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House of Commons
Thursday 7 May 1992
The House met at half-past Two o'clock
PRAYERS
[Madam Speaker-- in the Chair ]
2.35 pm
Mr. Dennis Skinner (Bolsover) : On a point of order, Madam Speaker. Will you confirm that on Thursdays, when there is business in the House the following week, it is usual for a statement to be made and for questions to be asked about that business? Is it correct that on this occasion there is to be neither a statement nor an opportunity for Back Benchers to call the Government to account through questions? Through your offices, can we establish who is responsible for the failure to have a business statement and questions? Are the Government, with their tiny majority, refusing, or have the usual channels made some other arrangements, which I do not find satisfactory? Will you confirm that business questions should be a matter for the entire House of Commons and not just the two Front Benches? Back Benchers in particular want to raise matters that are important to their constituencies and elsewhere and which concern the business for the following week.
Madam Speaker : This is a bit of an unusual week, even for me. As the hon. Gentleman understands, this is a matter for the Government business managers, not for the Chair. It is outside the authority of the Chair.
Mr. Skinner : But it is not usual?
BILLS PRESENTED
British Coal and British Rail(Transfer Proposals)
Mr. Secretary Heseltine, supported by Mr. Chancellor of the Exchequer, Mr. Secretary MacGregor, Mr. Secretary Howard, Mr. Secretary Hunt, Mr. Secretary Lang, Mrs. Secretary Shephard, Mr. Tim Eggar and Mr. Roger Freeman, presented a Bill to confer powers on the British Coal Corporation and the British Railways Board to act in relation to proposals for the transfer of any of their functions, property, rights or liabilities to any other body or person ; and for connected purposes : And the same was read the First time ; and ordered to be read a Second time tomorrow and to be printed [Bill 1.]
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European Communities (Amendment)
Mr. Secretary Hurd, supported by The Prime Minister, Mr. Chancellor of the Exchequer, Mr. Secretary Clarke, Mr. Secretary Heseltine, Mr. Secretary MacGregor, Mr. Tony Newton, Mr. John Gummer, Mr. Secretary Howard, Mrs. Secretary Shephard and Mr. Tristan Garel-Jones, presented a Bill to make provision consequential on the Treaty on European Union signed at Maastricht on 7th February 1992 : And the same was read the First time ; and ordered to be read a Second time tomorrow and to be printed [Bill 2.]
Non-Domestic Rating
Mr. Secretary Howard, supported by Mr. Chancellor of the Exchequer, Mr. Secretary Heseltine, Mr. Secretary Hunt, Mr. John Redwood and Mr. Robin Squire, presented a Bill to make further provision with respect to non- domestic rating for the period beginning with 11th March 1992 and ending with 31st March 1995 ; and for connected purposes : And the same was read the First time ; and ordered to be read a Second time tomorrow and to be printed [Bill 3.]
BUSINESS OF THE HOUSE
Ordered,
That--
(1) Standing Order No. 13 (Arrangement of public business) shall have effect for this Session with the following modifications namely :
In paragraph (4) the word "thirteen" shall be substituted for the word "ten" in line 44 ; in paragraph (5) the word "eighth" shall be substituted for the word "seventh" in line 46 ; and in paragraph (8) the word "two" shall be substituted for the word "four" in line 67 ; (2) Private Members' Bill shall have precedence over Government business on 11th December, 15th, 22nd and 29th January, 5th, 12th and 19th February, 26th March, 23rd and 30th April, 7th and 14th May and 2nd July ;
(3) Private Members' Notices of Motions shall have precedence over Government business on 19th and 26th June, 3rd and 10th July, 13th 20th and 27th November, 4th December, 26th February and 12th March, and ballots for these Notices shall be held after Questions on 3rd, 10th, 17th and 24th June, 28th October, 4th, 11th and 18th November and 10th and 24th February ;
(4) On Monday 15th February and Monday 17th May, Private Members' Notices of Motions shall have precedence over Government business until Seven o'clock and ballots for these Notices shall be held after Questions on Thursday 28th January and Thursday 29th April ; and (5) No Notice of Motion shall be handed in for any of the days on which Private Members' Notices have precedence under this Order in anticipation of the ballot for that day.-- [Mr. Newton.]
