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Opposition Day

Volume 81: debated on Wednesday 19 June 1985

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We now come to the important debate on Government-imposed price increases. I have selected the amendment in the name of the Prime Minister.

3.49 pm

I beg to move,

That this House condemns the Government's policy of intentionally increasing public sector prices through rising tariffs for gas and electricity, increased rents, rates, water charges and bus fares, higher charges for school meals, meals on wheels, home helps and prescriptions, which will result in disadvantage for all but the richest sections of society; deplores the increases in private sector prices resulting from the Government's extension and imposition of higher levels of value added tax; and strongly disapproves of the Government's mismanagement of the economy which has produced record interest rates and a consequent level of mortgage repayments which for most families greatly exceeds any gains from changes in income tax.
Inflation is the area of the economy in which the Government most often proclaim victory, but an examination of the facts shows that boast to be largely bogus. For five years, the Prime Minister has claimed credit for a falling inflation rate, and has rejected all blame for increases in unemployment. In both cases, the truth is almost the exact opposite of what she asserts. That is a demonstrable fact, and it was so even before the increase in the retail price index over the past five months.

I simply draw the attention of the House to the statistics. During the past six years the British inflation rate has fluctuated between 9 per cent. above the OECD average—that was in the year in which the Government increased VAT from 8 to 15 per cent., and pushed up the RPI by four points at a stroke—and 1·8 per cent. below it. The latter figure came about immediately before the last general election.

But over the period as a whole, the average rate of inflation in the OECD has fallen from 9 to 5 per cent., whilst in the United Kingdom it has fallen from 10·1 to 7 per cent. That is a comparison of our inflation record with that of our competitors and partners in the developed world. We have certainly done no better—and, indeed, have probably done worse — than the average in the other OECD countries.

There can be no dispute about unemployment. It is a question not of perhaps having done worse but of certainly having done worse, continually having done worse and remorselessly having done worse. In 1969, United Kingdom unemployment stood at 0·5 per cent. above the OECD average. In 1980 it was 1·1 per cent. above; in 1981, 3·9 per cent. above; in 1982, 4·1 per cent. above; and in 1983, 4·4 per cent. above; and in 1984 it was 5 per cent. above the OECD average.

In the five years for which there are statistics and in the five years of this Conservative Government, our unemployment rate has continually and remorselessly increased as compared with unemployment in the OECD countries of our partners and competitors.

I shall give way to the hon. Gentleman in a moment. So far I have given only the official statistics, but perhaps he wishes to argue with them.

Was there one single month under the last Labour Government when the rate of inflation was lower than it is now?

As I develop my case, the hon. Gentleman will discover that the problem that he has to face—[HON. MEMBERS: "Answer the question."]—is whether the present rate of inflation is the lowest that the Government could achieve, or whether, through their wilful policy and despite the advantages that they have enjoyed, they have behaved in such a way as to produce a rate of inflation that is worse than that in the countries of our competitors and collaborators in the OECD. The answer to that question is a categorical yes, and I am glad that the hon. Gentleman is wisely not prepared to argue with that contention.

The contention is that, as compared with other developed countries, our rate of inflation has continually and inexorably deteriorated. That has happened at a time when commodity prices have remained relatively stable and when almost all the external factors—I draw the hon. Gentleman's attention to oil prices — have encouraged an improving inflation rate. The things that have pushed up inflation in this country during the past five months are domestic factors, just as they were in 1979 and 1981. The causes of inflation are VAT, rents, gas, electricity and, overwhelmingly, mortgages. Things that are the direct result of Government policy have escalated the inflation rate to the 7 per cent. figure at which it now stands. All the increases that I have listed have come about either directly as a result of Government edict or indirectly as a result of Government incompetence.

It is now accepted that the most immediate cause of the increase in the retail price index is the increase in mortgage rates. About that I want to ask the Chief Secretary an immediate question. If he cannot answer it now, I warn him that we expect the Secretary of State for the Environment to answer when he winds up in five hours' time.

When official statistics prove the inadequacy of Government policy, it is the Government's practice not to change the policy but to change the statistics. That happened when the retail price index was replaced by the tax and price index; that happened when the method of calculating the unemployment total was altered to give a better figure; that happened when the method of estimating the number of people in work was altered to improve the total.

Is the same about to happen with the retail price index? I understand that the retail prices index advisory committee has been asked by the Government to consider the removal of mortgage rates from the inflation calculations. That is a simple matter to which the Chief Secretary can answer yes or no. If he cannot, the Secretary of State for the Environment can answer later. Perhaps the answer is known already. I shall be pleased to give way to hear the answer to the question. Have the Government, or have they not, invited the retail prices index advisory committee to consider the removal of mortgage rates from the RPI? We look forward to the Chief Secretary enlightening us as the afternoon progresses.

Whether or not the Chief Secretary admits that what I say is true, the increase in mortgage rates played a major part in the April and May inflation increases. The May increase was described by the Secretary of State for Employment as a "blip" in a downward curve. When he made his usual statement on the unemployment figures, the Secretary of State did not say that there had been a blip in April, a blip in March, a blip in February, a blip in January — that is five blips in a row. Many commentators believe that if blips are the euphemism for upward movements, there will be another blip next month.

Five blips in a row — possibly six — requires a collective noun. The word of course is "trend". The trend has been upwards since Christmas. The trend has been established not by external factors, because commodity prices are relatively stable and the pound has not significantly deteriorated since January. The cause is domestic Government policy and the principal cause is the increase in the mortgage rates, for which the Government are wholly and directly responsible.

The story of the mortgage rates increase is well known, but it bears repetition. For 18 months, the Chancellor of the Exchequer insisted that the pound must float free and find its natural value in world markets. While he was insisting upon that throughout 1984, commentators were saying that, since oil is priced in dollars, depreciation would increase oil revenues, the oil revenue increases would extend the fiscal adjustment, the extended fiscal adjustment would increase the Chancellor's scope for tax cuts, and therefore the Chancellor was in positive favour of depreciation. Not once did the Chancellor do anything to contradict that view.

