The Rt. Hon. Sir John Major KG CH

Tag: European Union

  • Mr Major’s Speech to Conservative Group for Europe – 22 April 1993

    Below is the text of Mr Major’s speech to the Conservative Group for Europe on 22nd April 1993.

    PRIME MINISTER:

    Two years ago I said I wanted to put Britain at the heart of Europe. And the heart of Europe is where I still want us to be.

    It is now 20 years since we joined the European Community.

    Since then, a whole generation has grown up. A generation free of the legacy of the old animosities. A generation which takes for granted co-operation between the Member States.

    Yet in 1973 all you would take to the Continent was a limited amount of foreign currency and £25 sterling. Today, we go to France much as we might go to Yorkshire. Last year we made a trifling 24 million trips to Europe.

    It is no longer an oddity for British students to spend a year in France or to see a German student rowing in the boat-race for Cambridge. For the manager or the professional it is becoming as normal for a career to include two years in Mannheim as a posting to Manchester. Little England steps out. But as we have been stepping out for more than 20 years now we hardly notice that we do it.

    Economic benefits

    There is also the minor question of profit. We British are traders. Our trade with the rest of the Community has risen thirteen-fold. In 1973 we exported £800 million to Germany. Now it is over £15,000 million. We export as much to Germany as to the United States and Japan combined. That is the scale of our European self interest. Since we joined, our exports to our partners in the Community have grown 50% faster than have those of our old partners in EFTA. That amounts to £20 billion last year. That’s a lot of prosperity and a lot of jobs.

    Britain has looked at the world, understood that it must be competitive … and competes.

    And the fact that we do compete makes inward investors flock here. Two out of every five who come to the Community come to Britain. Now we export cars to Japan, television sets to Germany and computers to the world. We hear a great deal about the industries we’ve lost. I would like to hear more about the industries we have gained.

    Take an example I saw recently. A textile factory that has become the most modern in the world; a firm taking on and beating Far Eastern competitors is exporting two million garments every week, and is about to double its workforce: a factory in Northern Ireland.

    How had they succeeded? They had seized the European market, attracted investment and made it a success.

    That Northern Irish factory is emblematic. Investors like our welcome. They like our tax structure. They like our industrial relations. They know that our workforce is flexible and adaptable. And we have English, – English, the world language. We should do well with such strengths. But outside the Community? Doing our own tiny thing, splendidly adrift? It’s just not on. Outside Europe Britain can survive; inside we will thrive.

    Britain’s achievements

    We take from the Community. And we put into it. Europe needs Britain just as Britain needs Europe. We have just completed the biggest free trade area in the world. A British initiative, started by a British Prime Minister, driven by a British Commissioner, and brought to fruition under a British Prime Minister. A single market that makes full use of the Treaty of Rome as a charter for economic liberty. A single market that helps us capitalise on the things Britain does uniquely well – our financial services, our transport and aviation and our telecommunications companies.

    Europe is only one part of the world trading system. The prize, if we can successfully complete the GATT round is huge: 200 billion dollars of extra prosperity for our globe. The risks, if we fail, are equally immense. Our influence, together with our Northern partners, tilts the Community onto the side of success. Thirty years ago the economist, James Meade wrote a famous pamphlet. An outward-looking Europe was good, he said, an inward-looking Europe should make us flee to the hills. We are fighting and winning the battles he identified. Historically some of our partners are protectionist by instinct. But Britain with her outside links, American and Commonwealth, will always thrust Europe outwards.

    We have also led the way to bringing in our old EFTA partners and friends Austria, Norway, Sweden and Finland. They share our instincts as global free traders. Many of the traditions on which our Parliamentary democracy is based come from the Scandinavian part of our heritage. A rugged, independent-minded legislature can sometimes be uncomfortable. Believe me, it can. But it is a good and healthy thing. They share that with us.

    Like us, too, they will be net contributors. They will be watchful how the Community spends its citizens’ money.

    Only a cloud-borne idealist would deny the debits to our membership. We joined late. We didn’t make the rules. A lot of them didn’t suit us.

    There is a legend of ancient Rome to illustrate the British predicament. It tells how the Sibyl offered the Roman Senate 9 books containing the future of the republic. Shocked at the price, the senators refused to buy them. The Sibyl burned 3 books. She then offered the other 6 for the same price. The Senate still refused. She burned 3 more. Seriously rattled, the Senate hastily agreed to buy the last 3 books for the price of the original 9.

    Ted, you bought the books. We have read them; and thank goodness you did buy them.

    But of course, we keep bringing out new editions. That is what happens to successful books. We have reformed the Common Agricultural Policy after years of squabbling. At Edinburgh we put a ceiling on EC spending until the end of the Century. At Edinburgh too we reached out to the new member nations. The Scandinavians now; and in time the Central European nations – Hungary, Poland, the Czech Republic and Slovakia. We won agreement against all the odds that those old friends would join. Not tentatively or in the future conditional tense, but “join” meaning “join”. That was always Britain’s wish; and it will be fulfilled.

    Like Douglas Hurd, I know that the Community has become too intrusive in our national life. Where this is so we must correct it and the Maastricht Treaty provides a way of doing so. But some intrusion is necessary and is in our interests. For example, if we are to make the Single Market work, there has to be some body of common law. It is we, British, who have pressed hardest for a true common market – a slogan made flesh. If we are to have that, it needs to be enforced and someone must have the authority to do so. The Commission and the Court have that authority. For all its quirks and quiddities, when the Commission battles against vested interests and for competition, it is on our side.

    Maastricht

    Of course, there is too much regulation both in Brussels and Whitehall; and indeed too much done at Community level better done by individual nations. Maastricht is the focus of that concern.

    But let me tell you a story. A colleague at a constituency dinner asked everyone present to tell him what they didn’t like about Maastricht.

    Up went a jungle of hands. “Nobody else got a point? Everyone had their say?”

    “Yes”.

    “Well” he said “you have raised 35 different points against Maastricht. 33 of them date back to the Treaty of Rome or the Single European Act. And 2 of them are valid complaints against the Treaty of Maastricht.”

    Maastricht has been used as the scapegoat for the varied and nameless fears about Europe, most of them wholly unrelated to the Treaty.

    I have never pretended that Maastricht is perfect, but, warts and all, Maastricht makes Europe better.

    Take “subsidiarity”, which I call “national precedence”. Subsidiarity enshrines in EC Law the principle that the Community should not be permitted to do what Member States can do better themselves.

    But there are areas – many areas where the Community countries do need to work together. The member states of the EC face an ocean of problems beyond the capacity of any of us to solve alone: migration; environmental degradation; nuclear proliferation; international crime and especially drugs; political instability to our East; terrorism; and protectionism. I do not see our Nation as a cog in some centralised superstate. Maastricht does not solve all problems but it draws all of us together for the shared, common sense purpose of trying to solve them.

    Of course, the Brussels centralisers haven’t all gone away. But they are now running against the tide. A tide that will flow ever more strongly in the enlarged Community we ensured at Edinburgh. The idea of a centralised Europe had resonance in a Community of the 6. But for 12, soon 16 and eventually 20 plus nations it is a grandiose doodle. It is not what the people of Europe want. We Conservatives, must have the confidence and the sharp-edged determination to stay in the heart of the European debate to win a Community of free, independent members. The nations must be free-standing – a colonnade, not a set of bars.

    To opt out of that struggle would deny 20 years of British effort and achievement. How does the Community work? Europe is a small sea of perpetual negotiation. It shapes its future and its laws by alliances between governments and ministers. Many who fear and oppose Europe are like the fat boy in “Pickwick”. They want to make your flesh creep. They think we are always going to lose the argument in Europe. That is defeatist and wrong. We learnt to swim in that sea long ago.

    The Single Market was a British idea; breaking open state monopolies was a British idea. CAP reform and enlargement have been British goals. If we tried to huddle back into some private yesterday we wouldn’t have any alliances we could make. Others would make the rules. And they’d impose the rules on us. That’s what our EFTA partners have learned. It’s one reason why they are queuing to join.

    I know there are those who have many objections to the Community. But I notice they offer no satisfactory alternative. What are the theoretical options? There are three:

    – to leave altogether. Put that bluntly, they shrink away from that choice;

    – to form some kind of association with an American free trade area. That is a sugar coated turnip and the economic hole that leaving Europe would open up cannot be filled with turnips;

    – third, to stick at “a Common market and no more”. That’s such a narrow, unexalted vision. Britain has long argued for a more coherent foreign policy for the Twelve. Because it makes sense for us to work together as we did in providing safe havens for the Kurds of Northern Iraq.

    So what really moves the opponents of Britain’s full participation in the EC? As much as anything it is frustration. Frustration that we are no longer a world power. Frustration that nowhere is the nation state fully sovereign, free to conduct its policies without concerting with ruddy foreigners. There is frustration that some of the fixed and treasured aspects of our national life are subject to seemingly relentless change. They practice a sort of phantom grandeur, a clanking of unusable suits of armour.

    I understand these feelings but I cannot share them. The world has moved on. Britain has to take its rightful place in it. Though no longer a global power we still have global interests and we need to defend them with determination but also with subtlety. We cannot afford to subject ourselves to the despotism of nostalgia. We need to use cleverness and shared strength. We must operate a network of little threads to make most use of the influence we do have. And the European Community is a handful of threads for the pursuit of our domestic and foreign interests.

    We hear a lot about principled opposition to Europe. Let’s not forget that there is a great deal of principled support too. Looking around, I see a great many who have been principled supporters of our place in Europe for as long as I can remember.

    The sly argument that to be a principled supporter of Europe is somehow to put Britain’s interests second needs dismissing for the nonsense it is. It’s precisely because we put Britain’s interests first that we need to be in there shaping the new Europe. A new Europe that is larger, more open and less intrusive. That’s not throwing away history, that’s not knocking down traditions. We are digging straight ditches and putting layers of bricks into them – what builders call a foundation.

    A wider Europe

    Those who say Europe is only an economic entity, a tower of brass, forget one small gift to our age: two generations of peace.

    The peace we have had in the West was not reached by the turn of a card. The ancient hatreds were composed and the ancient enemies conciliated with fearful singularity of purpose.

    Let’s not forget, that when we joined the Community, Spain Portugal and Greece were still governed by men in sunglasses and epaulettes. The dictators were booted out. Stability and democracy have been locked in – by membership of the Community.

    The tragedy in Bosnia on our borders is a terrible reminder of the loss of that blessing we here take too much for granted. It is an irony that many who protest most loudly that ‘Britain only joined a common market’ are the first to complain that the EC has not secured a political or military settlement to the conflict in Bosnia.

    Our long term purpose must be the whole continent of Europe with free democracies and without trade barriers. We are backing freer trade with more aid. A great swelling tide of humanitarian and technical aid flows to Russia and central Europe. The EC is by far the largest donor. £5 billion worth over the last three years. £5 billion to support democracy, and free market reform. Of course, we want it wisely spent. And who bangs on the most to insist upon that? Britain does.

    And it isn’t all governments, the big battalions who are helping. It is the small platoons too – volunteers and private benefactors, like those I was able to thank at Number 10 recently for their work in setting up the 1990s equivalent of Rhodes scholarships for young people from central and Eastern Europe.

    That is the best of Britain and it is part of our distinctive and unique contribution to Europe. Distinctive and unique as Britain will remain in Europe. Fifty years from now Britain will still be the country of long shadows on county grounds, warm beer, invincible green suburbs, dog lovers and pools fillers and – as George Orwell said – “old maids bicycling to Holy Communion through the morning mist” and if we get our way – Shakespeare still read even in school. Britain will survive unamendable in all essentials.

    Surely we trust our own integrity as a people quite enough to fear nothing in Europe. We are the British, a people freely living inside a Europe which is glad to see us and wants us. After 20 years we have come of age in Europe. One Conservative leader put us there. This Conservative leader means us to thrive there. So let’s get on with it.

  • Text of the 1993 Budget – 16 March 1993

    Below is the text of the 1993 Budget, held on 16th March 1993 and presented in the House of Commons by the Chancellor of the Exchequer, Norman Lamont.

    Budget Statement

    Mr. Deputy Speaker (Mr. Michael Morris) : Before I call the Chancellor of the Exchequer, it may be for the convenience of hon. Members if I remind them that, at the end of the Chancellor’s speech, copies of the Budget resolutions will be available to hon. Members in the Vote Office.

    The Chancellor of the Exchequer (Mr. Norman Lamont) : In my Budget last year, I announced a far-reaching reform that was supported, I believe, on all sides of the House. From November this year, public expenditure and taxation will be brought together in one annual Budget statement.

    The advantages of the new system are clear. Ensuring that tax and spending decisions are taken at the same time will allow better control over Government borrowing. Indeed, that is the main purpose of the change. With tax, spending and borrowing decisions presented in a single statement, the relationship between them will be much easier to understand. However, for now, our existing, and, to me, rather antiquated, procedures remain in place. I shall therefore concentrate today largely on the tax side of the accounts. My Budget should nonetheless be considered alongside the autumn statement that I delivered just four months ago.

    In that statement, I set a firm limit on public sector wage increases. This was essential and we shall stick to it. And I established tight overall spending ceilings for the next three years. But I also gave priority to programmes that would help to promote growth and the long-term performance of the economy. In this way, the autumn statement played a key role in putting Britain on course for recovery.

    My Budget today is designed to ensure that this recovery will be sustained. Above all, this Budget has two objectives : first, to support the recovery in the year ahead ; and secondly, to set out a clear medium-term strategy for bringing the borrowing requirement back towards balance. The “Financial Statement and Budget Report,” with a number of press releases filling out the details of my proposals, will be available from the Vote Office as soon as I have sat down.

    WORLD ECONOMIC BACKGROUND

    It is impossible to review the short-term prospects for the British economy without first considering what is happening in the world outside. Many people talk as if Britain’s economic problems were unique, as if we can somehow insulate ourselves from the economic tides that sweep across the world. The truth, of course, is quite different. As ours is an open economy which exports a third of its output, developments abroad have a profound impact on Britain. The one ray of light on the world scene has been the recovery in north America, and particularly in the United States. The United States economy grew by over 2 per cent. last year, with growth in the final quarter revised up to an annual rate of 4 per cent.; but the success of the United States stands in marked contrast to developments elsewhere.

    Industrial production has been falling in many of the world’s largest economies – over the last year it has fallen 2 per cent. in Italy; by 2 per cent. in France; by 6 per cent. in Germany; and by 7 per cent. in Japan. By contrast, in Britain, industrial production has actually risen, and the recent indicators of GDP confirm this gloomy world picture. Even Japan has now been visited by the prospect of recession, with gross domestic product declining by per cent. in the second half of 1992. France and Italy have also had to cope with falling output. And Germany, still struggling with the costs of reunification, has now suffered three successive quarters of declining GDP.

    It was against this background that my right hon. Friend the Prime Minister and I secured agreement at the Edinburgh Council last December to a European growth initiative. This was closely modelled on my own autumn statement, and was designed to deal with the most serious problem facing the European Community – and the seemingly inexorable rise in unemployment across the continent.

    Last year, unemployment in the Community rose by 1 million, and it is projected to rise further this year, to some 11 per cent. of the work force. France, like Britain, has 3 million unemployed; in Ireland and Spain more than one in six are out of work. Even in west Germany, unemployment is rising once again.

    To a large extent, this pattern reflects the impact of recession, but, particularly in the European Community, the recent rise in unemployment comes on top of a relentless upward trend. In the Community as a whole, unemployment rose in every single year from 1973 to 1985; and although it fell back in the boom of the late 1980s, it has stayed at well over twice the level of 20 years ago. Unemployment in Europe is much higher than in many other parts of the world; and it cannot be reduced simply by stimulating demand. A deep-seated problem needs more fundamental solutions. It requires more flexible markets, not just for labour but also for goods and services, and it requires support given by Governments to be directed less at propping up declining industries and more at helping the unemployed to rejoin the work force.

    Above all, if we are to secure a lasting reduction in unemployment over the years ahead, we must continue to resist the imposition of job-destroying measures emanating from Brussels.

    The high-cost economies of the European Community cannot insulate themselves from the world outside – from the more flexible economies of the Pacific rim and north America. Nothing would do more damage to job prospects, not just in Britain but across Europe, than the imposition of further tax or regulatory burdens on employers. That is why this Government will never sign the social chapter.

    UNITED KINGDOM ECONOMY

    While activity has been falling in many parts of the world, GDP in Britain rose slightly in the second half of last year. With interest rates down by four percentage points in just six months, Britain enters the year ahead in a more favourable position than most of our major competitors. That is confirmed by the European Commission, which expects Britain to be the fastest growing of all the major European economies both this year and next. The substantial interest rate cuts I have made provide a solid foundation for recovery this year, and they come alongside the measures in my autumn statement to revive business confidence. We are already beginning to see their effects.

    Lower interest rates have contributed to a pick-up in the growth of narrow money, while retail sales have been on a steady upward trend for almost a year. The abolition of car tax has prompted a surge in activity in the motor trade, right at the heart of British manufacturing. New car registrations were nearly 16 per cent. higher in the latest three months than a year earlier.

    By the end of this month, the additional money that I provided in the autumn statement will have taken about 20,000 properties off the housing market. Although house prices remain weak, building society commitments and advances are stronger, and both house builders and estate agents are now reporting increased activity.

    The extra support that I announced for British exporters will reinforce the competitiveness of our companies trading overseas, while exports in the last three months of 1992 were already at record levels; and the temporary increase that I announced in capital allowances will provide a continuing boost to business investment over the next six months. According to the CBI, manufacturers are more optimistic now than at any time for almost five years. The recovery we have seen in confidence rests, above all, on one crucial foundation – the dramatic progress that we have made in getting inflation down. There has been much debate about Britain’s experience with the ERM. Today I wish to make just two observations. First, it was absolutely vital to get inflation in this country down. The two years that we spent in the ERM were tough, but the war against inflation was one we had to fight, and one we had to win. Secondly, once sterling left the ERM, and with inflation sharply down, we were right to take the opportunity that that gave us to relax policy and get interest rates down.

