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House of Commons
Thursday 15 March 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 Third Reading read .
To be read the Third time on Tuesday 20 March at Seven o'clock.
Birmingham City Council (No. 2) Bill
(By Order) Order read for resuming adjourned debate on Question proposed [26 February],
That the Bill be now considered.
Debate further adjourned till Thursday 22 March.
Hythe, Kent, Marina Bill
(By Order)
Read a Second time and referred to the Examiners of Petitions for Private Bills.
Penzance South Pier Extension Bill
(By Order) Order for Second Reading read.
To be read a Second time on Tuesday 20 March at Seven o'clock.
Mr. Speaker : As the remaining 12 Bills have blocking motions, with the leave of the House, I shall put them together.
Shard Bridge Bill
(By Order)
Vale of Glamorgan (Barry Harbour) Bill
[Lords] (By Order) Orders for Second Reading read.
To be read a second time on Thursday 22 March.
Adelphi Estate Bill
(By Order)
Order read for resuming adjourned debate on Question proposed [27 February],
That the Bill be now read a Second time.
Debate further adjourned till Thursday 22 March.
Exmouth Docks Bill
(By Order)
London Docklands Railway Bill
(By Order)
London Underground (Victoria) Bill
(By Order)
London Regional Transport (Penalty Fares) Bill
(By Order)
London Underground Bill
(By Order)
Cattewater Reclamation Bill
(By Order)
Humberside County Council Bill
(By Order)
Clyde Port Authority Bill
(By Order)
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London Local Authorities (No. 2) Bill
[Lords] (By Order) Orders for Second Reading read.
To be read a Second time on Thursday 22 March.
Oral Answers to Questions
NATIONAL FINANCE
ECOFIN
1. Mr. Coleman : To ask the Chancellor of the Exchequer if he will make a statement on the proceedings of the most recent meeting of ECOFIN.
The Economic Secretary to the Treasury (Mr. Richard Ryder) : My right hon. Friend the Chancellor and I represented the United Kingdom at the Council of Economic and Finance Ministers on 12 March. The main topics discussed included the implications of German economic and monetary union, the European Bank for Reconstruction and Development, the revision of the financial perspective, the problem of fraud against the Community budget and the report of the European Court of Auditors for 1988.
Mr. Coleman : I am grateful to the Minister. Can he tell us how he intends to persuade our European partners to locate the new European Bank for Reconstruction and Development in London particularly with such a grudging attitude about Europe on the part of the United Kingdom--for example, our reluctance over the social charter and the exchange rate mechanism? Can he tell us what powers of persuasion he has?
Mr. Ryder : Our case is irresistible. It is so irresistible that we have produced the excellent brochure that I have with me. I shall be more than happy to send the hon. Gentleman a copy. Over lunch last Monday my right hon. Friend the Chancellor was able to raise the matter as part of the lunchtime agenda. The case for bringing the European Bank for Reconstruction and Development to London is clear. More than 520 foreign banks are already located in London. It is Europe's financial centre, and the centre of the Eurobond market, and we do more banking work with eastern Europe than any other banking capital in Europe. I hope that I have the hon. Gentleman's support and the support of the entire House in trying to get the EBRD to London.
Mr. Soames : In my hon. Friend's distinguished contribution at the ECOFIN meeting, did he have the opportunity to tell his colleagues on that body of the substantial support in industry in this country for full British membership of the European monetary system?
Mr. Ryder : The conditions for Britain's entry to the exchange rate mechanism were clearly spelt out at the Madrid summit last summer. As many people have already said, the question is not whether we should enter the ERM, but when.
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Mr. Hoyle : If the case is so overwhelming, will the Minister explain what will be said about the deficit on invisible earnings? For the first time since those figures have been recorded, they are in deficit--Mr. Ryder indicated dissent.
Mr. Hoyle : The Minister may shake his head--does he deny that the figures are in deficit? If he wants to deny it, he should get up and say so. Will he tell us what this incompetent and inept Government will do to remedy this sad state of affairs?
Mr. Ryder : This question relates to ECOFIN. That matter was not discussed last Monday at the ECOFIN meeting.