Will the Chancellor say when he contradicted the view that he welcomed depreciation? Will he give an example now? The Chancellor did nothing to contradict that judgment. As a result, on 10 January the pound seemed likely to depreciate to the value of a single dollar. As a result of that, the Chancellor stepped in on 11 January and manoeuvred an interest rates increase, which did not work.

The following day, not only the Chancellor, but all in Downing street, took a hand. At No. 10, The Observer newspaper was told that intervention to support the pound was imminent, while next door, at No. 11, The Sunday Times was being assured that intervention was out of the question. The result was chaos in the market and panic in the Government. On Monday 14 January, the Chancellor reintroduced minimum lending rates and began the process that ended with base rates at 14 per cent. and the highest real interest rates that this country has endured for 50 years.

The cause of those interest rates rising to that level was not the old theory of crowding out or the new excuse of international rates. It certainly was nothing to do with the money supply, even though the Government were not meeting their money supply targets. Interest rates in Britain are now 6 per cent. above those in Germany, America and Japan, for reasons that are special to the United Kingdom. Those reasons are and remain the incompetent management of sterling by the Chancellor and the panic that affected the Government thereafter. As a result of that unique increase in interest rates, mortgage rates rose to 13·75 per cent. and 14 per cent.—4 per cent. higher than at the time of the last election and 2 per cent. above the level that the Government inherited in 1979. In fact, those mortgage interest rates have been surpassed only once in our history, and that was under the Tory Government in 1981.

On 1 April, mortgage interest rates rose by a full 1 per cent. That added £9·60 a month to the repayments on a £20,000 mortgage, which is the average new mortgage taken out. That increase in repayments on the average new mortgage more than swallowed the £7·50 tax relief provided in this year's budget for a married couple. Thanks to the Government, during the past five years, that family with a £20,000 mortgage has faced a 4 per cent. increase in its mortgage repayments and an actual increase of £40 a month. The Conservative party, which claims to be the party of home ownership, has made home ownership more expensive than ever before.

For some families, especially young couples, the Government have made the price of home ownership prohibitive. Yet, if those same young couples want or have to live in rented accommodation, especially municipal rented accommodation, the cost has increased just as much. Thanks to the Government's decision virtually to abolish housing subsidies, increases in rents have escalated at a speed that no hon. Member, whatever his persuasion, would have regarded as tolerable five or 10 years ago. In 1978–79 — the last year of the Labour Government — the average council rent was £5·90 a week; last year, it was £14·77. The estimate for 1985–86 is £15·50 a week—an increase over seven years of 163 per cent. gross and 41 per cent. in real terms. These are massive increases which ordinary families find it almost impossible to face and bear.

The increases in mortgage repayments and in rates are borne by home owners and house renters who are desperately affected by another item of policy for which the Government are generally and directly responsible—the continuing increase in rates. I know that it is the practice of the Government's propaganda machine to blame the rates increases on individual councils. It may well be the whole absurd paraphernalia of rate capping and all that goes with it was not so much a device for holding rates down as a device for finding scapegoats on whom to blame the increasing rates.

Whatever the purpose of all these schemes introduced by the Chancellor and his many predecessors who escaped before he arrived, none has worked. Between 1974–75 and 1978–79—that is the period of the Labour Government, for hon. Members who enjoy making such comparisons—rates rose by 73 per cent. In fact, the real cost fell by 5 per cent. Between 1978–79 and 1984–85 the rates rose by 146 per cent.—the real cost rose by 46 per cent. Between the first year that this Government were in office and the estimate for next year, the rates increase will be 169 per cent.—a real increase of 44 per cent. That is 44 per cent., to which an additional escalating payment must be made for water rates, which continue to grow at a speed that is inexplicable to most people who have examined the industry.

The Government blame all this—a 44 per cent. real increase in rates plus the increase in water charges—on spendthrift councils. They justify their blame and substantiate their accusations by giving examples of items of spending which I freely admit are sometimes absurd, but which are almost always trivial in terms of a borough's total rates bill.

If councils are to blame for escalating rates, then Conservative councils are at least as guilty as Labour in local administration. I ask the Chief Secretary to consider the average domestic rates precept this year in the shire counties, where the Conservative party believes itself to hold sway and in some areas exercises undisputed power. In the 10 shire counties where Labour sets the rates, the figure is £4·83; in the 19 shire counties where the Conservatives set the rates, the figure is £5·31; and in the 10 counties where there is no overall control the figure is £5·34. By dividing the shire counties into three groups—Labour, Conservative and others—one can see that, according to the Government's criteria, the Labour party has a better record of thrift than the other parties.

I am not blaming the independents, the Social Democrats or the Liberals, who have increased the precept the most. I am not blaming the Tory councils which have increased the precept more than Labour councils. To blame them for the increase in rates would be as absurd as to blame all the other groups which have had the unpleasant task of imposing and passing on the price increases required by the Government. Those councils have increased their rates for two reasons — first, because the Government have increased councils' costs by imposing extra duties on them, such as the administration of housing benefit, and, secondly, because the Government have neglected services, such as local transport, which councils rightly thought it their duty to rescue.

At the same time as this Government have increased councils' costs, they have remorselessly and ruthlessly cut the rate support grant, which is central Government's contribution to local authority spending. In 1978–79 which was the last year of the Labour Government-this is another comparison which will be noted by assiduous hon. Members who like to make these comparisons — the RSG was £12·226 billion; this year it has sunk in real terms to £8·489 billion. If this Government had kept RSG at the level they inherited, local authorities would have received a sum so much greater than the sum they now receive that none of the increases about which there have been so many complaints would have been necessary or imposed.