    Inflation is now at its lowest level for over 25 years. The rapid fall in the headline rate is, of course, partly the result of the reduction in mortgage rates; but even more significant is the fall in the underlying rate. That is down in the last year from 5 per cent. to 3 per cent. Except for a few months in 1986, after the collapse in the oil price, underlying inflation has not been this low since February 1968.

    Short term prospects

    In my Mansion House speech, I announced the establishment of the panel of independent forecasters. My intention in doing so was to demonstrate more clearly that the judgments the Government have to make are not based on one single forecast.

    I have now received the panel’s first report, and I am most grateful to it for its contribution. The panel recognises that the substantial relaxation of monetary policy has greatly improved the prospects for recovery in 1993. Its forecasts for growth this year vary between and 2 per cent., with an average of just over 1 per cent.

    The Treasury’s forecast is very similar. Broadly in line with the average of the panel’s forecasts, we expect GDP to grow by 1 per cent. this year, with the recovery gathering pace through the year. Growth in the year to the second half of 1993 might reach 1 per cent., rising to 3 per cent. in the first half of 1994.

    However, as the panel stresses, uncertainties remain. It is possible that growth this year may exceed the 1 per cent. forecast that I have made, but there are significant downside risks, too. It is very difficult to be sure when consumers will feel that their finances are sound enough to support a stronger growth of spending, and there are, as I have said, considerable doubts about the prospects for our major export markets.

    This will inevitably affect the prospects for the current account. The deficit in 1992 was about £12 billion, and as the economy recovers and the unfavourable short-term effects of the fall in the exchange rate feed through, I expect the deficit to widen this year to £17 billion. But the measures that I shall be putting in place today should help to strengthen our trade position over the years ahead ; and I expect the deficit in the meantime to be readily financeable.

    The medium term

    The key to an improved trade performance lies in the competitiveness of our products, and the signs are encouraging. Earnings are now growing more slowly than at any time for 25 years. Labour productivity has been rising rapidly; and while unit wage costs in manufacturing have been rising in Japan and Germany, here they showed no increase at all during 1992. British business now has a great opportunity to expand into overseas markets and to replace imports at home; but costs must be kept under firm control. The Government’s task is to provide a clear and predictable framework for policy–to ensure that business has the freedom and the support it needs to get on with the job. Our strategy for sustained growth rests on three key principles : first, that growth comes from the private sector, not from Whitehall; secondly, that a continuing commitment to low inflation is vital if competitiveness is to be maintained; and thirdly, that the only way to increase the country’s long-term growth rate is by improving the supply side performance of the economy.

    Supply side policy

    Supply side improvements are seldom the stuff of headlines, but the policies that this Government have pursued have begun to improve the way that markets work. We have transferred to private ownership some two thirds of the state sector we inherited; and our labour market reforms have given back to management the power to manage, so that last year the number of days lost to strikes was the lowest for a century.

    But we still have a long agenda of unfinished business. In my autumn statement, I set out proposals to increase the role of the private sector in modernising Britain’s infrastructure. I also announced additional resources to underpin the education reforms that we have set in train.

    The wealth of a nation depends largely upon the skills of its people; and nothing could be more important for the long-term performance of the British economy than the steady improvement in education and skills that this Government are determined to bring about.

    INFLATION AND MONETARY POLICY

    However, if long-term improvements in economic performance are determined largely by the supply side, we have seen all too often in the past 20 years how short-term prospects can be blown off course by inflation. I am absolutely determined that this should not happen again.

    The Government’s objective is to keep the underlying rate of retail price inflation within the range of 1 to 4 per cent.; and to bring it down to the lower half of that range by the end of this Parliament. I expect underlying inflation to be 3 per cent. at the end of this year, close to the top of its target range, but inflation should fall further over the medium term. Monetary policy is set to meet that objective.

    The detailed framework for monetary policy was set out in my letter to the Treasury and Civil Service Select Committee last autumn; and since then, I have introduced two further developments to demonstrate our determination to conduct monetary policy in a way that will deliver our inflation target. We now publish a monthly monetary report which shows the information that guides our decisions. I have also asked the Bank of England to provide regular reports on our progress towards meeting our inflation objective.

    Interest rate decisions are based on a continuing assessment of monetary conditions, measured principally by the growth of narrow and broad money, and movements in the exchange rate and asset prices. Alongside the target for inflation, I am setting monitoring ranges for both the narrow and broad measures of the money supply; for the period of this Parliament the ranges are 0 to 4 per cent. for M0 and 3 to 9 per cent. for M4.

    In judging the prospects for inflation, I have to weigh the evidence from all the indicators, taken together. If any one is out of line, it is particularly important to assess its significance against the performance of the others.

    Following the recent substantial reduction in interest rates, M0 growth may be above its monitoring range in the period ahead, but, on the basis of the indicators taken together, I believe that interest rates at their current level are consistent with the achievement of the Government’s inflation objectives. At the lowest level in the European Community, they are also fully consistent with the prospects for recovery this year.

    FUNDING

    I turn now to funding, a subject of peculiar fascination for many City commentators and of particular interest to a number of my right hon. and hon. Friends. The Government’s full fund policy ensures that their borrowing does not add to inflationary pressures. I am clear that this policy remains appropriate, but, from time to time, it has been right to reconsider its detailed application.

    I have therefore decided that transactions by banks and building societies in gilts will, from now on, be included in the funding definition. In periods when banks and building societies reduce their holdings of gilts, extra sales to other sectors will be needed, but in current conditions the change I am making will help to ease the pressures on liquidity and avoid complicating money market management. If it also leads to some strengthening in the growth of M4, that would be no bad thing. In the year ahead, sales of gilts will, as usual, form the bedrock of the funding programme, but national savings will again make an important contribution.

    FISCAL POLICY

    In controlling inflation, monetary policy must of course be supported by a sustainable fiscal policy. I expect a PSBR in the current financial year of £35 billion – slightly lower than projected at the time of my autumn statement, but, because unemployment tends to increase for a while, even after growth has resumed, and because some taxes, particularly corporation tax, are collected a year in arrears, I expect borrowing next year to rise further. The PSBR for 1993-94 has therefore been set at £50 billion, some 8 per cent. of GDP.

    Unless action is taken, large deficits will continue over the medium term. The PSBR could still be around 6 per cent. of GNP in 1996-97, the last year of this Parliament. I do not believe that borrowing on that scale is acceptable, and I shall be announcing measures today to reduce it progressively over the years ahead. In the early 1980s, we took steps to bring the public finances back under control. We turned a PSBR of over 5 per cent. of GDP into a surplus of 3 per cent., and we nearly halved the ratio of public sector debt to GDP. We did not shrink from making the necessary changes then and I shall not shrink from making them today.

    The rise in the PSBR since 1989-90 is largely due to the recession, and, because of the reduction in the national debt in the 1980s, I have been able to allow the so-called “automatic stabilisers” – the increases in public spending and the reduction in tax receipts that directly reflect the weakness of the economy – to operate fully. It was right, I believe, to do this to maintain the level of demand during the recession. However, just as a business cannot go on year after year ignoring a fall in cash flow caused by a downturn in the economy, so too the Government cannot keep on running up debt in the hope that recovery will solve our problems. Even if the higher debt we now face was largely caused by the recession, the extra borrowing still has to be financed. As debt mounts up, so does the debt interest. In this way, what might have started off as a cyclical deficit could soon become a structural deficit unless action is taken to bring borrowing down.

    All around the world, we see countries striving to reduce their fiscal deficits or suffering from their failure to do so sooner. President Clinton’s programme shows that the need for fiscal discipline is now widely understood. The deficit which the Italians are now having to deal with is a salutary warning to those who think that a problem postponed is a problem solved. Those who argue that there is no need for action should confront the consequences of such a course – the consequences not just for the public finances but also for the level of interest rates.

    For all these reasons, I believe that the greatest threat to sustained recovery in Britain would come not from a lack of demand, but from excessive Government borrowing over the medium term. We have to address that problem now.

    Action to bring the fiscal deficit down clearly has to start with the amount that the Government spend. The new control arrangements that I put in place last year were an important first stage, and we now have firm ceilings for expenditure over the next three years that will keep the growth of spending below that of the economy as a whole.

    But proper control of public expenditure cannot be achieved simply by setting targets. It requires a continuous examination of each and every Department and of all the functions of Government. What was once a desirable role for the public sector may no longer be appropriate today. That is why the fundamental reviews of public spending are so important. Those reviews will inevitably take time, so I have also had to look at the revenue side of the accounts.

    BUDGET JUDGMENT

    In doing so, I have had to balance two key objectives : first, the essential task of helping recovery; secondly, the need to tackle the deficit so that the recovery will be sustained. I believe that my proposals today strike that right balance. In the year ahead, 1993-94, their effect will be broadly neutral, thus allowing the recovery to take hold, and I will be announcing later some measures to improve that prospect by helping business and the unemployed.

    However, for subsequent years, as the economy strengthens, my proposals are designed to build in a wedge of steadily rising revenue. Overall, they will raise revenue by £6 billion in 1994-95 and by £10 billion in 1995-96 – the equivalent of 1 per cent. of GDP.

    In setting out the Government’s plans for raising revenue, good intentions are not enough. I intend that, as far as possible, these proposals should be legislated for this year, in this year’s Finance Bill. Taken together with the tight public spending plans that I announced in the autumn statement, they should ensure that the PSBR returns towards balance over the medium term; but if further action proves necessary, I shall not hesitate to take it.

    REVENUE MEASURES 1993-94

    Taxation objectives – The proposals I shall be announcing today are part of a continuing programme of tax reform–a programme which has strengthened work incentives and improved the efficiency of the economy. In deciding where to look for additional revenue, I have been guided by a number of principles : first, that, where possible, money should be raised in a way that will not damage the working of the economy; secondly, that in general this means that reducing the value of allowances and broadening the tax base is preferable to increasing marginal tax rates; thirdly, that taxation should support social, health and environmental objectives.

    I will deal with my revenue-raising proposals in two parts. I will start with my proposals for the year ahead, 1993-94; I will then describe the measures that I propose for the two years thereafter. For the year immediately ahead, as I have said, my proposals are very broadly neutral. The objective has been to strengthen the recovery by giving help to business, but, in order to pay for that, I have had to raise revenue from other sectors of the economy.

    Allowances

    The first is income tax. With inflation down to levels not seen for a generation, I propose for the year ahead to freeze the personal allowances, the married couple’s and related allowances, the basic rate limit and the income limit for age-related allowances. The threshold for inheritance tax, the capital gains tax exempt amount and the earnings limits for tax relief on pension contributions will also remain unchanged. This will save some £670 million this year.

    Excise duties

    The second is excise duties. The removal of customs controls at the channel has been welcomed by many thousands of travellers who are now seeing the benefits of the single market at first hand. It has also brought many benefits to British business, including some 10 million fewer forms this year. But there is a natural concern as well about the impact of an increase in cross-border shopping, and the effect that it might have on British businesses, particularly in the south-east.

    In considering what changes to make to excise duties, I have had to balance that against the need to raise revenue. I have therefore decided to raise the duties on most alcoholic drinks by only 5 per cent. this year. From 6 pm today, the total tax on a pint of beer will rise by about 1p, and that on a bottle of wine by about 5p. I have also received many representations this year about the taxation of spirits, and, in particular, the taxation of whisky. This is one of Britain’s most successful exporting industries. I promised in my Budget speech last year to resist proposals from Brussels to introduce tax rules that would hit whisky sales in Europe; but, having succeeded in that, it is important that our own tax regime does not further disadvantage the industry. I have therefore decided to make no change in the duty on spirits this year. I am sure that that will be welcomed by hon. Members on both sides of the House, and especially in Scotland.

    I turn next to tobacco. Last July, my right hon. Friend the Secretary of State for Health published a White Paper containing our commitment to maintain the real value of the taxation on tobacco products, but again I have also had to take into account the impact of the single market. I propose, therefore, to increase the overall burden of duty by some 6 per cent, four percentage points above the rate of inflation. This will add 10p to a typical pack of 20 cigarettes – and, I regret to say, some 4 p to a pack of five small cigars. But I also propose to make this increase in a different way from usual.

    As the House will recall, cigarettes are subject to two different excise duties : a “specific” duty, which is a flat-rate charge per cigarette, and an “ad valorem” duty, on their price. Given that the health objective is to tax the harm that cigarettes do, it is better to tax the cigarettes themselves than to tax their price. I therefore propose to increase the specific duty on cigarettes by 10 per cent., while cutting the ad valorem duty from 21 per cent. to 20 per cent. This will mean a proportionately bigger tax increase for cheap cigarettes, many of which are imported.

    I also propose this year to increase the duty on most gaming machines by 20 per cent. Taken together, those changes will raise £290 million in 1993-94 and £365 million in 1994-95.

    I turn now to motoring taxes, where I propose to combine raising revenue with tax reforms. When I abolished car tax in my autumn statement, I said that I would recoup the cost from other motoring taxes. I therefore propose to raise all fuel duties by 10 per cent. from 6 pm today, putting 12p on a gallon of unleaded petrol and 15p on a gallon of four-star. From midnight tonight, vehicle excise duty for cars – the tax disc – will also rise, by £15, to £125.

    Taken together with the abolition of car tax, those measures will raise a net £400 million in 1993-94. The overall impact will be to shift the tax burden from car buyers to car users; and to help both the environment and the industry. Together with the increases that I have announced on alcohol and tobacco duties, it will add a quarter of a percentage point to the RPI in April, compared with indexation.

    Fuel scales

    Alongside the increase in fuel duties, I propose to increase by 20 per cent. the scale charges for free fuel supplied to company car drivers for private use. I also propose to abolish the 50 per cent. discount currently available to drivers doing more than 18, 000 business miles a year. Employees can, of course, avoid this tax altogether by paying for the full cost of all fuel provided for private journeys themselves. The environmental impact of my proposals on fuel duties will be strengthened by reducing the number of motorists who use fuel at no direct cost to themselves. This measure will raise £65 million in the year ahead and £70 million in 1994-95.

    Company cars and vans

    I turn next to the tax treatment of company cars. From its introduction in 1976 until 1988, the income tax charge on company cars significantly under-estimated their true value. Since then, charges have been steadily raised to more appropriate levels. I propose this year to complete that process, by bringing the car scales up to a level which fully reflects the true value of the benefit of a company car. That requires an increase in car scales of 8 per cent., bringing additional revenue of £100 million in 1993-94.

    However, as I said last year, the structure of the current regime remains unsatisfactory. In most cases, the value put on the benefit, and the tax that is payable, are determined not by the price of the car, but by the size of the engine. That might have mattered less when the scale charges were very low, but it now gives rise to serious distortions.

    Following consultation with the industry, I propose from 1994-95 to replace the current car scales with a simple system based on the price of a car. The annual benefit of a company car will be valued for income tax purposes at a fixed percentage of the manufacturer’s list price. To ensure that the reform is revenue-neutral, I propose to set that percentage at 35 per cent. Company car users will then pay income tax at their marginal rate on that amount.

    However, I do not believe that it would be right to apply the full rigour of the charge to those who use the company car largely for business purposes. I therefore propose that there should be a discount of one third for those company car users who drive more than 2,500 miles a year on business, and a discount of two thirds for those who do more than 18,000 business miles. In future, the tax on company cars will rise or fall automatically with the price of those cars. It follows that there will no longer be any need to set the tax charge each year in the Budget.

    My reform will reduce tax distortions in the car market and enable manufacturers and fleet managers to plan production and purchasing in a more rational and stable system. For these reasons, I believe that it will be welcomed. I also propose to replace the existing complex arrangements for taxing employees’ private use of company vans with a simple scale charge, covering both the van and any fuel provided, set at the modest level of £500. This will raise £10 million in the year ahead and £35 million in 1994-95.

    Anti-avoidance

    In addition, I intend to close a number of loopholes which have been exploited by people to avoid tax. First, from midnight last night I propose to exclude from the business expansion scheme all schemes which involve the provision of loans to BES investors. The BES was set up to encourage investment in small business – not to provide highly subsidised loans for top-rate taxpayers. Secondly, I intend to end the practice whereby group companies buy up other companies with capital losses simply in order to set those losses against their own capital gains. Thirdly, I intend to restrict the situations in which changes in company ownership can create scope to avoid advance corporation tax. Finally, I propose to tighten the rules for foreign companies under United Kingdom control. Full details of these and other measures are provided in a series of Inland Revenue press notices being issued today. The revenue is not insignificant. Taken together, the measures should raise some £70 million in the first year, rising to over £460 million in the following year.

    TAURUS

    Before leaving my proposals for 1993-94, I wish to make clear the position on stamp duties on securities and property other than land and buildings. Following the decision by the Stock Exchange last week to abandon TAURUS, stamp duty will remain in place at least for 1993-94, raising £1 billion during the coming year. I will review the position further in the light of the conclusions of the securities settlement task force set up by the Bank of England.

    The measures that I have proposed so far will raise £2.4 billion in 1993-94, not including stamp duty. Of this, £750 million is required to finance the abolition of car tax. I will be using a large part of the rest to reduce taxes on business.

    REVENUE MEASURES 1994 95 AND BEYOND

    Before I turn to business taxes, I intend to set out my tax proposals for 1994-95 and the years thereafter. As I have already explained, these tax proposals will build up over the years, creating a wedge of increasing revenue, which, as far as possible, will be legislated for in the coming financial year.

    National Insurance Contributions

    In my autumn statement, I took some tough decisions on current spending to maintain capital programmes, but, to protect the poorest and most vulnerable members of society, we also decided to uprate social security benefits in full. That decision was warmly welcomed on all sides of the House. However, had no further action been taken, the effect of that decision, combined with the rise in unemployment, would have been to push the national insurance fund into deficit. To prevent this, I introduced a new Treasury grant, and legislation to implement this has been taken through the House.

