House of Commons Hansard Debates for 15 Feb 1990

Hansard

House of Commons

Thursday 15 February 1990

The House met at half-past Two o'clock

PRAYERS

[Mr. Speaker-- in the Chair ]

PRIVATE BUSINESS

Redbridge London Borough Council Bill

(By Order) Order for further consideration, as amended, read.

To be considered on Thursday 22 February.

Birmingham City Council

(No. 2) Bill-- (By Order) Order for consideration, as amended, read.

To be considered on Monday 26 February at Seven o'clock.

Mr. Speaker : As the 16 Bills set down for Second Reading have blocking motions, with the leave of the House I shall put them as a single group.

Vale of Glamorgan (Barry Harbour) Bill

[Lords] (By Order)

Adelphi Estate Bill

(By Order)

Exmouth Docks Bill

(By Order)

Hythe, Kent, Marina Bill

(By Order)

London Docklands Railway Bill

(By Order)

London Underground (Victoria) Bill

(By Order)

Penzance South Pier Extension Bill

(By Order)

Shard Bridge Bill

(By Order)

Tees and Hartlepool Port Authority Bill

(By Order)

Ventnor Harbour Bill

(By Order)

London Regional Transport (Penalty Fares) Bill

(By Order)

London Underground Bill

(By Order)

Midland Metro Bill

(By Order)

South Yorkshire Light Rail Transit

(No. 2) Bill-- (By Order)

Cattewater Reclamation Bill

(By Order)

Humberside County Council Bill

(By Order)

Orders for Second Reading read.

To be read a Second time on Thursday 22 February.

British Railways Order Confirmation Bill

(By Order) Considered ; to be read the Third time.

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Oral Answers to Questions

NATIONAL FINANCE

Child Poverty Action Group

1. Mr. Martyn Jones : To ask the Chancellor of the Exchequer when he last met representatives of the Child Poverty Action Group to discuss taxation.

The Chancellor of the Exchequer (Mr. John Major) : I have not met them as a Treasury Minister.

Mr. Jones : When the Chancellor meets representatives of the group, I hope that he will have some good news for them on child benefit which, as he knows, is the best way to give support to families on low incomes. I hope that he will raise child benefit in line with inflation because, as he knows, it has been eroded since 1987 when his Government's manifesto commitment was to "pay it as now". Surely that should not mean to pay it as it was paid in monetary terms, but that it should be uprated in line with inflation. I hope that the Chancellor will take that point on board in his next Budget and put that right.

Mr. Major : I am grateful to the hon. Gentleman for his views. As he knows, we have a statutory obligation to review child benefit every year before the public expenditure round, and that has occurred. On the point about the freeze on child benefit in the past two years, the hon. Gentleman knows that there has been a compensating increase in income support and family credit, precisely to meet the point about low pay to which he referred.

Dame Elaine Kellett-Bowman : When considering the answer that he has just given, will my right hon. Friend bear it in mind that quite a number of his colleagues, let alone Opposition Members, feel strongly that child benefit is the only income of some women, who appreciate its being uprated whenever possible?

Mr. Major : I am grateful to my hon. Friend for that reminder. As she knows, child benefit was introduced by the present Government and at present costs £4 billion, all of which is paid to the wife.

Mrs. Beckett : Surely all that the Chancellor needs to say when he meets the Child Poverty Action Group is that, as the social security Minister who gave the pledge in the manifesto about child benefit, he feels morally bound to uprate it in line with inflation?

Mr. Major : It is always a pleasure to have advice from the hon. Lady, although it may be that I do not get quite as much advice from her as her right hon. and learned Friend the Member for Monklands, East (Mr. Smith). Nevertheless, I am pleased with the advice that she has given and shall certainly bear it in mind if I meet Miss Fran Bennett and her colleagues.

Manufacturing Productivity

2. Mr. Wood : To ask the Chancellor of the Exchequer if he will make a statement on the growth during the 1980s of manufacturing productivity in (a) the United Kingdom and (b) other major industrial countries.

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The Economic Secretary to the Treasury (Mr. Richard Ryder) : The average growth of output per person employed in United Kingdom manufacturing industry between 1980 and 1988 was 5.3 per cent., contrasted with 3.4 per cent. for the other Group of Seven economies.

Mr. Wood : I thank my hon. Friend for that encouraging response. Is not it also true that productivity in British industry has risen substantially above that in Japan? Does my hon. Friend agree that extra investment in new manufacturing industry, such as is happening in Stevenage, where over £600 million is being spent by Glaxo, British Aerospace and other companies, is the answer, to ensure that we have good manufacturing prospects?