In such circumstances, it is dishonest and absurd to blame the rates rises on local councils. It is as dishonest and absurd as it would be to blame the chemists for the increases in prescription charges from 20p to £2, to blame the dentists for the increased patient costs which come from open-ended charges, or to blame the opticians for the increased prices which result from the abandonment of NHS glasses and lenses. The Government are responsible for all those items, just as they are responsible for the rates increases.

Before the right hon. Gentleman leaves the question of rates, may I ask him to recollect that the Government imposed a limit on the GLC? Does he remember that the GLC then voted voluntarily to go below that limit and announced that it was able to do that without any reduction in the standard of services being offered to the people of London? Did the right hon. Gentleman welcome the move by the Government which forced the GLC to reduce the rate, or did he believe that his friends at county hall should have been allowed to raise the rates as high as they wished?

I will now demonstrate why I said that I am always happy to give way to the hon. Gentleman. Perhaps he will recall what happened when the GLC reduced the rate below the figure that the Government anticipated. That required the Government to give more money to county hall, and because that had to be done, they had to take money away from Lancashire and every one of the shire counties.

It is no good the hon. Gentleman saying, "No", because that is exactly what happened. It is what I told the Prime Minister would happen and it is what the Prime Minister justified having happened. Because the GLC remained within the law, the shire counties, many of them Conservative-controlled, were penalised. If the hon. Member for Enfield, North (Mr. Eggar) regards that as a sensible way of distributing the rate fund, I shall give way to him frequently in the future.

The people whom I have described — those who are paying higher mortgage rates and higher rents, both of whom are paying additional rates bills—are also the people who are now faced with massive increases in the cost of gas and electricity.

I have no doubt that, when the Chief Secretary makes his valedictory speech, he will say that gas and electricity prices rose between 1974 and 1979. I congratulate him on his perception in discovering that. During the lifetime of the Labour Government, gas prices, although they increased by 73 per cent. in nominal terms, fell by 39 per cent. in real terms. Between May 1979 and August 1985, gas prices rose by 128 per cent. in nominal terms and 56 per cent. in real terms.

Electricity prices rose much more quickly under Labour than they have under the Conservatives. However, I hope that, as the Chief Secretary entertains us with a detailed recital of the figures that I have offered him, he will also give the history of those price increases.

The Labour Government of 1974 inherited from their predecessor annual losses on gas of £41 million and on electricity of £176 million. I know that it is not fashionable for the present Government to defend their lineal predecessor, and the Chief Secretary may say that many of the problems that the Labour Government faced with gas and electricity prices were the direct result of the Heath Administration. He must make his own judgment on whether he wants to offer that condemnation.

The facts are beyond dispute—a £41 million deficit on gas and a £176 million deficit on electricity—and the Labour Government moved slowly towards a break-even point. As one of the Ministers who was responsible for this area of policy, I vividly recall that the criticism of the Labour Government was not that we were putting gas and electricity prices up too quickly but that we were increasing them too slowly—that we were subsidising the gas and electricity consumer.

The right hon. Gentleman said that he always gave way to my hon. Friend the Member for Enfield, North (Mr. Eggar).

While I could not lose by giving way, I am motivated solely by compassion. Therefore, I will not give way again to the hon. Gentleman.

The Government's attitude towards the gas and electricity industries has been diametrically different from that of a Government who struggled—not completely successfully — to make the industry break even. The Conservatives have used gas and electricity to raise revenue and collect taxes, and I will quote two authorities for saying that.

I remind the Chief Secretary of what the National Gas Consumer Council said about the gas tariff:
"We strongly opposed and fought vigorously against the suggestion that the tariff should rise higher than the commercial needs of the industry in order to provide a convenient source of revenue to the Treasury."
It went on to say that its opposition to the gas industry being used
"to provide a convenient source of revenue to the Treasury"
failed and that the fight to stop the gas tax was lost. It added that the
"three-year Government imposed programme of rapid gas price rises was…a programme that more than doubled the price of gas."
The same rule applies to electricity. I have quoted the report of the Select Committee on Energy in the House before. When I last raised it in debate, the Chief Secretary did not comment on the issue. I invite him to comment on it today. That Select Committee said:
"the proposed electricity price increase…is not justified on the grounds either of the Financial Target or the Government's economic pricing policy. The only possible reason for it is the Government's desire to raise additional revenue."

I had better not give way to the hon. Gentleman, or his hon. Friend the Member for Enfield, North will feel cheated

The Select Committee added:
"the industry has been required by the Government…to make payments to the Treasury in 1984–85 of some £360 million over and above the figure of £380 million which would be consistent with Financial Targets."
The Government now impose a purchase tax on gas and electricity. It is a surreptitious tax, but it is a tax nevertheless on electricity and gas.

The right hon. Gentleman is rightly concerned about price rises. I am sure that he is keen to enlighten the House and the country on his party's policy. Do he and his party believe in a statutory prices and incomes policy, or would he have some sort of fudge or compact with the trade unions?

My answer to the alternatives that the hon. Gentleman offers me is that I do not believe in a statutory incomes policy. I do, however, believe, as I have always believed, that an agreement must be forged between unions and Government — [Interruption.] I know how concerned the Government are by the increase in wages reported today. I hope that they will understand, if they are concerned about wage increases, that they should not be surprised by today's news. If the Prime Minister preaches the doctrine of every man and woman for himself and herself, she must expect the trade unions to do exactly the same. As Mr. Sid Weighell once said:

"If we live in a pigsty economy, everybody will try to get their snouts in the trough.
As the Conservatives have encouraged the belief that every man and woman should fight for himself and herself and damn the consequences, they should not be surprised if trade unionists take them at their word.

Order. I do not think that the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) is giving way. There will be ample time for other hon. Members to contribute to the debate.

