The Rt. Hon. Sir John Major KG CH

Tag: 1990

  • Mr Major’s Speech to Welsh Conservative Party Conference – 6 July 1990

    Below is the text of Mr Major’s speech to the Welsh Conservative Party Conference, made on Friday 6 July 1990 in Llandudno.

    CHANCELLOR OF THE EXCHEQUER:

    “This Conference recognises the need for stringent measures to curb inflation and to ensure growth and welcomes the specific measures to increase the commercial success of Wales.”

    This motion addresses the need to control inflation and the measures that are required. It recognises – rightly – the connection between curbing inflation and promoting economic growth and prosperity.

    The economic history of our first ten years demonstrates this connection with utter clarity. The reduction of inflation from the quite unacceptable levels reached in the 1970s was the essential prelude to the recovery of Britain’s industrial health and our national prosperity, and two achievements the cynics thought impossible. They are achievements we must both preserve and build on. I have no doubt that we can. But the absolute condition of our doing so is that we get inflation under control. No-one should regard this aim as an optional extra.

    For there is no hiding the damage inflation does to competitiveness. To investment. To industrial relations. Where it is the mother and father of industrial strife.

    On its own this would be reason enough. But there is another – equally vital – reason why we must get inflation down. And that is the social damage inflation does, to the people who are least able to protect themselves, the people who have contributed least to the problem. Inflation breeds fear and resentment. It punishes savers and penalises everyone who relies on a fixed income. That penalty is cruel, and it is permanent.

    But Mr Chairman, there is a legitimate question we must answer, one that genuinely puzzles many people, not least amongst the supporters of the Party. The question is: why has inflation come back? Why has it proved such a stubborn problem? And why indeed has it risen recently, despite our anti-inflation credentials and our real determination to reduce it?

    I think it is clear that the answer lies, in large part, in the tremendous surge of confidence we saw in this country in the aftermath of our third election victory in 1987. There was confidence on the part of industry, which resulted in a 40 per cent increase in business investment in the three years to 1989. That investment was of course welcome. We shall see the benefits of it in years to come – indeed, we are already beginning to see them – but the colossal scale of it nonetheless added to demand.

    And just as industry and business felt confident, so too did millions of individuals. And they too expanded their spending and borrowing, so that they and their families could be better housed, and as an investment for the future. The combination of this behaviour on the part of both business and consumers at the same time was unprecedented in the last fifty years, and it is at the root of our present inflationary problems.

    We were not slow to tighten policy as it became apparent this was necessary. But we can see now that our initial response underestimated the problem. However, that is only clear with hindsight. At the time, almost all outside commentators – like us – underestimated the inflationary pressures we faced. Now we need to reduce these pressures and that is why we have to maintain high interest rates, and a tight fiscal stance too.

    I know high interest rates are difficult, painful. But they are unavoidable. That magic potion, the painless cure for inflation, simply does not exist. I wish that it did, but it doesn’t. The truth is, as in every other country, the use of interest rates is essential to reduce inflation.

    There is no doubt, Mr Chairman, that they will work. Their effects are abundantly clear in the housing market, and in the high street too. Demand has slowed by a very considerable amount, but it is proving to be a longer haul than anyone expected. Disappointingly, we have still to see the RPI turn down, and I fear it will be a while before it does so decisively.

    We have to see inflation come down – and keep on coming down. Back down to the average level of our competitors; then beyond that to the level of the best, and then lower still. Nothing less will do. For this is the absolute precondition of all our hopes for the coming years. Low inflation will deliver them for us. High inflation will destroy them.

    I hope it will be clear from what I have said, Mr Chairman, that the policy is a long term attack on inflation. I have no intention of relaxing monetary policy prematurely, before the job has been done.

    Inevitably this means that it will be a difficult year. I in no way underestimate these difficulties. But neither should anyone underestimate the underlying long-term strength of the economy. This will endure, and continue to work to our advantage long after our present problems have been overcome. We should not forget what has already been done and what has been achieved. In the 1980s we have seen enormous changes. Many problems that appeared to be insurmountable ten years ago have been swept away.

    In 1979 no-one thought we could seriously return nationalised industries to the private sector. No-one thought that we could reform corporation and personal taxes in the way that we have done. No-one thought that we could deregulate and improve the supply side of our economy as we have. No-one thought in 1979 that a Government could successfully reform trade unions.