Mr. Ryder : I agree entirely with my hon. Friend's latter point. On his first point, manufacturing productivity growth in Britain over the past decade has been higher than that of any other leading western nation, including the United States and Japan.

Mr. Skinner : Why does not the Minister tell the whole story about productivity in manufacturing? Why does not he also say that during the past 10 years of this Tory Government, more than 900,000 manufacturing jobs have been lost in Great Britain, many of them in the north and the west midlands? Will he also say that in West Germany there is a balance of payments surplus, equivalent to £50 billion, while Britain is running a balance of payments deficit of £20 billion? There is the contrast.

Mr. Ryder : The hon. Gentleman may not know that manufacturing employment has been falling in every leading western nation for the past decade and more. Furthermore, manufacturing unemployment did not start rising in 1979, when this Conservative Government came to office, or in 1970 when the previous Conservative Government came to office. Manufacturing employment began to fall in 1966, the year that a Labour Government were re-elected.

Mr. Marlow : What is my hon. Friend's view on bringing about a major increase in the productivity of East German manufacturing industry, by British taxpayers providing vast amounts of money through the European Community budget to improve East German manufacturing industry?

Mr. Ryder : Earlier this week, I attended a meeting of Ecofin in Brussels at which the West German Finance Minister told us about the latest developments in the sphere to which my hon. Friend referred. It is inconceivable that the West German Finance Minister is unaware of my hon. Friend's views.

Tax Evasion

3. Mr. Ernie Ross : To ask the Chancellor of the Exchequer what steps he is taking to cut down on tax evasion.

The Financial Secretary to the Treasury (Mr. Peter Lilley) : The Government are strongly opposed to tax evasion, which is why we have doubled the number of staff engaged in anti-evasion work. We have increased the penalties, which had not been increased since 1960,

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implemented the bulk of the Keith committee's recommendations, simplified the tax system and reduced punitive tax rates, which invited avoidance and evasion.

Mr. Ross : Is it not true that according to the latest National Audit Office report, almost £4 billion or 15.5 per cent. of assessed tax revenues were uncollected in 1988? If the tax collection system was as efficient now as it was 10 years ago, we should have an extra £1.5 billion of revenue.

Mr. Lilley : I appreciate the hon. Gentleman's point. If he reads the Treasury's reply to the committee, he will see that the sum of money is notional and that it has been normal for large amounts to be under assessment while assessments are waiting to be fixed. The actual amount that remains uncollected is only about one fifth.

Mr. Gill : Does my hon. Friend believe that shifting the burden of taxation from a direct to an indirect basis is altogether helpful, to avoid this problem?

Mr. Lilley : That is certainly one of the factors that enter into the equation. However, I should also lay emphasis on reducing top tax rates. The previous Labour Government, when they had rates of 83 and 98 per cent., collected tax from only 30,000 taxpayers. Now, at the rate of income in real terms at which they would have been paying 83 per cent., 190,000 taxpayers declare their income.

Mr. Nicholas Brown : The Minister's general commitment is not matched by the detail that he has given the House. According to the performance indicators in the public expenditure documents that we discussed in the House on Tuesday, the Inland Revenue's cost per employee on income tax cases has fallen. If the resources have been saved--I doubt whether they have--will the Government merge the special office and the inquiry branch--a reform which they have been putting off since 1985--in order to clamp down on corporate fraud?

Mr. Lilley : If the hon. Gentleman looks closely at the figures, he will find that there has been a sixfold increase in the amount successfully recovered by the tax evasion unit. That is good news.

Mr. Gow : Does my hon. Friend have it in mind to introduce any measures to prevent the Labour party from giving evasive answers about the proposed roof tax?

Mr. Lilley : My hon. Friend makes an extremely good point. One of the worst types of tax evasion is for the Labour party to evade giving the British people details of the taxes that it proposes to impose on them. We should like to see an end to the evasion of many questions on the roof tax. Is the Inland Revenue to be invited to hand over details of individuals' taxation to local authorities? Will individuals see their tax burden rise with every increase in the capital value of their house?

Manufacturing Investment

4. Mr. David Marshall : To ask the Chancellor of the Exchequer what has been the level of manufacturing investment in each of the last two quarters.

The Chief Secretary to the Treasury (Mr. Norman Lamont) : Manufacturing investment was £3,163 million and £2,784 million at 1985 prices in the third and fourth

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quarters of 1989 respectively. Manufacturing investment reached a record level in 1989, after six years of growth averaging 8 per cent.