I return to the subject on which—[HON. MEMBERS: "Keep to the point."] I have not left the point. If Conservative Members will concentrate, when I say that I am returning to the point, it means that I have not left it. I am on exactly the same point.

The surpluses in the gas and electricity industries which the Government have arranged and have imposed—they would be called profits in private industry, and I suppose that they will be called profits if those industries are privatised — are used to reduce the public sector borrowing requirement. They are taxes, and they are intended to assist in the achievement of the massive tax cuts which the Chancellor pursues so frenziedly but never actually achieves.

I suspect that this frenzy will increase as the election approaches — not surprisingly from a party which promised to cut taxes but has in fact increased the annual tax bill by £29 billion. That means, I suspect and fear, that there will be additional assaults on public services such as the assault mounted by the Secretary of State for Transport in his direction to the London Regional Transport Board to reduce its level of revenue support. The assault resulted in fares being increased on average by 9 per cent., short journey fares being increased by 25 per cent. and children's bus fares being increased by 50 per cent. Those are the sort of prices that real families pay for the Chancellor's frenzied and vain pursuit of a surplus big enough to provide the tax cuts which he once promised and has failed to provide.

There will be the pathetic pretence that the problems of the economy, while all this is going on, can be solved by the belief and the pursuit of the superstitions which have so failed the economy for the last six years. I have absolutely no doubt that when the Chief Secretary speaks we will hear a repetition of all the old shibboleths that we have heard from him week in, week out, since he first became a member of the Government. He will announce that the policy which has visibly failed is really an invisible success and he will urge us to be patient, telling us that in the end the policy which has so damaged the economy will save the economy. To most people the absurdity of that blind faith is now obvious.

We were once told that, if the Government held down inflation, every other aspect of the economy would improve. What they have done is to attempt to hold down inflation by damaging every other aspect of the economy. The 2 million extra unemployed, the record level of company liquidations, the deficit on manufacturing trade, the net decline in investment and the negative net investment in manufacturing, construction and transport, are all the prices that we pay for the Government's belief that, if they hold down inflation, everything will come right. Not even in that particular have the Government succeeded. Not even in that promise have the Government managed to do what they asserted would be done.

The most recent of these promises was made by the Prime Minister somewhere in south-east Asia. I cannot recall the exact country—that does not matter; the right hon. Lady cannot either — but I do remember the promise. The promise was a 3 per cent. inflation rate by polling day. Therefore, I ask the Chief Secretary whether the Government are still committed to that figure or are now edging away from the Prime Minister's indiscretion. If the Government still believe that 3 per cent. is possible by polling day, let me remind them what they have to do. They have to cut inflation by 4 per cent. in the next two years. What the Government have achieved in six years is a reduction of 3·1 per cent. What they have achieved since the last election is an increase of 3·3 per cent.

Notwithstanding that, I make my position clear about what I fear most—that the Prime Minister will cynically attempt to keep her promise by further collapsing the economy, by adding to record unemployment, by adding to the number of company liquidations, by increasing the deficit on manufacturing trade and by worsening the position in transport, manufacturing and construction, where net investment is already negative. My fear is that the Prime Minister will cynically deepen the damage in the vain hope of having a least one semi-plausible claim to make about her economic record. I do not think that it will do her reputation very much good. The country no longer believes her economic prescription—how could it when so many promises have been broken and when so many forecasts have proved risibly wrong?

I conclude with one recent example. On 21 March the Chancellor spoke to the House about inflation which he said
"will stay low and will get lower."
Since then, the retail prices index has risen twice. What is more, even when the Chancellor gave his assurance on 21 March, he must have known that it was going to rise in April, but what he said to the House was that inflation
"will stay low and will get lower."—[Official Report, 21 March 1985; Vol. 75, c. 973.]
It is conduct such as that and words such as those—

The Chancellor is assuring the House that he said something different in the Budget speech. It is a sort of defence to say that one said one thing on one day and another on another day, but I do not think that it is a defence that will take him very far. I believe that it is defences like that and statements of the sort that I have just described which make the comment that the Chancellor offered the House on 21 March wholly apposite—apposite not to the inflation rate, but to the Government's reputation—that it will stay low and will get lower.

4.26 pm

I beg to move, to leave out from "House" to the end of the Question and to add instead thereof:

'supports the Government's sound financial policies to reduce and contain inflation, to provide the basis for a fifth successive year of economic growth and to secure a sustained rise in living standards.'.
The motion standing in the name of the official Opposition covers an enormously wide area, in the hope, presumably, that it may hit a few targets—

The right hon. and learned Gentleman is a sitting duck for a start.

Just give me a chance to see whether I can fly. The hon. Gentleman is usually more generous than that.

In the hope that echoes of the debate may reverberate in the valley of Brecon and Radnor, the amendment attempts to give a little more coherence to the debate. The difficulty is that the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) makes most of his interesting speeches outside the House. Taking my cue, however, from his most recent interview with The Guardian, and his recent Crosland lecture at Oxford, I shall direct my remarks today to the broad priorities of the Government's economic policies and the question of nationalised industry prices.

The Government's economic policies have been clearly stated and consistently followed since the day on which they assumed office in 1979. I think that our record stands close comparison with that of other countries of the OECD and so far out-tops the record of the last Labour Government that I am rather surprised the right hon. Member for Sparkbrook should even have tabled the motion.

We inherited a situation where inflation, starting from a figure of around 17 per cent. in the autumn of 1974, which the right hon. Member for Leeds, East (Mr. Healey) represented as 8·4 per cent., had accelerated to 26·9 per cent. in 1974, before falling temporarily as a result of the short-term expediency of incomes policy. By May 1979, inflation was 10·3 per cent. and on a sharply rising trend.

