whenever we urge the adoption of an industrial strategy for manufacturing industry, the Conservatives do not believe that that is a policy. That says far more about them than it does about us. Right across the political spectrum, people are deeply worried about the future of our industry. Those who work in it, manage it, and advise it are all deeply worried. The only people who do not seem to worry about the crisis in manufacturing industry – it must be a crisis, if we have a £20 billion balance of payments deficit – are the Conservatives, and the Ministers responsible for the conduct of our economic policy.

    We will urge this alternative again and again until the message gets home – not only the Labour party, but the whole of Britain wants a strategy for manufacturing industry.

    Mr. Tim Smith (Beaconsfield) Last week the right hon. and learned Gentleman told us that he supported an industrial strategy. Will he be a little more specific? We are all concerned about the prospects. Is the right hon. and learned Gentleman talking about tax incentives or greater public spending? What policies does he have in mind?

    Mr. John Smith I do not know whether the hon. Gentleman was present during our debate last Tuesday – he probably was – but I am prepared to accept his assurance that he is concerned about manufacturing industry. The Opposition have many more Conservative Members to work on.

    Let me spell out, as I did last Tuesday, the three crucial elements of that industrial strategy – first, the repairing of the ravages of the neglect of education and training by a massive education and training programme; secondly, a policy to introduce new technology by Government support for research and development; thirdly, a strong regional policy to tackle the continuing decline of the under-used regions of this country. Once again, one may be told –

    Several Hon. Members rose –

    Mr. Smith Conservative Members should allow me to speak. Given what happened earlier, I have been reasonably generous in giving way at all to some Conservative Members.

    As the hon. Member for Beaconsfield (Mr. Smith) will come to realise, perhaps before his colleagues on the Government Front Bench do, that is the essential precondition of any successful economic policy for this country. The Opposition have also urged the abandonment of the one-club golfing of exclusive reliance on interest rates and recommended the limitation of bank lending as a superior alternative to the control of demand, as long as that is necessary.

    In addition, the new Chancellor should take the opportunity today to rule out tax cuts in the next Budget. He should use the Autumn Statement, again as the Opposition recommended only last Tuesday, to initiate regionally targeted public investment to strengthen education and training, and research and development, and to stimulate regional economies.

    That is not only an alternative policy – it is the alternative policy which Britain desperately needs. It is a policy which will secure our prosperity not just for the year or two to come but throughout the 1990s. Let us never forget that the crucial folly of the former Chancellor’s policy was to lecture the Federal Republic of West Germany that its economic miracle was over and that ours had just begun.

    When we look at the massive trade deficit and how it has gone throughout the whole of this decade, despite North sea oil revenues, which the Conservative party had and which they frittered away, we see an adequate commentary on the effectiveness of the Government’s policy. Let it not be forgotten that other countries of the EC, which, in the Prime Minister’s warped view of our continent, are so badly trailing behind, have superior economies and are much better fashioned societies than ours.

    The purposes of economic policy are to be centred on four objectives – steady and balanced economic growth, control of inflation, the attainment of full employment, and reasonable equilibrium in our balance of payments. The last objective – the balance of payments – has been downgraded as we have seen a decade go by in which our North sea oil wealth has been frittered away and our economy and society made the laboratory for Thatcherite experiments in free market economics, social unfairness and the retreat of Government from their proper responsibilities.

    Because of the conduct and content of Government policies, I fear that our economy has been gravely weakened and the social cohesion of our society put at risk. This country desperately needs a change in the style of Government and in the economic policies that have been pursued – a change in both the conduct and content of Government. But we are told that it is business as usual. The country received that statement as a threat, not as a promise. In an interview in the Daily Express, the Prime Minister told us that her convictions had to be seen in every piece of policy. That must have sent a shudder through every independent-minded Minister – if there are any left in this Administration. The Prime Minister’s convictions “in every piece of policy” tells us more about how the Government are run in this country than almost anything else. If it is business as usual, we will continue with a debilitating balance of payments deficit, and the highest interest rates and the highest inflation rate of leading industrial countries. I fear that, both economically and socially, we will continue to lag behind the rest of Europe.

    This confused and divided Government cannot provide the leadership which Britain needs for the 1990s. They cannot do so, because they cannot change while the Prime Minister remains at their head. As the Financial Times editorial observed on Saturday As she has become pre-eminent her Government has become much more vulnerable. What concerns the Opposition is not so much the vulnerability of Government as the vulnerability of our country. What Britain needs is not a new Chancellor but a new Government – a Labour Government.

    The Chancellor of the Exchequer (Mr. John Major) I beg to move, to leave out from “House” to the end of the Question and to add instead thereof: ‘congratulates Her Majesty’s Government on the determination with which it has pursued policies to bear down on inflation and improve the supply side of the economy; welcomes the sustained growth of output, productivity, investment, employment and living standards which the United Kingdom has enjoyed as a result; and endorses the Government’s resolve to continue with the policies which are in the long-term interest of the British economy.’. At the outset I wish to say how much I regret the resignation of my right hon. Friend the Member for Blaby (Mr. Lawson). I had the pleasure of serving with him in the Treasury for three years – for one year as Treasury Whip, and for two years as Chief Secretary. I enjoyed that experience enormously. I supported his policies and those of the Government when I was Chief Secretary. I believed that they brought increased prosperity to the country then, and I have not changed my view since then. Whatever the controversies of the day may be or may bring, I believe that history will record that few Chancellors brought about so many fundamental improvements to the economy of this country. Only the grudging and mean-spirited will deny that. My right hon. Friend was a great reforming Chancellor and will be remembered as such.

    The right hon. and learned Member for Monklands, East (Mr. Smith) made his usual forceful speech – both forceful and his usual speech. It was good music hall. He has become the Jasper Carrot of parliamentary debate. For all the humour, however, it was an empty speech. It was empty of policy, it made no serious attempt to diagnose the problem, and it provided no solutions whatsoever. On the one single issue on which he was questioned by my hon. Friend the Member for Northampton, North (Mr. Marlow) it was not until some minutes had passed and someone had whispered to him that he actually provided the answer.

    There is no difficulty at all about a diagnosis of the economic problem that we face at present. As a result of over two years of exceptional growth on a scale which no one expected, least of all the Opposition, we have seen the re-emergence of inflationary pressures. They are evident both in rising domestic prices and in the growth of imports.