Mr. Marshall : Notwithstanding the Minister's answer, does he accept that the Government have an appalling investment record? The share of manufacturing investment in GDP fell by one quarter between 1978 and 1988. Does not that prove the Government's utter contempt for the nation's manufacturing prospects and their preference to grab what they can from the sinking ship?

Mr. Lamont : The hon. Gentleman says notwithstanding my answer, as if somehow he did not want to hear the facts in it. The facts are that between 1983 and 1989 investment grew by 8 per cent. on average, but under the previous Labour Government manufacturing investment grew by 1 per cent. per annum. Manufacturing investment is now 7 per cent. above the level in 1979. It grew by 5 per cent. last year and it is now at a record level. It may surprise Opposition Members to hear that manufacturing output in the 1980s grew faster in Britain than in Germany.

Mr. Burt : Has my right hon. Friend had the opportunity to calculate the effect of the strike at Ford on manufacturing investment? Does he agree that it behoves all parties in the House that want to see manufacturing investment to support companies such as Ford, which want to invest in Britain, not those who are striking and so putting at risk future investment in Britain?

Mr. Lamont : Two factors are important for manufacturing investment. One is increased profitability and the other is improved industrial relations. Both have improved enormously under the Government and in the teeth of opposition from the Labour party.

Mr. Strang : What effect are interest rates that are much higher than those of any of our European competitors having on investment intentions? Is falling manufacturing investment consistent with an on-going economic miracle? When does the Chief Secretary expect interest rates to start falling?

Mr. Lamont : It is expected that manufacturing will continue to grow faster than non-oil GDP. Obviously, investment will, to some extent, be affected by interest rates, but it is important that we should reduce demand of which investment is part. The fact remains that in recent years we have had extremely strong investment growth, including strong manufacturing investment growth.

Personal Savings

5. Mr. French : To ask the Chancellor of the Exchequer what action he is taking to promote personal savings and investment.

Mr. Major : There have been a range of measures to encourage savings and investment in recent years.

Mr. French : Has my right hon. Friend been able to assess the popularity of personal equity plans following the improvements made to that scheme by his distinguished predecessor? Notwithstanding present high mortgage commitments, are not more and more people investing in PEPs?

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Mr. Major : My hon. Friend has taken a great interest in the personal equity plan schemes. He will be delighted to know that the number of plans taken up and the amount invested are now running at higher levels than at any time.

Dr. Marek : As so often, the right hon. Gentleman talks about savings for those who are basically rich enough to afford advice on how to save. What does he intend to do for the ordinary saver, the person who is being crucified by the present high mortgage rates?

Mr. Major : The hon. Gentleman may conceivably not have noticed it or remembered it, but independent taxation comes into force from 1 April this year, which will be of considerable help to the married woman saver.

Interest Rates

6. Mr. Anthony Beaumont-Dark : To ask the Chancellor of the Exchequer what recent representations he has received about interest rates and their effect on the economy.

Mr. Major : I have received a number of such representations.

Mr. Beaumont-Dark : Does my right hon. Friend accept that many people in the House and outside it admire the way in which he has tackled his job in the few short weeks that he has been Chancellor of the Exchequer? Does he further accept that many of us hope that the belief that the pound and interest rates ought to be tied to the deutschmark has been buried? Because of the Germans' headlong and precipitant flight to a new fatherland, their inflation is likely to be very high. If Germany's interest rates increase 1 per cent., may we have an assurance that our interest rates need not follow, because British industry could not sustain such a rise or compete with it?

Mr. Major : I am grateful to my hon. Friend for the first part of his question. As to the second part, I shall continue to judge interest rate levels against what I think is right for the country's counter- inflation policy.

Mr. Beith : Does the Chancellor realise that yesterday's announcement by one building society of increased mortgage rates spells personal tragedy for many people as well as great pressure on wage negotiations in the coming year? Can the Chancellor give the other building societies any hope of a reduction in interest rates while he refuses to make a clear commitment to Britain's early entry into the exchange rate mechanism, or should all building societies increase their interest rates in anticipation that base rates will remain high?

Mr. Major : It would be very attractive to be able to stand here and say that I foresee an early reduction in interest rates. However, I must tell the hon. Gentleman and the House that it would be unwise to make such a commitment until I am certain both that it would be right in terms of beating inflation and that once we bring interest rates down, we can safely keep them down.

Mr. Ian Stewart : I thank my right hon. Friend for that answer, and I am sure that he will have strong support from Conservative Members in making sure that the campaign against inflation is maintained for as long as it need be. Will my right hon. Friend emphasise that an

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increase in mortgage rates is not the same as an increase in the rate of inflation? In that respect in particular, the retail prices index is a very unsatisfactory measure of inflationary conditions. When the RPI falls below the real rate of inflation, as it will over the next two years with falling interest rates, will my right hon. Friend take the opportunity to introduce a more realistic official inflation indicator and be prepared to adjust the annual uprating of benefits accordingly?

