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the House will be interested to hear the forecast from the National Institute of Economic and Social Research which was released earlier this evening. It predicts that"with a continuation of Tory policies unemployment will continue to rise throughout 1992 and 1993. Total investment will fall in 1992 by a further 1.3 per cent. After a fall of 15 per cent. in 1991, manufacturing investment will fall by another 4.9 per cent. in 1992 and that growth will be just 1.3 per cent. in 1992, well down on Norman Lamont's forecasts last November."
Those are the views of an independent institute. There is no recovery here. Indeed, the review comments :
"There is little tangible evidence of any recovery in activity in the early weeks of this year."
I will treat the House again to the quotation that my hon. Friend the Member for Derby, South used earlier.
"If we'd known how it would turn out, we wouldn't have done anything different."
Those are not General Custer's last words. They are the words of the Chancellor of the Exchequer explaining why the recovery did not come earlier, and, as we now learn, looks as if it will come substantially later, if at all, under the present regime. My hon. Friend the Member for Derby, South made the point that if we have to go through all this again, it is highly unlikely that our fellow citizens will vote to do so. I urge them not to.
9.28 pm
The Economic Secretary of the Treasury (Mr. John Maples) : The debate has been characterised by a variety of speeches. It is interesting that, although the opening and closing speeches for the Opposition had some interesting characteristics, and the last one in particular was amusing, neither made any effort to grapple with the issue of inflation or to state what the Labour party's policies would be.
My hon. Friends the Members for Hampshire, North-West (Sir D. Mitchell) and for Cornwall, North (Sir G. Neale) reminded us of the serious dangers of inflation to business. My hon. Friend the Member for York (Mr. Gregory) reminded us of the devastating effect that inflation can have on savings. My right hon. Friend the Member for Hertfordshire, North (Sir I. Stewart) pointed out clearly the weaknesses in the Opposition's policy. We were encouraged by my hon. Friend the Member for Kensington (Mr. Fishburn) to go for zero inflation. I am afraid that I missed the speeches of my hon. Friends the Members for Cornwall, South-East (Mr. Hicks), for Bury, North (Mr. Burt) and for Welwyn Hatfield (Mr. Evans), but I am told by my hon. Friend the Minister of State that they were worth reading, and I shall certainly read them.
I listened with interest to the hon. Member for Berwick-upon-Tweed (Mr. Beith). He is pretty tough on inflation--as tough as us, if not tougher. His intervention on the hon. Member for Derby, South (Mrs. Beckett) was interesting because she failed to respond to his invitation to say that Labour is serious about inflation. My hon. Friends and I find that the appalling thing about this debate is having to take lectures on inflation from the Labour party. If one wants to know what will happen in the future it is sometimes interesting to look into the history books. I think that one Labour hero said, "There's no need to look into a crystal ball when you can read the book." The book does not read very well. During the period of the Labour Government, the average inflation rate in Britain was 15.5 per cent. and the average for the European Community was 12 per cent. During the
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period of this Government, the average inflation rate in Britain has been 7.2 per cent., which has been the average for the European Community.Mr. Allen McKay (Barnsley, West and Penistone) : The effect also matters.
Mr. Maples : Inflation is a bad thing. That may surprise the hon. Gentleman, but it is.
Under Labour, the highest rate of inflation was 26.9 per cent. and the lowest was 7.6 per cent. Under the Government, the average has been 7.2 per cent. Our average rate is lower than Labour's lowest rate.
During that time it is not surprising that M0 was growing at 12 per cent. a year, and public spending was out of control. That resulted in a letter that the then Chancellor of the Exchequer was forced to write to the International Monetary Fund--an interesting document for students of history. I doubt whether a British Chancellor has ever been forced to sign a more humiliating document than the letter that the right hon. Member for Leeds, East (Mr. Healey) had to write on 15 December 1976, asking the IMF for a standby agreement. Such agreements are usually given by the IMF to bankrupt Latin American countries. He had to apply for a substantial loan and, in the last paragraph of that letter, in effect he had to hand over the control of British economic policy to the president of the IMF.
We do not have much to learn from the Labour party about inflation, but the interesting question is : what has it learnt? The Labour party has had 13 years in which to reflect and to repent. It seems to me that those years have not been spent usefully.