    This makes sense at a time when ensuring economic recovery is our priority, but it is clearly not a fair or reasonable basis for financing the national insurance fund over the medium term. A Treasury grant is paid for by the general body of taxpayers, including millions of pensioners who have already made a full contribution to the fund throughout their working lives. Accordingly, my right hon. Friend the Secretary of State for Social Security and I propose to place the finances of the national insurance fund on a firmer footing.

    I do not propose to increase national insurance contributions in the coming year. However, from April 1994 my right hon. Friend and I propose to increase the class 1 main rate of employee national insurance contributions by 1 per cent., to 10 per cent., and the class 4 rate for the self-employed by 1 per cent., to 7.3 per cent. The arrangements for employees earning below the lower earnings limit and the self-employed with profits below the lower profits limit will be unchanged by these measures. The necessary legislation will be brought before the House in the coming year.

    Taken together, these increases will raise about £1.8 billion in 1994- 95 and £2.2 billion in a full year.

    However, that will still leave a deficit in the national insurance fund of £2.8 billion in 1994-95 and a similar sum the following year. National insurance contributions are, of course, paid not just by employees and the self-employed, but also by employers; and when a deficit of this size emerges in the fund, it is natural to look to all contributors to make up the balance. The remaining deficit is roughly equivalent to an increase in the employer national insurance contribution rate of 1.2 per cent. from 10.4 per cent. to 11.6 per cent. However, having reflected carefully, I do not believe that it would be appropriate to increase the burden on employers. I therefore propose to retain a smaller Treasury grant to make up the continuing shortfall in the fund.

    North sea fiscal regime

    One of the main objectives of this Government’s tax reforms has been to eliminate tax rules which distort investment decisions. This was the driving force, for example, behind the far-reaching reform of the corporation tax system in 1984. Today I wish to carry this principle through into another important sector of the economy – the North sea, and in particular petroleum revenue tax, or PRT.

    When PRT was introduced in 1975, the North sea oil sector looked very different – oil prices were very high and the typical oilfield was relatively large. The purpose of the new tax was to ensure that the Exchequer got its fair share of the large profits to be made in the North sea, while companies were left with a reasonable return on their investments.

    However, as the North sea has developed, the PRT regime has come to look increasingly anachronistic. As profits in many existing fields attract a marginal tax rate of over 83 per cent. there is little incentive for companies to keep costs under control or for additional investment in existing fields. Moreover, as a result of the uniquely generous allowances that are available, the Exchequer is no longer getting a fair return. In 1991-92, the PRT regime actually cost the Exchequer £200 million.

    As many in the oil industry recognise, this is neither reasonable nor sustainable. The North sea tax regime has to be placed on a clear long-term footing, so today I intend to set out a major reform which will raise revenue in the medium term and give the oil industry a stable framework to plan ahead.

    I propose from 1 July this year to reduce the PRT rate on existing fields from 75 per cent. to 50 per cent., and for new fields I propose with effect from today to abolish PRT entirely.

    It follows that, for new fields, I also intend to scrap all the allowances that go with the existing PRT system, including, for example, relief for exploration and appraisal expenditure that can be set against PRT on existing fields : but contracts entered into before today for exploration and appraisal will continue to get relief against PRT on existing fields for the next two years. Allowances that can be claimed within existing fields will remain essentially unchanged.

    This reform will greatly simplify the tax regime for new fields, disapplying at a stroke some 300 pages of complex legislation; and it means that the only tax on new oil fields in the North sea will be corporation tax – at 33 per cent., the lowest rate of business tax in the industrialised world. Britain will have a competitive tax regime which strikes a reasonable balance between the interests of the industry and those of the nation as a whole.

    The paradox of this reform is that, despite the abolition of PRT for new fields, and the reduced rate for existing fields, after 1993-94 it will actually raise revenue for the Exchequer. I expect the yield in 1994-95 to be some £300 million and in the following year to be some £400 million.

    Relocation expenses

    I turn now to another area where reform is long overdue – the tax treatment of job-related relocation expenses.

    When a company asks its employees to move house, it may offer help with relocation expenses. Usually, that involves paying for the cost of the removals, but sometimes, if the move is to a more expensive area, the employer will also pay allowances towards the employee’s higher living costs.

    For the past 40 years, we have allowed employees to receive most of this help tax-free, provided the employee has sold his existing home – a condition which has been the subject of much criticism. That means that someone whose employer gives them as much as £25,000 might pay no tax on it at all. On the other hand, people who decide to move to find work and pay their own costs get no help whatsoever from the tax system.

    I see a case for some measure of relief where employers help meet employees’ removal expenses, but it is difficult, in my opinion, to find a convincing rationale for a system of tax relief whose effect is to give the biggest subsidy to those moving to the highest-cost areas. With these reliefs expected to cost the Exchequer no less than the staggering sum of £800 million this year, I believe that the time has come for reform.

    I am therefore asking the Inland Revenue to withdraw the present extra-statutory concession which helps people moving to a more expensive area, and I propose to restrict relief on removal expenses to payments of up to £8,000 for people whose employers require them to relocate after 6 April this year. Under the new system, the existing home need no longer be sold to qualify for relief. Although these changes come into effect immediately, they will not start to raise revenue until the year after – about £200 million in both 1994-95 and 1995-96.

    Mortgage Interest Relief

    I turn now to mortgage interest relief. The rapid expansion of home ownership is one of this Government’s most enduring achievements, and I have no plans to change the existing ceiling for mortgage interest relief of £30,000, but in the last few Budgets we have taken steps to improve the focus of mortgage interest relief and to contain its costs – most recently in my 1991 Budget – by restricting the relief to the basic rate.

    Even so, mortgage interest relief is expected to cost the Exchequer £4.3 billion next year alone. I propose, therefore, to reduce the rate at which relief is given from 25 per cent. to 20 per cent., but I propose to defer the implementation of this change until April 1994. In all, this change will yield £900 million in 1994-95 and £960 million in the following year.

    At the current mortgage rates, no borrower will be more than £10 a month worse off from the reduced rate of relief, and for many with mortgages below £30,000 the increase in payments will be even smaller. Moreover, it is the level of interest rates, not the amount of tax relief, that is the most important determinant of the cost of a mortgage. Because interest rates have fallen so far since October 1990, payments on the average mortgage have been cut by over £150 a month, so the cost of the change I am proposing is equal to just a fraction of the benefit mortgage payers have already received from lower mortgage interest rates.

    I know that there are some elderly people with life annuity home income plans which allow them to draw down some of the savings that they have invested in their houses. Such schemes will continue to attract relief at 25 per cent.

    I am fully aware that, despite some encouraging signs of increasing activity, the housing market remains fragile. That is why the changes I have described will not come into effect until next year; and it is also why I have one further proposal which will affect people buying houses. Whereas my proposals on mortgage interest relief do not apply until April 1994, this measure comes into effect immediately. I propose to double the stamp duty threshold to £60,000 for documents executed from today and not stamped before 23 March, when the required Budget resolution has been considered by the House.

    This means that the cost of buying homes priced at between £30,000 and £60,000 will be reduced by up to £600. From today, the number of transactions in the housing market liable to stamp duty will be halved. This will be of particular benefit to first-time buyers, who tend to buy less expensive homes. With mortgage interest rates at their lowest level for decades, this reduction in stamp duty should provide a further stimulus to the housing market. The change will cost £220 million in 1993-94 and about £270 million in the following year. Last year, I announced a significant change in the treatment of the married couple’s allowance, giving couples greater flexibility in allocating it between them. Today, I have a further important change to propose.

    At present the married couple’s allowance reduces a taxpayer’s liability at his or her marginal rate. A taxpayer on the 20 per cent. lower rate benefits by £344, but a higher rate taxpayer gets £688 – twice as much. There is no good reason why an allowance intended to recognise the responsibilities of marriage should give least to those on low incomes and most to those right at the top of the income scale.

    From 6 April 1994, therefore, I propose to restrict relief for the married couple’s allowance to the lower rate of 20 per cent. It will then be worth the same amount to taxpayers at all levels of income. The allowances which are linked to the married couple’s allowance for those aged under 65 will be similarly restricted.

    Because of the higher level of MCA to which they are entitled, this change will bear harder on elderly married couples, so, also from 1994-95, I propose to increase by £200 the married couple’s allowance for those aged 65 and over. This will ensure that pensioners paying tax at the basic rate are affected by the change in the same way as any other basic rate taxpayer, and some elderly married couples in the lower rate band will actually gain slightly.

    As I have said, these changes will not come into effect until 1994-95. They will then raise about £900 million in 1994-95, and £1.2 billion in 1995-96.

    Green measures

    In recent years, there has been much debate on the subject of global warming and the role that tax measures can play in combating it. This has led the European Commission to propose a Community-wide carbon tax. There may indeed be a case for further co-ordinated international action on global warming, but I remain unpersuaded of the need for a new European Community tax. Tax policy should continue to be decided here in this House, not in Brussels.

    Individual countries should, of course, take their own measures to give people the right signals to encourage the efficient use of energy. Today, I shall propose measures designed to do just that, and to raise revenue at the same time.

    Last June, my right hon. Friend the Prime Minister signed the United Nations convention on climate change at Rio. This was a milestone in international efforts to halt global warming. When Britain and other countries have ratified the convention, the Government will be committed to bringing forward measures aimed at returning greenhouse gas emissions from this country to 1990 levels by the year 2000. My right hon. Friend the Secretary of State for the Environment published last December a consultation paper which set out the various options.

    The largest contribution to the growth in United Kingdom carbon dioxide emissions in the coming years is expected to come from the transport sector. I therefore propose to make clear today the Government’s long-term intention on road fuel duty. We intend to raise road fuel duties on average by at least 3 per cent. a year in real terms in future Budgets, in addition to the increase I have already announced for this year.

    In deciding the level of duty to be levied in any particular Budget, we will, of course, take full account of conditions at the time – including, if charges for motorways and urban roads are introduced, the overall level of taxes and charges which road users are paying. However, my announcement today will help manufacturers and consumers to plan ahead. It should provide a strong incentive for motorists to buy more fuel-efficient vehicles, and it will raise at least a further £520 million in 1994-95 and £950 million in 1995-96. However, in order to meet the commitment that we entered into at Rio, action will be required not just in the transport sector, but across the whole economy, and in deciding how best to meet our carbon emissions target, we will need to ensure that the right incentives are in place throughout the economy – encouraging people to consume less and conserve more. Above all, it is crucial to avoid taking measures that will have a disproportionate impact on the competitiveness of British industry.

    Against this background, I have one further measure to propose that will not only encourage greater energy efficiency in every household in the country, but will also raise a considerable amount of revenue for the Exchequer over the years ahead.

    Fuel and energy supplies to industry pay VAT in Britain. Those to the home do not. In this respect, we are unique in the European Community. I therefore propose, over the next two years, to end the zero rate of VAT on domestic fuel and power. Again, this change will not come into effect immediately, but in 1994. VAT will be charged at 8 per cent. from 1 April 1994 and at 17 per cent. from 1 April 1995.

    This measure will raise some £950 million in 1994-95, £2.3 billion in 1995-96 and around £3 billion a year thereafter. For the first time, the rate of VAT on domestic fuel and power will be the same as that charged on goods like loft insulation material, which improve energy efficiency. This will bring to an end the current anomaly, which makes nonsense of any attempt to use the tax system to improve the environment. – [Interruption.]

    Mr. Deputy Speaker : Order. The House should listen to the Chancellor.

    Mr. Lamont : My intention is to legislate for this proposal this year.

    Social security benefits will, of course, rise automatically to reflect the price effect of this change, but I recognise that this will cause particular problems for those on low incomes. My right hon. Friend the Secretary of State for Social Security will take this into account when the income-related benefits are uprated next year. Taken together with the measures which have already been announced, these tax proposals take Britain two thirds of the way to meeting the Rio target, and they will do so in a way that does the least possible damage to the competitiveness of British industry. I am confident that the remaining gap can be filled through sensible energy-saving measures, as and when the convention is ratified by our major industrial competitors.

    The measures I have announced so far will raise substantial revenue in 1994-95 and beyond. I turn now to my measures for business.

    DEREGULATION

    Self-assessment and simplification

    As the House is aware, the Government have embarked on a major drive to reduce the burden of regulation on industry. I will therefore start with three significant measures of deregulation, which should be of particular benefit to the self-employed and to small businesses generally. Self- assessment of income tax has operated successfully in many countries, including the United States, but none of my predecessors has found a way of introducing it here. For most people, that has not been a problem – the PAYE system already deals very simply with the tax affairs of some 16 million employees – but for the 8 million taxpayers who have to fill in a tax return each year, the current arrangements are very far from simple. Following a detailed consultation exercise, I now propose to offer these people, including 4 million self-employed, the option of self-assessment on income tax. Legislation will be brought forward in next year’s Finance Bill to implement the proposal from the earliest practicable date, which is 1996-97.

    For those who choose to take it up, self-assessment should provide a significant reduction in bureaucracy and paperwork; and it will also bring out more clearly the link between public spending and the burden this places on the individual taxpayer. A more transparent tax system can only lead to more informed choices and debate; and I believe that self-assessment for a third of all taxpayers will contribute to that.

    But for self-assessment to work, the system has to be simple enough for taxpayers themselves to be able to fill in their own returns. My second reform will achieve a significant simplification, particularly for the self-employed. One of the least attractive features of our present tax system is that it is simply too complicated for them to work out how much tax they owe : people setting up in business on their own are more or less forced to employ an accountant. Since 1926, the self-employed, working under the so-called “preceding year” basis of assessment, have generally paid a tax bill based on profits they made up to two years previously. People with several different sources of income may be assessed on a number of different bases, with separate tax bills and payment dates for each. It would be difficult to invent a more complicated system for taxing the self-employed, even if one set out with that very intention. Under my new proposals, people will have just one tax bill each year, covering all their income, and the self-employed will pay tax on the profits they make in the current year, not the preceding year. This should be a major simplification; and I am sure it will be warmly welcomed.

    Taken together, these two measures amount to the most fundamental reform of income tax administration since the introduction of pay-as-you-earn in 1944.

    Statutory audit

    My third announcement is of particular interest to smaller businesses.

    At present, all businesses which are incorporated have to have their accounts audited. While it is clearly important that accounts should be reliable and indeed that the Inland Revenue and other users should have the assurance they need that the accounts have been drawn up properly, the current statutory audit requirement imposes a disproportionate cost on many small businesses. My right hon. Friend the President of the Board of Trade will therefore shortly be issuing a consultative document setting out options for reducing this burden, at least for the very smallest businesses that are incorporated. This would deliver significant savings and would represent a major step in cutting out red tape and bureaucracy.

    BUSINESS TAXES

    Reducing the Government’s borrowing requirement will benefit business by ensuring that the recovery is sustained, but, as I said in my Mansion House speech last October, the Government are determined to keep our policies under continuous review to ensure that British business has the backing it needs to compete in world markets. This is particularly true of our tax policies.

    Britain already has the lowest rate of tax on business profits in the industrialised world, and we have a personal tax system which makes it attractive for entrepreneurs and managers to live and work in Britain. We intend to see that continue.

    Britain has had an outstanding record over recent years in attracting investment from overseas – indeed, we have attracted no less than a third of all foreign investment into the European Community over the last few years – but we cannot be complacent. With the advent of the single market, the competition in Europe to secure inward investment has become ever more intense. So my Budget sets out to ensure that our business tax regime retains its clear competitive edge.

    Surplus ACT and the taxation of dividends

    In discussions with business organisations over the last few months, one issue has come up again and again the problem of surplus advance corporation tax, or ACT. Many believe that this feature of our tax system both penalises successful British-owned international companies and distorts investment decisions.

    This issue has, of course, been with us for many years, and it has so far defied solution. Nonetheless, I made a commitment in my Budget last year to return to this subject, and I am pleased to be able to report to the House that I have now found a way forward.

    I hope that the House will bear with me, as I am afraid that my proposals are complex, but they do attack the problem of surplus ACT, they are central to the strategy of this Budget, and they raise significant amounts of revenue.

    At present, ACT is paid on dividends at 25 per cent. This funds a tax credit which covers the basic rate income tax bill of the shareholder, but, as its name implies, it is also an advance payment of the company’s corporation tax bill.

    In normal circumstances, the system works very well, but sometimes it does bring problems, particularly for companies which earn a large proportion of their profits overseas. These companies often end up paying an ACT bill on their dividends that is greater than their entire United Kingdom corporation tax liability. The so-called “surplus ACT” that results cannot be claimed back, so in effect it becomes an extra tax on profits.

    This can have damaging economic effects. For example, it gives some companies a strong incentive to move important activities, including research and development, abroad, leading to the loss of skills and jobs in this country. It cannot be right to distort the commercial decisions of British companies in this way or to give companies a positive incentive to move elsewhere in Europe; so today I am putting forward some proposals that will go a long way towards alleviating the problem.

    First, I shall establish a special tax regime from 1994-95 to help foreign-owned international companies which are considering setting up their headquarters in the United Kingdom. This will make it more attractive for international companies to base their operations in Britain, and it will further promote London’s position as Europe’s leading financial centre.

    Secondly, I am today issuing a consultation document proposing a scheme under which British companies may choose to class any dividend paid out of overseas profits as a “foreign income dividend”. Unlike normal United Kingdom dividends, this will not carry any tax credit, and although ACT would initially be payable in the usual way, the company will be entitled to a refund if it gives rise to surplus ACT. Once fully operational, this scheme could reduce the build-up of surplus ACT by some £250 million a year.

    Finally, I have one further proposal which will help not just companies with surplus ACT, but all dividend-paying companies; and it will do so in a way that will raise considerable revenue. I propose simply to reduce the rate of ACT in two stages, from 25 to 22 per cent. in 1993-94 and then to 20 per cent. in 1994-95. This will give companies which pay dividends a cash flow benefit of about £2 billion over the next two years, and it will reduce the build-up of surplus ACT by about £300 million next year.