Mr. Major : My right hon. Friend is right to say that the retail prices index as presently constituted is an inaccurate measure of the underlying rate of inflation in the British economy. He will be aware that few countries in the world include mortgage repayments in their retail prices index, as we do. I take note of my right hon. Friend's other comments.

Mr. Robert Sheldon : The Government have said frequently that if their economic policy is not hurting, it is not working. Is not the real problem that the Government's policy is hurting manufacturing industry, investment and home owners? When will the Government open their eyes to the possibility of an alternative approach, such as credit control--which, although not perfect, can be of some help?

Mr. Major : The most damaging thing for industry and for the economy as a whole is inflation. Our monetary policy is there specifically to bear down on inflation. If we had not used monetary policy successfully in recent years, I doubt whether there would have been the dramatic reduction in unemployment which all right hon. and hon. Members welcome, and which today's announcement shows is continuing.

Sir Anthony Grant : Does my right hon. Friend agree that although the battle against inflation must take priority, the burden of it is being borne excessively by small businesses and home owners? [ Hon. Members :- - "No."] Yes it is. While I accept that my right hon. Friend cannot anticipate his Budget, will he, with his usual sensitivity, take that into consideration? After all, the need for the battle was not the fault of small businesses and home owners, but that of the Government.

Mr. Major : I understand the concern felt by my hon. Friend, who is a powerful and consistent proponent of lower interest rates. I entirely sympathise with the difficulties that many home owners in particular face at present. I have to bear in mind as an overriding objective the necessity to ensure that we have the right economic conditions for bringing down inflation and for ensuring that it is kept down. I must keep that in the forefront of my mind and policy, and I propose to do so.

Privatisation

7. Mrs. Wise : To ask the Chancellor of the Exchequer what he estimates privatisation revenue will be in 1989-90.

Mr. Lilley : The latest estimate of net privatisation proceeds in 1989-90 is £4 billion.

Mrs. Wise : Is not the Minister aware that, at the time of the previous Budget statement, the expected revenue was £5 billion? Can the shortfall be accounted for by the selling-off of water at far below its real value, and will that

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shortfall be a factor that will prevent the Chancellor from raising tax thresholds in accordance with the Rooker-Wise amendments?

Mr. Lilley : The hon. Lady is not correct. Water was sold at a good price, and I was glad to see that 85 per cent. of employees in the water companies participated in the sale. On the hon. Lady's second point, a Labour Government who deprived themselves of a continuing flow of privatisation proceeds would have a black hole that they would be unable to fill without higher borrowing or higher taxation of the sort that she alludes to.

Mr. Gerald Howarth : While the £4,500 million received in the present financial year is a welcome by-product of the privatisation programme, will my hon. Friend confirm that the political purpose of the programme is to release businesses from political control into the healthy private sector, where every privatised industry has performed wonders for the economy of the United Kingdom and for its staff?

Mr. Lilley : My hon. Friend is absolutely correct. We have privatised some 29 major companies, and virtually every company has increased its turnover, profits and investment and improved its industrial relations as a result. That is good for the company and good for the taxpayer because companies end up paying higher taxes--as British Telecom does--than they used to provide in dividends to the Inland Revenue.

Mr. Mullin : What shall we live on when there is nothing left to privatise?

Mr. Lilley : Should a Labour Government be elected, the problem that the hon. Gentleman envisages would come sooner. What would a Labour Government do without the proceeds of privatisation from day one? I should be interested to hear the answer to that question. It is clear that we have increased the flow of tax revenues to the Government from those companies, because they are now more profitable, which is an on-going benefit to the country, and we have reduced the debt of the nation, which is an on-going benefit to the Exchequer as well.

Social Charter

8. Mr. Fishburn : To ask the Chancellor of the Exchequer what is his latest assessment of the effect on the United Kingdom's long-term economic performance of the proposed European social charter.

Mr. Ryder : It would raise costs, and cost jobs.

Mr. Fishburn : Does my hon. Friend accept that the best social charter that the country can have is plentiful and, ideally, full employment in the most modern and competitive industries?

Mr. Ryder : I fully agree with my hon. Friend. As he knows, Britain has created more jobs during the past six years than any other country in the European Community.

Mr. Chris Smith : Was not the Minister really saying in his first answer that Britain under the Tories can survive only by bad employment practices and cheap labour? Have not the other 11 countries of the European Community, with which, I remind the Minister, we have 70

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per cent. of our trade deficit, realised that completely the opposite is the case, and that a good employment record is a recipe for economic success?