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Orders of the Day
Debate on the Address
[Second Day]
Order read for resuming adjourned debate on Question,
That an humble Address be presented to Her Majesty, as follows :-- Most Gracious Sovereign,
We, Your Majesty's most dutiful and loyal subjects, the Commons of the United Kingdom of Great Britain and Northern Ireland in Parliament assembled, beg leave to offer our humble thanks to Your Majesty for the Gracious Speech which Your Majesty has addressed to both Houses of Parliament--[ Mr. Kenneth Baker.]
Question again proposed.
Public Expenditure
2.37 pm
The Chief Secretary to the Treasury (Mr. Michael Portillo) : I wish to add my welcome to you, Madam Speaker, on taking up your post in the Chair. When you were elected there was a great deal of discussion about the loneliness of your position and the fact that you can have no friends. As the new Chief Secretary, I feel the strongest empathy for your position. I no longer have any friends. I have already found that colleagues who used to greet me cheerfully in the Corridors now pass by disdainfully on the other side. My ministerial colleagues are firmly pledged to support me in the most rigorous control of public spending and have given me their most firm and unwavering support, but always with the caveat, "Not in my Department, thank you." I believe that that is known appropriately as "NIMDism".
It is unusual during the debate on the Address to have a debate on public expenditure separate from the main debate on the economy, but public spending is an important subject, and I am delighted that it has been chosen. However, I am surprised that it is the Labour party which has chosen that subject. If there is one point on which we can agree, it is that economic policy was the issue on which the Labour party lost the general election. Its decision that economic policy should be the subject of the first debate is brave indeed. That is known as leading with one's chin, and it provides an early opportunity for the architects of Labour's defeat--the right hon. and learned Member for Monklands, East (Mr. Smith) and the hon. Member for Derby, South (Mrs. Beckett)--to remind us how their designer socialism turned out to be the blueprint for losing a record fourth election on the trot.
It is astonishing to sentient beings such as you, Madam Speaker, and myself, that now, with their edifice so evidently collapsed, those same architects are now referred to--apparently with no sense of irony--as the "dream ticket". Labour Members representing Scotland--those who survived the Tory onslaught there--will recall the Tay bridge disaster. William McGonagall--a fine poet with whom you, Madam Speaker, will be familiar-- tells us that the
"Beautiful Railway Bridge of the Silv'ry Tay"
collapsed with the loss of 90 lives
"On the last Sabbath day of 1879,
Which will be remember'd for a very long time."
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The architects of the Tay bridge never worked again--yet the designers of Labour's disaster are apparently to be commissioned to prepare the next set of drawings, with dispatch and without much of a competition. How can the Labour party contemplate forgiving the master craftsmen of its defeat? How can it entrust the future to such proven incompetents? The clue is to be found in the term "dream ticket". Shakespeare understood dream tickets. How prophetically he spoke of the need for modern electorates to forgive incompetent shadow Ministers. In "A Midsummer Night's Dream" he gave them the perfect apology :"If we shadows have offended,
Think but this, and all is mended,
That you have but slumber'd here,
While these visions did appear."
That, indeed, is the dream ticket.
Although I am delighted to be given the opportunity to debate public spending, could it be that the Labour party has chosen that topic to enable each candidate for its leadership and deputy leadership to perform in the House? This will be a sort of beauty parade--if one can describe in such terms an event involving the hon. Member for Kingston upon Hull, East (Mr. Prescott).
Mr. Campbell-Savours : Will the Minister give way?
Mr. Portillo : I shall, even though this is by way of a maiden speech.
Mr. Campbell-Savours : Congratulations.