Those rates of inflation were bidding fair to destroy our economic base and social cohesion. The right hon. Member for Sparkbrook will well recall those days, as he was Secretary of State for Prices and Consumer Protection from 1976 to 1979, so some of his observations had an added piquancy. He will recall the policies with which his Government tried, without success, to contain the situation. He will also recall his clear statement of priorities in February 1978, when he said:
"in terms of promoting employment opportunities throughout the country as a whole, nothing is more important than containing inflation."—[Official Report, 7 February 1978; Vol. 943, c. 1271.]
I applaud that clear statement of principle. Would that the Labour Government had applied it. I ask the right hon. Gentleman whether this is one of the old shibboleths to which he referred, one to which he has returned, or one which he has never left.

Does that quotation still represent one of the priorities of Labour party policy? The right hon. Gentleman did not touch with sufficient clarity, either in his Crosland lecture or in the interview in The Guardian, on his priorities and how he hoped to achieve them. Let me chart the Government's record on inflation.

In May 1979 inflation was 10·3 per cent. and rising, as the previous Administration's attempts to impose bureaucratic short-term solutions were collapsing. If ever there was a pigsty economy, it was in those dark winter months of 1978–79, when the noses of certain sectors of the trade union movement were in the trough and the right hon. Gentleman and his friends did nothing to remove them.

In 1980 the Government set out in place of the previous bureaucratic short-term solutions a medium-term financial strategy to promote honest finance and sound money and a sustained fall in inflation. We have stuck to our strategy, and it has been successful. Inflation has been steadily squeezed from the system.

The hon. Gentleman must learn to control himself. We are no longer in Committee Room 10.

Under the previous Administration inflation averaged 15·5 per cent. Under this Administration it has averaged 9·7 per cent. Since June 1983 inflation has averaged 6·2 per cent. Inflation is under control in a way that it has not been since the late 1960s.

The right hon. Member for Sparkbrook made much play of the upturn in the RPI figures this spring and summer. In May the RPI showed an annual increase of 7 per cent., compared to 6·9 per cent. the previous month and 5 per cent. earlier in the year. Of course these figures are unwelcome, but Opposition Members should not pretend that they come as a great surprise or signal the failure of our policies.

My right hon. Friend the Chancellor of the Exchequer made it clear in his Budget speech that he expected inflation to edge up in the middle of this year. This increase in the RPI is due largely to temporary factors and, as the right hon. Member for Sparkbrook is right to point out, mortgage interest plays a great part. The rise in inflation followed a certain upset in the exchange markets at the beginning of the year — a clear sign of the problems that would assail any Government not committed to the firm financial and fiscal policies that we are implementing.

The right hon. Member for Sparkbrook made some points about the activities of the retail prices index advisory committee. He will know, having occupied the position that he did, that this is an independent advisory committee, with representatives of the TUC, the CBI and the Government, and is to report towards the end of 1985. The Government have asked it to look at a range of factors, but if the right hon. Gentleman is suggesting that it is likely to be prejudiced in favour of the Government, he is being grossly discourteous to the independent members who form it.

No matter what I am suggesting about the advisory committee, I am asking about the Government. Have the Government asked the committee to look at the inclusion of mortgage rates?

We have asked it to look at a range of factors, including in particular the contribution made by housing.

If the hon. Member for Copeland (Dr. Cunningham) is suggesting that the independent advisory committee is likely to put its name to a figure, he should reflect a little more.

No, it is not a Government fiddle. Let me remind the hon. Gentleman, who has perhaps not considered his question as closely as has the right hon. Member for Sparkbrook, not having held the same range of posts in the last Administration, that most other countries do not include mortgage costs in their RPI.

I have given a clear and explicit answer, and these matters are for the decision and recommendation of the independent advisory committee. The right hon. Gentleman should contain himself. Does he wish to assert that the committee is not advisory and not independent? I have given a clear explicit answer to his question. If he is not satisfied with it, he should have formulated his question in a different way. He clearly has not thought through the charge which he is rather apt to throw around the Chamber.

Let me point out that every monthly statement of the RN under the last Labour Government was higher than the 7 per cent. figure recorded a fortnight ago. The right hon. Gentleman went grudgingly a little way to conceding that, but he did not deal satisfactorily with that rather striking comparison.

Will my right hon. and learned Friend say that again, because I should like to memorise it?

My hon. Friend is right. It is a simple proposition that should remain in the memories of every hon. Member, and, I hope, the electors. Every monthly statement of the retail prices index under the last Labour Government was higher than the 7 per cent. figure recorded a fortnight ago. That is the most telling and succinct epitaph on the counter-inflationary policies of the last Labour Government.

The figure of 7 per cent. still concerns us, but it also emphasises how right we have been to make the containment of inflation our first priority, to rest upon the shibboleth which the right hon. Member for Sparkbrook enunciated so admirably and clearly in February 1978.

In his Budget speech my right hon. Friend the Chancellor made it clear that we expect inflation to turn round again by the end of the year, falling to around 5 per cent., and further in 1986. We still do, and we can say this with confidence because we are sticking to our financial strategy, which we set out in 1980. Monetary conditions are sufficiently restrictive to squeeze inflation from the system. Our fiscal policy has public borrowing on a sensible track. The PSBR was equivalent to 5·4 per cent. of GDP in 1978–79. In the last financial year, despite the coal strike, it was about 3 per cent., the lowest figure since the early 1970s. For this year we are looking for a further reduction to £7·1 billion, or 2 per cent. of GDP, to underpin our strategy for lower inflation.

Of all the subjects on which the right hon. Member for Sparkbrook has touched in his speeches outside the Chamber, this is one to which he has never given a clear and succinct answer. I address this question specifically to him, as I have on previous occasions. What proportion of GDP to go on the PSBR does he regard as acceptable in the present circumstances? I shall willingly give way if he wishes to answer.

The right hon. Gentleman is shifting uneasily in his seat. The question is ludicrous for him because he cannot answer it. He has not worked out the position on that. He has not really worked through the Labour party's counter-inflationary policies.

