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Economic Situation

Volume 979: debated on Thursday 21 February 1980

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asked the Chancellor of the Exchequer if he is satisfied with current developments in the economy.

It will take time for our policies to check the long-run decline of the economy which we inherited.

How much more evidence does the right hon. and learned Gentleman require to convince him that excessive monetarism is not good for the economy? Will he accept that it is absolutely clear that that is the main cause of our economic problems, not least de-industrialisation, which is proceeding apace in the Northern region? If the right hon. and learned Gentleman will not listen to us, will he at least listen to a few of his more intelligent hon. Friends who share our concern?

It is important for the House to appreciate that there is no question of excessive monetarism. If interest rates are higher than is tolerable for the revival of industrial prosperity or other conditions, that is a consequence of public sector borrowing and spending being too high. The hon. Gentleman is entirely wrong to attribute de-industrialisation to excessive monetarism or to any policies of this Government. He should recollect, for example, that between 1973 and 1979 manufacturing output fell by 5 per cent. That was long before excessive monetarists, as he chooses to put it, came near the Treasury.

Will my right hon. and learned Friend accept that I endorse the general aims of the Government's economic policy and most of the monetarist means of attaining it? However, is the Chancellor of the Exchequer totally satisfied that those policies are being applied with sufficient flexibility and sense of timing in order not unduly to undermine the social objectives of our Administration?

I am entirely satisfied in that respect. Indeed, the anxiety that people must have experienced is that the country had to wait until a change of Government before returning to the prospect of monetary discipline. It is only when our policies in that regard have been followed and made effective that we can set about pursuing the social objectives on which my hon. Friend and I so firmly agree.

If the right hon. and learned Gentleman is satisfied with the progress made by the economy under his Chancellorship, why did he not warn the electorate nine months ago that the country was in for 20 per cent. inflation and 20 per cent. increase in wage costs? Further, will he accept that last week we should have seen a 20 per cent. increase in interest rates had the Government not broken all their principles by lending £500 million to private banks to prevent the market from driving interest rates up?

The right hon. Gentleman knows as well as anyone in the House that the conditions that we inherited from him lead us—

I understand the right hon. Gentleman becoming so angry in the light of his own record. He must be reminded of the fact that we warned the British electorate at the last election that the country was facing an economic crisis more serious than any that we had faced since the end of the war and that it would take a number of years to begin restoring the health of the economy, which the right hon. Gentleman handed over to us.

Does my right hon. and learned Friend agree that it is sheer hypocrisy for the right hon. Gentleman to citicise the Government's policies when, under his administration, unemployment doubled, taxation for the ordinary family doubled, prices doubled, the national debt doubled and the value of the pound was halved? [HON. GENTLEMEN: "Reading".] Does my right hon. and learned Friend agree that it is sheer hypocrisy?

Order. Before the Minister replies, let me say that the hon. Gentleman knows that it is quite un-parliamentary to accuse another hon. Member of hypocrisy. I am not asking the hon. Gentleman to give it another name. I just wish to point out that he used the word "hypocrisy".

May I reply on a personal basis, Mr. Speaker? What I thought that I said was that the arguments were sheer hypocrisy. I did not necessarily accuse an individual Member of hypocrisy.

It is a point of order that arises out of this matter, Mr. Speaker. The Shadow Chancellor distinctly called my right hon. and learned Friend a liar.

Order. If that is so, it is distinctly un-parliamentary and will be withdrawn.

Further to that point of order, Mr. Speaker. May I correct the hearing of the hon. Member for Staffordshire, South-West (Mr. Cormack). I was simply recalling to my hon. Friend the Member for Norwich South (Mr. Garrett) that when we predicted the 12 things that a Conservative Government would do if they were elected, we were accused of telling lies. In fact, they doubled the rate of value added tax—

Order. The right hon. Gentleman knows that he must resume his seat when I stand. If he did not accuse the right hon. and learned Gentleman of being a liar, that is an end of the matter. I merely wished him to withdraw it, if he had. It is as simple as that.

Further to that point of order, Mr. Speaker. I was making it clear that I was referring to the accusation hurled at the Labour Party during the last election when we told the truth about the Conservative Party. I should never accuse the right hon. and learned Gentleman of lying. I have too little respect for his understanding to believe that he can ever tell the truth.

Is the Chancellor aware that his exchange rate policy is directly responsible for the large amount of manufactured imports and the difficulties that our manufacturers have in exporting their goods? Is he further aware that the consequences for our industry are extremely serious? Will he instruct the Governor of the Bank of England to intervene properly and effectively to keep exchange rates at a reasonable level?

The right hon. Gentleman should know, because he may well recollect what was said by his right hon. Friend the Member for Llanelli (Mr. Davies) only last summer, that the exchange rate is clearly one of many areas in which Government cannot have control. He should also understand that the exchange rate is fundamentally determined by market forces. Any sustained attempt to influence it by a change of intervention policy would have adverse consequences on other aspects of economic policy.