The Minister is pressing to know why we have chosen a debate on economic affairs. I have here a leaflet--I see that the Minister is being briefed about it by the Chancellor of the Exchequer. Perhaps he will tell us more about this document, which I believe was circulated as an eve-of-poll leaflet in the constituency of the hon. Member for Hendon, South (Mr. Marshall). It describes a tax demand from the Labour party, called "Labour's Tax Bombshell", which is followed by a tax table which was replicated in the tabloid newspapers. Will the Minister admit today that that tax table is a lie? It was a campaign lie ; it was not based on the truth. Those tax tables were never at the heart of Labour policy, and were never used by the shadow Chancellor. They were not produced at our press conference or in the shadow Budget. They were a lie, yet they contributed to the election of a Conservative Government. Will the Minister disown that leaflet today? [Interruption.]
Mr. Portillo : In my wildest dreams, I did not expect to draw so much blood so early in the debate. The hon. Member for Workington (Mr. Campbell-Savours) now tells us that the tax proposals were not central to the Labour party's policies. What an extraordinary thing! I suppose that that is a vote for the hon. Member for Dagenham (Mr. Gould), if not for the hon. Member for Brent, East (Mr. Livingstone).
I will answer the point raised by the hon. Member for Workington. We costed Labour's programme--the programme that the Labour party gave us. Why did we have to cost it? The reason was that the Labour party refused to cost it. If the Labour party had costed it, we might have been able to think about its figures. In the absence, we provided our own, based on Labour's programme.
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Mr. Campbell-Savours rose --Madam Speaker : Order. The hon. Gentleman has had an intervention. I hope that he will bide his time for moment.
Mr. Portillo : I was drawn to mention the hon. Member for Brent, East. I am sorry that the hon. Gentleman has been excluded from the beauty parade. He has been banned even from reaching the catwalk. That is a great pity in view of his undoubted talent for spotting an election-losing policy at 40 paces. He warned the Labour party time and time again that its policies on taxation matters would lead it to disaster, but like the court fools who were licensed by great monarchs to tell the truth, but not to do it too often or too loudly, the hon. Gentleman told the truth too often and too loudly, and he has been sent packing from Labour's court. He knows why the election was lost, and he knows why it was won.
Our victory underlined the British people's confidence in this Government's capacity to manage the economy. It was an endorsement of our reliability under the pressure of a difficult international environment, with growth in the Group of Seven countries during 1991 at its lowest in a decade, and with the United States, Canada and Germany all having experienced recessions. The key factor in our victory was the voters' fundamental confidence in the Government's control of public finances.
Mr. John Marshall (Hendon, South) : On a point of order, Madam Speaker.
Madam Speaker : Is the hon. Gentleman rising on a point of order?
Mr. Marshall : Yes. The hon. Member for Workington (Mr. Campbell- Savours) insists on calling-- [Interruption.]
Madam Speaker : Order. Is the hon. Member for Hendon, South rising on a point of order?
Madam Speaker : Let me hear it.
Mr. Marshall : The hon. Member for Workington says that I won my election on a lie. I did not, and I think that he should withdraw that statement.
Madam Speaker : That is not a point of order for the Chair. I hope that we shall have a most robust and interesting debate, and I hope that it will not be too personalised.
Mr. Portillo : Voters in the election were clearly concerned about how much they would be asked to pay in taxes, on what the money would be spent and what quality of services that money would buy. This party believes that what the Government take from those who earn to spend on their behalf should be as little as possible and should be spent as well as possible. That clarity of vision gave voters a stark choice.