If ours is called a dogmatic and monetarist approach, I shall plead guilty. I shall be in the good company of most of the Finance Ministers of the developed world. These are the very policies which were so strikingly endorsed at the last OECD ministerial meeting in Paris. In the words of the Bonn economic summit communiqué:
"In order to sustain non-inflationary growth and higher employment, we have agreed that … we will follow prudent, and where necessary strengthen monetary and budgetary policies with a view to stable prices, lower interest rates and more productive investment."
Does the right hon. Gentleman dissent from that and from the views of his presumed friend the President of France?

If the debate is to be more than a mere exercise in rhetoric by Opposition Members, it is right to consider what alternative policies they advocate. The right hon. Gentleman has told us, or The Guardian readers, that within days of a Labour Government taking office, whenever that may be, he will produce a medium-term economic strategy.

I am glad that the hon. Gentleman knows with such precision the day and outcome of the general election.

It is interesting to note that the right hon. Gentleman describes his policy as a medium-term economic strategy, not a medium-term financial strategy. I have got the point that the right hon. Gentleman, in his expansive way, is taking a broad view of the problem. Therefore, he should give us his broad views of the problems, instead of confining himself to one or two rather trumpery pieces of rhetoric. I hope that he will tell us what he would propose. As the hon. Member for Glasgow, Cathcart (Mr. Maxton) has told the House exactly when the general election will be, and what its outcome will be, the right hon. Gentleman will have devoted considerable thought to these matters and will no doubt produce his plan only a few days after the general election.

The right hon. Gentleman has not mentioned that plan in this debate. Nor was there a serious mention of the level of the borrowing requirement in his speech. This afternoon he resisted my blandishments again and described my question as ludicrous. Is it not a question which he would address in his medium-term economic strategy? The right hon. Gentleman did not mention the money supply. I pay tribute to him for the fact that in his interview with the Tribune on 10 May 1985 he said of the money supply:
"We shall regard it as a tool for managing the economy in the way that we want."
Perhaps he is to a tiny degree a monetarist. I welcome him to the club.

The right hon. Gentleman promises us a new form of non-enforceable social contract on pay with the trade union movement. I hope that that theme will be developed during the debate, because it will be particularly interesting to hear the views of the Liberal and Social Democratic parties. They not only believe in a social contract, but believe that it should be statutory, enforceable and extended to prices.

Will the right hon. and learned Gentleman tell the House where he picked up the words "social contract" in either the Liberal or Social Democratic party manifestos?

I apologise deeply to the hon. Gentleman if he does not fancy the words "social contract". I thought that after the years when he and his hon. Friends underpinned the Labour Government, the words "social contract" had passed into Liberal and SDP currency. Perhaps the hon. Gentleman can catch your eye, Mr. Deputy Speaker, and explore such interesting semantic questions.

Even over a period of years the country will recall the failure of those policies. For a party which has put down this motion to take as the centre plank of its policies an incomes policy, enforceable or unenforceable—either of which in the long term is unenforceable in practice—reveals a remarkable failure of memory or an obstinate incapacity to learn. We can only murmur in the words of Dr. Johnson:
"The triumph of hope over experience".
The right hon. Gentleman has been more expansive on prices. In his Tribune interview of 10 May he said:
"I favour the reconstruction of price controls … but not blanket price controls … the sort of selective price controls that were beginning to evolve which prevented unreasonable price increases"—
not observable to the rest of the country—
" — increases that were the product of a company's monopolistic power in the economy and which prevented exploitation—I want to see again … Some sort of control on prices ought to be one of the sanctions we used to influence industrial behaviour.
The hon. Gentleman might have enlightened us on whether he believes in some sort of statutory control or arbitrary powers such as he was prone to use in 1978, or whether he merely advocates an increased and strengthened Monopolies and Mergers Commission. It appears that, while the right hon. Gentleman has forgotten the lessons which his Government learned painfully at our expense during the intervention in our affairs of the International Monetary Fund, he remembers the one aspect of policy which failed so signally in whatever form it was introduced.

I shall now deal with the more startling charges in the Opposition's motion—nationalised industry prices. To have a sensible debate on this issue it is important to establish, or re-establish, to return to, or not to leave, the facts, because they have been stated on many occasions from these Benches. The right hon. Gentleman gave the House some of the facts, but in a highly partisan and selective form.

Domestic electricity prices increased between 1974 and 1979 under the Labour Administration by 170 per cent., while between 1979 and February 1985 they increased by 84 per cent. The right hon. Gentleman is right to draw our attention to the fact that the rate of inflation was more acute in the period in which he presided as the protector of consumers than it has been under our Government at any time.

Industrial electricity prices increased between 1974 and 1979 by 133 per cent., compared with 65 per cent.

between 1979 and 1985. Indeed, domestic electricity prices were frozen for two years to April 1984, and electricity price increases are expected to be at or below the rate of inflation during the next two years. In short, under the Labour Administration electricity prices increased by 2 per cent. every six weeks, whereas under the present Government they have increased by 2 per cent. during the past two years. I hope that my hon. Friend the Member for Harrow, West (Sir J. Page) will also record that particularly important point.[Interruption.] My hon. Friend can read Hansard, but hon. Gentlemen may be more disadvantaged.

Between 1974 and 1979, industrial gas prices rose by 288 per cent. If the competitiveness of British industry was a concern of the right hon. Gentleman, that is an extraordinary figure. Between 1979 and 1985, the increase was only 94 per cent.

Between 1974 and 1979, domestic gas prices increased by 73 per cent. Because gas remained substantially under priced in economic terms, which created severe distortions in the market, gas prices had to be increased in real terms during the following three years. Once that step had been taken, gas prices rose no faster than inflation. Domestic gas prices did not increase during the 15 months to January 1984, and Sir Denis Rooke told the Select Committee on Energy on 20 November 1984 that he expected to be able to hold gas prices to roughly the rate of inflation for the next three or four years because of efficiency savings.