    In the 1980s we have done all these things. Deregulated. Privatised. Cut tax rates and abolished taxes. We have moved from being a Government that constantly had to borrow to finance spending to one that has repaid a large proportion of the debts accumulated by Governments over the last 200 years. Who in 1979 would have thought that a modern Government would have repaid £25 billion of the national debt, as we have done in the last three years?

    The 1980s have been one of the most successful decades in the history of the British economy. We have had strong growth in investment, in productivity, in new businesses and in jobs. Over the last six years this country has produced more new jobs than any other country in Europe. And after decades of decline, we have seen our share of world trade first stabilise and in the past year actually rise.

    The effects of our policies on ordinary people up and down the country are also clear. Since 1979 real take-home pay for a married man with a family has increased by more than a third. More people now own their own homes, more people now own shares and more people than ever before have their own pensions. Ownership – with all the security and opportunities it gives you – is now an everyday aspiration for the many, not just the few.

    But in Wales you do not need to look at the statistics. Here you have the evidence before your eyes. Wales is – manifestly – a success story. You have attracted businesses and investment from all over the world at a remarkable rate. Indeed, in 1988 over a fifth of all the inward investment to the UK went to Wales. Companies like Toyota, Bosch and Ford are investing billions of pounds in the principality. They chose the UK in Europe, and in the UK they chose Wales.

    Mr Chairman, we all know that Governments cannot create jobs and Ministers cannot legislate for prosperity. But I believe that much of the success of Wales in the last ten years flows from the commitment, flair and energy of Nick Edwards and Peter Walker. They have applied the Government’s policies with enormous vigour and imagination and it has produced very real rewards for the people of the Principality. There is no-one better than David Hunt to build on that.

    Ten years ago Wales was still heavily dependent on a narrow range of heavy industries. In the main, these were nationalised corporations, unproductive, inefficient and loss making. But today the prosperity and jobs of the Welsh people are based on a more balanced and a wider range of economic activities. Who would now turn the clock back? And if so, for what reason?

    That may sound like a rhetorical question. But it is not. For – amazing as it may seem – there are people who want to turn the clock back, for Wales, and for Britain. This regressive organisation goes under the name of the Labour Party.

    A couple of weeks ago the nation had the opportunity to see an interview with the leader of this small and increasingly desperate band. A rare opportunity indeed – for as a species they tend to shun occasions where they will be forced to answer straight questions. And what did we hear? Words, yes – lots of them. But answers? No, none.

    All the old Labour reflexes were there: tax to the hilt and spend as if there was no tomorrow. But what about taxation? If you look carefully you’ll see that Neil Kinnock committed himself to compensate only working people with his tax plans. Why only “working people”, I asked myself?

    I have found the answer. It lies buried in their last policy document: “Meet the Challenge, Make the Change”. In that, you’ll find that Labour plan a new tax on savings, to be levied at 9 per cent.

    Savers have always suffered under Labour. In the 1970s pensioners saw Labour rob them of their savings, by letting inflation rip. And they plan the same again. On my calculations that tax plan alone would make a million people worse off, and half of those are pensioners.

    And then there’s Mr Kinnock’s confident assertion that fourteen out of fifteen basic rate taxpayers would be no worse off. If he knows that, he knows who they are, but he doesn’t dare tell them. If he knows that, he knows what his growth projections are, but he doesn’t dare announce them. If he knows that, he knows what their public expenditure plans really cost, but he won’t tell us.

    Or, if he doesn’t know, then this “fourteen out of fifteen” line is just make believe, an empty phrase that sounds good but means nothing.

    But a tax on savings is just the tip of Labour’s tax iceberg. Let me give you a flavour of some of their other pledges:

    – They intend to freeze the married couple’s allowance. That would make all married couples in this country, 24 million people, worse off.

    – They have a plan to abolish the upper earnings limit on National Insurance contributions, making over 3 million people worse off.

    – And on top of this Labour plan to increase the top income tax rate to 50 per cent.

    – They plan to restore capital transfer tax and to meddle with mortgage interest relief.