Which party could the voters trust, and which party would lead them out of the recession? Was it to be the party whose solution to the recession was a £7 billion tax increase? Was it to be the party that, faced with a recession in the mid-1970s, recklessly carried on spending? Was it the party that, having increased public spending in the 1970s as a proportion of gross domestic product by some six percentage points in just two years, was forced to raise
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tax rates to 98p in the pound? Was it the party that, despite that massive increase in taxation, still could not balance the books so that the public sector borrowing requirement peaked at 9er cent. of GDP--in today's money, almost £60 billion? Was it the party that borrowed and borrowed, and went on borrowing until its credit ran dry and it had to crawl to the International Monetary Fund?The answer to those almost rhetorical questions is no. Instead, the voters put their trust in a party that had shown over the period of its government that it could reduce public borrowing, end the inexorable rise in public expenditure's share of national income and bring about a massive reduction in personal taxation.
Mr. Dennis Skinner (Bolsover) : On borrowing, the Chief Secretary will know that there was an estimate of roughly a £28 billion public sector borrowing requirement. There is also another suggestion in the hidden agenda that the likely outturn is well over £35 billion. What I want to know from the Chief Secretary, who is trying to lecture the Labour party about borrowing, is when he, in the medium term or otherwise, along with the Chancellor of the Exchequer, will be able to balance the books. We have a right to that answer now. We did not have it in the general election. Tell us now.
Mr. Portillo : On the first point, I have no reason to change our forecast of a £28 billion PSBR for this year. The rest of my speech deals with the broader point, and I hope that the hon. Gentleman will bear with me.
The tax reforms introduced by the Government since 1979 are the envy of Europe. We have cut the basic rate of income tax from 33p to 25p, and the top rate from 83p to 40p. We have introduced a new starting income tax rate of 20p, we have raised basic tax allowances by 27 per cent. in real terms, we have cut the corporation tax rate from 52 per cent. to 33 per cent., which is now a level lower than in any EC or G7 country, and we have reduced the small companies' rate of corporation tax from 42 per cent. to 25 per cent.--a remarkable record.
Despite that reduction, we have been able to increase public spending in priority areas, in particular to ensure that it reaches those people who depend necessarily on the taxpayer. I said just now "despite that reduction in taxation", but in fact it is largely because of that reduction. Opposition Members will not understand that paradox. They are not good at understanding paradoxes ; they are good only at creating them-- inadvertently. But the lesson of the past 13 years is that, if we reward enterprise and if we give people access to wealth creation, we get more wealth creation. It is as simple as that.
Lower tax rates and a smaller role for the state foster an environment in which business can flourish, industry can prosper and the economy can grow. It is that growth which can enable and which will enable the Government to increase public expenditure in key areas, cut direct taxes and reduce borrowing.
Mr. Bruce Grocott (The Wrekin) : Before the Chief Secretary goes entirely into fantasy, when he is talking about the economy growing, will he remind us how the economy grew in the past 12 months?
Mr. Portillo : The hon. Member knows that we have not had growth in the past 12 months, but his scepticism and cynicism are answered by this point. Labour Members also could not understand this point. They could not believe
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that we would be able to reduce public borrowing from the level at which it had been left to us by the Labour party. They did not understand that we could cut public spending as a proportion of GDP and could reduce taxation. We did all those things during our period in government, and we shall do them again. That is what we did in the 1980s, and that is what we will do in the 1990s.It is by a determined policy of rolling back the reach and the scope of the state that the Government have created the conditions for a massive increase in wealth creation, with benefits not just for a privileged few but for all, spread widely through our community. Individuals are now free to buy their own council houses. They are free to leave the state earnings- related pension scheme. They are free to take out personal pensions. More than 4.5 million people so far have done just that.
It is now easier to set up and participate in employee share schemes, while the introduction of personal equity plans has reduced the bias against direct share ownership by the people. The return of state businesses to the private sector has not only given employees in those businesses a stake in the businesses in which they work, but has contributed to wider share ownership among the public at large. Those policies are the ones that we pursued successfully in the past decade. They are again at the core of the new Parliament, as the Queen's Speech makes clear.
We had to hear a great deal during the election campaign about how we were not spending enough on this programme or on that other pet project of the Opposition. No doubt, undaunted by the electorate's judgment at the election, the hon. Member for Derby, South will repeat the same things this fine spring afternoon.