I am trying to follow the logic of the Chief Secretary's argument. Does he believe that the Labour Government were wrong to increase those prices and, therefore, approach break-even? Would he have preferred us not to do that and to leave a bigger deficit for him to deal with when he came to office?

I am coming to the principle. I am sure that the right hon. Gentleman, who is well known for his courtesy in debates, will allow me to develop my speech. There is an important principle to be debated here. I hope that we will be able to establish a little common ground between the two sides of the House on the principle by which nationalised industry prices should be regulated. The right hon. Gentleman is right to say that we should focus on the general principle, and I shall derive much support from the White Paper which the Labour Government produced in 1978.

If the hon. Gentleman will allow me, I shall develop my speech. I am sure that he wants to make a relevant intervention, but I hope that he will have an opportunity to catch your eye, Mr. Deputy Speaker.

Under the Labour Administration, domestic water charges increased by 86 per cent., while between 1979 and February 1985 they increased by 83 per cent. Opposition Members will no doubt object to the fact that water charges are to be increased by about 11·5 per cent. this year, but they may have overlooked the fact that under the Labour Government the water authorities' investment declined by a third in real terms, while between 1979 and 1983 investment increased by a sixth in real terms.

In 1984–85 capital expenditure was about £750 million, and it will increase by almost £200 million by 1987–88. The right hon. Gentleman was anxious about the levels of investment. I remind him that during the last financial year there were record levels of investment across the country totalling about £55 billion, and that is likely to be matched this year. I have drawn his attention to the figures for the water industry. That is why we have planned for higher water charges. Following a summer of drought last year, I hope that the country will see the good sense of that. It is pointless advocating increased investment in infrastructure if measures to pay for it are not supported.

I come now to the point raised so perceptively by the hon. Member for Copeland—to reflect on the principles which should underlie the pricing of nationalised industries. I assume that both the last Labour Government and this Government accept that the prices that industries charge should cover their marginal costs of supply, including a satisfactory return on the capital they employ. In case Opposition Members have forgotten, the energy policy Green Paper presented to Parliament by the right hon. Member for Chesterfield (Mr. Benn) in February 1978—I am sorry that he is not here to contribute to the debate—said:
"Energy prices should give both consumers and producers reasonably accurate signals about the costs of energy supply".
Those are impeccable economic sentiments.
"Underpricing encourages consumers to waste gas resources … prices should therefore at least cover the cost at which supplies can be provided on a continuing basis, while yielding an adequate return to investment."
I really wonder what we are debating.

If Opposition Members ask what is a reasonable return on investment, I can only refer them to the nationalised industry White Paper of March 1978, which indicated that the required rate of return on investment should, in normal circumstances, be 5 per cent. in real terms.

I have to admit that the required rate of return on capital for the gas industry, under its targets, is about 4 per cent., for the electricity industry about 3 per cent., and for the water industry under 2 per cent. That leads me to cite the well-worn words of Clive of India:
"I am astounded at my own moderation."

If I were to send the Treasury the evidence that West Lothian district council gave yesterday, figures and all, on the loss of income tax and many other related benefits in relation to the Polkemmet closure—which is the subject of a major public inquiry about the pit that was flooded—would I be assured of a full answer once the Treasury had the figures?

I should not like to commit myself until I have seen the hon. Gentleman's letter, as it may not be entirely a matter for my Department. I understand what the hon. Gentleman is saying about tax loss. I hope he recognises that whenever he and I have corresponded I have endeavoured to answer his questions very fully. I shall look at his letter, and if parts of it are matters for my right hon. and hon. Friends, I hope that he will forgive me if I pass it on to them.

Will my right hon. and learned Friend inform the House whether the figures for the rate of return on capital are on a current or a historic cost basis?

We have been talking about revenue loss. There is one other statistic which I should like my right hon. and learned Friend to give me, which I could memorise and pass on to my constituents. How much has been lost to the country and to the energy industries as a result of the strike last year, led by Arthur Scargill and aided and abetted by Opposition Members?

My right hon. Friend the Chancellor of the Exchequer in his Budget, gave the best figure that we were able to provide for last year. It is a little too early to say exactly what the consequential costs will be for this year. If my hon. Friend tables a question later in the year, I hope to be able to oblige him. The figure will certainly be in hundreds of millions, not tens of millions.

The debate is clearly about prices, costs and comparisons between this Government and the previous Labour Government. The one cost to which the Chief Secretary has not referred——and he should have done—is the human misery inflicted by the Government's policies. Will he make a comparison between the unemployment rate during the last 15 months of the Labour Government—when it was falling steadily—and the figure after six years of this Conservative Government, when 2 million more people are unemployed? If, as the Prime has suggested, getting inflation down to 3 per cent. will cost another 1 million jobs, will the Chief Secretary support that? Is that the price that we will have to pay?

I hope that I can deal with that intervention as courteously as I know how. If the hon. Gentleman will cast his mind back—although I do not know whether he was in the Chamber—he will recall that his right hon. Friend the Member for Sparkbrook said that the first priority for employment was the containment of inflation. That is my answer to the hon. Gentleman.

Even a most cursory examination of the facts must show that this is a most ill-conceived Opposition motion. The Government's record in reducing and containing inflation since 1979 is vastly superior to that of the previous Labour Government. Despite the last few months' figures, there is little reason to doubt that the RPI will be back on a declining path before long.

Our methods are plain and proven. We have a consistent strategy, which we have sustained for the past five years, and which we will sustain through the next five years. In 1980 we set out a medium-term financial strategy to promote honest finance and sound money. We have stuck to it and concentrated on what Governments can realistically influence. We have secured monetary conditions which are sufficiently restrictive to squeeze inflation out of the system. We have buttressed those with a fiscal policy which has put public borrowing on a sensible downward path.