Manufacturing Productivity
2. Mr. Tredinnick : 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.
The Chief Secretary to the Treasury (Mr. Norman Lamont) : The average annual growth of output per person employed in United Kingdom manufacturing industry between 1980 and 1988 was 5.3 per cent., compared to 3.4 per cent. for the other Group of Seven economies.
Mr. Tredinnick : I thank my right hon. Friend for his reply. Is he aware that unemployment in the east midlands has fallen by 20 per cent. in the past year? Is he further aware that employment in manufacturing has increased by 18,000 since 1983? What are the figures for manufacturing output? Have they increased under this Government? How do they compare with the figures under the previous Labour Government?
Mr. Lamont : Manufacturing output has increased. Manufacturing productivity has been a remarkable success story. It has grown faster in this country than in any other G7 country, including Japan and the United States. It has grown at twice the rate of the 1970s and it is higher than it was in the 1960s. That helps to explain the remarkable success of industry in my hon. Friend's constituency and in neighbouring areas.
Mr. Robert Sheldon : Will the Chief Secretary accept this, the last of my pre-Budget recommendations : that the 25 per cent. capital allowance for plant and machinery is hopelessly inadequate, given the level of inflation and the value of capital equipment, which deteriorates over the first year of its life? That level is not an investment incentive ; it is an investment disincentive. Will the Chief Secretary seek to remedy it?
Mr. Lamont : I always listen carefully to the right hon. Gentleman, and I note what he describes as a late Budget representation, although it seems to be a little wide of the original question.
Mr. John Townend : Does my right hon. Friend agree that for productivity to increase there must be more investment in manufacturing and research and development? Is he aware that in east Yorkshire and Hull an enormous amount of development is taking place? In my constituency, BP has just finished a new acetic acid plant
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costing £250 million and has announced plans for a research laboratory, which will employ over 200 scientists and high-paid technicians.Mr. Lamont : I am pleased to hear the good news from my hon. Friend's constituency. He is right that productivity is related to investment. However, it is related not to investment alone but also to good management and good industrial relations, which have improved remarkably.
Inflation
3. Mr. Steinberg : To ask the Chancellor of the Exchequer when he expects to have zero inflation.
The Chancellor of the Exchequer (Mr. John Major) : I shall set out my forecast for inflation next week.
Mr. Steinberg : The fact is that the Government have no chance of getting inflation down to zero per cent., even though that was the stated aim of the previous Chancellor of the Exchequer. It will not fall significantly from the present rate of inflation. Many of my constituents are suffering great hardship because of the Chancellor's and the Government's policies. Many of them are facing hardship because of increases--
Mr. Speaker : Order. In fairness to the House, the hon. Gentleman should ask a single question.
Mr. Steinberg : Inflation has been fuelled by high interest rates, high rents, high gas and water prices and the dreaded poll tax.
Mr. Speaker : Order. I think that that is about enough.
Mr. Steinberg rose -- [Interruption.]
Mr. Speaker : Order. It is not at all fair to the hon. Gentleman's colleagues for him to ask several questions.
Mr. Major : I thought for a moment that the hon. Gentleman was trying to talk out Question Time. The reality is that without utilising our present interest rate policy there will be no chance of bringing down the rate of inflation to a level that is tolerable for most people. To that end we shall continue to sustain monetary policy. It is important that we do so for economic and social reasons. The hon. Gentleman mentioned the community charge. It is perfectly true that the dramatic burst of spending by local government will raise the retail prices index, but much of that comes from local authorities of which the hon. Gentleman approves.
Mr. Budgen : Will my right hon. Friend accept my congratulations on the way in which, to date, he has borne down on inflation? Does he agree that it will be far more difficult in future to resist the demands of those, from every section of the community, who recommend and enjoy inflation, and who will look to him for a major relaxation of credit before the next general election?
Mr. Major : I share with my hon. Friend the belief that it is vital to take whatever action is necessary to bring inflation down.