    I also propose to reduce from 25 to 20 per cent. in 1993-94 the tax credit that shareholders get when they receive a dividend. Those who are familiar with these issues – a select few, I fear – will know that tax credits affect two main groups of shareholders. Those with no tax liability, particularly pension funds, can claim a cash payment from the Inland Revenue for the tax credit, and higher rate taxpayers have to make up the difference between the 40 per cent. top rate of tax and the 25 per cent. tax credit they receive. The reduction in the tax credit that I am proposing will therefore have two important effects. First, the payments that lower rate payers, non-taxpayers and particularly pension funds, get from the Inland Revenue will be reduced by five percentage points, saving the Exchequer no less than £1 billion a year. Secondly, higher rate payers will have to pay an extra 5 per cent of tax on the dividends they receive in order to discharge their liability to tax at the top rate of 40 per cent. This, in turn, will yield an extra £200 million a year.

    Finally, in order to ensure that most ordinary shareholders are not affected by this change, I propose to reduce the rate of tax on dividends from the current basic rate of 25 to the lower rate of 20 per cent. The effect of this, combined with the change to the tax credits, is to leave basic rate taxpayers neither better off nor worse off than they are now.

    Thus, these proposals achieve three objectives at the same time. They will give companies a £2 billion cash flow boost over the next two years, they will significantly reduce the problem of surplus ACT for the future, and they will raise £900 million extra revenue for the Exchequer from 1995-96 onwards.

    There is, however, one group for whom I believe it would be desirable to ease the immediate effect of these changes. I therefore propose for charities to phase in the effect of the reduction in the tax credit over a four-year period. I also have some further measures for charities, to which I shall turn later.

    Export credit

    The House will be relieved to hear that my next measure is a little less opaque, but it is equally important for the long-term success of British manufacturing.

    In the autumn statement, I announced a substantial increase in export credits to help British businesses win major contracts abroad, but the fact remains that export credit insurance has proved expensive for the taxpayer. For that reason, the Government have negotiated hard over the years to secure a reduction in the subsidies offered by other countries. Some progress has been made, and we shall continue in that effort, but in the meantime British firms, in my opinion, are sometimes at a competitive disadvantage in seeking business overseas. My right hon. Friend the President of the Board of Trade and I have therefore looked again at the whole range of ECGD services and have decided to make some important changes. The first relates to premiums. Last year, premiums were cut on average by about 20 per cent., but there is scope to do more. We have therefore decided to make a further reduction of 7 per cent. in the average level of ECGD premiums. This means that, while premiums for individual export markets will always differ, the average level of premiums paid by British exporters next year will be down to around the average paid by their G7 competitors.

    The second is export credit cover. In the autumn statement, I increased the cover available to exporters by £200 million this year, and by a further £500 million for 1993-94. Over the next three years, my right hon. Friend and I propose that additional cover of £1.3 billion should be made available for those exporting into some of the fastest growing and most important markets around the world. Taken together with my autumn statement announcement, this means that the annual cover for these markets will have increased by more than 75 per cent. in just four years.

    As a result, British firms will now be able to go into export markets with greater confidence that they can compete on a more equal basis with their overseas competitors. I am sure that they will seize the opportunities that are now available to them.

    Insurance

    Over the years, one of Britain’s most successful exporting industries has been insurance, but for some years now the industry has argued that the tax reliefs available to some of their European counterparts put them at a competitive disadvantage. In fact, that is not the whole story; in other respects, our own tax system is very favourable. Nevertheless, having reviewed the position again, I believe that there may indeed by a case for allowing tax relief on certain types of equalisation reserves covering occasional, exceptional losses.

    However, if such reserves were to be allowable for tax, they would also have to be within the regulatory framework for the industry. This would be a major departure for both the tax and regulatory systems. A consultation document will be issued later this spring to consider the options.

    Lloyd’s

    I also propose to introduce a significant reform of the tax regime for Lloyd’s. I propose to tax the gains on the disposal of assets which form the premiums funds of Lloyd’s names in the same way as those of corporate insurers, and I intend to replace the current reserve arrangements with a better targeted reserve, which should enhance Lloyd’s ability to deal with the particularly volatile type of risk which makes up most of its business.

    My proposals will greatly simplify the taxation of Lloyd’s. Lloyd’s has certainly had a difficult time recently, but it remains vital if London is to retain its pre-eminent position in the world insurance market. Taken together, the two reforms I am proposing will cost the Exchequer nothing.

    SMALL BUSINESS

    The measures I have announced so far will be of help particularly to large businesses, but small firms play a crucial role in our economy. Small businesses do not follow the economy ; they lead it. That has been demonstrated time and time again. In this Budget, I shall set out some further proposals which will help small businesses to lead the recovery once again.

    Loan guarantee scheme

    Following heavy losses in recent years, the banks are bound to be more cautious in their lending in future. Moreover, the fall in property prices has reduced the security for many of their loans. As the recovery progresses, small firms may therefore find that their prospects for expansion are increasingly threatened by a shortage of bank finance. My first proposal is directed precisely at that problem.

    The Government’s loan guarantee scheme helps entrepreneurs who have viable projects but who do not have the track record or loan security to attract sufficient finance on their own. It enables them to borrow with a Government guarantee, usually for 70 per cent. of the value of the loan, in return for paying a premium of 2 per cent. on the guaranteed part of the loan.

    In Germany and the United States, a large proportion of lending to small businesses is done at fixed rates of interest. By contrast, in Britain, most borrowing is linked to the level of base rates. I have long believed that many small businesses would benefit from making more use of fixed-rate finance, which would give them more stability and would enable them to plan ahead.

    I propose therefore to make a substantial reduction in the loan guarantee scheme premium for guarantees on fixed-rate lending. This will fall to per cent. and will, I hope, encourage more fixed-rate lending. I also intend to reduce the premium on other variable rate loans to 1 per cent. The premiums will henceforth apply to the whole loan, not just the guaranteed portion. This change should take effect in the next month or so.

    I also propose that the limit on the size of loan allowed to such businesses should be raised from £100,000 to £250,000, and the proportion of the loan guaranteed increased from 70 per cent. to 85 per cent. I am sure that those proposals will be warmly welcomed by small businesses. My right hon. Friend the President of the Board of Trade and I will be taking this forward urgently with the banks.

    CGT reform

    My second measure relates specifically to entrepreneurs who have built up successful businesses and now wish to sell them in order to start up a new one.

    The current capital gains tax regime provides generous annual exemptions to those who make regular capital gains from trading in shares, but it is much less generous to the entrepreneur. Typically, he sells shares in his own company only once, so has only one year’s annual exemption to set against gains built up by hard work over a lifetime. Thus, for every £100 taken out of the old company at the margin, he has only £60 to invest in a new one. It is hardly surprising that entrepreneurs complain that they are locked in by the CGT regime, and prevented from investing their talents elsewhere. For this reason, I propose in future to defer the payment of CGT for any entrepreneur whose gains from the sale of his own company are reinvested in another qualifying unquoted trading company, or companies. I know that this will be widely welcomed by the venture capital industry.

    I also propose to relax the conditions for CGT retirement relief by reducing the qualifying shareholding from 25 per cent. to 5 per cent. ; and to extend this relief to cover full-time employees as well as directors. These changes will cost £50 million in a full year.

    VAT threshold

    I turn now to the VAT regime, which for many small businesses takes up a great deal of time and can be a particular source of worry. The best way to help is to keep them out of the VAT system altogether. I am therefore raising the VAT threshold to the maximum extent possible. The new threshold will be £37,600.

    Cash accounting and bad debt relief

    Over the past couple of years, I have also announced measures to allow traders to reclaim VAT on debts which remain unpaid after 12 months, and to encourage firms to take advantage of the cash accounting scheme under which traders only have to pay VAT to Customs when they themselves have been paid by their customers. I now intend to take this further in a way that will help many small businesses. I propose to increase the ceiling on turnover below which firms may join the cash accounting scheme by £50,000 to £350,000. This will allow an extra 15,000 businesses to benefit, on top of the 400,000 that qualify already.

    I also intend to help businesses which are too big to take advantage of the scheme. At present, VAT can be reclaimed on any invoice which remains unpaid after 12 months. I propose to halve that qualifying period to six months.

    These measures will give considerable help to companies, improving traders’ cash flow by some £150 million in the year ahead.

    VAT penalties

    In addition, I have a further series of reforms to propose to the current system of VAT penalties.

    First, I intend to focus the rules better so that only larger errors and the most persistent offenders will incur the “misdeclaration penalty”. This will reduce the number of penalties imposed by over 40 per cent. Secondly, I propose to place a three-year limit on the number of years’ interest that can be charged when tax has been underpaid. Thirdly, I have decided to reform the VAT default surcharge so that traders will be notified sooner of default and surcharged at a lower rate, and only on larger defaults. This will make the surcharge more effective, but remove some 125,000 small traders from the default surcharge altogether. I know that this will be welcomed by small businesses.

    Keith Report

    I have one final reform of the VAT penalty system. Following Lord Keith’s 1983 review, the Government concluded that it would be wrong to give Customs discretion over the level of VAT penalties. After considerable debate, this conclusion was eventually accepted by the House–I remember the strong debates very well – but the controversy has continued ever since, and, over time, more and more people have come to believe that it is wrong to have a penalty regime which is almost entirely automatic.

    I have considered this matter all over again, and I have concluded that the time has come to make a change. I propose, therefore, that Customs should be given some discretion to mitigate the penalties for misdeclarations, to enable them to take account of the individual circumstances of the trader. If necessary, of course, the trader will still be able to appeal to a VAT tribunal, which will also have greater scope for discretion.

    These reforms will put the VAT compliance system on to a secure long-term basis. They will be of most benefit to small businesses, for whom the burden of compliance is heaviest; and I know that they will be widely welcomed on both sides of the House.

    Bloodstock

    I have already announced my intention to extend value added tax to domestic fuel and power from 1 April next year. I have one further announcement to make on VAT.

    As the House knows, it has long been this Government’s intention to switch the burden of taxation from direct taxes on income to indirect taxes on consumer spending. It is perhaps less well known that Britain has one of the lowest effective rates of VAT in the European Community.

    Against this background, and in a Budget designed to place the public finances on a sound footing, I have inevitably had to look very carefully at the whole structure of our current VAT regime, and particularly at whether all different category.

    Having reflected carefully, I have decided nonetheless not to extend the VAT base beyond fuel and power. I do, however, have one further announcement on VAT, which will I hope offer some consolation to those hon. Members who would rather be at Cheltenham today, watching the Champion Hurdle.

    For some time, the bloodstock industry has been concerned about competition from other EC countries which levy a lower rate of VAT on horses. The single market has exacerbated this problem and created a major incentive to move bloodstock business abroad, threatening 30, 000 jobs.

    There have been intensive discussions between the Jockey Club and Customs, and I am pleased to announce that a way forward has been found. As a result of proposed changes in the Jockey club’s rules, owners who wish to do so will now be able to organise their racing activities in a more commercial way. This in turn will enable them to meet the normal business test for VAT registration and to claim credit for VAT on purchases, subject to the usual rules.

    I know that there have been representations on this from both sides of the House, and I know that registration on this basis meets the industry’s concerns over this problem. No Government have done more for racing than this one – and quite rightly so, for it is an important industry, and a vital part of our national life. This measure will be welcomed by the industry and by its many supporters in this House.

    UBR

    I have one final announcement, which will be of direct help to many businesses.

    My last Budget helped many thousands of firms by altering the business rates transitional arrangements to accelerate the gains of those who gained most from the change in the system, while freezing real rates bills which otherwise would have risen substantially. The freeze applied for one year only, so many businesses now face a substantial increase in their rates bills in the year ahead – up to 20 per cent. over and above inflation on large properties and up to 15 per cent. on small properties.

    It would, I believe, be wrong to impose such increases in present circumstances. I therefore propose for a further year to freeze in real terms the rates bills of those losing from the new system. As a result of this and last year’s measures, no business will face a real increase in its rates bill in the year ahead, and many will benefit from reductions. In cash terms, that means that no bill will rise by more than 3.6 per cent. – the increase in the RPI in the year to last September.

    Subject to Parliament’s approval, the Government will again pay extra sums into the business rates pool to ensure that the income of local authorities is not reduced. My right hon. Friend the Secretary of State for the Environment will shortly introduce a Bill to implement these proposals. Full details will be published today in a press notice.

    The new measure will reduce the total business rates bill in England and Wales next year by 2.6 per cent. Bills in Scotland and Northern Ireland will likewise be reduced by 2.6 per cent. in aggregate. My right hon. Friends the Secretaries of State for Scotland and for Northern Ireland will be announcing the details. These measures will again bring significant and early benefit to many thousands of businesses throughout the United Kingdom. About 800,000 business properties will benefit. The revenue cost is estimated to be some £370 million in 1993-94, and some £260 million in 1994-95.

    Taken together, the measures I have announced will reduce the burden on business by about £1 billion in the year ahead. I hope that the House will agree that this is the best possible use for the sums I have been able to raise this year.

    NATIONAL LOTTERY AND CHARITIES

    The House is aware, also, of the Government’s plans to introduce a national lottery from next year. This will provide a substantial increase in resources for a number of good causes : charities, sport, the arts, the national heritage and the millennium fund. I have no doubt that the lottery will be both popular and successful. We have always made it clear that the national lottery will be taxed. In deciding the tax rate, I have taken into account the level of tax on other forms of gambling and the extent to which spending is likely to be diverted from other taxed activities. Much, of course, will depend on how the lottery develops and I shall keep the position under review, but for the first year of its operation I propose that national lottery tickets should be taxed at a rate of 12 per cent. Existing society and local authority lotteries will be exempt. Winnings will incur no tax whatsoever. I believe that these proposals will make sure that the national lottery gets off to a good start. Since 1979, the Government have done an enormous amount to help charities. Indeed, their special position in society is recognised by the substantial tax reliefs, approaching £1 billion, that they already receive, and they will also benefit from the new lottery. I now have two further changes to propose.

    First, I intend to raise the annual limit for income tax relief under the payroll giving scheme from £600 to £900 with effect from 6 April. Secondly, I propose that the minimum gift attracting tax relief for single donations under the gift aid scheme should be reduced from £400 to £250 from today, thus increasing substantially the incentive, through the tax system, to charitable giving. These measures build on the principle that tax reliefs for charity should focus on what individuals give, rather than what charities themselves spend. Taken together, they will boost tax relief on donations to charities by some £30 million in a full year.

    EMPLOYMENT MEASURES

    In the autumn statement, the Government announced a number of measures to help the unemployed, and in my Budget I have set out my further proposals to help business and sustain recovery. That it the best way to promote employment.

    However, we know from experience that unemployment may continue to rise for a while even after growth has resumed. That is a matter of great concern to the whole country, and it is a concern which I fully share. My right hon. Friend the Secretary of State for Employment and I have therefore decided to take further special measures to help an extra 100,000 unemployed people.

    First, we have decided to provide more help for those who wish to set up their own businesses under the business start-up scheme. This offers advice and financial assistance, and has been one of the most successful employment schemes. We propose to offer an additional 10, 000 places in 1993-94. That will give a direct boost to small business creation and self-employment in years ahead.

    Secondly, the Secretary of State for Employment proposes to introduce a new initiative to allow the long-term unemployed to learn the practical skills they need to find work. In the past the benefit rules have been an obstacle to allowing them to study. We intend to introduce an education allowance that will enable 30,000 long-term unemployed people to study on full-time vocational courses. Thirdly, it is widely agreed that, in every community, there are plenty of jobs needing to be done, and plenty of people who want to do them.

    My right hon. Friend the Prime Minister has recently indicated the importance of offering more unemployed people the opportunity to undertake some form of useful work or other activity. We are therefore launching a new community action programme to allow 60,000 of the long-term unemployed to do part-time work in their local communities, organised by voluntary groups. Those involved will be paid an allowance based on their previous benefit rates plus a small premium. The scheme will start as soon as possible. Those who have been unemployed for a long time tend to lose touch with the job market, and the problem is that they find it increasingly difficult to find an employer who wants to take them on. We propose to test in pilot schemes the feasibility and effectiveness of a new approach under which, rather than pay benefit to the long-term unemployed to do nothing, payments will instead be made, for a limited period, to an employer who recruits them. Employers taking on people who have been out of work for at least two years will receive a one-year subsidy based on the benefits which would otherwise have been paid. That subsidy will taper off as the period of employment progresses. Pilot schemes using different approaches will be launched this summer in four parts of the country. If they can be made to work, I believe that they could be useful, and would lead to permanent jobs for the long-term unemployed as the economy recovers.

    Finally, the establishment of training and enterprise councils throughout the country has successfully brought local business people into the design and running of training and enterprise programmes for the unemployed. I now propose to offer the TECs a new £25 million fund. My right hon. Friend the Secretary of State for Employment will invite TECs to submit competing applications to develop the most imaginative schemes to help the long-term unemployed and stimulate job creation. The degree of local business involvement will be an important criterion against which each application will be judged. These measures will cost £230 million, and will give special help to those who need it most, including disabled people. The disabled will be given priority in the vocational education initiative and in community action, helping us to build on our achievements in helping the disabled back to work. In the first nine months of 1992-93 the Employment Service found jobs for 31,000 unemployed disabled people, 25 per cent. more than in the same period of 1991-92. I am sure the House will welcome this.

    PRIVATE FINANCE

    Mr. Deputy Speaker, in my autumn statement I announced significant changes to the rules for the private financing of major infrastructure projects. This initiative has met with an enthusiastic response, and today I have a number of specific developments to announce.

    First, hon. Members will recall that legislation has already passed through both Houses permitting the construction of a new fast rail link that will cut the journey time between Heathrow and Paddington. I can now announce that BAA plc and British Rail have agreed to proceed with this project, the Heathrow Express. This is a major new joint venture, involving private sector investment of nearly £300 million. As well as providing a substantial boost to the construction industry, this project will significantly enhance the transport infrastructure of the nation’s capital.