    – And they plan to introduce a new local government tax. But they won’t tell us what it is. When Mr Dimbleby asked Mr Kinnock all he said was: “I’m sorry, I can’t enlighten you”.

    Well, I can enlighten Mr Kinnock about one thing. Taxpayers aren’t fooled. They know Labour would cost them dear. And as for spending, all we ever hear is pledge after pledge from Labour spokesmen, but never a number in sight.

    Mr Kinnock hasn’t been doing his sums. Perhaps he won’t add up the numbers. Perhaps he can’t add up. Perhaps it’s not the numbers that don’t add up. Perhaps it’s Mr Kinnock.

    The fact is, the Labour Party has nothing to offer this country other than a determination to put the clock back. I have no doubt that the Party that has these policies to secure Britain’s future is the Conservative Party. We are the Party with the policies that will bring inflation down and keep it down. We are the Party that will promote saving. We are the Party that will enable Britain’s businessmen to translate our opportunities into success.

    Mr Chairman, I believe that in the next decade these opportunities will be immense. The next ten years will be years of great change and rapid progress. The single market in Western Europe will be completed. The dramatic transformation of the countries of central and eastern Europe will open up wholly new trading opportunities.

    In the 1990s there will be more countries that are genuinely free; and there will be a wider and more prosperous world market. There will therefore be tremendous opportunities for this Principality and for the other parts of the United Kingdom. This will be a world in which British businesses will be able to generate the wealth and the jobs that will provide prosperity, security and opportunities for all our citizens.

    The economic changes of the 1980s mean that this country starts with a formidable base to take advantage of the 1980s. We have a sound base; and we have the flair and enterprise to build on it. We have immense opportunities. I believe that the long term outlook for the people of this country is brighter today than at any time for a generation.

  • Mr Major’s Written Parliamentary Answer on Disabled People – 5 July 1990

    Below is the text of Mr Major’s written Parliamentary Answer on the Disabled People on 5th July 1990.

    Mr. Ashley To ask the Chancellor of the Exchequer if he will list the tax concessions available for disabled people and their carers; and what is the annual cost to the Revenue.

    Mr. Major Various social security benefits for the disabled are exempt from income tax:

    Benefit Cost of Exemption (1989-90) £ million
    Invalidity benefit and severe disablement allowances 390
    Industrial disablement benefits 70
    Allowances to rehabilitees 7 (negligible)
    Attendance allowance 95
    Mobility allowance 55
    War disablement benefit 95

    Two tax allowances are available in respect of disability: the blind person’s allowance and the additional personal allowance for a husband with dependent children whose wife is totally incapacitated throughout the tax year. Each of these allowances costs up to £5 million a year.

    In addition, the following extra-statutory concessions give favourable treatment to payments to the disabled:

    A26 Sick benefits – Estimated cost: up to £100,000.
    A59 Home to work travel of severely disabled employees – No central data on which to base a reliable estimate.
    A62 Pensions to employees disabled at work – Estimated cost: up to £100,000.

    Further details are given in the Inland Revenue’s booklet IR 1.

  • Mr Major’s Written Parliamentary Answer on the Exchange Rate Mechanism – 5 July 1990

    Below is the text of Mr Major’s written Parliamentary Answer on the Exchange Rate Mechanism on 5th July 1990.

    Mr. Barry Porter To ask the Chancellor of the Exchequer what his latest plans are for taking the United Kingdom into the European exchange rate mechanism; and if he will make a statement.

    Mr. Major I refer my hon. Friend to the answer that I gave to my hon. Friend the Member for Chichester (Mr. Nelson) on 7 June at column 774.

  • Mr Major’s Written Parliamentary Answer on the European Currency – 5 July 1990

    Below is the text of Mr Major’s written Parliamentary Answer on the European Currency on 5th July 1990.

    Mr. Malcolm Bruce To ask the Chancellor of the Exchequer if he will make a statement on his new proposals for a European currency.

    Mr. John Greenway To ask the Chancellor of the Exchequer what plans he has for an alternative European currency unit to compete with the currencies of European Community member states; and if he will make a statement.

    Mr. Major I refer the hon. Gentleman to the answer that I gave to my hon. Friend the Member for Richmond and Barnes (Mr. Hanley) on 21 June at column 655.