Mr. Ryder : If the social charter went through as it stands, the first people to suffer and to lose jobs would be women and the unskilled. I imagine that the hon. Gentleman's slogan in Islington at the next election will be, "Back the social charter and create unemployment."

Mr. Carrington : Does my hon. Friend agree that, in view of events in eastern Europe and the potential reunification of Germany in particular, the social charter has now become an outdated irrelevance?

Mr. Ryder : My right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler), the former Secretary of State for Employment, said when he held that post that hundreds of thousands of British jobs would be at risk if the social charter went through. We need no lessons on unemployment problems in this country, because our unemployment is two thirds of the European average.

Public Expenditure

9. Mr. Tony Lloyd : To ask the Chancellor of the Exchequer what is his latest estimate of the public spending planning total for 1990-91.

Mr. Norman Lamont : The public expenditure planning total for 1990- 91 has been set at £179 billion.

Mr. Lloyd : I am sure that the Minister will confirm that we have an historically low level of public spending. How then can he justify the present position? Owing to our current balance of payments deficit, one item on which spending will be cut in real terms is export promotion services.

Mr. Lamont : In fact exports are doing extraordinarily well : the latest figures show that they are up 15 per cent. on the previous year. If exports are to increase, what matters most is the competitiveness of British industry, and we are determined to achieve that.

Mr. Yeo : Has there ever been a period in British history when, at the same time, public expenditure has risen substantially in real terms, the proportion of gross domestic product gobbled up by the state has fallen and a considerable amount of public debt has been repaid?

Mr. Lamont : My hon. Friend is right. There have been large real- terms increases in specific priority programmes within total general Government expenditure, which at the same time has fallen as a share of GDP. I believe that that is entirely related to the sharp increase in our growth rate--compared with that of our European competitors--during the same period.

Mortgage Arrears

10. Mr. Harry Barnes : To ask the Chancellor of the Exchequer what is his latest estimate of the number of home-owners with mortgage arrears.

Mr. Major : Around 70,000 mortgages are more than six months in arrears, less than half of 1 per cent. of total home-owners.

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Mr. Barnes : I am sure that all hon. Members are meeting more and more constituents whose debts have reached crisis point. Many have become homeless, and the position has been worsened by the increase in mortgage rates. The plight of those people is desperate : they also face increases in transport and heating costs, and the poll tax, which is yet to be imposed in England and Wales. Are not we moving from crisis to catastrophe, and should not those who reside at No. 10 and No. 11 Downing street be evicted, rather than our constituents?

Mr. Major : I share the hon. Gentleman's concern for those who are in difficulties. However, the level of arrears, although a little higher than it was a while ago, is still very low. A vast number of repossessions are predominantly the result of marriage break-up rather than high interest rates.

Mr. Tim Smith : Will my right hon. Friend confirm that the figures that he just gave for mortgage arrears account for 0.73 of 1 per cent. of all mortgage holders, and that that proportion is lower than it was at the end of 1985? If that number is in arrears, by definition 99.27 per cent. of people are not.

Mr. Major : I confirm those figures. Of course arrears are difficult and painful for every individual home owner, but it is equally true that they are not running at the critical level implied by the hon. Member for Derbyshire, North-East (Mr. Barnes) in his supplementary question.

Mr. Benn : Is the Chancellor aware that--quite apart from the tragedy of repossession--many people who had thought that they were home owners have discovered that they are home buyers? There is a big difference between the two. The Government have no interest in home buyers ; they try to persuade home buyers that they are home owners, which they are now discovering that they are not.

Mr. Major : The right hon. Gentleman is clearly unaware that the number of properties repossessed in 1989--which, I think, underlies his concern--was less than one fifth of 1 per cent. of the number of building society loans. The problem has been there for a long time, and it certainly existed when the right hon. Gentleman was a Minister.

Mr. Dunn : Is my right hon. Friend aware that more than 2 million more families now own their homes than in 1979? Is not there a strong case for raising the mortgage tax relief threshold from £30,000 to at least £60,000-- [Interruption.]

Mr. Speaker : Order. The hon. Gentleman has an absolute right to say what he wants to say.

Mr. Dunn : --to take account of the huge increase in the value of homes, especially in the south-east, and in north-west Kent in particular?

Mr. Major : I note my hon. Friend's representations on that matter. He should bear it in mind that owner-occupation has risen from 55 to 65 per cent. in the past decade and that there is still a substantial demand for home ownership to continue, as I believe and expect it will.

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