    Secondly, there is Crossrail, a public sector project first proposed in 1989 to reduce congestion in central London. The Government remain committed to securing for London the benefits that Crossrail will bring, but we now believe it would be preferable to take this project forward as a joint venture with the private sector. The present proposals for Crossrail will therefore be re-examined. Our aims will be to maximise the participation and financial involvement of the private sector and to secure the best value for money for the taxpayer.

    One of the most ambitious civil engineering projects ever conceived has been made possible by private finance. I refer, of course, to the channel tunnel. This will provide a fast link between Britain and Paris, cutting journey times dramatically, but those times could be cut still further by reducing the time taken for journeys within Britain itself. For that to happen, a new rail link will be required – from London down to the channel tunnel itself. This will be a massive undertaking – one of the largest infrastructure projects in this country since the war – but, after careful consideration, the Government have decided to make a firm commitment to the project. So I can announce today that the channel tunnel rail link will go ahead.

    My right hon. Friend the Secretary of State for Transport will be inviting the private sector to come forward with bids so that the project can be taken forward as a joint venture as soon as possible. We will discuss timing with the private sector. We hope to be able to introduce a Bill as soon as the legislative timetable permits, and to see the new line fully completed around the end of the decade. The Government will make their own financial contribution, recognising the benefits that will accrue to domestic travellers from the new link. Full responsibility for the project, its management and completion will be transferred to the private sector.

    Subject to the results of detailed work by British Rail over the next few months, the London terminus of the new link will be located at St. Pancras. This will provide a new lease of life for this magnificent Victorian building, which will become the gateway to London for international passengers. My right hon. Friend the Secretary of State for Transport will make a statement on the details of the route shortly.

    Over the years ahead, my private finance initiatives will play an ever increasing role in the modernisation of Britain’s infrastructure. The projects I have announced today represent a considerable step forward. They will not only improve the country’s transport network; they will also create jobs. I am sure they will be warmly welcomed by the country and by the House.

    INCOME TAX

    I turn finally to income tax. My priority in this Budget has been to set out a clear strategy for reducing public sector borrowing over the medium term. I am therefore unable this year to reduce the basic rate of income tax. I also propose to leave the higher rate of tax unchanged at 40 per cent.

    However, in my Budget last year, I opened up an alternative route for moving over time towards our ultimate objective – a 20p basic rate of income tax for everyone. The new lower rate band I announced last year at a stroke took 4 million taxpayers on low incomes down to the 20 per cent. rate, cutting their marginal rate of tax by a fifth. In this Budget, I have taken my reform a step further. The Government’s 20p pledge not only involves a reduction in marginal tax rates for 19 million basic rate taxpayers, but, also, when the basic rate is eventually brought down to 20p, tax reliefs for basic rate taxpayers will, of course, be worth 20p in the pound, too. In this Budget, I have brought forward that change by restricting three specific tax reliefs to 20 per cent., not just for basic rate taxpayers, but for all taxpayers.

    First, I have reduced the tax credit on dividends to 20 per cent., to cut the rate of advance corporation tax which companies pay on dividends. Secondly, I will be reducing the rate of relief on mortgage interest payments to 20 per cent., to cut the subsidy on borrowing and to pay for a reduction in the tax on housing transactions. Thirdly, I will be restricting the tax relief for married couples to 20 per cent., to make it worth the same for all taxpayers.

    All these measures are sensible reforms in their own right. When revenue has to be raised, it is far better to do this by broadening the tax base than by increasing tax rates; but, in addition, the restrictions I have introduced will also allow me to make further progress in getting income tax rates down.

    I therefore propose to increase the width of the new 20p band in 1993-94 by £500 to £2,500. That will help all taxpayers currently paying tax at 25 per cent., and it means that, in the coming year, nearly 5 million taxpayers will face a marginal rate of income tax of only 20 per cent. Already, for about a fifth of all taxpayers, I will have delivered on our promise of a 20p rate in the first Budget of the Parliament, and I will have done so by a sensible and fair reform of the tax system. But I can also go further. The measures I have announced today will also allow me to make a further extension of the 20p rate in 1994-95. From 1 April next year, I propose that the 20p band should cover the first £3,000 of taxable income, £500 more than in the year ahead ; and we shall continue to widen the 20p band in the years to come – year by year, we will make our progress towards our objective : a 20p basic rate of tax for everyone.

    CONCLUSION

    In the first Budget of this Parliament, I have set out the Government’s economic strategy. I have cut the tax burden on business; and given help for small businesses, exports and the unemployed. I have demonstrated clearly how we will bring Government borrowing down in the years ahead. That is the only way to sustain growth and build a strong and and sound economy in the 1990s.

    This is a Budget for sustained recovery and a Budget for jobs – not just for this year and next year, but right through this decade. I commend it to the House.

  • Mr Major’s Article on Industry and Manufacturing – 12 March 1993

    Below is the text of Mr Major’s article on industry and manufacturing, published on Friday 12th March 1993.

    PRIME MINISTER:

    British manufacturing is vital for our economic future. And British industry is performing far better than most people realise. Time after time, businessmen tell me of international successes that somehow don’t make the headlines. Who is providing the steel to build the new rail terminal at Charles de Gaulle airport in Paris? A British company in Bolton. Which country is exporting Nissan cars to Japan? Britain is. The statistics tell the same story. Manufacturing productivity is up in Britain; so is manufacturing investment; so are manufactured exports – up 6 per cent, in the last quarter of 1992, compared with a year ago.

    Of course, we have a long way to go. There will be setbacks along the way; and – sadly – the last element to turn up in any recovery tends to be employment. But the Institute of Directors’ survey for February showed that business leaders are becoming much more optimistic about their companies’ prospects. This message is reinforced by the latest CBI survey, reporting the biggest rise in car sales for nearly five years, more confidence among retailers and a willingness to increase investment. More houses are being built; and the House Builders’ Federation has just reported a 20 per cent rise in sales. All these figures were released in recent days, but you could be forgiven for missing them in the prevailing gloom.

    I want to see every sector of the economy enjoy recovery. We have a strong service sector. The City of London in particular is a huge generator of export earnings for Britain. Before the 1980s, there was a tendency to undervalue such contributions. Even the name we gave to them – “invisible earnings” – suggested there was somehow something unreal about them.

    In the 1980s, we came to realise services were a big plus to the British economy. But making things matters, too. To earn Britain’s way in the world, we also need a strong, competitive and productive manufacturing base.

    Private enterprise – not government – will create that. Unlike our political opponents, I do not want to go back to a failed past of subsidies and state control. They want to rob successful companies through extra taxes to prop up the weak. I want to get government off business’s back; to set business free to succeed. So let me explain what I believe Government can do to help British industry.

    Its first responsibility is to make sure the fundamentals are right. By that I mean – above all else – low inflation. Our inflation rate has been below the average for the European Community for 18 months now. At 1.7 per cent in January, the headline figure is the lowest for a generation. Low inflation helps industry control its costs and compete abroad. We have the lowest interest rates in the European Community. We have a highly competitive exchange rate. And in our factories costs are rising more slowly in Britain than in Japan or Germany – a sure recipe for export success, and for securing a bigger share of our home market, too.

    With the labour market reforms set under way by Margaret Thatcher, and pursued again in this Parliament, we won our way to industrial peace just in time to take advantage of the huge opportunity presented by the European Single Market. Manufacturing investment has flooded into Britain. Companies like Nissan, Toyota and Sony have brought new jobs and confidence to British manufacturing.

    With the unique version of the Treaty we secured at Maastricht, we have achieved the best of both worlds for inward investors: a Britain inside Europe and outside the Social Chapter. If others want to add costs that make their industry uncompetitive, that’s their business – but perhaps not for long. Once the Maastricht Treaty is ratified, Britain will be the best launch pad for manufacturing success in Europe.

    Our European policy is the second element in our strategy to create the right conditions for British business. It leads to the third, which we are pursuing in Brussels, Whitehall – yes, and town hall too: too roll back regulation.

    We have made a start, at Maastricht, in putting the brakes on Brussels intervention. But too much regulation is home-grown: dreamt up with too little thought, enforced with too much zeal. We have to look again at factory regulations that define mild washing up liquids as hazardous substances. And we have to look more closely at the way European directives grow another layer of regulation when they pass through the hands of our own bureaucracy. The rule too often seems to be: two bits of red tape are better than one. Let me offer you a better rule: red tape costs jobs. That is why, as part of his Deregulation Initiative, I have asked Michael Heseltine to take an especially close look at the way we implement European rules.

    Deregulation doesn’t just help our big, established companies. It clears the obstacles in the way of the new ones that will create the jobs of the future – the jobs that will replace those lost as older firms become more efficient. That means encouraging entrepreneurs, and nurturing innovative ideas.

    The fourth strand in our strategy is to build new bridges between British research and its industrial application. That is why I have appointed William Waldegrave to take responsibility for science, research and development at Cabinet level; and he will be publishing a White Paper shortly on the links between research and wealth creation.

    The fifth – and perhaps most important – strand lies in our policies for education, maths, science and technology are now locked into the curriculum for every child. We are expanding the numbers going on to further education, by nearly a quarter of a million young people over the next three years.

    But we cannot rest content with raw numbers. I have spoken before of the need to create, through vocational qualifications, another ladder of opportunity for young people. John Patten and Gillian Shephard are looking across the board at education and training for 16-19 year olds: to ensure that in quality and relevance we equip young people with the skills for success in the twenty-first century.

    This will help to break down some of the ingrained, senseless prejudices that have directed too many able young people away from industry, commerce and manufacturing. We need to build up craft skills and practical training, as well as enterprise and business initiative.

    Harold Macmillan once said: “Exporting is fun”. Maybe; but in the competitive world of the 1990s, it is also very hard work. Government can’t export for business; but it can help to open doors. And that is the sixth strand in my strategy to help build up our manufacturing base.

    In Europe, we have created a Single market of 340 million people – the biggest in the world. But that is not enough. The world is our market; and we will continue to work hard for the successful completion of the world trade talks, because this will bring down tariffs on British goods, protect British inventions and open new markets for British services too.

    In the Autumn Statement, Norman Lamont helped by providing extra export credits. And when I went to India recently, I took a group of top British businessmen with me – a practice I hope to repeat on other visits. Together, on the same trip, we secured some key orders in the Middle East: Challenger Tanks in the afternoon in Oman; and Tornados in the evening in Riyadh.

    The Government will do all it can to help industry fight its battles for Britain. But I know where the real credit lies behind every success: with the businessmen, the engineers, workers at every level in the companies concerned. Together, Government and industry can make a reality of my ambition – to see more of what matters made in Britain.

  • PMQT – 11 March 1993

    Below is the text of Prime Minister’s Question Time from 11th March 1993.

    PRIME MINISTER:

     

    Engagements

    Q1. Mr. Mudie : To ask the Prime Minister if he will list his official engagements for Thursday 11 March.

    The Prime Minister (Mr. John Major) : This morning I presided at a meeting of the Cabinet and had meetings with ministerial colleagues and others. In addition to my duties in the House, I shall be having further meetings later today.

    Mr. Mudie : Can the Prime Minister tell the House how today’s distressing news that 5,000 Rolls-Royce jobs are to be lost and how the fact that since he became Prime Minister 750,000 manufacturing jobs have been destroyed fit in with any supposed strategy for manufacturing industry? And can he tell the country when it can expect this industrial carnage to end?

    The Prime Minister : Let me respond first to the hon. Gentleman’s point about Rolls-Royce and the distressing announcement this morning of job losses at Derby and elsewhere. The hon. Gentleman will know that Rolls- Royce has two main international competitors, Boeing and Pratt and Whitney. He will know also that Pratt and Whitney has plans to cut 10,000 jobs over the next year or so and that Boeing will cut a total of 28,000 jobs. In both cases, the job losses have the same cause as those at Rolls-Royce–the state of the international market and of international demand. As to what is being done, I hope that the hon. Gentleman has not forgotten the long list of things that I set out the other day. If he wishes me to do so, I shall willingly repeat it.

    Sir Terence Higgins : Will my right hon. Friend take time today to have discussions with the leader of the Labour party about the deplorable behaviour of the official Opposition last night, which was clearly encouraged by the Front Bench? Is it not pathetic that the Opposition have to resort to such tactics, instead of using effective debate, as these inevitably bring the House into disrepute?

    The Prime Minister : Any discussions are for my right hon. Friend the Chief Whip and his Opposition counterpart. I condemn what apparently happened last night, although I was not in the House. I have to ask why the Leader of the Opposition did not stop it and, more relevantly, why his deputy Chief Whip seemed to be organising it.

    Mr. John Smith rose–

    Hon. Members : Answer.

    Madam Speaker : Order.

    Mr. Smith : If manufacturing matters to the Prime Minister– [Interruption.]

    Madam Speaker : Order. The House must settle down and listen to what hon. Members have to say and to the responses.

    Mr. John Smith : If manufacturing matters to the Prime Minister, as he would have us believe, what action does he intend to take to prevent the loss of 5,000 jobs at Rolls-Royce?

    The Prime Minister : The right hon. and learned Gentleman still lives in a world in which the Government do everything and everything is the Government’s fault. That may be his vision of the future, but for most people it is their vision of the past, and a past that was not successful. He should remember, for example, the national enterprise board. It picked losers, not winners, it cost millions, and many of its investments, taking the sort of action that the right hon. and learned Gentleman would advocate, subsequently went into liquidation or receivership.

    Mr. John Smith : Does the Prime Minister not remember that an Administration headed by one of his predecessors took Rolls-Royce into public ownership, otherwise it would not be there today? Does he recollect that only last week he told us in his The Independent interview that we have undervalued engineering skills? What on earth is the point of his talking about the value of engineering skills when, as Prime Minister, he does nothing about the loss of 5,000 skilled engineering jobs?

    The Prime Minister : The right hon. and learned Gentleman may also recall that we put many industries into privatisation, without which they would not be in profit and creating jobs today. The way to create engineering and other jobs is to make sure that we have a growing economy and the right sort of international competitiveness. We have intervened to get the single market running and we have improved export credit guarantees. The right hon. and learned Gentleman has clearly forgotten all the matters that were contained within the autumn Budget. It is not nannying intervention of the sort that the right hon. and learned Gentleman advocates that this country needs ; it is the sort of supply-side measures that we are taking.

    Mr. John Smith : Does the Prime Minister not understand that this litany of self-serving excuses gives no comfort to the 5,000 people who are to lose their jobs, let alone the 10,000 Rolls-Royce workers who have lost their jobs in the recent past? Does he not understand that in France today the Government are giving temporary help to the aerospace industry precisely to keep skilled engineering groups together? Why does not his Government back British industry the way other Governments back their industry?

    The Prime Minister : If France is so successful, why are there 3 million unemployed there? Here is the right hon. and learned Gentleman again with his perennial gloom. He might welcome some of the new jobs announced recently : Digitals move for 1,100 more jobs at Ayr ; the prospect of 3,000 more jobs in Staffordshire ; the new jobs won yesterday in Cambridge ; the 6,000 jobs to be created in Manchester. Why do these always bypass the right hon. and learned Gentleman on Tuesday and Thursday afternoons?

     

    Q2. Mr. Bates : To ask the Prime Minister if he will list his official engagements for Thursday 11 March.

    The Prime Minister : I refer my hon. Friend to the reply that I gave some moments ago.

    Mr. Bates : Does my right hon. Friend agree with me that it is vital to the success of the security services that they are kept free from political interference in operational matters? If so, does he agree that the remarks made yesterday by a Labour spokesman on Northern Ireland were a total disgrace and a slur upon the courageous and dedicated way in which the security services carry out their duties on behalf of all of us?

    The Prime Minister : I agree with my hon. Friend. Those remarks were absurd. They were a slur on officers whose achievements must have saved many people from death or injury. The Opposition would have done better, rather than attacking the police, to join us last night in attacking terrorism. The Leader of the Opposition might tell us whether he stands by what his hon. Friend said or by the police in what they have to do. He cannot do both.

    Mr. Ashdown : On this bleak day for job losses, will the Prime Minister reflect on the fact that, while there are 3 million unemployed in Britain, there are also 3 million small businesses in Britain, and a real, extra boost for small businesses could provide a real, extra boost for jobs? Will he cut the uniform business rate and penalise the late payment of bills, or is he simply content to continue to let small businesses go to the wall, as at present, at the rate of 250 a day?

    The Prime Minister : The right hon. Gentleman has absolutely no idea that more than 400,000 new small businesses were formed last year. If he really wants to help create small businesses in future, perhaps he will stop joining others in delaying the European Communities (Amendment) Bill and putting at risk the inward investment that has totalled £100 billion in the past five years. If we have to choose between the right hon. Gentleman’s principles and his action, we had better be careful not to decide on his action until he has done it.

    Mr. Gale : My right hon. Friend will have struck a chord with most of our constituents when he recently drew attention to the corrosive effects of violence on television. Will he now go a stage further and direct the Cabinet’s attention to the further effects of paedophilia created and transmitted by computer which, at present, is not covered by the law? Will he ensure that controls are included in the next criminal justice Bill?

    The Prime Minister : I understand that that is covered by the law. But notwithstanding that, my right hon. and learned Friend the Home Secretary is well seized of the difficulties raised by my hon. Friend and is examining them.

     

    Q3. Mr. Lewis : To ask the Prime Minister if he will list his official engagements for Thursday 11 March.

    The Prime Minister : I refer the hon. Member to the answer I gave some moments ago.

    Mr. Lewis : Will the right hon. Gentleman concede that it is now time to release the capital receipts, long held by local authorities, in order to bring skilled building workers back into work to provide decent homes for the homeless and for elderly people?

    The Prime Minister : As the hon. Gentleman may recall, my right hon. Friend the Chancellor of the Exchequer released many of them in the autumn statement and those that have been released are currently being underspent by local authorities.