  • Mr Major’s Written Parliamentary Answer on the Bank of England – 5 July 1990

    Below is the text of Mr Major’s written Parliamentary Answer on the Bank of England on 5th July 1990.

    Mr. Beith To ask the Chancellor of the Exchequer when he last met the Governor of the Bank of England to discuss exchange rate policy.

    Mr. Major I meet the Governor of the Bank of England on a regular basis.

  • Mr Major’s Parliamentary Answer on Charities (Tax Relief) – 5 July 1990

    Below is the text of Mr Major’s response on Charities (Tax Relief) made on 5th July 1990 in the House of Commons.

    Mr. Ian Taylor To ask the Chancellor of the Exchequer what representations he has received from charitable organisations on the decision to introduce new tax reliefs for single gifts to charity; and when he proposes to issue detailed guidance for donors and charities on the arrangements for claiming relief.

    Mr. Major Charitable organisations are enthusiastic about gift aid, the new tax relief for single gifts to charity. Detailed guidance will be made available in good time for the start of the scheme.

    Mr. Taylor Does my right hon. Friend agree that the Charities Aid Foundation and other organisations have welcomed the Budget as the best news ever for charities? That is also shown by the fact that in the past few years the income of the 200 major charities has more than doubled. The Government have shown that we wish to restore the generosity of spirit of our people, who give to charities in which they feel most involved. Does my right hon. Friend agree that the negative, carping attitude of Opposition Members, who think that the work of voluntary organisations should be taken on by the Government, shows the lack of generosity of spirit on the Opposition Benches?

    Mr. Major My hon. Friend puts his point extremely well. The Charities Aid Foundation was gracious about the budgetary elements that I announced earlier in the year. I hope that a large number of people will take the opportunity of the new tax relief to give generously.

    Mr. Campbell-Savours Does the Chancellor really believe that The Adam Smith Institute should be treated in charity law in the same way as Barnardos, the Save the Children Fund and Oxfam, when all that The Adam Smith Institute does is to pump out irrelevant, right-wing nonsense and rubbish?

    Mr. Major Perhaps The Adam Smith Institute should be treated in precisely the same way as the Fabian Society, as indeed it is.

  • Mr Major’s Parliamentary Answer on Monetary Integration – 5 July 1990

    Below is the text of Mr Major’s response on Monetary Integration made on 5th July 1990 in the House of Commons.

    Mr. Spearing To ask the Chancellor of the Exchequer when, and in what year, he placed his proposals for further monetary integration within the European Community before its Council of Ministers.

    Mr. Major I have not yet done so, but I expect to discuss it later this month.

    Mr. Spearing I thank the Chancellor of the Exchequer for that reply, especially as the question should have been “in what form”, not “in what year”. Does the Chancellor agree that in an authority that was charged with the responsibility of supervising a common currency, there would be some responsibility for the economy of the area over which that currency was dominant? If that supervising authority is to be accountable, should it be answering questions only to a person or body who must lump it or like it, or should it be accountable to a body that can do something about it? Will the right hon. Gentleman’s paper address the distinction between the two types of accountability and which form do the Government prefer?

    Mr. Major I certainly concur with the hon. Gentleman’s view that the question of precisely what accountability means and to whom will be critical in future debates in the intergovernmental conference and elsewhere on economic and monetary union – whatever sort may emerge in the European Community. As the hon. Gentleman knows, the Government do not believe that the Delors prescription for stage 3, with its single central bank, its single monetary policy and its present lack of accountability, is a concept acceptable to the House of Commons. I will carry that view to all my fellow Finance Ministers.

    Mr. John Townend Does my right hon. Friend agree that his proposal that the hard ecu should be accompanied by a European monetary fund which could require central banks to repurchase their own currencies with the ecu or equivalent hard currencies would be a powerful sanction against lax monetary policy and, as such, could be the beginning of an embryonic European federal bank?

    Mr. Major I agree that the hard ecu would be the most effective counter-inflation currency yet devised and, for that reason, may commend itself to people in future years. The essence of my scheme for a hard ecu is that it is optional, evolutionary and gradualist. That is an immense improvement on what is presently on offer in the Delors report.