    Let me be quite clear about the main priority before us. It is progressively to reduce inflation and bring the economy back to the path of steady growth. There is no doubt about that. I know that inflation is not high by the standards of the 1970s, and it is still as low today as in the best month we ever saw during the period of the last Labour Government. I know, too, that some people argue that a little inflation is no bad thing, that one can live with it, that it induces a feeling of well-being and does no harm. Emphatically I do not share that view.

    I do not share that view because inflation has two particularly destructive effects. First, it damages the economy – it brings uncertainty, it discourages investment, it breeds suspicion and conflict in industrial relations, and it puts a premium on playing safe at all levels of management. It is no coincidence that the past eight years, which have seen the longest period of sustained growth – strong and steady growth – since the war, has also been the period in which inflation has been reduced.

    Ms. Clare Short (Birmingham, Ladywood) Given that inflation is destructive in all the ways that the right hon. Gentleman has described, why have the Government allowed it to rise?

    Mr. Major The hon. Lady would have done far better to address that problem to her right hon. and learned Friend the Member for Monklands, East. She should also be aware that, if we were to see the implementation of the policies that her right hon. and learned Friend has in mind, inflation would be back in the stratosphere. I shall turn to that particular question in a moment.

    Mr. Tony Banks (Newham, North-West) rose –

    Mr. Major But the social effect of inflation is even more pernicious, as we saw during the period of office of the last Labour Government. It bears most heavily on those least able to protect themselves. In the last five years of the 1970s, with high inflation and low interest rates, pensioners saw the value of their life’s savings halved and their retirement security diminished. Indeed, many pensioners today may be on social security benefits, not because they failed to save and prepare for a secure retirement – often they did so at some hardship and sacrifice – but because the Labour Government lost control of inflation and destroyed their security. That happened because the Labour Government had neither the courage nor the foresight – or both – to pursue the necessary but occasionally unpopular policies to curb inflation.

    The Opposition have learnt nothing since then – as the hon. Member for Birmingham, Ladywood (Ms. Short) should know. Their present policy is clear. They would reduce interest rates prematurely and relax monetary policy. They would increase spending massively, and undermine fiscal policy.

    Mr. Tony Banks rose –

    Mr. Stuart Bell (Middlesbrough) rose –

    Mr. Major rose –

    HON. MEMBERS Give way.

    Mr. Speaker Order.

    Mr. Major Labour would devalue the currency as each and every previous Labour Government have done – [Interruption].

    Mr. Speaker Order. I must say to the House again – as I had to say to Conservative Members earlier – that if the hon. Member who has the Floor does not give way, hon. Members must resume their seats. It only wastes time to shout, “Give way, give way.”

    Mr. Major I understand that the Opposition do not like being reminded about how their policies destroyed people’s security, but they deserve to be reminded because they are peddling the same policies again. The policies that they operate would not stop inflation. They would unleash hyper-inflation, with all the economic and social consequences that we saw before.

    There is no conviction whatsoever in the Opposition’s concern about inflation. Their conviction is against the very policies that would curb inflation and bring it down. That is their concern.

    We need to be quite clear about the need to bring inflation down and I have no doubt whatsoever that we are right to use all the practical levers at our disposal to do so.

    Mr. Bell I should like the Chancellor to concentrate for a moment on the Government’s present policies. The OECD review stated that the Government have been raising interest rates to bear down on inflation and to stabilise the exchange rate. Is that still the policy of Her Majesty’s Government?

    Mr. Major If the hon. Gentleman will wait a moment I shall turn specifically to that point. Indeed, I have already begun to do so.

    In my judgment, we are absolutely right to use all the practical levers at our disposal to bear down on inflation. One of these – an important one, of course – is fiscal policy. One of the great achievements of my right hon. Friend the Member for Blaby has been the transformation of the Government’s financial position.

    Public expenditure – [Interruption]. Opposition Members racked up debts day after day when they were in Government – we have repaid the debt that they racked up. Public expenditure remains under firm control, and we are now repaying Government debt – the debt that the Labour Government built up – on a massive scale. By the end of this financial year we shall have repaid roughly one sixth of the public debt accumulated over two centuries, at an annual saving of £3 billion in debt interest costs.

    No one should doubt that my right hon. Friend the Member for Blaby had a tight fiscal policy, and no one should doubt that I intend to keep it equally tight.

    The key lever on inflation is monetary policy – the use of interest rates. I understand very clearly that high interest rates are often unwelcome and often painful, but they are effective and they are having their intended effect now. Spending is slowing down, with retail sales in particular falling over the past three months; so are house prices, which rose much too fast over the past two years; and so is monetary growth, which is now moving close to its target range.

    I understand very well that present levels of interest rates make things very difficult for some home owners, particularly young people who have large mortgages in relation to their incomes, but there are others who should also concern us. We also have to be concerned about those young people who could not afford to buy in the first place, because of the pace of rising prices – [Interruption]. If only for their sakes, there had to be a correction to rising house prices to prevent them being priced right out of the market. That correction is now happening – [Interruption]. It is clear that Opposition Members hate the thought of home ownership and the independence that it brings. The harsh truth is that too many people have been borrowing too much and saving too little, and high interest rates provide a direct incentive to redress that balance.

    Interest rates have other important effects, however – not least on the exchange rate. A falling exchange rate directly raises the prices of things that we buy from abroad and reduces the discipline on British industry. That can only feed inflation. A firm exchange rate helps underpin the policy to stop inflation, and for these reasons it should be clear that I favour a firm exchange rate.

    Mr. Eric S. Heffer (Liverpool, Walton) The right hon. Gentleman talks about the housing problem. Is he aware that the Government have been responsible for cutting council housing? They have encouraged the idea that people should buy their own homes and now they have implemented a policy of high mortgage rates, which means that the very people whom they encouraged to buy are suffering under their policies. How can the right hon. Gentleman explain why the Government should be so cruel to the people whom they encouraged to buy homes and why they are also leaving people without any houses at all?

    Mr. Major The hon. Gentleman should bear in mind that under this Government this country has seen its greatest ever growth in home ownership – [Interruption] – and that will continue.

    Not surprisingly, exchange markets were unsettled last Thursday, but less so than many imagined and far less than the Leader of the Opposition predicted. On Friday he said, “today when the pound plummets” – [HON. MEMBERS: “Disgraceful!”] But it did not plummet. And I hope that in future the right hon. Gentleman will keep his market predictions to himself and not seek to talk sterling down. Markets can see for themselves that policy has not been changed and will not be changed.

    Mr. John Smith If the right hon. Gentleman believes that markets sustain the Government’s policy, is he aware that a year ago today the pound was valued at DM 3.15, but today it is valued at DM 2.90? Is he also aware that interest rates were then 13 per cent., but today they are 15 per cent.? What kind of market verdict is that on the Government’s economic policy?