    Mr. Marlow : We are told that we are winning the arguments in Europe. Does that mean that Mr. Delors, the Commission, Benelux, Chancellor Kohl and President Mitterrand are now enthusiastic decentralisers? Does that mean that the principle of subsidiarity will allow the House, and this House alone, to make a decision on whether we have a 48-hour week?

    The Prime Minister : As the hon. Gentleman knows, article 3b specifically puts subsidiarity into the EC treaty and changes the situation in the future about that matter. He himself should vote for that instead of obstructing it.

    Mr. Bryan Davies : Will the Prime Minister explain to the House why he has tabled a motion again today to allow debate to continue on the European Communities (Amendment) Bill, a motion which has been tabled many times in recent weeks and never moved? Has he made a deal with the Liberals and nationalists this evening, or will he be running away from his second defeat this week?

    The Prime Minister : The hon. Gentleman clearly is as keen as I am to see progress on the Bill.

    Dr. Spink : Will my right hon. Friend join me in welcoming the latest excellent figures for new house sales which were 20 per cent. up in the first eight weeks of this year? The Opposition concentrate on talking Britain down, but is that not good news for Britain?

    The Prime Minister : My hon. Friend makes his point with great clarity. He is quite right about housing. He will know that mortgage rates for first-time buyers are lower today than they have been since 1956, and that is before many families yet feel the benefit of the interest rate cuts since the autumn. Many people are clearly deciding that now is a good time to buy, and I welcome that.

     

    Q4. Mr. Matthew Taylor : To ask the Prime Minister if he will list his official engagements for Thursday 11 March.

    The Prime Minister : I refer the hon. Member to the answer I gave some moments ago.

    Mr. Taylor : Is the Prime Minister aware that prices in the South West Water region have risen 77 per cent. since 1989, faster than in the rest of the country, and are due to double over the next few years, faster than in the rest of the country? When the right hon. Gentleman recently visited Cornwall and Devon, he told the Western Morning News on 5 February that he was looking at action to help people with those problems. He told me last week on 4 March that he defended the price increases that we have seen. Which is right–what he said here or what he said in the west country?

    The Prime Minister : I told the hon. Gentleman last week that the prices were broadly the same as those of Anglian Water, and they are. I can tell him again this afternoon that I am examining the matter with my right hon. and learned Friend the Secretary of State for the Environment.

     

    Q5. Mr. David Atkinson : To ask the Prime Minister if he will list his official engagements for Thursday 11 March.

    The Prime Minister : I refer my hon. Friend to the answer I gave some moments ago.

    Mr. Atkinson : Is my right hon. Friend aware of a joint media campaign in my area called Action Desk, involving the Bournemouth Evening Echo, the Dorset chamber of commerce and Two Counties Radio, which is designed to beat the recession in our area by encouraging the spread of good news about our economic recovery and encouraging a positive approach by business and individuals?

    Will my right hon. Friend commend this initiative and recommend it to other areas and above all, will he recommend it to the national media in order to counter the doom and gloom coming out of the Opposition?

    The Prime Minister : I am grateful to my hon. Friend for his remarks. It certainly is time that we started talking more positively about our good successes and about the opportunities we now have with low inflation and low interest rates.

    Mr. Lewis : What about jobs?

    The Prime Minister : And, in answer to that seated intervention, about the new jobs, many of which I listed a few moments ago. Exports are up; manufacturing productivity is up ; car sales are up ; house sales are up, and one day Opposition Members opposite may begin to acknowledge that.

  • Mr Major’s Speech to 1993 Conservative Central Council – 6 March 1993

    Below is the text of Mr Major’s speech to the 1993 Conservative Central Council meeting, held in Harrogate on 6th March 1993.

    PRIME MINISTER:

    Yesterday this Conference paid its tribute to Nick Ridley.

    He was an original. A one-off. And whatever he did he faced the world square on and never once flinched.

    The Commons was the poorer when he left it. And the Party is the poorer for his loss.

    Mr Chairman, in the last two years events have thrown at this country everything they could.

    Abroad – we’ve had the Gulf War, the Yugoslav war, a world recession that gets worse abroad as it gets better here. There have been plans from Europe that we’ve had to water down or reject. At home we have had our share of world recession, a difficult general election, and conflicts on Europe that strike deep at the instincts of many in our Party.

    Mr Chairman, on these issues it’s right that we should have vigorous debate. When people feel strongly they should express their views. Argue their case. Fight their corner.

    But once we have taken our decisions on how to proceed, then I believe we should all support those decisions. The British people put us back in power to carry on with the full range of our policies. They gave us five years to beat inflation, create growth and jobs, improve choice, fight crime and maintain the unity of the United Kingdom.

    Mr Chairman, that is what I want to see this Party and this Government do. And I want to see us do it now – and I want to see us do it together. It is in difficult times like these that the Conservative Party most needs to be united – and to stay united.

    At the last election we had one of the biggest leads in votes ever recorded. But only a 21 seat majority – now, sadly, for the moment only 20. So these are difficult days. We no longer have a cushion of 100 seats, and those who want us to be successful know what that means. Let me say it bluntly – disunity is a luxury we cannot afford.

    Mr Chairman, none of us should forget the scale of the responsibility placed upon us. On April 9th last year, 14 1/4 million people turned to us – people of all ages, all walks of life, from all corners of Britain. Every one different. Each with their own personal hopes and fears. They all trusted us with the hard job that lay ahead.

    We must live up to that trust. That does not mean responding to every short-term whim. It does not mean avoiding difficult decisions. It does mean holding fast to the long-term course that will bring us prosperity, growth, and jobs, even in the teeth of short-term difficulties.

    Those short-term problems have often caught the headlines. But they have not prevented progress towards our long-term objectives. So let me put it all in perspective. Let me remind you of what we have done in the last eleven months – smack in the middle of a world recession.

    I’ll start with the Health Service. Remember what Labour said about health. They said if we won it would be the end of the Health Service. One year on, we have more National Health Service Trust hospitals and more GP fundholders providing better care to more patients than ever before.

    The end of the Health Service? One year on, it’s not the NHS that’s falling apart; it is Labour’s scares that have fallen apart. Remember that truly disgraceful election broadcast? That was the one in which Robin Cook predicted the end of the NHS. Well today the Health Service is moving on – and Robin Cook has been moved on. Out on his Jennifer’s ear – and deservedly so.

    As hospitals have become self-governing – running their own affairs – so have schools. Over 500 have chosen the new freedom to become Grant Maintained. They have moved out of the hands of local authorities and into the care of governors and parents.

    And we’re promoting subject teaching in primary schools – so much more important than vague topic work and generalised themes. So it’s maths, geography, science and history lessons. And putting emphasis right from the start on standard English and on the 3Rs.

    That, Mr Chairman, is the right Tory agenda – and we have put it in place in the first year. We’re supporting good teachers and putting the spotlight on the bad. Publishing the exam results of every school.

    Mr Chairman, those results should never have been hidden in the first place. Now we’ve brought them into the open. And they will never be hidden again.

    And, one more thing, Mr Chairman. When we talk of publishing the facts, I must say this to those teacher unions that are threatening to boycott tests – you are wrong. Life is a test. You do pupils no good by hiding them from reality.

    To teach children what they need to know, we must find out what they don’t know. Tests are an essential part of good schooling. Tests are here to stay. And I hope the teacher union leaders get that message loud and clear from this Conference. And, before I leave education, here’s something for the history books.

    By 1996 nearly a quarter of a million extra students will be in college – the biggest expansion ever. And when they are there they won’t have to join the activities of the National Union of Students – because we are ending the NUS closed shop.

    That’s the right Tory agenda – and all in the first year. And it is not only the NUS monopoly that is going – remember Neddy, that hangover from the 1960s, that corporatist relic?

    Well, that’s gone, too. Unlamented. We have scrapped it. And not before time. We are giving new freedoms to members of Trades Unions. And new powers for every individual to act in court to stop wildcat strikes. All part of the right Tory agenda – and in hand in the first year.

    And the Tory programme to promote ownership is rolling forward, too. We have introduced a new incentive for personal pensions. One that will help millions enjoy their retirement in comfort and security.

    In housing, we are back on course for the home-owning democracy. We have a new scheme to help tenants become homeowners by treating rents as mortgage payments. We’re giving leaseholders the right to buy their freeholds. And later this spring Michael Howard and his team will launch a new campaign to spread the Right to Buy.

    That’s the right Tory agenda – this Government’s agenda. Never mind the news – that’s the reality.

    All that sounds like a full menu for a full Parliament. Yet all I have done is to give you a selection of starters. Your starters for 5, 10, 20 years, years in which we will indeed – build a stronger and better Britain.

    Fine words, you say. But fine words butter no parsnips. What about jobs? I know that the main thing so many people seek above all is a worthwhile job. That is why, from April, we will have in place the most comprehensive package to help people back to work that we have ever seen in Britain: youth training, Training for Work, Restart, Job interview guarantees, business start up schemes. Schemes that will help up to 1 1/2 million of our fellow citizens keep in touch with the world of work.

    And those schemes all have one thing in common. Every one was opposed by the Labour Party. How can they defend that? They call for help for unemployed people and then vote against it.

    We want our training schemes to lead to full-time jobs. It’s permanent jobs that people want. The only way to get people permanently back to work is to help the economy grow. To improve our skills. To promote our exports. To widen our manufacturing base. And to make it worthwhile to start new companies.

    That’s the road back to jobs. Permanent jobs. Jobs with prospects. And that’s the road we are travelling. The outlook for our economy is good. Interest rates down. Inflation down. Strikes down. Manufacturing productivity up. Retail sales up. Exports up. That’s what’s happening. And that’s the way back to work for Britain. The only way.

    The prospects for the Nineties are good. It’s been slow, frustratingly slow. But we are on our way. And don’t just take it from me. Over the next two years Britain is forecast to have the highest rate of growth in Western Europe.

    If we have confidence in ourselves others will have confidence in us. And when confidence grows jobs must follow. Some people still haven’t quite grasped the progress we’ve made.

    So let me put this way. 1954 – that’s 39 years ago, the year Roger Bannister ran the 4 minute mile – that was the last time the January inflation rate fell to 1.7%.

    And 1956 – 37 years ago, the year Jim Laker took 10 Australian wickets for 88 at the Oval and, no, drat it, I wasn’t there! – that was the last time mortgage rates for first time buyers were as low as they are, now.

    So, for goodness sake, let’s not belittle what we’ve done. Let’s not run our prospects down. Let’s leave that to the Labour Party. Day after day they attack us for ‘talking the economy up’. What a crime. What a dreadful thing to do. Trying to instill confidence.

    Well, it’s about time we got after them for talking the economy down. When did you last hear John Smith say a good word about Britain?

    And another thing, is there anyone here who’s ever seen Gordon Brown smile? No one. I thought not. Is there anyone anywhere who’s ever seen Gordon Brown smile? Is there anyone who wants to see Gordon Brown smile? And by the way, has anyone yet seen Gerald?

    Mr Chairman, there’s something else that is absolutely crucial to business confidence – the certainty that Britain will help determine policy in Europe, and not be dragged along behind a policy made by others. We should remember what we have achieved for Britain in Europe this year. We have every right to be proud of it.

    We have completed the biggest free trade area the world has ever seen. We have reformed the Common Agricultural Policy after years of squabbling. We have put a ceiling on EC spending right until the end of the century. We have opened up the Community to new members. And we are changing the course of Europe – away from centralism and returning powers to member states.

    That is the classic British agenda for Europe. It is not the federalist agenda. On crucial issues we are making sure the final say sits where it should be – right here in Britain. So let’s not fear the future in Europe. Let’s go out and shape the future of Europe. Shape a market of 340 million, where businesses can compete, export and invest wherever they like – where future generations will have opportunities we never dreamed of to work and to travel.

    And we must shape a wider Europe. That’s what we decided at Edinburgh – to bring in new member nations, first from Scandinavia and later from central Europe. And we won agreement – against all expectations – that our old friends, the Poles, the Hungarians, and the Czechs would eventually join us.

    Do you remember how as the Iron Curtain fell we welcomed them to our Party Conference two years ago? Well, we are still working on their side. And now – in time – we look forward to them joining the European Community, too – as a result of our influence.

    The present Community is but a fragment of Europe. Our long- term vision is a Europe without trade barriers, a vast continent of free democracies, from the Urals to the Atlantic and from the Baltic to the Mediterranean.

    A Europe full of trade and free of war. We won’t achieve that speedily – but isn’t that what we should work for for future generations? So let me tell you what’s at stake. I know the concerns and passions aroused by arguments over our future in Europe. I see them in the House of Commons whenever we debate the Treaty of Maastricht.

    I understand the instincts and the patriotic feelings that motivate many in our Party who have doubts about the Treaty. I understand, and share, their pride in Britain’s great past. But we have to build a great future. So let me tell you, clearly and frankly, that I believe the fears of those who resist our European policy are mistaken.

    Mistaken because they underestimate what we have achieved in our negotiations in Europe.

    Mistaken because they have failed to focus on our wider vision of Europe.

    Mistaken because if we step aside from what we have agreed there would be an enormous economic price to pay.

    There would be an immediate blow to economic recovery. International investors, who have poured money into Britain, £100,000 million in the last five years, would turn their backs on us.

    Those investors want access to the European market. And if we sidelined ourselves they would no longer be certain that that would be the case. That is why the price of standing aside from the agreement we freely made would be heavy. As Douglas Hurd told you yesterday, it would be £50 billion off our national production over the next five years. I wonder how many jobs that would cost?

    And then there is that Social Chapter – another threat to jobs. Surely no-one in this Party – for any reason – would give houseroom to that. Where we want to be is on the inside track to prosperity, and outside the grasp of bureaucracy and socialism. Inside Europe and outside the Social Chapter.

    I know our Party. I cannot believe that anyone, when they have considered all the facts, could want to let slip those opportunities before us.

    Let me tell you what I believe. To do so would be to take a conscious decision to become irrelevant in Europe. That would be a decision not only for our time, but for our children’s also. It would be the surest possible way to impoverish our country and damage our standing in the world – almost beyond repair.

    So let us put aside the fears and hesitations that hold our Party back. We may have our differences. But they are as nothing to the things that unite us.

    So let us take the chance we have today – to mould Europe in our own image. Don’t let us shirk that challenge. In a thousand years of history we never have. And we must not now.

    Mr Chairman, I want British industry to win not just in Europe, but around the world. I want a different attitude to industry at every level in this country. I want people to see that making things matters. I want more that matters to be made in Britain.

    Our exporters need to know that the Government supports them. And where we can help to open doors and free up markets we will always do so. That’s why in the Autumn Statement we committed £700 million extra to help British companies win new orders. And when our businessmen travel abroad I expect all our embassies to work with them. Cultural exchanges are fine – but I want export deals as well.

    Mr Chairman, exports are booming. Leaving the factories faster than journalists leaving the Daily Mirror. Mirror, mirror, on the wall – are there any journalists left there at all? In the battle for exports I want Government out there in the field foursquare behind our businesses.

    A few weeks ago, I spent the morning in India, lunched in the desert in Oman, and had dinner in a palace in Saudi Arabia. And that day, as a result of months of effort by business and Government working together, we won orders for British goods worth billions and safeguarded thousands of jobs. These days there are no easy exports. The world is too competitive for that. More competitive than ever before.

    Those countries that once were captive markets are now manufacturing themselves or challenging us as rivals. The countries on the Pacific Rim have developed massive industries of their own. China is set to become a huge manufacturing power in the century to come. Against that background, we need to help British companies carve out a bigger place for Britain. But before we export, we have to manufacture. And we have to manufacture quality.

    That’s why we need to build up craft skills and practical training in every part of Britain. End once and for all that senseless prejudice against the best of our brains going into commerce and industry. That prejudice is damaging – and we can no longer accept it.

    Mr Chairman, by helping business I don’t mean artificial subsidies to industries. I mean setting the right economic structure for business. I mean pursuing the right policies for business. I mean having the right curriculum in our schools. I mean reforming vocational training. I mean lifting burdens from the back of businesses.

    Of course, we need some regulations. But there are people in Brussels, in local councils and, yes, in Whitehall who seem to have a mania to hold back the future in a mesh of pettifogging detail.

    So I have told every Department of State: scrap unnecessary regulation. It’s a simple message. Red tape means lost jobs. And that doesn’t only apply to large companies like ICI. It applies to the smallest businesses and local services too.

    You know what I mean. Health and safety enthusiasts bent on eliminating every conceivable – and inconceivable – risk. Local councils badgering good nursery schools when they’d be better employed helping them.

    The food safety people who tell us that what we’ve been eating for generations will certainly kill us if we don’t stop instantly. Well we’ll certainly die a good deal sooner if we do stop eating instantly. Mr Chairman, it’s all gone way over the top. Well, I’d rather it went in the bin.

    Isn’t it barmy? Would Drake have been in time to meet the Armada, and would Nelson have made Trafalgar, if an inspector had been on hand to say ‘Hold everything – we haven’t checked the ship’s biscuits!”

    Mr Chairman, I said earlier that one of the reasons we were elected was to keep up the fight against crime. Vandalism; burglary; car theft. Crimes against property; crimes of violence; crimes involving drugs.

    The fear of crime lies deep in the instincts of law-abiding people. They find it hard to understand how others move outside the law, careless of the interests of their neighbours, preying on the property of others, even threatening their lives. I said last week that we need to understand less and to condemn a little more. That was not a simple cry for retribution.

    My point was this. Unless society sets rules and standards and enforces them, we cannot be surprised if others flout them. It’s true we mustn’t exaggerate the problem. Compared to many others in the world, Britain is still a safe country.

    But those who point to that and say ‘do nothing’ are wrong. I say to those people: even if the problem here is smaller, it’s still far too big. And every single victim of crime in this country will agree with that.

    That’s why this Government has done so much to step up crime prevention and crack down on crime. There are too many violent offences – that’s why we have increased penalties against them, especially for those thugs who go out carrying firearms.