Mr. John Smith : Is the Chancellor aware that all three local authorities in the Mid-Staffordshire constituency--two of which are Conservative--have set poll tax levels
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-- [Interruption.] I have selected a constituency in which the Conservative party has a 14,000 majority. Surely that is perfectly fair. The three authorities have set levels significantly higher than the previous rate bills and far higher than the Government's ludicrous guidelines. Do not those examples and others throughout the land show clearly that the Secretary of State for the Environment was perfectly correct when he said that the poll tax would have a devastating impact on the retail prices index? Does the Chancellor agree with his colleague?Mr. Major : The right hon. and learned Gentleman was
uncharacteristically unreasonable in omitting from the beginning of his question the fact that the Labour county council covering that area has dramatically increased its expenditure. He also did not mention, for example, the quite astonishing and unreasonable community charge of more than £600 to be set by Labour-controlled Lambeth.
Sir William Clark : Will my right hon. Friend remind the House what the rate of inflation was before 1979? Does he agree that if the Labour policy about which we know was implemented, we should have hyperinflation and a run on sterling?
Mr. Major : There is no doubt that Labour's policy would cause a run on sterling--and we have yet to find out precisely what Labour's policy will be in individual aspects. The Labour Government's inflation record speaks for itself. Their best month was still higher than our worst.
Income Tax
6. Mrs. Gorman : To ask the Chancellor of the Exchequer if he has recently received any representations about the relationship between incentives to work and the level of income tax.
The Financial Secretary to the Treasury (Mr. Peter Lilley) : My right hon. Friend has received a number of representations about income tax.
Mrs. Gorman : I thank my hon. Friend for his reply. Does not the incentive effect of lowering direct taxes more than offset any loss to the Treasury because it increases the general buoyancy of the economy? Will he apply that logic to women who may wish to go out to work and who would be encouraged to do so if they were allowed to offset some of the costs for help in the home or with children?
Mr. Lilley : I am sure that my right hon. Friend the Chancellor heard that late pre-Budget representation. All that I can do is to refer my hon. Friend to my answer to a similar question in the previous Question Time.
Mr. Nicholas Brown : Surely a better answer for the Financial Secretary to give to his hon. Friend the Member for Billericay (Mrs. Gorman) would have been to say that the Government's tax policies are specifically designed to advantage the well-off rather than the generality of the community. If he had wanted to give his hon. Friend an alternative answer, he could have said that the parliamentary Labour party was absolutely right and that next Tuesday, the Government would abolish the tax on workplace nurseries.
Mr. Lilley : I can answer the hon. Gentleman's question a little more fully by referring to the past and not to the future. The previous Labour Government had tax rates of
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83 per cent. on the rich, but only 30,000 people paid them. Now that we have reduced the rates to 40 per cent. at the same level of income, 190,000 people pay them. People in the top 5 per cent. of incomes are paying 30 per cent. of the total income tax burden against only 24 per cent. at the end of the Labour regime. If anything, we have soaked the rich to everyone's satisfaction.Mr. Tim Smith : Does my hon. Friend agree that one person's tax relief is another person's tax bill? Introducing a new tax relief erodes the tax base. Will my hon. Friend, therefore, concentrate on the Government's long-term objective of reducing the standard rate of tax and thereby helping all taxpayers?
Mr. Lilley : I recognise my hon. Friend's point, which continues a fruitful discussion that we had at a recent Adjournment debate. [Interruption.]
Mr. Speaker : Order. Will the House settle down please? It is very difficult to hear at this end of the Chamber.
Mortgage Interest
7. Mrs. Wise : To ask the Chancellor of the Exchequer what was the total amount of mortgage interest paid by owner-occupiers for 1988 ; and what is the comparable amount in 1989.
Mr. Major : The total of interest payments depends both on interest rates and the amount of mortgages outstanding. Of the growth from £22.1 billion in 1988 to £32.4 billion in 1989 nearly half was due to the increase in the stock of mortgages.
Mrs. Wise : Does the Chancellor of the Exchequer accept that the squeeze on home owners has put more than 400,000 of them into some form of arrears, and that the position of many of them and of the poorest will be worsened when the poll tax comes in? What does he intend to do to relieve that burden of debt?