    Mr. Major Two years ago, markets were at almost precisely the same level as they are today, a point that the right hon. and learned Gentleman has overlooked. Markets can see that policy has not been changed and will not be changed, and no change in policy means just this. It means that I will set interest rates as high as is needed for as long as is needed to bring down inflation, and in this I will continue to be guided by a range of monetary indicators, including the exchange rate.

    I will deal comprehensively with the Government’s approach to economic and monetary union and the Delors report in the debate on Thursday, but I shall say something now about the exchange rate mechanism of the European monetary system.

    Mr. Jack Straw (Blackburn) Has she seen this speech?

    Mr. Major As a matter of fact, my right hon. Friend has not seen the speech.

    HON. MEMBERS Oh.

    Mr. Speaker Order.

    Mr. Major I am sorry to disappoint the Opposition on that point.

    The exchange rate mechanism, as its name implies, is no more than a contrivance, a means for promoting a greater stability of exchange rate between Community currencies and greater price stability. However, it is not a recipe for problem-free economic management, and it should not be seen as such. We should recognise that it does not change the economic fundamentals. It does not reduce the pain of bringing down inflation. It does not mean that a country does not need reserves and can forgo intervention in the exchange market – far from it. It does not, and cannot, absolve a country from an adequately tight monetary policy. It does not insulate a country from high interest rates. Anyone who believes that early British membership would bring interest rates in the United Kingdom tumbling down would be sadly disappointed. Indeed, the very essence of the exchange rate mechanism is a strong commitment to set interest rates at whatever level is needed to keep the exchange rate within its bands.

    Although it is no panacea, experience in recent years suggests that the exchange rate mechanism has helped participants both to bring about greater stability in exchange rates and to reduce inflation. I am in no doubt that in the right circumstances it would help us, too. But the circumstances have to be right if it is to be in our interest to join. The exchange rate mechanism will face new tests as exchange controls are abolished throughout the Community, and as the single financial market develops. In these circumstances, it would be very risky both for the United Kingdom and the present participants to introduce sterling – a currency which is traded much more widely than any other in Europe with the single exception of the deutschmark – when there is such a large differential between our inflation and interest rates and those in Germany.

    Following the Madrid summit, the Government reaffirmed their commitment to join the ERM and specified precisely the conditions under which we will do so. The question is not whether we should join, but when. I repeat the conditions now for the avoidance of doubt. We will join the exchange rate mechanism when the level of United Kingdom inflation is significantly lower, when there is capital liberalisation in the Community, and real progress has been made towards completion of the single market, freedom of financial services and strengthened competition policy. That was the position that was set out at the Madrid summit and it remains the position today. There should be no doubt: when these conditions are met we will join – clearly and in good faith. Were it not a question of good faith, my right hon. Friend the Prime Minister would not have set out the conditions so clearly some time ago.

    Mr. A. J. Beith (Berwick-upon-Tweed) How long does the right hon. Gentleman think will be a reasonable period of time within which to assess whether these things have come to pass?

    Mr. Major As the hon. Gentleman will have understood from what I have just said, that is not wholly within our hands, for much of the action needs to be taken by other people, rather than us, so how speedily that will be done is in other people’s hands as well as ours.

    Without those conditions being met, entry into the exchange rate mechanism would be neither in our interest nor in that of Europe. With them, membership of the exchange rate mechanism will bring benefits to this country as it has, in my judgment, to its present members. That is a further reason why economic policy must be addressed to bringing inflation down – both for wider economic reasons and as the necessary preliminary for entry into the exchange rate mechanism. We have set out our conditions for entry clearly. We are not hiding behind “certain prudent conditions”, as the Opposition sought to do.

    Bringing inflation down is an important task, but it will be neither easy nor speedy. Inevitably, anti-inflation policy is bound to slow the economy down for a time. Therefore, I do not expect to see domestic demand growing anything like as fast next year as it has in recent years. Nor would I expect anything more than a fairly modest rate of output growth. With spending slowing down, businesses will have to take a hard look at ways to keep down their costs, including wages. If they do not succeed in that, the harsh truth is that jobs may be lost, needlessly. I hope that management and unions will ensure that that does not happen, and that Opposition Members will reinforce that message.

    In recent months, much has been made of the rapid growth of our trade deficit, not least by the right hon. and learned Member for Monklands, East. It has grown.

    Mr. Robert Sheldon (Ashton-under-Lyne) Does what the right hon. Gentleman is saying confirm that he does not believe that the exchange rate mechanism is a half-baked scheme?

    Mr. Major The right hon. Gentleman may reflect on what I have just said. I have said that when the conditions are right we shall enter into the scheme. That is self-evident.

    In recent months, the right hon. and learned Member for Monklands, East has made much of the rapid growth of our trade deficit. It has grown, and by far more than is comfortable. It cannot continue at present levels and it will not, as we have always said. In due course, it will come down as demand growth slows.

    But the Opposition paint far too black a picture of the trade deficit. What they have never been prepared to admit is that much of it reflects investment and not consumption. Over the past two years, investment has grown by 23 per cent. – the fastest two years of investment growth on record – and over the whole life of this Government investment has grown far faster than consumption. This investment does suck in imports – often capital equipment – and it may widen the trade gap in the short term. That effect is clearly unwelcome. What must be understood is that in the medium term, to the extent that these capital imports build up extra productive capacity, that will play a part in reducing future deficits. Much of today’s problem is a preliminary to better performance tomorrow, and exports have been performing better and now stand at an all-time record level.

    I suppose that it was a little optimistic to expect the right hon. and learned Member for Monklands, East to acknowledge the facts on investment. Business investment is a higher proportion of gross domestic product than ever before, but as far as the Opposition are concerned, that does not count. Why not?

    In their view, it does not count because investment is not investment unless it is paid for by the taxpayer, because training is not training unless it is publicly financed by the taxpayer, and because the supply side of the economy cannot possibly be right unless it is managed from the centre. It would be a tragedy for industry if that form of thinking ever returned to the government of this country.

    Over the last decade, under our economic policies, the underlying strength of the economy has improved and British industry is in fundamentally good shape. Our approach is working. In the past two years profitability has been higher than at any time since the 1960s. There is a record rate of new business start-ups – more than 1,600 per week so far this year, by far a new record. Productivity in manufacturing has grown faster in the 1980s in the United Kingdom than in all the other major industrialised countries. And that is after two decades in which we were bottom of the league, much of the time governed by a Labour Government. Moreover, employment has risen faster over the past five years than at any time since the war and by more in this country than in any other European country.