    There is too much drug dealing – that’s why we’ve taken powers to confiscate the assets of those who sell drugs and wreck the lives of young people. There have been too many lenient sentences – that’s why we’ve given the Attorney General power to refer sentences to the Court of Appeal. And one final example – it is intolerable that some offenders charged with a crime go out and commit another while they’re on bail. I want to see those further offences reflected in the sentences they receive.

    Mr Chairman, there can be no doubt about where this Party stands in the fight against crime. And no doubt about the support we have given to those who fight it. We have given our police forces better pay and more resources than any Government in history. Now we must help them get even better results in everything they do. That is why we are now reviewing the effectiveness and the organisation of British police. I want our police to the most modern and the most efficient crime-fighting force in the world.

    Mr Chairman, the issue of crime runs deep. To catch and to punish is to deter. But we want to prevent crime too. So we must go to the roots of why some young people do what they do. Too many children have been denied the proper guidance they need in their own homes and schools. Of course, the authority of the family comes in here.

    And, yes, the churches – they may have a legitimate role to criticise, but they certainly have a role to play. And there’s another factor that goes right home in every sense. And that’s too much violence in videos and on television. What we watch is the single biggest influence on many people’s thinking.

    We’re an open society. We can’t censor television. But we can say to parents – control what your children watch. And we can say to those who make and distribute films and videos – think whether a relentless diet of violence won’t have a serious effect on the young. And we can say to television programmers – don’t just be careful when you show it, be careful what you show.

    Mr Chairman, Government alone cannot change behaviour. Concepts of right and wrong are something for all of us. But there are some things Government can do – and we will.

    First, truancy. It is stark staring obvious to me that if children are staying out of school, they are not learning what they should be and they are probably learning what they shouldn’t. For too long the facts on truancy have been hidden by a conspiracy of silence. So from this autumn in our new league tables we will make all schools publish openly their levels of attendance.

    We will find out where the problem is worst. We’ll target it and tackle it. I want our children in class. Not in trouble. And, Mr Chairman, we are taking another step. This morning Ken Clarke told you about his new proposals to set up secure centres for that hard core of youngsters who go on offending and reoffending, devoid, it seems, of any sense of fear or guilt about what they do.

    Some say we shouldn’t respond. They say it’s a relatively minor concern. I don’t agree. I say that not to respond would be a double dereliction of duty. A dereliction of duty to the public at large. And, worse, a dereliction to those children. Because we let children down if we don’t set boundaries and enforce them. For their own good and for the good of their communities we must take those persistent young offenders off the streets.

    It is a clear-cut idea, carefully worked up over these last few months, targeted directly at an obvious gap in the law. How strange – but how very revealing – that in a matter of minutes it was condemned out of hand by the new model Labour Party. When I heard that, it sounded just like the old unreconstructed Labour Party to me.

    When the test came they failed it – so let’s give them another chance. We’ll set them another test. Eleven times in all Labour have voted against the Prevention of Terrorism Act. I find that unbelievable.

    And so, I suspect, do the people in the battle against terrorism who are putting their lives on the line to protect the lives of others. Terrorism is the biggest crime of all. So for Labour let it be the biggest test of all. So no hedging, no weaving, no messing about. Let them vote with us next week – or pipe down about crime.

    Mr Chairman, I’ve reminded you of some of the things we have done in these last few months – and set out some of our plans for the future. As always this Party is a reforming Party. And as a nation we need to reform. Because we live in a rapidly changing world. Change can be frightening. We must manage it carefully. Nurture it to our national advantage. Our watchword is – to hold on to the best of the past and to create the best for the future.

    Mr Chairman, last March it was at this Central Council that we launched the General Election campaign – the election that no-one thought we could win. We took our message to every part of our country. It was the roughest, toughest campaign for years. But we won it.

    And how did we win? By sticking to our principles. By keeping our nerve. By standing together. And, above all, by staying together. United. That’s how we won – and that’s a lesson we must never forget.

  • Mr Major’s Joint Doorstep Interview with the Polish Prime Minister – 3 March 1993

    Below is the text of Mr Major’s joint doorstep interview with the Polish Prime Minister, Mrs Hanna Suchocka, held in London on Wednesday 3rd March 1993.

    PRIME MINISTER:

    Good afternoon! I have been delighted today to welcome the Prime Minister to Downing Street. It was not the first time we have met but we were able to carry our discussions a good deal further both bilaterally and in terms of Poland’s relationship with the European Community.
    We had the opportunity this morning to look at a whole range of issues. I was delighted at the outcome of the Edinburgh Summit which agreed for the first time that in due course Poland will become a full member of the European Community. We discussed this morning some of the ways towards achieving that. The Prime Minister briefed me on the economic programme and I was able to congratulate her on her success in getting an extremely difficult budget through Parliament. I was also able to confirm this morning that we will be happy to continue our assistance to Poland through the Know-How Fund and through other areas of bilateral assistance. I was also able to confirm that we were content to transfer the money that was available to the Polish Stabilisation Fund to go directly to help the Polish banking system become established and that was an agreement we made this morning. I am happy to confirm it and I hope it will be satisfactory and assist the Polish banks firstly to establish themselves securely and secondly to prepare for private ownership in the future. This was a continuing illustration of an ever-growing and closer relationship with Poland. I look forward to our trade relationship continuing to grow. It has grown quite substantially. The Prime Minister will be addressing the CBI tomorrow and I have no doubt she will have investment and the growth of trade very high on her agenda for that occasion. She is a very welcome guest and I am delighted to invite her to say a few words to you.

    MRS. SUCHOCKA:

    Thank you, ladies and gentlemen! I would like to confirm the words that have been spoken by Prime Minister Major. The most important topic that we have discussed during the meeting this morning is the change to eventually Poland’s full membership of the EC as well as bilateral relations between the United Kingdom and the Polish Republic. We have also spoken about the utilisation of the Stabilisation Fund for the restructuring of the Polish banking system. In this regard, we have received the confirmation of Prime Minister Major’s Government that these funds can be used for the purpose.

    Another topic that has been raised pertained to the access of Polish products to western markets. One of the conditions for that was the passing of the Polish budget. The budget has now been passed and we would very much count on the United Kingdom in moving Poland from a high-risk group in terms of credits for exports to a risk group that is more favourable. This would definitely be very conducive to the development of foreign investment in Poland. These talks pertaining to trade relations are very important for my country. I would also like to recall, using this opportunity, that Poland is the UK’s largest trade partner in central and eastern Europe.

    QUESTIONS AND ANSWERS

    QUESTION:

    Prime Minister, was there talk about the calendar and specific conditions that Poland should meet on its way to becoming an EC member and will you be still promoting Poland during the Copenhagen meeting in June?

    PRIME MINISTER:

    The answer to the second question is undoubtedly yes. We have made no secret for some time that we look forward to the day when Poland can become a full member of the European Community. That is why we promoted that particular course at Edinburgh, that is why we are keen to enhance the existing relationship between Poland and the Community, why we believe that there need to be a number of steps between now and full membership.

    Full membership is a few years away because there is a great deal of development necessary for the Polish economy in the interests of Poland because Poland will be subjected to the full rigour and force of competition in the Community once she becomes a member.

    The answer is clear: Yes, we want Poland to become a member; yes, we wish to assist Poland to become a member; and we hope we can take progressive steps towards that during the rest of this decade.

    QUESTION:

    [Inaudible].

    PRIME MINISTER:

    That is a matter that really needs to be discussed with the whole of the European Community and I think that is being discussed in the Community. It is not a matter that is settled yet. The problem does not especially lie in the United Kingdom, as you know.

    QUESTION:

    [In Polish, but regarding credit guarantees].

    MRS. SUCHOCKA:

    Yes, we have discussed that. A final answer can come after completion of negotiations with the London Club and only upon the conclusion of those negotiations can we have a full response to the question of medium- and long-term credits.

    QUESTION:

    Prime Minister Major, you assert that Poland is not really ready to be exposed to the rigours of the free market. On the other hand, I understand Polish diplomacy complains about not being given free access of their own goods to western markets. Isn’t this a bit contradictory?

    PRIME MINISTER:

    I don’t think it really is contradictory when you look across the whole of the economic sector but I have some sympathy with the demand that the whole of Europe should open its markets more and the Prime Minister knows that is my view.

    QUESTION:

    Prime Minister, could you expand on your view that pessimists are running down Britain, say who they are and respond to the Opposition who say it is about time you got in touch with what was going on in the real world where unemployment is [indistinct].

    PRIME MINISTER:

    I set all this out this morning in a speech. There is nothing to add to that. It is perfectly clear in the speech.

  • Mr Major’s Comments on India – 24 January 1993

    Below is the text of Mr Major’s comments on India, made in Delhi on 24th January 1993.

    QUESTION:

    [The Prime Minister was asked whether he thought the Indo-British relationship was damaged by Britain’s new role in the European Union]

    PRIME MINISTER:

    No, I do not see how they can and I certainly do not think whatever may happen within the European Community will affect them in the slightest. The relationship that exists between England, the United Kingdom and India is based on years of history, on years of common interest. They are both leading members of the Commonwealth, we have a common view on many international problems. Now I see that as a quite separate matter from our relationship with the European Community and an enduring matters. I would have suggested, and I daresay most Indian politicians would agree with me, that the present relationship between my country and India is as good today as at any time for very many years past and I see no reason why it cannot continue to stay that way.

    QUESTION:

    [The Prime Minister was asked about the future of the Commonwealth]

    PRIME MINISTER:

    Oh yes, I do not have a shred of doubt about the future of the Commonwealth. You cannot break up the sort of links that have been built up between Commonwealth countries over recent years. You cannot always point to them in tangible form in the same way that one may have a direct trading relationship with a near neighbour, but they are links of language, they are links of history, they are links of interest and they are links of common interest. So I do not have any reservations about the future of the Commonwealth, I have deliberately sought to manoeuvre Britain’s position back into the centre of the Commonwealth, I think that is where she belongs and I wish to see the Commonwealth strengthened. I very much expect in the years to come that other countries will wish to join the Commonwealth and I see no-one wishing to leave it and I think that perhaps is the clearest illustration of its continuing strength.

  • PMQT Written Answers – 11 January 1993

    Below is the text of the written answers relating to Prime Minister’s Question Time from 11th January 1993.

    PRIME MINISTER:

     

    Scottish Constitution

    Mr. Home Robertson : To ask the Prime Minister if he will list the people whom he has consulted in connection with his stocktaking exercise about Scotland’s constitutional position.

    The Prime Minister : I have had frequent opportunities to hear views from people of all political persuasions and from many backgrounds, including the church, the law, business, academic life, the arts and the media.

     

    India

    Mr. Vaz : To ask the Prime Minister which cities he intends to visit on his next visit to India.

    The Prime Minister : I shall visit Delhi as a guest of the Indian Government on republic day on 26 January. I shall also visit Bombay.

     

    UN Population Conference

    Mr. Worthington : To ask the Prime Minister (1) in which country the United Nations conference on world population will be held; and on what dates;

    (2) what proposals the Government have to involve relevant non-governmental organisations in preparation for the 1994 United Nations conference on world population;

    (3) what proposals the Government have to enable (a) relevant non-governmental organisations and (b) hon. Members to attend the 1994 United Nations conference on world population;

    (4) which Government Department is to be responsible for the 1994 United Nations population conference.

    The Prime Minister : The international conference on population and development will take place in Cairo from 5 to 13 September 1994. A decision will be taken shortly on which Government Department will also take prime responsibility for United Kingdom preparations for the conference. The Government will make proposals shortly for how hon. Members and relevant non-governmental organisations might be involved in the preparations.

     

    Committee of Permanent Representatives

    Mr. Llew Smith : To ask the Prime Minister what proposals he has to apply the decision to improve transparency in the activities of the European Council to the availability to Parliament of (a) the minutes of COREPER and (b) proposals prepared by COREPER for the Council prior to their consideration by the Council.

    The Prime Minister : There are no such plans.

     

    EC Monetary Reserve

    Sir Teddy Taylor : To ask the Prime Minister why the European Council in Edinburgh concluded that the EC’s monetary reserve should be halved between 1994 and 1995; and if he will make a statement.

    The Prime Minister : The decision was taken in the light of the recent reform of the CAP, which involves a shift away from price support towards direct payments to producers. That should make CAP expenditure progressively less susceptible to the impact of fluctuations in the dollar/ecu exchange rate.

     

    EC Agriculture Spending

    Sir Teddy Taylor : To ask the Prime Minister why the European Council concluded on 11-12 December that agriculture spending by the EC would fall between 1993 and 1994; and if he will make a statement.

    The Prime Minister : The figures to which my hon. Friend refers are those for the agricultural guidelines in constant 1992 prices. The guideline is calculated in real terms by up-rating the 1988 baseline figure by 74 per cent. of the estimated growth in real Community gross national product (GNP) between 1988 and the year in question. This calculation takes place when the Commission submits its preliminary draft budget. For 1993, therefore, the guideline was calculated in May 1992. Subsequently, the estimate of Community GNP was revised downwards. Although the decision was too late to affect the 1993 figure it will be reflected in the guideline for 1994 and thereafter. The estimate for the guideline for 1994 to 1999, used by the European Council in its future financing plans, takes account of this latest information.

     

    European Environmental Agency

    Mr. Llew Smith : To ask the Prime Minister what arrangements were agreed at the Edinburgh summit for the siting of the European Environmental Agency.

    The Prime Minister : It was agreed at the European Council that the siting of the European Environmental Agency will be decided by common agreement between member states at a forthcoming European Council, giving appropriate priority to member states who do not at present provide the sites for Community institutions.

     

    Edinburgh Summit

    Sir Teddy Taylor : To ask the Prime Minister if section A (Citizenship) on page 5 B of part B of the “Conclusions of the Presidency” in Edinburgh was designed by the Council to apply to all member states.

    The Prime Minister : The section referred to by the hon. Member was designed to meet Danish concerns but it represents an interpretation of the provisions of the Maastricht treaty relating to citizenship of the union which was agreed by all member states and is true for all of them.

    Mr. Austin Mitchell : To ask the Prime Minister what procedures he proposes for ratification of the inter-governmental agreement reached at Edinburgh on Danish qualifications to the Maastricht treaty.

    The Prime Minister : The decision does not require ratification.

    Mr. Llew Smith : To ask the Prime Minister if he will make a statement on how Her Majesty’s Government propose to implement the decision set out at paragraph 7 of the Edinburgh declaration on the conclusions of the United Kingdom presidency of the European Council to increase public investment in decision-making.

    The Prime Minister : The United Kingdom will work closely with other members of the Council, the Commission and Parliament to ensure that the measures on transparency agreed in Edinburgh are put into practice as soon as possible.

    Sir Teddy Taylor : To ask the Prime Minister why the European Council in Edinburgh concluded that there should be no increase in the provision of loan guarantees between 1993 and 1999; and if he will make a statement.

    The Prime Minister : The Edinburgh European Council endorsed the conclusions of the ECOFIN Council in October that the Community’s growing international responsibilities had led to an increase in the level and scope of lending to non-member states backed by guarantees on the EC budget, and that considerations of prudent budgetary management and financial discipline called for the establishment of a new financial framework, including an appropriate form of provisioning. The European Council accordingly agreed that a guarantee fund should be established, with a target size of 10 per cent. of the Community’s outstanding liabilities arising from external loans and guarantees ; and that this should be financed by a reserve in the financial perspective not exceeding 300 million ECU in each year from 1993 to 1999 (in 1992 prices), from which payments would be made into the fund in proportion to the value of new loans agreed. This framework will be sufficient to allow continuing significant levels of new lending to non-member states guaranteed on the EC budget.

    Mr. Spearing : To ask the Prime Minister if he will give the names of the persons signing their names as plenipotentiary of each relevant state to the inter-governmental decision relating to Denmark at the European Council meeting in Edinburgh.

    The Prime Minister : The decision relating to Denmark was not signed. This does not affect its character as an agreement binding in international law between the parties to the treaty on European union on how certain of its provisions are to be interpreted and applied.

     

    Princess of Wales

    Mr. Hoyle : To ask the Prime Minister what advice he received from sources outside the Government concerning the constitutional position of the accession to the throne of the Princess of Wales, before making his statement to the House of 9 December.

    The Prime Minister : The advice which I took on this matter is confidential.

     

    Gambling

    Mr. Peter Bottomley : To ask the Prime Minister if he will describe the process by which concerned people can contribute to and respond to Government ideas on maintaining, abolishing or changing the restrictions on stimulation of gaming or gambling.

    The Prime Minister : The processes are the same as those for any other aspect of Government policy. As necessary, the Government issue consultation documents on particular aspects of the gambling controls. In addition, interested parties may at any time make their views known direct to Government or via Members of Parliament.

  • Mr Major’s Speech in Ottawa – 18 December 1992

    Below is the text of Mr Major’s speech in Ottawa made on Friday 18th December 1992.

    PRIME MINISTER:

    Forty years ago, my family nearly emigrated to Canada. They did not at the last moment do so and so my first visit here has been somewhat delayed. I began to think as our plane moved from one airport to another and our car moved from one road to another that the delay might be even longer than I first imagined it to be but nonetheless, I am delighted to be here this evening and most grateful to you Brian and to you Mila for the very warm welcome we have received.

    We meet this evening in the Province of Quebec and we do so on the 200th anniversary of the first meeting of the parliaments of Lower Canada and Quebec City and I wondered when I uncovered that nugget of information what our forebears who fought over this place might have made of this meeting today. Were you to believe some of the accounts you occasionally read of European relations within the memberships of the Community, you might have thought that little has changed, that I was General Wolfe and Jacques Delors was General Montcalm. I must tell you that would be a misleading impression.