In "Meet the Challenge, Make the Change" in 1989, there is a short paragraph of about 20 lines on inflation. It does not make any effort to say how to deal with the problem, but it contains this amazing, mind- bending sentence :
"Inflation is in fact a complex phenomenon whose causes will vary from one situation to the next."
That is a facile cop-out because it does not say what one does to control inflation.
In 1990, the Labour party went further. In "Looking to the Future", the 1990 policy revision, there is a page on inflation. Again, there are no suggestions on how one would set about keeping it under control, but there is this amazing proposition :
"We propose to develop regular discussions between government, employers, trade unions and others about Britain's economic prospects".
Hon. Members : What is wrong with that?
Mr. Maples : That is not a policy for dealing with inflation. It sounds to me and to my hon. Friends very reminiscent of beer and sandwiches at No. 10. With the new model Labour Treasury team, I suspect that it would have to be shellfish and champagne. In 1991, "Opportunity Britain" went a little further, as it contained a paragraph headed "Monetary discipline". It is only a heading, it does not say anything about monetary discipline and it dismisses the use of interest rates, calling instead for the use of credit controls.
The subject of credit controls is interesting. I do not know whether Opposition Members have studied the remarks of the right hon. Member for Llanelli (Mr.
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Davies), who has the advantage over all of them of having been a Treasury Minister for a few years. In June 1989, he was reported as saying :"The Labour Party idea that you should have credit controls is rubbish. There is no way you can control credit except by controlling the price of credit, and the price of credit is Bank Rates." A couple of weeks later, on 18 June, the Leader of the Opposition said on "Panorama" that we need credit controls. Obviously, he had not read or digested those remarks. My right hon. and hon. Friends and I can forgive him. He has a little difficulty when he is let out alone, and we understand that. Perhaps the more honest comment came from him in that famous "World at One" interview with James Naughtie-- [Interruption.] Opposition Members do not like it. We have the tape of that interview and it makes fascinating listening. When James Naughtie asked the right hon. Gentleman, "What would a Labour Government do to reduce inflation?", after having lost his temper and sworn a little he said, "To cut a long story short, we don't know." We know that he does not know, but it is a pity that some Labour spokesmen are not aware of that.
The debate about credit controls rumbled on. In October 1989, a few months after the remarks by the right hon. Member for Llanelli, the hon. Member for Dagenham (Mr. Gould) said in a Walden interview that a Labour Government would impose controls on mortgage lending specifically on people trading up. Of course he realised that if there had to be credit controls they would have to be on mortgage lending, which accounts for more than 80 per cent. of consumer borrowing. A week later the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) said that he strongly disagreed and that there was no way in which they would penalise a family who wished to buy a larger house. On that, as on so many matters, there is something of a muddle among Labour Front-Bench spokesmen. We found especially interesting- -this was brought out in the speech by the hon. Member for Derby, South-- the fact that the key lever for controlling monetary policy and inflation is interest rates. It is the key lever used by all other members of the exchange rate mechanism, by the Bundesbank and by the Dutch and French central banks. It is also used by the Americans and the Japanese, but apparently we do not need to use it. We went through a ridiculous charade over interest rates and what has been christened Monklands law, which states that whatever interest rates are, they ought to be 1 per cent. lower. That was the case at varying interest rates last year.
The "World At One" is a dangerous programme for Labour's Front-Bench spokesmen because on that programme on 15 November last year the shadow Chancellor was asked by the presenter whether he would like the Government to make further cuts in interest rates. One would have thought that he would say 1 per cent. It had been 1 per cent. all year, so why should it be any different? However, the shadow Chancellor said :
"I would have to take advice about it".