    Mr. Graham Allen (Nottingham, North) As the new Chancellor of the Exchequer has put forward such a convincing view of how rosy the economy is, will he tell the House why in such circumstances his predecessor resigned?

    Mr. Major I should have thought that the hon. Gentleman could do a good deal better than that. I suspect that my right hon. Friend the Member for Blaby (Mr. Lawson) will be able to speak for himself on that matter.

    None of those improvements is accidental. Each and every one of them is a direct result of the policies that we have pursued over recent years. It may be that we shall face a difficult year ahead, but if that is to be so, industry is far better motivated and equipped to handle it than at any time in the 1970s.

    Only the Opposition refuse to recognise the changes that have occurred in the past 10 years. Their persistent denigration of the economy bears no relation to reality. Business men, both here and abroad, are well aware of the improvements that have taken place. They know that this country’s economy is strong. That is why they are investing in this country at record levels. Work forces know this too. That is why workers, more involved than ever before in the success of their companies, have increased their productivity faster than in any other major industrial nation – and we have more people in work than at any time before in our history.

    I believe that people recognise that we must deal with the short-term difficulties before us, and they expect us to do so. They know that our economic prospects have been improved out of all recognition in the past decade, and they expect us to build on that. The fact that the right hon. and learned Member for Monklands, East does not recognise it is a sign of how out of touch he is now and will be shown to be at the next general election. I have no doubt that the policies that we have been following are the right ones and I propose to continue them. I see no need for radical changes in policy.

    We must never go back to the policies which nearly destroyed our economy in the 1970s and led to the inflation rate of a banana republic under the Labour Government. The Labour party is well aware of that. That is why it has invented Mr. Mandelson and his public relations gloss and disinvented Socialism. Socialism is rarely mentioned from the Opposition Front Bench except to deny that it exists. The Labour party knows what poison it is for most of the people in this country. Occasionally, even – [Interruption].

    Mr. David Shaw (Dover) Listen, Kinnock!

    Mr. Major If the Leader of the Opposition is back with us, I shall continue.

    Occasionally, even BBC interviewers ask what Labour would do. The Leader of the Opposition tells them with delicious frankness that he has not a clue. But the Labour party’s policies, however it tries to hide them, seep out one by one. The Labour party is in favour of credit controls – just as everyone else is abandoning them. It would renationalise wherever it could. It would increase taxes on companies and individuals. It would abolish the trade union legislation. The Leader of the Opposition would reinvent sector working parties. A Labour Government would spend more – [Interruption].

    Mr. Speaker Order. I do not need to remind the House of the pressure that there is to participate in the debate. I ask the House to give the Chancellor of the Exchequer a fair hearing for the rest of his speech.

    Mr. Major The right hon. and learned Member for Monklands, East said a few minutes ago that he wished television were here in the Chamber. I wish that the public could see the behaviour of Opposition Members. They cannot bear the fact that over the past few years the levels of prosperity in this country have risen by an unprecedented amount and the people are well aware that that is the case. They know very well that the policies of the Opposition would take us back precisely to where we were in the 1960s. A Labour Government would spend more, borrow more and, yet again, they would devalue, as each and every successive Labour Government have done. The policies that they espouse are the failed policies of the 1960s. The electorate rejected them before and it will do so again. I invite my right hon. and hon. Friends to reject the motion and to support the amendment.

  • Mr Major’s Speech in Northampton on Economic Policy – 27 October 1989

    Below is the text of the press release, 231/89, issued by Conservative Central Office on Friday 27 October 1989. The text is of the speech made by Mr Major in Northampton, his first speech as Chancellor of the Exchequer.

    CHANCELLOR OF THE EXCHEQUER:

    I understand the difficulties that many face with high interest and mortgage rates. But they – and the resulting slowing of the economy that we must see – are the means by which we will cure the problem. They are not the problem.

    The problem is inflation. I have no doubt that the central task before us is the reduction and the elimination of rising prices.

    Not only does this objective remain the same, but so do the policies needed to achieve it. I was fully involved as a Treasury Minister in setting economic policy barely three months ago. I have not changed my views over those three months.

    Many think a little inflation does no harm. I do not share that view.

    For some people, inflation may seem a cosy companion. But for others it can be disastrous. Those on fixed incomes see savings eaten away, and security destroyed. For those without savings and on low incomes there is the nagging insecurity of falling behind and losing the dignity of self-sufficiency. These fears were real for millions when inflation took over in the 1970s. We must not let this happen again.

    And for businesses inflation is the same unpleasant brew. It destroys competitiveness, damages industrial relations, undermines investment, and savages profits.

    So inflation must go. Ending it cannot be painless. The harsh truth is that if the policy isn’t hurting, it isn’t working.

    I set out these truths to make one central point. All aspects of policy will be directed to bringing inflation down. Reducing it is never easy, but it is absolutely necessary.

    I know that there is a difficult period ahead. But the important thing is that we cannot and must not fudge the determination to stop inflation in its tracks. I won’t fudge it.

    The economy is not regulated by interest rates alone. Government income is many billions of pounds greater than expenditure. We are repaying our debts. And this is underpinned by firm control of public expenditure. So the Government’s financial position is very sound.
    High interest rates are working exactly as intended. Spending is slowing down – we can see it in housing and in the shops. As a result the shortages which were driving up costs in industry are easing.

    Interest rates also affect the exchange rate. A declining exchange rate pushes up prices, so I favour a firm exchange rate. The budgetary position and the present level of interest rates are such as to keep the exchange rate firm. And our tactics in the foreign exchange markets are designed to check fluctuations which are of no economic significance.

    We have had some fluctuations over the last twenty four hours. That is hardly surprising as people round the world react to an event which they were not expecting. The resignation of a Chancellor of the Exchequer is not an everyday event. But the policies I have described were the right ones before this event. And they are the right ones now.

  • Mr Major’s Parliamentary Answer on the EC Social Charter – 25 October 1989

    Below is the text of Mr Major’s Parliamentary Answer on the EC Social Charter, held on 25th October 1989

    FOREIGN AND COMMONWEALTH SECRETARY:

    Mr. Wallace To ask the Secretary of State for Foreign and Commonwealth Affairs what is the policy of Her Majesty’s Government towards those clauses of the European Community’s draft social charter which would ensure the participation of the work force in decision-making within companies.

    The Secretary of State for Foreign and Commonwealth Affairs (Mr. John Major) We are fully committed to the principle of employee involvement, but we believe that it would be misguided to harmonise practice throughout Europe. It is for businesses to develop the arrangements that best suit their own circumstances and those of their staff.