Mr. Major : As the hon. Lady will know, the vast majority of borrowers are still keeping up with their mortgage payments, and I expect that to continue to be the case. Borrowers in serious difficulties account for less than 1 per cent. of the total number of borrowers.
Mr. Oppenheim : Bearing in mind the fact that for years and years the Opposition steadfastly opposed the sale of council houses, that even now Labour councils put obstacles in the way of people who want to buy their council houses and that under this Government there has been a record rise in home ownership, does not concern for the plight of the home owner sound rather odd coming from the lips of Opposition Members?
Mr. Major : My hon. Friend is correct in his observations, in particular that owner-occupation has risen dramatically. The demand for it continues and it will continue to rise.
Mr. Beith : Does the Chancellor recognise that the only way to get interest rates down without pushing inflation up is to combine membership of the exchange rate mechanism with a tighter fiscal stance? Since the Labour party is not prepared to do that, why does not he give it a try on Tuesday?
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Mr. Major : I am grateful to the hon. Gentleman for his advice, but he will understand that I have no intention of responding to it now.
Mr. Conway : Does my right hon. Friend think that those who now have a mortgage, who may want a different house, or those who aspire to have a mortgage, would benefit if we were to embrace the policy to freeze new mortgages advocated by the Opposition's environment spokesman, the hon. Member for Dagenham (Mr. Gould)?
Mr. Major : What is certainly true is that the Opposition's policies would create a mortgage queue, which would help no one who wishes to become a home owner.
Mrs. Beckett : Does the Chancellor realise that many home owners who are struggling not to fall into arrears will find his complacency deeply worrying? Has he taken no notice at all of the recent Policy Studies Institute report, which suggests that about 1 million people are in serious housing debt, especially as that report was published before the most recent mortgage and rent increases?
Mr. Major : The hon. Lady misjudges me if she thinks that I am complacent or unconcerned about the issue, but the reality is that only a relatively small number of borrowers are in difficulty. When that occurs, I hope that they will take the advice of their lender, whether a bank or building society, and I hope that, wherever possible, that lender will enable them to meet their mortgage payments by extending the mortgage. That is frequently the position. It has been in the past and I expect that it will be so in the future. But there is no doubt whatever that a premature move to bring down interest rates would not be to the benefit of the economy, would not assist us in bringing down inflation and would not assist mortgage holders either.
Mr. Wilkinson : Notwithstanding the necessity to maintain a tight monetary policy, I remind my right hon. Friend that many families in outer London face acute hardship because of great difficulty in keeping up with their mortgage payments and the rising cost of commuter fares. In his forthcoming Budget, will he ensure that he does not rely on monetary policy alone to restrain inflation? His predecessor's obsession with monetary policy was very damaging.
Mr. Major : As my hon. Friend knows, he will receive the answer to that question within a few days.
Mr. Speaker : Question No. 8 Mr. Cunliffe?
Question No. 9. Mr. John P. Smith? [ Hon. Members :-- "Where are they?"]
Question No. 10. Mr. Randall?
Mr. Skinner : They are all in Staffordshire.
Mr. Speaker : Order. It is always a help to the Chair if hon. Members who cannot be here to ask their questions inform the Chair.
Non-oil GDP
11. Mr. McAvoy : To ask the Chancellor of the Exchequer what proportion of non-oil gross domestic product, non-oil taxes and national insurance contributions represented in (a) 1978-79 and (b) 1989-90.
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Mr. Norman Lamont : Non-oil taxes and national insurance contributions amounted to 34.1 per cent. of non-oil GDP in 1978-79 and 37.1 per cent. in 1988-89, the latest available year.
Mr. McAvoy : Will the Minister admit that under the Tories, tax take has increased as a proportion of GDP? Will he further admit that the Tory claim to have reduced taxes is entirely bogus, given that the Government have reduced taxes only for the rich and increased them for the rest of us? Does the Minister think that the poll tax will help to reduce the overall burden of tax?