Apparently, he did not need any advice when he was calling for a 1 per cent. cut every two weeks during 1991, but by October he needed advice about it. Perhaps it is good that humility has broken in, because Monklands law was never a sensible policy. The shadow Chancellor's
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attitude shows that Labour does not have a serious policy on inflation. It is not serious about interest rates and that shows that Labour is not serious about inflation.The Labour party recently developed or found by accident a rather convenient fig leaf called the exchange rate mechanism. We are supposed to take seriously its commitment to the ERM, but it is rather difficult to take seriously a party that apparently cannot make up its mind about Europe. [Interruption.] Labour supported Britain's entry to the European Community in 1962, opposed it in 1964, supported it in 1966, opposed it in 1971, supported it in 1975, opposed it in 1983 and now Labour supports it again. Every single member of the shadow Cabinet who was in the House in 1972--I have the Division list here--opposed British entry to the Community in 1972 when the Bill on accession to the Community went through Parliament. The Division list contains the names of not only the shadow Chancellor but the Leader of the Opposition. In 1986--only five and a half years ago--14 members of the shadow Cabinet voted against the Single European Act. By chance, I have the Division list for that and among the names are those of the hon. Member for Derby, South and the right hon. and learned Member for Monklands, East (Mr. Smith). Over the past five and the next 10 years the key to the development of the European Community is the Single European Act and 14 Labour Members, including the two proponents whom we are now supposed to take seriously, voted against it. The 1983 Labour manifesto on which they all ran for election or re-election stated :
"We will also open immediate negotiations with our European Community partners and introduce the necessary legislation to prepare for Britain's withdrawal within the lifetime of a Labour Government."
I have kept until last the words of the Leader of the Opposition. Apparently the keystone of the Opposition's policy on inflation is membership of the exchange rate mechanism. The attitude of leading Labour Members to the ERM and the European Community throws an interesting light on the question whether they can be taken seriously. As usual, the Leader of the Opposition is the somersaulter supreme on this issue. In 1975, in an article in Tribune, he said :
"Only the EEC in its political and economic dimensions is the robber of the real sovereignty of the people".
In 1983--he had not changed his mind during those eight years--he said :
"We want out of the Common Market."
In 1988, he had changed his mind. In The Independent on 4 February, he was quoted as saying these amazing words :
"I have never seen hostility towards the European Community in the Labour party".
Where had he been? Obviously, he had not been listening to his right hon. and hon. Friends. What is more, he obviously had not been listening to himself.
During the short space of five years, the Labour party has moved from outright opposition to the European Community to fawning acceptance of anything that comes from Brussels. From the way in which Labour Members behave, one would think that Mr. Delors had a large block vote at the Labour party conference. We are supposed to take seriously that Damascene conversion by two or three Labour Members-- [Interruption.] I am getting enough laughs.
Let us look behind those few members of the Opposition Front Bench whose word we have on that matter. Last week, we had a debate on the economy. Four
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of the eight Labour Back Benchers who spoke in that debate called for devaluation. That is hardly a ringing endorsement of the Opposition Front-Bench policy. In the debate on the autumn statement, 25 Labour Back Benchers tabled an amendment calling for full- blooded socialism. That is not even consistent with membership of the European Community, let alone the exchange rate mechanism. What I and some of my hon. Friends wondered during that debate was how many more Labour Members thought the same and would have liked to sign that amendment. We suspect that it was the brave tip of a cowed and gutless iceberg--[ Hon. Members-- : "It is melting."] It is melting fast. The only reason why the Labour party decided to favour the ERM is that the party perceived differences of opinion within the Conservative party about it. When we shot that fox, Labour decided to favour economic and monetary union. Its policy has been driven by disingenuousness and opportunism.Mr. Nicholas Brown : On the subject of disingenuousness and opportunism, I am sure that the Minister will recall that in the last three of the Conservative party's manifestos one of the key elements of its attack on inflation was its very tough strictures on borrowing. Is that still the case?
Mr. Maples : We shall continue to run a very responsible fiscal policy. We have always done so. I have just checked my copy of the Division list, only to find that the hon. Gentleman voted against the European Single Act. I thought that he might have been about to rise to tell us that we had been mistaken--
Mr. Brown rose --
Mr. Maples : The hon. Gentleman has had his opportunity. Labour's Treasury team has been investing a good many of its lunch hours in the City, trying to persuade people that Labour is now a reformed character and should be allowed out on parole. It would be interesting to hear what some of the City commentators have had to say about that. My right hon. and learned Friend the Chief Secretary pointed out that almost all of them thought that the advent of a Labour Government would bring an increase in interest rates. Some of them said that interest rates would go up, some said by 4 per cent., but none said that they would go down.