    Mr. Wallace May I take this opportunity to congratulate, and possibly sympathise with the right hon. Gentleman, on his first appearance at the Dispatch Box in his new office? Does he agree that there is a public mood that in 1992 with the single market, there will be much more than just a business man’s Europe and that employees should be able to participate in some of the objectives including having a better say in the industries in which they work? Can the right hon. Gentleman confirm reports that the French Government are proposing a revised draft of the European social charter in some way to trade off employee rights against closer European monetary integration? What is the Government’s response to that? Does he accept that both objectives should be pursued with much greater vigour than the Government have shown hitherto?

    Mr. Major I am grateful to the hon. Gentleman for his congratulations. That was most kind of him. With regard to the social charter, of course the Government accept that there is a social dimension to the Community. Our concern is that the social charter is the wrong way to achieve the objectives that many people want. With regard to the French attitudes, we all wait to see what President Mitterrand has to say in Strasbourg later today.

    Sir Anthony Meyer Since many clauses in the social charter are modelled on British practices or, if amended, could be made acceptable to British practice, would it not be better for my right hon. Friend to exercise his talent for reconciliation to achieve some agreement rather than appear to reject the whole concept out of hand?

    Mr. Major At the moment our concern is that the Commission draft is a confused mixture of general principles and detailed intrusive regulation. We believe that that would have the practical effect of restricting the freedom of workers and employers to negotiate the most suitable arrangements for themselves and their staff. The employers and employees should negotiate those matters and there should be no imposition from above.

    Mr. Benn Is the Government’s position not now clearly established, as it was in Kuala Lumpur, in that they sign an agreement and repudiate it later? The Prime Minister agrees to 1992, but repudiates its implications later. Is that not an example of complete consistency by the Prime Minister and the Foreign Secretary?

    Mr. Major No such agreement signed in Kuala Lumpur was repudiated. The right hon. Member for Chesterfield (Mr. Benn) will be aware of the many Cabinet decisions to which he subscribed which he apparently subsequently denounced in his memoirs.

    Mr. Arbuthnot Can my right hon. Friend confirm that our record on social policy is really rather good compared with that of some of our competitors? Does he also agree that in the circumstances the last thing that we need is a social charter imposed by other countries?

    Mr. Major I can certainly confirm that. The essence of any social policy is to create employment. We have created far more jobs in the United Kingdom over recent years than any of our European partners. That creation of jobs should be the centre of any social dimension.

    Mr. Kaufman May I congratulate the right hon. Gentleman on his appointment and wish him a happy and constructive spell at the Foreign and Commonwealth Office? I assure him that he can rely on security of job tenure at the Foreign Office, unless, of course, he hears Mr. Charles [Interruption.]

    Mr. Speaker Order. The question is about the EEC.

    Mr. Kaufman It is indeed, and I was offering my congratulations to the right hon. Gentleman and saying that I hope that his job tenure will be acceptable to him and to Mr. Charles Powell.

    Since the right hon. Gentleman has responded to the hon. Member for Orkney and Shetland (Mr. Wallace) by drawing attention to the question of harmonisation, why is it that the Prime Minister traipses from international conference to international conference seeking to wreck harmonisation? She did so at the EC summit [Interruption.]

    Mr. Speaker Order.

    Mr. Kaufman She did so at the EC summit from a position of total isolation by opposing the social charter, at the NATO summit from a position of total isolation by opposing negotiations on short-range nuclear weapons and at the Commonwealth summit from a position of total isolation by repudiating the agreement that the right hon. Gentleman had negotiated.

    Mr. Speaker Order. I ask for brief questions.

    Mr. Kaufman My question follows directly on the subject of harmonisation. The Prime Minister repudiated an agreement that the right hon. Gentleman had negotiated to fulfil her role as the enthusiastic accomplice of apartheid in South Africa.

    Will the right hon. Gentleman [Interruption.]

    Mr. Speaker Order. I am reluctant to say this to the right hon. Member for Manchester, Gorton (Mr. Kaufman), but such questions take a long time and that is unfair to the House.

    Mr. Kaufman Will the right hon. Gentleman stand up against Mr. Powell on such issues in the same way as the Chancellor is standing up against Sir Alan Walters? Is he going to be a Foreign Secretary or is he going to be the man who sweeps up after the Lord Mayor’s procession?

    Mr. Major First, I am grateful to the right hon. Gentleman for his congratulations. I shall make up my own mind about my responsibilities as Foreign Secretary, as I was appointed to do.

    If I might bring the right hon. Gentleman back to the social charter, in terms of bringing harmony he may recall the Madrid agreement of Heads of Government that said that tackling unemployment was the top priority and that there should he a clear respect for subsidiarity. If anyone failed to bring harmony it was the Commission, which wholly ignored the instructions of Heads of Government.

    Several Hon. Members rose —

    Mr. Speaker Order. We are making extremely slow progress. We have dealt with only two questions in about 20 minutes. I ask for brief questions as we shall then receive brief answers.

    Mr. Andrew MacKay Unlike the right hon. Member for Manchester, Gorton (Mr. Kaufman), may I ask a question about the social charter? Is my right hon. Friend aware that most of my colleagues believe that the social charter has no relevance to the single market? We believe that this sovereign Parliament should decide such matters, not the EC.

    Mr. Major I entirely share my hon. Friend’s view and that is, of course, what the principle of subsidiarity means.

  • Mr Major’s Written Parliamentary Answer on Overseas Visits – 25 October 1989

    Below is the text of Mr Major’s written Parliamentary Answer on Overseas Visits on 25th October 1989.

    Mr. Allen To ask the Secretary of State for Foreign and Commonwealth Affairs if he will list the overseas venues he has visited since becoming Foreign Secretary.

    Mr. Major Since becoming Foreign Secretary, I have visited:

    Paris – for the International Conference on Cambodia.
    Washington – for discussion with the Administration and Congress.
    New York on two occasions – to address the Economic Club and the UN General Assembly.
    Bonn – for talks with the German Foreign Minister.
    Luxembourg – for a meeting of the Foreign Affairs Council.
    Chartres – for an Informal Meeting of EC Foreign Ministers.
    Kuala Lumpur – for the Commonwealth Heads of Government Meeting.

  • Mr Major’s Written Parliamentary Answer on the United States of America – 25 October 1989

    Below is the text of Mr Major’s written Parliamentary Answer on the United States of America on 25th October 1989.