You will not be surprised to hear from me, Madam Speaker, that I do not believe that one can judge the standard of services by the amount of taxpayers' money that we put into them. As Mandy Rice-Davies might have said, a Chief Secretary would say that, wouldn't he? But even if we use that outdated measure favoured by Labour Governments in the 1960s and 1970s and still favoured by the hon. Member for Derby, South today, it is clear that we have delivered large increases in resources to priority areas and that we were able to do that while cutting direct taxes and cutting public borrowing.
Since 1978-79, spending on the health service in England has increased by more than 54 per cent. Spending on law and order has doubled. Capital spending per pupil in the nation's schools fell by 60 per cent. under Labour. Since 1978-79, when, you will recall, Madam Speaker, we came to power, it has risen by 13 per cent. Central Government investment spending on health and social services fell by 26 per cent. under Labour, but it has risen by 53 per cent. under this Government. Investment in vital infrastructure such as national roads and transport fell by almost 40 per cent. under the Labour Government, and is up by 63 per cent. under this Government. There have been substantial increases in the investment in British Rail and London Transport. Investment by those two this year is set to be more than £2.5 billion.
The reason why I have drawn your attention to these highly significant statistics, Madam Speaker, is to demonstrate that the Chief Secretary is not necessarily against public spending. I am against excessive public
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spending, poor value for money and public spending on the wrong things. In fairness to my colleagues, I should say that that has generally given Chief Secretaries plenty of scope, as my distinguished predecessor found when he had the job.The essence of good government is to decide from time to time what our priorities are and to ensure that the money is available for those priorities and for those people most in need. That requires the Government to keep the firmest grip over the total of public spending. Aneurin Bevan once said that the language of priorities was the religion of socialism. But today the language of priorities is the monopoly of Conservatism.
Mr. Nigel Spearing (Newham, South) : I am grateful to the Minister for giving way to answer a question which he is uniquely fitted to answer. In determining the right level of expenditure for local government, his Government adopted standard spending assessments. Does he agree that more than 50 councils--both Conservative and Labour-controlled--received less money for their services than even the Government designated because of the shortfall in their SSA for capital charges of interest? For instance, Newham had £10 million less than it should have had because £18 million was allocated by the Government for interest charges, but it had to pay £28 million of interest. All those councils had to top-slice services. Was that deliberate or was it a mistake?
Mr. Portillo : I am grateful to the hon. Gentleman for raising the point about interest. It simply shows that a policy of borrowing does not come freely. The Government do not reward local authorities for the level of borrowing that they undertake. The Government compensate for what we believe to be an appropriate level of borrowing. That is why authorities which borrow excessively will have to bear the cost themselves. It is absolutely right that they should do so. Value for money must play its part. When my right hon. Friend the Prime Minister was Chief Secretary to the Treasury, he summarised the need to focus on efficiency when he said :
"Value for money is not an arcane fetish of Treasury Ministers It is an absolute obligation that public sector managers owe to the taxpayer."
Value for money has been central to our reforms, in particular in health and education.
Figures for the first six months of our national health service reforms suggest that an extra 250,000 patients have been treated this year. Since 1978-79, there are 16,000 more doctors and dentists and 51,000 more nurses and midwives. In higher education, the number of students has risen from one in eight in 1979 to one in four in the coming year. Efficiency scrutinies, market testing and compulsory competitive tendering are saving us hundreds of millions of pounds a year in central Government, local government and the national health service.
The Queen's Speech underlines the priority that the Government attach to improving the quality of public services. The citizens charter, under the excellent stewardship of my right hon. Friend the Chancellor of the Duchy of Lancaster, will be at the centre of decision-making and steps will be taken to apply its principles throughout the public services, promoting the challenge of competition and putting the customer first.