What about inflation? That is the subject of today's debate-- [Interruption.] I am dealing with the Opposition's policy on inflation. I shall start with James Capel. Who had lunch at James Capel? Will nobody own up to that? James Capel estimates that under Labour, inflation typically would be about 2 per cent. higher. Goldman Sachs has predicted that inflation would be higher under a Labour Government. S. G. Warburg said :
"the biggest flaw in Labour's approach concerns the absence of a credible strategy for tackling inflation."
Mr. John Smith rose --
Mr. Maples : I am in the middle of a paragraph--[ Hon. Members-- : "Give way."] I shall do so in a minute. I am in the middle of a paragraph and I shall give way when I have finished it. UBS Phillips and Drew--
Mr. Smith rose --
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Mr. Maples : I am dealing with the City. When I have finished, I will give way to the right hon. and learned Gentleman.
UBS Phillips and Drew said that it was not yet convinced that the Labour party has successfully expelled its inflationary tendencies. I would be especially interested to know--and so should the Leader of the Opposition-- who had lunch with UBS Phillips and Drew. Not only did they strike out on interest rates and inflation, they struck out pretty generally. The UBS Phillips and Drew briefing also said : "It is not hard to ridicule this pot -pourri of supply-side socialism : that unmistakable whiff of failed 1960s policies ; the National Investment Bank, surely destined to retrace the history of the National Enterprise Board, picking losers."
Labour talks a lot about investment, but the investment made by its members in lunch hours does not seem to have paid off.
Mrs. Beckett : Has the Minister seen UBS Phillips and Drew's most recent report, which talks about a second Labour Government consolidating their position after a second election victory?
Mr. Maples : That must have been written by someone else. I quote again :
"A pot-pourri of supply side socialism : that unmistakable whiff of failed 1960s policies".
I quoted only about six of the 22 comments that I have before me--none of which is favourable.
Labour has not only failed to convince the City--
Mr. John Smith : The Economic Secretary made a point of quoting Goldman Sachs, to which Conservative Members constantly refer. Did the hon. Gentleman read a day or two ago that the Government's given explanation for the recession--international factors--was described as eyewash by Goldman Sachs? If the Minister believes Goldman Sachs in one instance, why does he not believe it in another?
Mr. Maples : I do not believe anybody on everything, but Goldman Sachs' chief economic adviser has been a consistent supporter of Treasury policies throughout the past 18 months. Goldman Sachs says that, under Labour, interest rates and inflation would increase, and it does not make any very polite comments about Labour policies. The Opposition are in disarray over several of their policies, but nowhere more so than in respect of their policies on spending and tax. In 1989, the Leader of the Opposition promised :
"At the time of the next General Election, we will set out the accurate costs of our manifesto proposals."
A few months later, the hon. Member for Derby, South said : "We will begin the detailed costing of the manifesto at the end of next year"--
that is, 1990. We did not get it, and in September 1991, we were told by the hon. Member for Copeland (Dr. Cunningham) :
"Detailed spending pledges will not be included in Labour's manifesto".
That must be one of the first examples of an election promise being broken before the election has even taken place.
We have done the Opposition's sums for them. We make the cost of their proposal £35 billion--or did. I cannot remember any specific pledges being denied but if any have been, we have no difficulty, because new pledges
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are added all the time. I could ask my right hon. and learned Friend the Chief Secretary for confirmation, but I believe that the total now is £37 billion or £38 billion.Under Beckett's law, the hon. Member for Derby, South says that those are not pledges but wishes and prayers. Let us examine a couple of them. In "Opportunity Britain", Labour states that it will increase overseas aid to 0.7 per cent. of GNP. That would cost £2.3 billion. The hon. Member for Derby, South says that is not a pledge, but in his speech to the Labour party conference last year the shadow Foreign Secretary confirmed that target, saying that that was a firm commitment, costed and clear. He pledged that a Labour Government would carry it out. Who are we to believe- -the shadow Foreign Secretary or the hon. Member for Derby, South?
Mr. Smith rose --
Mr. Maples : I have one more question for the right hon. and learned Gentleman to answer. "Opportunity Britain" stated that Labour
"will increase the basic pension in line with prices or earnings, whichever is the higher".
The right hon. and learned Member for Monklands, East confirmed that at Labour's party conference, when he said :
"Of course that Labour Government will restore the link between retirement pensions and earnings and prices--whichever is the higher."