    Mr. Wood To ask the Secretary of State for Foreign and Commonwealth Affairs when he next plans to visit the United States of America.

    Mr. Major I visited the United States twice last month. Plans for my next visit are not yet firm.

  • Mr Major’s Parliamentary Answer on Afghanistan – 25 October 1989

    Below is the text of Mr Major’s Parliamentary Answer on Afghanistan, held on 25th October 1989

    FOREIGN AND COMMONWEALTH SECRETARY:

    Mr. Wareing To ask the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on Her Majesty’s Government’s policy towards Afghanistan.

    Mr. Major We have consistently supported efforts to replace the present regime in Kabul with a truly representative Government acceptable to the majority of Afghans. That is the necessary preliminary to any lasting settlement and to the voluntary return of Afghan refugees.

    Mr. Wareing It is now nearly six months since the Soviet Union did the right thing and withdrew its troops from Afghanistan. It is perfectly clear that the Government in Kabul is far from being doomed as we were told that it would be, but we do know that the feudal terrorists are pouring rockets into Kabul onto hospitals and buses, and innocent people are being killed. Will the Foreign Secretary assure us that he will use all his energies to ensure that neither the United States nor Pakistan gives succour or arms to these terrorists?

    Mr. Major In view of what the hon. Gentleman has just said, he may be both surprised and shocked to know that in the six months since Russian troops left, 4,000 supply flights from Russia have gone to Najibullah.

    Mr. Ron Brown Does the Minister accept and understand why the regime has not been defeated? It is because the workers, peasants and above all the revolutionary women who support the Government have made it clear that they back enlightened change and reforms. It is about time that this Government understood those things and that one cannot defeat a revolution with popular backing. Despite all the dirty tricks, the regime in Afghanistan will prevail.

    Mr. Major I fear that I cannot agree with the hon. Gentleman. So enlightened is the regime to which he refers that 5 million people have fled from it.

  • Mr Major’s Parliamentary Answer on Hong Kong – 25 October 1989

    Below is the text of Mr Major’s Parliamentary Answer on Hong Kong, held on 25th October 1989.

    FOREIGN AND COMMONWEALTH SECRETARY:

    Mr. Morley To ask the Secretary of State for Foreign and Commonwealth Affairs when he next plans to visit Hong Kong; and if he will make a statement.

    Mr. Major I hope to visit Hong Kong early in the new year. Precise dates have not yet been determined.

    Mr. Morley Is the Foreign Secretary somewhat relieved that after the Commonwealth conference’s unanimous agreement to a statement on the position in Hong Kong, no member of the Commonwealth repudiated the statement one hour after making it? As the Foreign Secretary moves more towards the idea of compulsory repatriation, and there is much talk of economic migrants as against refugees, how does the right hon. Gentleman intend to determine between economic migrants and genuine refugees in the case of Hong Kong?

    Mr. Major First, on a point of information, the hon. Gentleman may care to know that no communiqué was repudiated – [Interruption] – by the Government. The communiqué was accepted in its entirety and without demur. However, there were four areas in the communiqué on which I expressly declined to agree with my Commonwealth colleagues and the subsequent press statement set out the British position on those areas. In the case of Hong Kong, the international community has accepted for some time that all those screened out as non-refugees should, in due course, be returned to Vietnam. Ultimately, that is the only possible solution.

    Sir Peter Blaker May I congratulate my right hon. Friend not only on his appointment, but on securing the statement in the communiqué by the Commonwealth Heads of Government to which he has just referred, relating to the return to Vietnam of those boat people who are determined not to be genuine refugees? How far have my right hon. Friend’s talks about monitoring such returns proceeded with the Government of Vietnam?

    Mr. Major Those talks are continuing. I hope that they will be concluded before too long, but, as yet, they are not wholly finished. We are concerned to ensure that when Vietnamese refugees and non-refugees return to Vietnam they are treated properly and fairly and we shall seek to ensure that monitoring arrangements are made to safeguard them.

    Mr. Heffer On a point of order, Mr. Speaker.

    Mr. Speaker Does the point of order arise out of the question?

    Mr. Heffer This is a very important matter, Mr. Speaker. Hon. Members cannot properly hear what is being said. I do not know whether it has anything to do with the new television cameras, but we cannot hear the questions being put to the Minister, or the replies. Hon. Members sitting over here certainly cannot hear. Will you look into this matter, so that we can at least hear what is being said?

    Mr. Speaker Perhaps I should ask hon. Members to speak up. I had some difficulty in hearing the last question – [Interruption]. Order. I shall have the microphones looked into.

    Mr. Foulkes I do not think that my hon. Friend’s complaint will apply to me. Will the Secretary of State consider giving some assistance to the Government of Vietnam to help with the refugee settlement programme? Will he also do what he can to ensure proper safeguards and monitoring for the return of refugees? Does he understand that although Opposition Members support encouragement and persuasion to return for those not accepted as refugees, we shall strongly oppose forced repatriation? Will he now rule out force as part of his orderly return programme?

    Mr. Major I shall take the hon. Gentleman’s final point first. It is becoming increasingly clear that voluntary repatriation cannot provide the comprehensive solution that is necessary. We are seeking to counsel and persuade the Vietnamese boat people to return to Vietnam. We are receiving the full support of the United Nations High Commissioner for Refugees in doing so. I invite the hon. Gentleman to recognise that the problem in Hong Kong is now acute. It is getting worse and cannot be borne much longer. It will soon be necessary to tackle the thorny question of involuntary repatriation. I shall do that as and when it is necessary. I shall most certainly be seeking safeguards for those people who return, because I regard that as a most important matter.

    Mr. Lester Will my right hon. Friend agree, before he approves any agreement with the Vietnamese Government, to consider the concerns of many colleagues in the House about the prospect of 33,000 Vietnamese non-refugees being forcibly returned to Vietnam? Will he also undertake to consider our views that any aid should be directed to their resettlement – difficult enough in many communities in Vietnam – and that the United Nations or the European Community should examine much more carefully the rehabilitation of the whole of Vietnam’s infrastructure and development, now that it has changed its policy to one of development and a market economy? Unless we do that, many of us will be deeply worried about reluctant or compulsory repatriation, given that people will be returned to the abject poverty from which they have come.

    Mr. Major Vietnam stands a better chance of getting what it wants from the international community if and when it fulfils its international obligations – that point must be understood. The key element is an unequivocal and public commitment by Vietnam to taking back all non-refugees in safety and dignity, and we shall seek that.