At the heart of the citizens charter is the principle that what the state does it must do well. The charter
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programme is about finding better ways of converting the money that can be afforded into even better services. That will be a central component of public expenditure policy in the years ahead. However, the citizens charter is designed to complement rather than substitute for the Government's other fiscal policy objectives. Those objectives are unchanged, as the Queen's Speech makes clear.Our determination to control public spending and conduct the business of Government prudently does not simply arise from our desire for efficient government and sound economic policy. Vital though those both are, there is, for us, a profound question of principle. Unlike the Opposition, we do not believe in the inexorable growth of the reach and size of the state. Nor do we believe that the state can and should try to solve all our problems.
Unlike the Opposition, we believe in rolling back the state and returning to the individual as much autonomy over his or her life as possible. For that reason, it is vital to keep the firmest control of that proportion of the national wealth that is taken from the people in taxation and spent on their behalf.
The Queen's Speech commits us to reducing the share of national income taken by the state, as it commits us to balancing the budget over the medium term. We shall set policy in the medium term to ensure that the United Kingdom meets the convergence criteria set out in the Maastricht treaty, and we shall reduce taxes when it is prudent to do so.
I do not claim that attaining those objectives will be easy, but attain them we must. Otherwise, we shall leave future generations with an unacceptable legacy. A sustained rise in borrowing would obviously imply higher debt interest payments in years to come. The right hon. and learned Member for Monklands, East has stuck doggedly to his shadow Budget against criticism from far and wide--nay, from as far afield as Dagenham. The hon. Member for Derby, South has recently told us of her continued belief in clause 4, her attachment to the trade unions, her affiliation to CND and her lingering fondness for the right hon. Member for Chesterfield (Mr. Benn) and, indeed, for Mr. Arthur Scargill. The hon. Lady believes that a combination of leader and deputy leader of her party can form what she calls a "creative partnership".
That creative partnership on offer today is between the economic policies that lost Labour the 1992 election and the broader policies that lost Labour the elections of 1983 and 1987. That may be described as a dream. It is certainly the Labour party sleepwalking into the future. If it is a dream ticket, it is a dream come true not for the Labour party but for the Conservative party.
While the Labour party dreams, we shall work. Our policy remains to balance the budget over the medium term and to reduce taxation when it is prudent to do so. The policy is tough and is beyond the comprehension of an Opposition who do not understand how the economy works, nor the need to make choices. But it is a less daunting task than we faced in the 1980s, when we inherited high rates of taxation and a deficit in excess of today's. During the 1980s, we cut those taxes and we eliminated that deficit. Last month, we were re-elected because the British people know that the policies that succeeded in the 1980s will succeed again in the 1990s.
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3.5 pmMrs. Margaret Beckett (Derby, South) : May I join in the congratulations to you, Madam Speaker? I am delighted to see you in your place.
I also congratulate the Chief Secretary to the Treasury on his promotion to the Cabinet. I am not entirely surely whether I should congratulate him on the specific post that he occupies, for two reasons. The first is the underlying situation that he has inherited--the state of the public finances, about which I propose to say a little more than he did. The second reason is the framework within which the right hon. Gentleman is expected to resolve those problems, about which I shall again say a little more than he did. In case the right hon. Gentleman thought that a change of personnel might deflect our approach to the Government's policy, it is only fair to warn him that that is not so. The present Prime Minister, when he was Chancellor, speedily dissociated himself from targets set by his predecessor. When asked about the phrase that inflation should be the judge and jury of performance, he said, "I never said that." That was a wise precaution, as his policies were just about to shove inflation to almost 11 per cent. It may be that one reason for the present Chief Secretary's appointment is that he will be able to make a similar claim, and state, "I did not say that," about a number of matters that his predecessor has recently said.
The policy stance that the right hon. Gentleman must defend and implement on this occasion was explicitly stated and reinforced not only by his predecessor, the dear departed Chief Secretary to the Treasury, now the Secretary of State for National Heritage, but by the Chancellor and the Prime Minister that the present Chief Secretary to the Treasury still serves. I was delighted to hear the present Chief Secretary reiterate his position today.