    Mr. Bell In relation to monetary integration, does the Chancellor of the Exchequer recall the remark of Sir Alan Walters that by joining the exchange rate mechanism, currency speculators could force a realignment of the pound – and thus a devaluation – and take us back to the stop-go policies of the 1960s? In anticipation of our joining the exchange rate mechanism, has not the pound increased in value? How does the Chancellor reconcile the views of Sir Alan Walters with the pound’s stability now?

    Mr. Major I see no particular reason why I should. My view about the exchange rate mechanism is entirely clear – I believe it to be in the interests of the country to join, and in due course, when the conditions that we have set out are met, we will most certainly join.

    Mr. Dykes As the independent central bank has been so spectacularly successful in Germany, and as a similar mechanism is now proposed for the European Community, why are the Government, who are anxious to counter inflation, so timid about the suggestion?

    Mr. Major I certainly do not accept that we are timid about countering inflation or that there is a necessary parallel between the activities of the Bundesbank and the German national legislature, and the position of the Bank of England and our legislature. It is my clear view – I regret that my hon. Friend does not share it – that the man or woman responsible for monetary policy should be available to the House of Commons to answer for his or her policies.

  • Mr Major’s Parliamentary Answer on Inflation (Europe) – 5 July 1990

    Below is the text of Mr Major’s response on Inflation (Europe) made on 5th July 1990 in the House of Commons.

    Mr. Loyden To ask the Chancellor of the Exchequer how many European countries currently have a higher inflation rate than the United Kingdom.

    Mr. Major Two, Sir.

    Mr. Loyden The Chancellor of the Exchequer and the Prime Minister constantly make claims about the health of Britain’s economy, but Britain has the worst inflation rate of the seven most industrially advanced countries. Is not that a disgrace?

    Mr. Major The hon. Gentleman is correct. The rate of inflation is a good deal higher than I would wish it to be, or than it will be in due course. As the hon. Gentleman clearly shares my view, I am surprised that he supports Opposition policies that would raise inflation and keep it high for a very long time.

    Mr. Higgins Is my right hon. Friend aware that we may be giving the impression that our currency is declining in value faster than that of other countries because of the appallingly poor quality of the paper used for the new £5 note? Will he ensure that paper of the proper quality is used and that he does not harmonise in that respect with the other European countries, whose currency notes have always been of far poorer quality than ours?

    Mr. Major My right hon. Friend makes an important point that will be echoed in many quarters.

    Mr. John Smith Does the Chancellor reflect that it is a poor comment on 11 years of Conservative Government that we have the worst rate of inflation of all the G7 countries, and that nine of the European Community countries have a better inflation record than ours? After 11 years in government, is not that a pitiful record?

    Mr. Major The right hon. and learned Gentleman is being typically selective. He has overlooked the greatest growth in investment and productivity and the greatest underlying improvement in the economy over that 10-year period compared with any other nation in Europe.

    Mr. Beith Now that the Chancellor has had an opportunity to discuss with the president of the Bundesbank the working of the anti-inflationary policy, why does he still believe that an autonomous central bank, with responsibility to maintain price stability, has no place in Britain and can be no part of European monetary union?

    Mr. Major For precisely the same reasons as I have explained to the hon. Gentleman.

    Mr. Ian Stewart With the approach of 1992 and the greater harmonisation of many activities in Britain and the other member states of the European Community, will my right hon. Friend give serious and urgent consideration to introducing a more reasonable and equivalent measure of inflation than the retail prices index, which is quite unlike the measure used in other European countries? The inclusion of mortgage interest rates greatly exaggerates the supposed rate of inflation, although interest rates are raised to reduce inflation. Does my right hon. Friend accept that the sooner that change is made the better, particularly so that comparisons with other Community countries can be more realistically understood outside the House?

    Mr. Major My right hon. Friend is entirely correct that, on a more comparable basis that takes account of the differing factors in the relative inflation measures, the more correct rate of inflation in the United Kingdom is about 7 per cent., compared with a European Community average of about 5 per cent. He made an important point.

  • Mr Major’s Parliamentary Answer on Bank Loans – 5 July 1990

    Below is the text of Mr Major’s response on Bank Loans made on 5th July 1990 in the House of Commons.

    Sir Robert McCrindle To ask the Chancellor of the Exchequer what reaction he has obtained to his appeal to the banks for greater care in offering loans to their customers.