    Jacques Delors and I come here today to scale a different set of heights, a different set of heights in a different cause, partners in what we believe is a great enterprise – the building, the construction of the European Community and a new and wider Europe and as we debate from time to time the details of this directive or that piece of legislation, it is all too easy to forget what the principal aim of the Community is and all to easy to forget that the Community is unique amongst international organisations; unique in its shared framework of law among nations; unique in the way in which it has turned traditional enemies into firm friends in a matter of two or three decades; unique in the way in which it is breaking down economic and political barriers across Europe. It is a mixture, our Community, of vision and of shared self-interest.

    On this very day when you Prime Minister, George Bush and President Selinas have completed the North American Free Trade Agreement I should like to pay tribute to those same qualities which you have shown in bringing that agreement to fruition. [Applause].

    As so many times in the past, my country marches arm-in-arm in our instincts with Canada for in a fortnight’s time our Single Market in Europe will be fully open for business and since we faced the task of breaking down barriers among twelve countries, I think we too can take some small pride in that achievement.

    Both developments are welcome but there is a greater prize and both of us must continue to work together to secure the greatest free trade prize of all, a successful outcome to the Uruguay Round and a successful outcome as speedily and as comprehensively as we can get it. [Applause].

    Why do we need it? Not because of some free trade philosophy, some ideal; we need it for the most practical of all reasons, because of the boost it will bring to our economies, to the world economy at a time when that boost is sorely needed from one end of the world to the other. On both sides of the Atlantic we face similar problems, problems of recession, problems of recession leading to higher unemployment. In Canada, as in Britain, the burden of corporate debt has held back recovery. Many businesses have cut back their workforces, many people today are without work because of the depth, severity and length of that recession and yet productivity is rising sharply and that is vital to our success in today’s increasingly competitive markets, a success that can only be earned and will only be retained by those prepared to take tough decisions often unpopular at the time and often unpopular for many months after they are taken.

    In Canada, you have achieved exemplary success in controlling inflation. We too recognise the danger of that particular scourge. In Britain, we have now brought our inflation down below the European average, a dramatic change over the last two years. Our interest rates today are the lowest in Europe and even, Prime Minister, a touch today below yours.

    New growth is desirable in itself, desirable for prosperity but essential to bring unemployment down again in our countries. It will take time to reverse the trend so in Britain and at our Edinburgh Council across Europe as a whole we have announced initiatives to boost investment, reduce burdens on business and redirect government spending towards projects which will encourage long-term growth and short-term employment as that growth is built.

    These, I think, are shared instincts we have between Europe and Canada but let me say a word perhaps for a moment about Canada and the United Kingdom because your country of Canada and mine have a relationship which goes far beyond economics. We share a bond that comes from membership of the Commonwealth and from having the same Head of State. It is a deep bond, a lasting bond, an enduring bond and as we have developed a new relationship between the Community and Canada neither we the British nor for that matter the French have had to suppress our national ties of history, culture and shared interests. Indeed to the contrary, we have built upon those traditional ties and somewhere I suspect in that mix in Canada, somewhere Brian I think there has been an added ingredient – that tiny speck of Irish ingredient that may have given it perhaps a special flavour in your country. [Applause].

    We speak of ties, of shared links. I should like to say this evening to you, Brian, thank you for what you have done to strengthen those ties between Canada and Europe. I believe you can take pride in those achievements and also in the world role that Canada increasingly plays. Wherever you may look, look around as you will in the world’s trouble-spots, be it Yugoslavia, Somalia, Cambodia, you will find Canada is there and in Yugoslavia and Cambodia British forces are there alongside yours. In Somalia, our humanitarian agencies will be enabled by you and the United States to carry through their tasks and the European Community collectively is making an all-out effort to try and bring peace to the former Yugoslavia. That can only be done in partnership with others and in that partnership Canada’s role is both valued and crucial.

    So we, Britain and Canada, are partners in several enterprises. Today, Jacques Delors and I have approached Canada in a new guise, in the European Community-Canadian relationship and no European Presidency these days is complete without adding to that relationship with Canada. The strength and scope of it was very clear even in the brief discussions the President, the Prime Minister and I have been able to have since we arrived a couple of hours ago.

    I say tonight with total certainty that I confidently expect the same result in this new relationship as Britain has had over many years in all its dealings with Canada. Canada is a valued ally. More than that, Prime Minister, it is a close friend; it has been, it is and it will remain so in the future.

    You began this evening in a most agreeable way as we all await our dinner and I must say I think it is a very attractive trait to have the speeches before dinner – we will all enjoy our meal more, you will be more hungry and we will be more relaxed and we will all benefit. You began with a toast. Let me propose another, a toast I think of great importance, if you can reach for your glasses, one I propose with an immense degree of pleasure. I would like you to rise and drink to the further strengthening of cooperation between Canada and the European Community. That, Ladies and Gentlemen, is the toast – Canada and the European Community. [Applause].

  • Mr Major’s Speech to the European Parliament – 16 December 1992

    Below is the text of Mr Major’s speech to the European Parliament in Strasbourg, made on Wednesday 16th December 1992.

    PRIME MINISTER:

    The British Presidency of the European Community

    Introduction

    The European Council at Edinburgh took place at the end of one of the most difficult periods in the Community’s history. It was Britain’s responsibility to steer the Council to a successful conclusion. With the help of our partners, we did that.

    We never expected our Presidency to be easy. Many of the challenges we faced were not unique to our Presidency. We took the chair as the Community began to come to terms with the Danish referendum on Maastricht. Serious recession was afflicting most of Europe, indeed most of the world. A stormy referendum in France was just beginning. At the end of that campaign, we experienced great volatility in the currency markets, which has continued. The need for a GATT agreement had never been greater, but the obstacles to overcome remained formidable, as the Munich Summit showed. War was raging in former Yugoslavia and instability gripped the rest of Eastern Europe.

    Against that background, we knew what our objectives were; we set these out clearly at the start of the Presidency. Even as difficulties have increased, they have not blown us off course. During the British Presidency, a series of complicated negotiations has come to a head; many of the negotiations inter-locking; all of them complex.

    As Douglas Hurd made clear to this Parliament in duly, we set ourselves a number of tasks: to complete the single market; to agree a future financing settlement; to implement subsidiarity, and to make the Community more open. Externally, we wanted to get a GATT agreement; to launch enlargement negotiations; to tackle the problems of former Yugoslavia; and to develop relations with the emerging democracies to the East.

    The Community has tackled all these priority areas. Of course, some problems remain to be solved; but we have solved the main problems confronting the Community now. The Community can go forward more confidently as a result.

    Economic Recovery

    Underlying this agenda is the need for economic recovery. At Edinburgh, we agreed on supportive action at the Community level, as part of a growth initiative to stimulate new investment and new jobs in every country in the Community.

    The most important element of this is, of course, the Community’s success in completing the single market on time – the biggest free trade project in history. Some 500 measures have been passed since the programme began in the mid-1980s, breaking down barriers to trade and enterprise across the Community. This means new opportunities for all Europe’s businessmen; and competition to make the most of those opportunities should mean lower prices and more choice for Europe’s consumers.

    At the start of Britain’s Presidency, the single market was already 90% complete. Inevitably, some of the toughest pieces of legislation were left until last. Nonetheless, political agreement has been reached on a string of key directives. After 31 December, there will still be areas where more can and will be done, for example, in transport, energy, telecommunications. But the cumulative work of the last six years, covering the Presidencies of all twelve Member States, amounts to a magnificent achievement. I pay tribute to the contribution made by the European Commission and to the cooperation with this Parliament in enabling this body of legislation to be adopted. The single market is now opening for business.

    The agreement between the Community and the United States on agricultural issues was a breakthrough in worldwide trade negotiations. Much work now needs to be done speedily in Geneva. But negotiations have resumed among all the parties to the GATT. The Commission is playing a positive and leading role. As the European Council confirmed, the Community must press for an early, successful and balanced conclusion to the Uruguay Round.

    An OECD estimate puts the benefit to world income at something like $200 billion per year. What is more, benefits will be general, not specific to manufacturing countries such as EC members in the North. Trade is worth much more than aid to boosting economic growth in developing countries.

    At Edinburgh, we added a third element to the Community’s endeavour to promote recovery and prosperity. We agreed to set up a new European Investment Fund to guarantee loans to infrastructure projects and small and medium sized businesses, and also a special loan facility at the European Investment Bank. These will be able to support a total of new investment of up to £24 billion. Taken together with other Community agreements to reduce the regulatory burdens on business, and national programmes to encourage investment and new jobs, this should give a new boost to confidence and economic recovery.

    Recovery can be helped by action at the international level but conditions must be right at the national level for international action to be effective. National action is crucial. We all agreed at Edinburgh that we must improve efficiency, reduce subsidies and enhance competition. Sound finance, low inflation and firm control of public sector wage bills help to create the conditions for reductions in interest rates. And we agreed on the need to give priority to capital spending and incentives to private investment.

    The Maastricht Treaty

    To be effective, the EC needs the right institutional framework, the right relationship with its citizens. At Edinburgh, we found a solution to the problem of Denmark and the Maastricht Treaty, enabling the Community to move forward as Twelve.

    Maastricht is the best achievable basis for the Community’s development. All twelve agreed that. It will improve the working of the Community – making the institutions more accountable; strengthening the rule of law; giving the principle of subsidiarity a legal base.

    By the end of this year, ten countries will have ratified. In Britain, the House of Commons is now looking at the Treaty in great detail. We are committed to completing our ratification before the present Session of Parliament ends next year.

    At Edinburgh, we had to tackle three Maastricht-related issues: the Danish issue; subsidiarity; and openness.

    We had a specific Danish problem and we found a solution particular to Denmark. No-one, including the Danes, wanted renegotiation of the treaty, nor a new ratification process. But Denmark required an additional, and legally binding, instrument. So we confronted a delicate conundrum. And we solved it. We agreed to a decision, binding in international law, which will enable Prime Minister Schluter to go back to the Danish people and recommend a ‘yes’ vote in a second referendum next spring. This takes up the concerns in the Danish memorandum in a way which is consistent with the Treaty. The solution is designed specifically for Denmark.

    The ratification process this year had thrown up doubts across Europe about the way the Community was developing. There seemed a general fear that the Community was in danger of becoming too remote. The Community had to become more open; decisions in the Community had to get closer to ordinary people. For the first time, the principle of subsidiarity is being formally enshrined in an EC treaty. People everywhere, it seemed, were a little baffled by a paper principle; they needed to be persuaded by practice. So, in advance of formal implementation, the Commission is showing us what that principle will mean.

    I congratulate the President of the Commission for his work. The presumption is, as the Commission document puts it, on national action, not Community action. But subsidiarity will operate without disrupting the institutional balance. The Commission has published lists of proposals which will not now take forward and of existing legislation which it wishes to see repealed. Subsidiarity will be judged by actions, not assertions. Community action here is both positive and persuasive. The European Council welcomed the Parliament’s ideas for a new Inter-Institutional Agreement. The Council are now committed to negotiate a new one with the Commission and this Parliament.

    Openness is just as important. At Birmingham, Foreign Ministers were asked to find ways of opening up the Community’s work to greater scrutiny. Now the Commission have agreed on more consultation in advance of legislation; and the Council have agreed to publish voting records and to let television cameras into some important Council discussions. This is a solid start.

    In the future, Community institutions are going to need to cooperate even more closely. At my instigation, the Edinburgh Council was the first where there was a substantive political discussion with the President of the Parliament at the beginning of our discussions, putting those discussions clearly into their wider context. Herr Klepsch made a valuable contribution. I am confident that this will set the pattern for future European Councils.

    Sites of Institutions and Size of the European Parliament

    Two decisions will be of particular interest to the European Parliament. We settled on new numbers of MEPs for Member States. The main reason for this was the need to increase German representation after unification to include the Eastern Lander. But we also had to make sure that the new arrangements made sense in the context of the future enlargement of the Community. The Council took up the Parliament’s Resolution based on the de Gucht proposal, on the composition of the Parliament from 1994. That was the basis for our final decision. That shows the institutions working together properly.

    We also reached a final settlement of the sites of the main institutions. This is of direct interest to the Parliament. We took account of views expressed here, but many interests had to be balanced. The European Parliament shall have its seat here in Strasbourg; twelve monthly plenary sessions will be held here. Additional plenary sessions will take place in Brussels, where the Committees shall be based.

    Although I know that some of you will have been disappointed by this decision, the spirit of cooperation at Edinburgh allowed us to settle an issue which has been contentious for years, and which has held up other important decisions on sites. The clarity of the Edinburgh decision will let you get on with the job of agreeing working arrangements.

    Money

    The Community also needs a financial framework which gives it the resources it needs and which the Member States can afford. At Edinburgh, we agreed the future financing of the Community to the end of the decade. This was possible because everyone saw that any settlement had to balance two requirements: the need for a confident, cohesive Community; and the need to take account of the economic realities we all face. I recognise that this Parliament called for a much higher level of own resources and spending. I recognise too that some – but by no means all – Community spending substitutes for national spending, and so does not add to total spending, and so to additional burdens on taxpayers. But the view of the Council was that the Community could not be exempt from the pressures, to which all member states are now subject, to keep such burdens down. And the importance of reducing national budget deficits, in the interests of convergence and lower interest rates, was stressed by all in the Council.

    That is the background to the Edinburgh decision to keep the present Own Resources Ceiling, the limit on Community spending, for a further two years.

    Thereafter, there will be a gradual increase. Internally, Community spending will increase by over 30 per cent between 1992 and 1999. On cohesion, total structural funds will increase by over 60 per cent by the end of 1999. The Cohesion Fund will be larger than originally proposed by the Commission. Commitments for Spain, Greece, Ireland and Portugal will double between 1992 and 1999. External actions in 1999 will reach 6.5 billion ecu compared with 3.5 billion ecu in 1992, helping to meet real needs in countries as different as Russia and Somalia.

    This final outcome, gives us the sound financial foundation we need. We are committed to cooperating closely with the Parliament and to agreeing a new Inter-Institutional Agreement. I hope we shall also reach a settlement this week on the 1993 budget.

    Relations with the Rest of Europe

    At the end of the British Presidency, I believe the Community can look forward, plan confidently. I hope it will also look outward.

    In the last couple of years we have at times risked becoming too introspective, though in the last six months we have held a constructive EC/Turkey Association Council, a good EC/ASEAN meeting in Manila, and a summit meeting with the leaders of the Visegrad countries. Tomorrow, with President Delors, I fly to North America for the EC/US and EC/Canada Summits. All that is as it should be. But in Edinburgh we set a new external agenda in two important respects.

    First, the way is now open for enlargement. We agreed that it was in the Community’s interests to get negotiations under way as soon as possible. They will start in the New Year with the Austrians, Swedes and Finns. The technical preparations have been laid by the Council. Negotiations will also start before long with the Norwegians.

    A second priority for 1993 is the East. Russia and Eastern Europe are Western Europe’s biggest challenges for the 1990s. The Commission have put forward an important paper on the relationship between the Community and the countries of Eastern Europe. This paper, formally welcomed in the Edinburgh Conclusions, calls for early trade liberalisation and full membership of the Community for those countries with Association Agreements as soon as they are ready for it.

    We are also working to develop relations with the Former Soviet Union. We are in the middle of negotiations for Partnership Agreements with Russia, Belarus, Ukraine and Kazakhstan.

    It might seem from what I have said so far that the Edinburgh Council was the only event of the Presidency. Although many subjects came to a head at the Council, the result rested on work undertaken earlier. Throughout the last six months, we have laid particular stress on the Community’s external relations. With the long internal agenda it would perhaps have been pardonable if the EC had neglected the outside world. But that has been far from the reality.

    In one external area there has been precious little good news: Yugoslavia. The Community has jointly led with the United Nations a determined international effort. In August we called the International Conference on the Former Yugoslavia in London. The EC’s representative, Lord Owen, is co-chairing a meeting of the Conference’s Steering Committee at Ministerial level in Geneva today.

    The former Yugoslav Republic of Macedonia could be the tinderbox to ignite a wider Balkans conflagration. At Edinburgh, the European Council agreed to unblock Community and international assistance to Macedonia which will help stabilise the country. The Commission will allocate 50 million ecu of humanitarian and technical assistance. Other Member States will also provide a matching amount from their own resources. In addition, we unreservedly backed the United Nations plan to put a battalion of soldiers in the Republic to monitor the peace there.

    The Community and its Member States have led the international humanitarian effort. Despite this activity, this determination, the situation in Bosnia shows no improvement. We are all appalled by the systematic detention and rape of Moslem women in Bosnia. The European Council demanded that all detention camps close immediately, that secure access be given to humanitarian organisations.

    It is appalling that, as most of Europe comes closer together, burying old feuds in new cooperation, the Community should see on its doorstep a reversion to a savagery that has no place in the world of today or tomorrow. Those who behave in this way cannot expect any relationship with us, for our Community is built on a system of values to which our common commitment is firm, as firm as our faith in freedom itself.

    Conclusion

    Let me in conclusion add a more positive message. I know that earlier this year many of you in this Parliament were uneasy, as I was, that the Community seemed in danger of faltering. I firmly believe that Edinburgh has changed all that. Edinburgh leaves the Community pointing in the right direction. We have declared the single market open. We have – confirmed our commitment to Maastricht. The solution we have found for Denmark paves the way for a referendum there in the Spring. We have begun the process of bringing the Community closer to its citizens. We have taken a major initiative for economic recovery. We have settled some long-running internal problems. And we have provided the firm budgetary foundation the Community needed.

    So the Community can now lift its sights. That is what our people, and the rest of Europe, expect of us. We can now get on with the crucial business of finalising the Uruguay Round, which the world economy so desperately needs; and with healing the division across the heart of our continent. The end of the Cold War broke down barriers, but the wound was so deep, had festered for so long, that the healing cannot come quickly or automatically. It is up to us to build bridges, spreading prosperity, encouraging hope. It is up to the Community to give a lead.

    Before Edinburgh, the question being asked was “Can the Community give a lead?” The answer at Edinburgh was “Yes” it can. And with your help, it surely will.