Mr. Lamont : I am sure that I speak for all my hon. Friends when I say that if the Labour party were to choose to fight the next general election on which party would deliver tax cuts, we know who would win it. The hon. Gentleman is not on a good point, when the Labour party has voted against every tax cut that the Government have ever made. Is reducing the rate of income tax from 33p in the pound to 25p in the pound a tax cut or not? If we had simply carried on with the tax regime that we inherited, with the same rates, bands and allowances, and adjusted them for inflation, a married man on average earnings would be paying nearly £20 a week more. That is the tax burden that we had under the Labour party.
Mr. Anthony Coombs : Does my right hon. Friend agree that the virtuous circle brought about by the Government's low tax policies has meant more growth, more incentive and therefore a higher tax take for the Treasury? Does he further agree that, should the Labour party have the opportunity, unlikely as it seems, to put its policy of higher taxes, a wealth tax and an investment tax into operation, that would damage the good of the economy and therefore that increased tax take?
Mr. Lamont : My hon. Friend is right, and the truth of what he says is shown in the rise in average living standards, which have gone up by nearly one third for the man on average earnings in the past 10 years, in contrast to the stagnation in living standards under the Labour party. In addition to the tax burden, the Labour Government also had a debt burden, which could not be financed out of taxes because the tax rates were penally high, so they had to finance borrowing out of inflation, which lowered living standards.
Dr. Marek : The Chief Secretary is adept at talking about tax cuts, but he talks only about income tax, when the total tax take has increased under the 11 years of this Government. As a result, total tax as a percentage of GDP is higher than it was when the Labour party was in office. If the Tory party is not to be permanently saddled with the tag of being the tax, tax and tax again party-- [Hon. Members :-- "No."] Oh yes. The tax, tax and tax again party. Will the Chief Secretary give an estimate of when the tax level that existed under the Labour Government will come about as a result of the Tory Government's policies?
Mr. Lamont : That is a little bit like being lectured on celibacy by Mae West.
Mr. Colvin : Does my right hon. Friend accept that he has had it straight from those on the Opposition Front Bench that their policies, if they were elected, would be to put up the rate of tax, reduce the tax revenue to the Exchequer, and plunge the country back into the depths from which we rescued it in 1979?
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Mr. Lamont : That is absolutely right. If we had a borrowing requirement burden similar to that which we had under the previous Labour Government, that alone would be the equivalent of 14p on income tax.Mortgages
12. Mr. Hinchliffe : To ask the Chancellor of the Exchequer what was the monthly payment on an average mortgage in July 1988 ; and what was the comparable figure in February 1990.
Mr. Lilley : The figures are £128.63 and £190.31.
Mr. Hinchliffe : Does the Minister share my concern about the clear connection between the huge increases in mortgage repayment figures and in homelessness? Is he aware that in Yorkshire and Humberside, during the 10 years of the present Government, homelessness has increased by 860 per cent? What are the Government doing to get to grips with the appalling human consequences of a high interest rate policy?
Mr. Lilley : We all recognise that high interest rates mean that families have to cut spending on other things for the time being. The level of repossessions in the past year was below that for the previous four years.
Mr. John Marshall : Does my hon. Friend agree that rising interest rates are an international phenomenon from which we cannot insulate ourselves? Does he further agree that a policy of increasing public expenditure as practised by Labour councils and advocated by the Labour Front Bench team would lead only to higher interest rates?
Mr. Lilley : My hon. Friend is correct. No Labour Government to which Opposition Members could point--let alone a Conservative Government-- have succeeded in reducing inflation without a period of high interest rates.
Mr. Chris Smith : The Financial Secretary must be aware that millions of families are facing mortgage bills that are £100 more than they were two years ago. In Mid-Staffordshire, the average is £50 extra a month. It is no comfort to such families to be told that it is an international phenomenom. When will the Financial Secretary and the Government end the exclusive reliance on interest rates as a mechanism for taking demand out of the economy?
Mr. Lilley : I recognise the difficulties of people with high interest burdens. We should remember, however, that under this Government living standards for the average family with two children and on average earnings have increased by 32 per cent. more than inflation. The index takes account of mortgage interest payments. Under the Labour Government, the increase was only 1 per cent.
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