The other possibility that we must entertain is that it is partly the Chief Secretary's own record that commends itself to the Prime Minister as thoroughly as it alarms me. The right hon. Gentleman came into government at the Department of Social Security, where he showed considerable competence and absolutely no conscience about presiding over a steady stream of cuts in the standards of living of the poorest people in our society. Those cuts were inflicted at the behest of the then Chief Secretary, now our caring Prime Minister. The right hon. Gentleman had a brief spell of relaxation at the Department of Transport and then resurfaced as the handler of the poll tax, which I understand he still defends.
I listened with fascination today when the right hon. Gentleman spoke about his views as Chief Secretary. He said--I hope that I repeat him correctly-- that he was not against public spending, but against excessive public spending where it is poor value for money and spending on wrong things. I cannot think of a worse characteristic for a Chief Secretary than to champion the poll tax, as it suggests that he is willing--apart from anything else--to see billions of pounds of public money wasted on ideological folly. We look forward, not only with interest but with some trepidation, to the right hon. Gentleman's approach to the problems that he inherits.
In this first day of debate on the Queen's Speech, it seems right to examine the position of public expenditure due to the claims that the Government made during the election which, as the Chief Secretary fairly said, were at
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the heart of their statements about their record, the promises that they made for the future and the basis on which they were re-elected. The light that the Queen's Speech casts on those promises is also worth examining in this debate.The first of the right hon. Gentleman's problems is the recession-worsened state of public finances, both the overall picture, and the waste, mismanagement and misdirection that that picture conceals. Let us briefly dispose of the myth of world recession, which, back in 1990 to 1991, was supposed to have ambushed an innocent Government from behind. It was, to be blunt, a load of baloney. Britain's recession was begat in Downing street and fed and nurtured in all those Whitehall Departments where Ministers insisted on price increases for electricity, for water, for rents, for fares--until, as inflation headed inexorably upwards, so too did interest rates : to 15 per cent., where they stayed and stayed and stayed, seeing off in the process thousands of our fellow citizens, who lost their businesses and homes as a result.
Sadly for our national interest, the fate of the boy who kept crying wolf has overtaken the Government--a wolf in the shape if not of a world recession, then certainly of serious problems in many of the world's economies. That is likely to cause increased problems for the Government, who hoped that someone else's growth might have helped to pull us forward out of our home-grown recession. As it is, we are in somewhat uncharted waters. After the elections of 1983 and 1987, the Government let inflation and interest rates rip and erode the promises that they had made on public spending. Inflation doubled within two years of each of those elections as public spending was cut or promises were not fulfilled ; then interest rates rose to squeeze out inflation.
Membership of the exchange rate mechanism and the path of convergence to monetary union will make this course much more difficult to follow n this occasion, yet the Government must deal with the borrowing requirement of £28 billion which they predict for this year--and rising--against the background of a continued balance of payments deficit, which, without precedent, has persisted even in the course of the worst recession since the 1930s. Both the borrowing requirement and the balance of payments deficit are the consequence of underlying weakness in our economy, and that weakness, like the recession itself, is a product of this Government's mismanagement of the economy.
In both the recessions that the Government have induced, we have lost manufacturing capacity--20 per cent. of it in the first one alone. So we can no longer satisfy the demand for goods at home by the sale of goods produced at home--hence our balance of payments problems. And the startling and abrupt turnround in our public finances--from surplus quickly to balance and then in a year to a £14 billion deficit and a predicted doubling to a £28 billion deficit this year--is a result not of Government response to the recession, for which a case could perhaps be made, but almost wholly of the impact of the recession.
I noticed, incidentally, that the Chief Secretary referred to the borrowing requirement of today as if it were better than the borrowing requirement of the last Labour Government. [Hon. Members : -- "It is."] Conservative
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