    I understand my hon. Friend’s concerns; I wish there were an easy alternative, but neither he nor anyone else has yet found one. The whole international community made it perfectly clear at Geneva and elsewhere that it was not prepared to take non-refugees. It is therefore not reasonable to accept that they will have to stay in Hong Kong for ever and I cannot, will not and do not accept that – [Interruption].

    Mr. Speaker Order. May I say to those who are asking questions from a sedentary position that that does not help us to hear?

  • Mr Major’s Speech to Conservative Party Conference – 12 October 1989

    The text of Mr Major’s speech to the 106th Conservative Party Conference, held at the Winter Gardens in Blackpool, on 12 October 1989. The text of the speech is from the press release, 201/89, issued by Conservative Central Office on the same day.

    FOREIGN SECRETARY:

    When I was appointed, some of the newspapers said I had never been north of Dover. So I thought I had better come to Blackpool. Just to prove them wrong.

    At that time Gerald Kaufman was in Africa. Fact finding – a new departure for him. He said I had no experience – that I was a stooge. It’s a good thing he likes me or heaven knows what he’d have said! As for him, I share the general view. He’s a real charmer!

    The Prime Minister was worried about my appointment. She thought I might be too old. Too staid. Too well known. That’s why she gave me: Lynda Chalker, William Waldegrave, Francis Maude, Tim Sainsbury and Ivon Brabazon. And she let me keep my PPS Tony Favell, to whom I owe so much.

    It’s a team with a style of their own. Unstuffy. Practical. And with their eyes on the opportunities of the future. There are tremendous demands on them: from Hong Kong to South Africa; from Lebanon to Cambodia; and from Brussels to Moscow. But they are the right team to represent Britain around the world.

    They have something else in common that Gerald Kaufman might have noticed. They have far more Government experience than Neil Kinnock and the rest of the Labour front bench put together.

    And what is more: our team are getting more experience of Government every day. And we intend to make sure that Mr Kinnock and his colleagues never get any at all.

    I am fortunate to have taken over from Geoffrey Howe. If he will permit me to say so, he is a very good friend to have. I have sought his advice often in the past – and I shall not hesitate to do so in the future.

    Throughout my lifetime the continent of Europe has been divided. There have been grim political barriers across the whole of Eastern Europe. And economic barriers throughout the West.

    Now the barriers are coming down. Three years from now those inside Western Europe will have gone. And in the East, the Iron Curtain is being torn apart before our eyes. You don’t need me to tell you this. You see it in your living room night after night. We now see:

    – a non-communist Prime Minister in Poland;

    – free elections imminent in Hungary;

    – real debate in the Soviet Parliament;

    – and thousands and thousands of East Germans fleeing from repression in the East to freedom in the West.

    Some years ago, Mr Khrushchev threatened that Socialism would bury the free market. If he were here today he would see how wrong he was. It is the free market that is burying Socialism.

    That makes it even more sad, even more ironic, that the Labour Party are repolishing their socialism just as the Soviet Union, Hungary and Poland are abandoning theirs. Too late, as usual, the Labour Party have not learned the simple underlying lesson of Eastern Europe. Socialism has failed. The more intelligent socialists know it has failed. The news is spreading throughout the world and – some day – it may even reach Walworth Road. But don’t hold your breath!

    In our party we knew that freedom could not forever be crushed. But few expected so much change so soon.

    Now we must help that change.

    We must support freedom and reward reform. That’s why this Government pressed vigorously and successfully for generous treatment of Poland and Hungary by the European Community.

    Last year Britain got the Community to secure an important trade agreement with Hungary. This year we did it with Poland. Last week, we secured a generous package of Community Aid for both those countries. Our aim is to encourage and reward real reform. That is why Britain has set up its own fund for Poland, worth £25 million over 5 years, to help them run elections, set up newspapers, form political parties, and build businesses – the very life blood of a free society. And I can tell you now that we are setting up a similar fund for Hungary as well.

    The ultimate success of the reforms in Poland and Hungary will depend on the resource and determination of the Poles and the Hungarians themselves. But we cannot allow them to fail for want of our help at this critical time in their history.

    Change in Eastern Europe is dramatic and welcome. But we must be hard-headed about it. We must not and dare not neglect our defence. Just ponder this. If the will of the West had weakened, the reformers in the East would have lost long ago. If the Kremlin tune had been a winning one, they would never have changed it. Mikhail Gorbachev and Margaret Thatcher can do business because he knows she means business.

    So beware when Labour want to make unilateral concessions. From weakness. That is not our way. We will reach negotiated agreements. From strength.

    Mr Chairman, Western Europe is changing too. Fifty years ago, Europe was full of young people with knapsacks going off to fight. Now it is full of young people with haversacks going off on holiday. That is a better Europe. A new Europe.

    Entering the European Community was a momentous decision. It opened up new opportunities which we are now beginning to take up. And it aroused great uncertainties which at last we are beginning to put aside.

    I am not someone who believes in Europe right or wrong. We must judge it on its merits. But a clear-eyed look at British national interests shows beyond doubt that we have benefited from Community membership – and we will continue to do so.

    We are now setting the European agenda, and we no longer need to fear being dragged along behind unpopular policies.

    The fight to get the Community on the move – and in the right direction – is already half won. That could not have been done without the joint achievements of the Prime Minister and my predecessor, Geoffrey Howe. And nor could it have been done without the work of our colleagues, the Conservative members in Europe. They are an important part of the right team for Europe.

    Of one thing I am sure: we in the Conservative Party make a terrible mistake if we are defensive or defeatist about our role in the Community. For it is we who have breathed new life into it. It is we who put the Community’s finances on a firm foundation; we who tackled soaring farm spending and absurd food surpluses; we who brought the Community together to speak with one voice to the wider world. It is we who have brought the 1992 drive to the top of the Community agenda.

    Let none of us forget these things. Together, British Conservatives have performed a priceless service to the Community.

    It is our show. The Community is carrying out our programme.

    We are putting the torch to a whole bonfire of petty obstacles and niggling controls. The Community has already agreed over half the measures of the 1992 programme. And as a result, people throughout the Community will be free to save wherever they want. Practise their profession wherever they wish. Buy insurance across national boundaries. And much else too.

    Excellent progress. But not enough. Now we must sure that what we have agreed for Europe is implemented throughout Europe.

    There is no backlog in this country. We keep our promises. If we agree to something, we do it. It’s Britain that has the best record for carrying out the community’s objectives. And it’s Britain that makes the fewest guest appearances in the European Court.

    It’s not what you say that matters – it’s what you do. It’s not only the principles you preach – it’s the policies you practise.

    And there is much else that must be done.