    The Chancellor of the Exchequer (Mr. John Major) My remarks on the marketing of credit were addressed to all the lending institutions. There are encouraging signs that they are taking the matter very seriously.

    Sir Robert McCrindle While welcoming the recent attention paid to that important matter by my right hon. Friend, may I ask whether he is as concerned as I am by the recently issued figures showing that credit is still far from being under control? Does he accept that the financial institutions still engage in practices that pressurise people into effecting credit and that are far from the traditional practices in some corners of the City of London?

    Has my right hon. Friend given any consideration, even at this late stage, to the possibility that the banks and building societies should be required, on a temporary basis, to make special deposits with the Treasury, thereby limiting their opportunities to encourage people to engage in irresponsible credit-taking?

    Mr. Major I congratulate my hon. Friend on his well-deserved honour in the recent birthday honours list which will give considerable pleasure to his many friends.

    On my hon. Friend’s specific points, I confirm that I share his view that the volume of credit being advanced is still higher than I would wish. That means that we will retain a level of interest rates higher than it would be otherwise. On his advocacy of special deposits, I feel that, alas, their disadvantage is that their practical effect might be to raise rather than to reduce interest rates which would be difficult territory. The prime difficulty with the activities of lenders lies not with the banks or building societies, but elsewhere. Sir Gordon Borrie, the Director General of Fair Trading, has expressed his view on that matter.

    Mr. Robert Sheldon Is not it clear that the policy of relying on a single instrument for the control of credit is not working? Should not the right hon. Gentleman pay more attention to the hon. Member for Brentwood and Ongar (Sir R. McCrindle) and think more seriously about proper credit controls, rather than rely on a weak form of exhortation?

    Mr. Major My recent speeches were related not to credit controls, but to the marketing of credit. Credit controls are a separate matter. Although I understand the right hon. Gentleman’s advocacy of them, I do not believe that a deregulated economy without exchange controls would be even remotely effective.

    Mr. Beaumont-Dark Does my right hon. Friend accept that when he appeared before the Treasury Select Committee, some hon. Members pointed out that organisations like the Halifax building society were making offers such as, “Take a second mortgage and have the trip of a lifetime round the world”? Many of us are pleased that, at long last, the Treasury is taking the view that long-term investment is good for the country, but that people mortgaging their homes for holidays is the way to financial and economic disaster.

    Mr. Major I entirely share my hon. Friend’s view. He will be aware that following the Jack report, a code of practice to cover the banks” and building societies” relationships with customers, including credit marketing and the use of confidential information, is being drawn up under the chairmanship of Sir George Blunden. I welcome that and look forward to the code in due course.

    Mr. Nicholas Brown When perfectly sensible suggestions such as those made by hon. Member for Brentwood and Ongar (Sir R. McCrindle) were being put forward by the Opposition, they were derided by Treasury Ministers. Why does the Chancellor believe that the same ideas are now gaining currency among Conservative Members?

    Mr. Major I have yet to hear any sensible ideas emanating from Opposition Front-Bench spokesmen.

    Sir William Clark Will my right hon. Friend resist any suggestion that we should return to the stupidity of special deposits? Does he agree that they will work only if we reintroduce exchange controls which is quite against our economic philosophy and that of the European Community?

    Mr. Major My right hon. Friend touches on an important point, but I reiterate what I said a few moments ago. There is a very real danger that special deposits would have the practical market effect of driving short-term interest rates up, not down.

  • Mr Major’s Written Parliamentary Answer on the Retail Prices Index – 4 July 1990

    Below is the text of Mr Major’s written Parliamentary Answer on the Retail Prices Index on 4th July 1990.

    Mr. Forman To ask the Chancellor of the Exchequer, pursuant to the answer to the hon. Member for Carshalton and Wallington, 20 December 1989,Official Report, column 242, whether he has now received a report from the Retail Prices Index Advisory Committee.

    Mr. Major I have today received a report from the RPI Advisory Committee. It examines how to incorporate the price of holidays into the RPI and certain other issues in its work programme. On the price of holidays the report recommends that the CSO should collect data and examine a new methodology which will have to be subjected to further scrutiny before it could be incorporated into the RPI. I will present the report to Parliament and announce the Government’s decision on the recommendations in due course.