Who are we to believe in that instance--the shadow Chief Secretary or her boss? The right hon. and learned Member for Monklands, East did worse. He produced a completely new spending pledge that was not even included in the £35 billion that I mentioned. On 30 December, he said on "World At One"--a dangerous programme for the right hon. and learned Gentleman :
"I would release the capital sums which local authorities have at their disposal".
There is up to £8 billion of those. I do not know whether we are talking about £2 billion, £3 billion or £8 billion. However much it is, it is public spending and it is public borrowing.
Mr. Smith rose--
Mr. Maples : The right hon. and learned Gentleman was not even listening when I made my last point, and I have given way several times to Opposition Front Benchers.
I have discovered the secret. I have discovered why the Labour party has difficulties with its arithmetic. Into my hands has fallen an interesting document entitled "The Way to Win : Labour's Campaign Handbook for the 1990s". It provides guidance for Labour candidates, and it contains an interesting section headed "Counting the Votes". I want my right hon. and hon. Friends to listen to this : why Labour has difficulties will be made clear.
The document explains :
"You need to know how many votes you require to win."
That is pretty uncontentious, but it is a little more complicated than it sounds. The document continues :
"For example, Constituency A has 65,000 voters. If the general election turnout is 75 per cent., then the total voting will be 48, 750. If only two parties stand, you need 50 per cent. 1 to win--24, 375."
If Labour candidates are thought by the Labour party not to be able to add up to 25,000, it is not surprising that the Opposition Front Bench cannot make it up to £35 billion.
Mr. John Smith : The Economic Secretary referred to expenditure on overseas aid. Will he make it clear,
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speaking on behalf of the Government, that the Government are reneging on their commitment to meet the United Nations target?Mr. Maples : It is a long-term target, as we have made clear. [Interruption.] That is exactly the point. The shadow Foreign Secretary said that Labour would meet it in the lifetime of a Parliament : he said that a Labour Government would do it in five years. It is in a list of spending pledges.
I am glad that the right hon. and learned Member for Monklands, East intervened, because I am just coming to him. The right hon. and learned Gentleman represents the respectable face of the Labour party. He is not very consistent about the exchange rate mechanism or European monetary union ; he does not have much of a policy on inflation. He ran on a 1983 manifesto. Nevertheless, he represents the respectable face of the Labour party. What we must ask ourselves is whether he represents anyone in the Labour party other than himself. From time to time, he represents his client down in Islwyn ; but he certainly does not represent the parliamentary Labour party. Recently, we have been entertained by a series of articles in the newspapers. They started in The Guardian --[H on. Members :-- "It is a Tory newspaper."] We are told that it is a Tory newspaper. We had the headline :
"Curious case of the Scot on the rocks".
We learn that the right hon. and learned Gentleman is
"not radical enough",
and
"less clever than he thinks".
We read
"Why the knives are coming out for John Smith",
and
"Why the claws are out for John Smith".
I have quoted from only four of the many newspaper articles that have appeared over the past 10 days.
I originally thought that all this was because Labour Back-Benchers were upset about raising people's taxes if they earned more than £390 a week, or about the idea that raising income tax helped the country to get out of the recession. Then I realised that I had been very naive. The truth was revealed to me in one of the newspaper articles, in which it was made clear that nothing of the sort was the case--that we were seeing a jockeying for position for when Labour lost the next election.
That was set out very succinctly in The Independent on Sunday --not, I think, a supporter of the Conservative party--which stated : "More worrying for Labour is the most convincing theory, that last week's shenanigans constituted elaborate jockeying for the party leadership should Labour fail to become the government. Many within the party detect a pre-emptive strike to damp down Mr. Smith's chances of walking his way to the leadership."
Not only is the right hon. and learned Gentleman not as clever as he thinks ; he is not as popular as he thinks.
There are red lines on the carpet in the Chamber so that we cannot stick swords in each other's fronts. Perhaps we should arrange for a red line to be drawn behind the right hon. and learned Gentleman, to make sure that no one can stick a dagger in his back. I hope that it does not happen, but, if we were to find a dagger in his back, whose fingerprints would we find on it? Would they be those of one of the 25 signatories to the amendment to the autumn statement who want socialism, or would they be those of one of the 100-odd other hon. Members who would have
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