    – We need to open up financial services still further. Britain has done so completely. Other countries are dragging their feet. It’s time they did the same as us.

    – We need to open up transport. It’s time some of our partners thought of cosseting their international passengers instead of feather-bedding their national airlines! It is ludicrous that air travel costs three times as much in the Community as it costs in the USA – and that must be put right.

    – We need to cut state subsidies. They distort competition. We are cutting them. But some member states are actually increasing them! That has to stop!

    – We need to abolish exchange controls throughout the Community. We abolished them ten years ago!

    – We need to crack down on fraud and regain the trust of the tax payer.

    – And we need faster flows of people and goods across Community frontiers, without giving up the effective controls we must have against the criminal, the terrorist and the drug runner.

    Our partners in the Community have come to expect that sort of common sense from the British. And I’ll let you into a secret: they’re really rather grateful!

    In recent months we have seen much discussion of economic and monetary union. It means different things to different people.

    So far, the discussion has centred on only one set of ideas. They would involve an end to national currencies, to independent national central banks and national control over fiscal policy. All that in exchange for benefits that are unspecified and uncertain. We can’t accept those ideas, but there are other ideas to discuss and we will put them forward.

    Mr Chairman, Labour accuse us of wanting a free enterprise Europe. Well, I do. I do want a free enterprise Europe. And I’ll tell you why. Because free enterprise works and Socialism doesn’t! The Labour Party may not have noticed it, but that is why the people of Eastern Europe are shedding socialism for free markets even as we speak.

    Labour say they’ve changed their attitude towards Europe. That is true. They have. They were malevolent. Now they are simply incompetent. But they remain blinkered. They still think like that famous newspaper headline: “fog in channel. Continent cut off”.

    They still do not understand that Europe’s greatest social problem is unemployment.

    We welcome the debate over Europe’s social dimension. We say: of course there is such a dimension. But it is not the dimension set out in the Commission’s grandiose social charter. There is nothing social about a dimension which prices people out of jobs.

    I know a bit about unemployment. From personal experience. I won’t forget it. I hated it. And I rejoice at over three years of steady cuts in the dole queue here. We now have one of the lowest rates of unemployment in the European Community. So it is with total conviction that I shall argue in this country and in the community that the Conservative recipe for tackling unemployment is right, and the Socialist recipe is wrong.

    Mr Chairman, jobs must be at the very heart of a social Europe. Our partners said just that last June in Madrid. Now we must all act on it.

    Of course, our idea of a social Europe doesn’t stop at jobs. We have a wider perspective than that.

    We want a Europe where everyone has the chance to contribute towards the success of their enterprise – and reap the rewards of that success. Capital ownership should not be the province of the rich – it must become available to everyone.

    We want a Europe where people have the chance to develop their careers and their talents.

    We also want a Europe where people enjoy the highest standards of health and safety.

    But that’s not all we want!

    We want a Europe where workers have the right not to be discriminated against on the basis of race, sex, creed or disability, and where they have the right to belong to a trade union if they want to and the right not to belong if they don’t want to.

    And last, but not least, we want a Europe clean and green enough to hand on to our children.

    That is the social dimension of the Community that we want to build.

    Mr Chairman, we Conservatives are realists. We know that the best way to achieve our objectives is for countries to work with their national traditions – not against them.

    We want companies and workforces to come to their own arrangements.

    Above all, we want decisions to be taken by those who have to live with them.

    It’s a very simple principle. It means that all those things that can’t best be done together at Community level should be done at local level, by each member state. The Community calls that principle ‘subsidiarity’. It deserves a better name. Because, if we Europeans stick to is, it will take power away from the centre, where it should never be left, and hand it back to the people – where it belongs!

    That principle is understood well enough in Eastern Europe. For it’s the very diversity of the West which is so attractive to the East.

    Mr Chairman, after the last World War, people said, as they always do, ‘this must never happen again’. This time there was a difference. This time they did something about it. They created Western European institutions that have become so embedded that traditional European conflict is now inconceivable. That is the gift from the statesmen of the last 40 years to the present generation – and it is a gift beyond price.

    Now the statesmen and women of today have a new challenge.

    All Europe stands on a threshold – and we Europeans now have to make a choice. We can turn our backs on the divisions of the past, and tear down the barriers that divide us. Or we can cling to the old certainties – and go on as before.

    That would be an abdication. An abdication of such scale that future generations would never forgive us.

    There are times when the pace of events and the path of policy come together. When they do, the course of history can change.

    In Europe, East and West, we are living through such a time.

    Opportunities will arise that may not recur. Some will be clear. Some will not. Some may be expected. Some not.

    We must take these opportunities. There is a feeling in the air. In East and West, and between East and West, there is a better Europe to be built. A Europe more secure. More prosperous. More free.

    In Britain, in the Community, in the wider Europe, this Party has built better than it knew.

    It has opened up choices undreamed of a few years ago.

    They are there for the taking.

    Together, let us take them!

  • Mr Major’s Comments on TUC and Labour Defence Policy – 8 September 1989

    Below is the text of the press release, 130/89, issued by Conservative Central Office on 8 September 1989 and entitled “John Major Attacks TUC’s Defence Resolution”.

    FOREIGN SECRETARY:

    The Rt. Hon. John Major, Foreign Secretary, today criticised the TUC’s contortions over defence, they gave a taste of what’s to come at Labour’s own conference.

    Mr Major said: “The unions could have taken the opportunity of a defence debate to set out a clear and coherent commitment to Britain’s security. They didn’t. Instead, they chose to play with words to paper over the differences between multilateralists and unilateralists. The motion they adopted shows that one-sided disarmament by Britain is still very much on the cards of the TUC. It is a triumph of political cynicism over national interest”.

    The TUC gave the game away by calling for ‘multilateral involvement’ by Britain, but ‘unilateral initiatives’ as ‘speedily as possible’. Mr Major said: “There’s not much point in Britain turning up for the meeting if it’s just to agree someone else’s agenda”.

    “The fact is that we and our allies are negotiating with the Warsaw Pact a series of arms control agreements which will make the world a much safer place. If the TUC had their way, we would have nothing to negotiate with”.

    “In their re-write of history, the unions have given all the credit for progress in arms control to the Soviet Union. They are wrong to do so. It was the determination of the NATO allies to deploy cruise missiles which has led to the removal of a whole class of nuclear weapons”.

    “The TUC’s debate was a crucial test for Labour’s policy review – and it failed abysmally. They fudged the motion, just as Labour fudged the policy. Until the left comes to terms with the real world, they will be in no position to offer security to the British people”.