Nor is there any conflict between reducing inflation and creating more jobs. The one is dependent upon the other, as the right hon. Member for Sparkbrook recognised in February 1978 and, perhaps more authoritatively, as the Bonn summit recognised in its communiqué. We reject, as the country has rejected on various occasions, the distortion, the inefficiency, the bureaucratic complexity of price controls, wage controls and dividend controls.

The Labour party — whether inside or outside the Chamber — has offered us nothing but a torrent of synthetic indignation and a tepid rehash of the policies of yesteryear.

The alliance, perhaps recalling the Lib-Lab pact of the 1970s out of which it was conceived, has offered us a statutory prices and incomes policy—so much for its moderation, detachment and imagination. Our policies have been proved and they have yielded results. They provide a framework of success and stability for the years to come.

I invite my right hon. and hon. Friends to reject with contempt the Opposition motion and to support the Government amendment.

4.58 pm

Alliance Members welcome the opportunity provided today by the Labour segment of the Opposition to debate one of the most important indicators of Government economic policy—an indicator at the sharp end where things matter to people, not one of those intermediate targets discussed in terms of witchcraft and voodoo that have fatally beset Treasury Ministers during this and the previous Tory Administration.

It will be of interest throughout the country that at last the House of Commons is debating prices rather than monetary aggregates. The people of mid-Wales will listen to the debate on prices with rather more satisfaction than hitherto when they have had to listen to stories about M3 —which, when that proved to be a useless indicator of money, was changed to MO, which has now proved to be even more useless. We await the next fantastic indicator of monetary aggregates that the Government may dream up.

It is also a good time for the debate because, as everybody knows, the Government's medium-term financial strategy lies in ruins. The Financial Times this morning pronounced a stately funeral oration on the Chancellor's policies. The question of the hour, which I suppose will not be answered in today's debate, is how the Prime Minister can find someone reckless enough to come in to sweep aside the witchcraft and try to get the show on the road in reasonable economic terms. She has little time left before the run-up to the general election in which wholly to recast her financial and economic policies.

Some of the worst manifestations of state-imposed prices flow from the appalling mismanagement of interest rates during the regime of the present Chancellor. This country has the highest nominal interest rates of any major European country, or of Japan or the United States, except for Italy. Not only mortgage interest but interest paid by new and struggling business men has become crippling and has led to a record rate of bankruptcies and liquidations.

The Government orate about competition, but they are destroying real competition in many spheres of business. It is not the cash-rich monster companies or the companies that donate so generously to what they consider to be a Conservative party suffering from the record high real interest rates, but the very engines of competition, the small new businesses, the up and coming businesses, whose directors do not sit in lordly state but take their coats off, and, if they have to have a board meeting, have it in the gents because they are really running the business and making it go. Now many of them are going to the wall, not because of their own failings but because of the extortionate demands of the banking system.

I am sure that we would all like to see lower interest rates not just for small businesses but for everyone. Having castigated the Government, does the hon. Gentleman agree that the two major influences on interest rates — oil prices and interest rates in the United States — are outside the control of the Government?

It is late in the day for the hon. Gentleman to echo the parrot cry of Treasury Ministers, who know better but have nothing else to say, that it is all the fault of United States interest rates. The hon. Gentleman must understand that prime rates today in the United States—thank goodness—are only 9·5 per cent. As everyone knows to his cost, prime commercial rates in this country are over 13·5 per cent. To blame the United States is not only years out of date but wholly fallacious.

The interest rate factor has a major effect in producing crippling price levels. Another obsession of the Government that is largely responsible is the Prime Minister's obsessive fear and hatred of any alternative centre of power. It is rumoured that she is even jealous of power at the highest level in the constitution, but that is not germane to this debate.

Wherever alternative sources of power exist, the Prime Minister is determined to root them out; hence the lunatic obsession with abolishing the metropolitan counties and the GLC. In many cases, it is local administration, local budgeting and local financial control that ensure a reasonably low level of keen pricing. The centralisation that is the driving motive of the Government, not just on Whitehall but on 10 Downing street, is pushing up the prices of a whole range of public utilities.

How can the hon. Gentleman square his concern with localising decision-making with his concern to introduce a statutory price control system?

On another occasion I should be delighted to lecture the hon. Gentleman on the fact that alliance incomes policy is decentralised to the greatest possible extent and would consist of local and regional tribunals which would make their own decisions in an arbitration fashion. If the hon. Gentleman is trying to tax us with a centralised incomes policy, he should look back to the Government of his right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath).

The cutting out of the transport support grant and the crippling of the passenger transport executives in all the metropolitan areas are having a disastrous effect on the successful policy of lower bus fares to encourage more passenger use.

By many authorities, some of them supported by Liberals.

One of the most significant giveaways in the social security Green Paper, which has just been debated by the House, is the crazy suggestion that free school meals should be abolished, and that instead the proposed family credit system should include sufficient cash to cover school meals for children of poor families. What an absurd centralisation of a service that is dealt with economically on a local basis. Anyone who reads the Daily Telegraph weekly bulletin of food costs will have noted the wide variations between different parts of the country. The provision of a uniform cash allowance, which would inevitably have to cover the higher range of food costs, instead of allowing local education authorities to carry on their duty of providing free school meals economically, would add considerably to that branch of education costs.

The Government are even jealous of the water authorities, which were the creation of a previous Conservative Administration. The Prime Minister is not content with being able to control the nominations to those authorities and the appointment of their chairmen. She is not satisfied with enabling them to fix prices secretly, without the press being allowed to attend the meeting; she wants to interfere with the price mechanism that they adopt.

No doubt all hon. Members have taken note of the shrewd observations of the chairman of Thames water authority as to how the Government frustrated his authority's intention to make only a modest price increase. The Government insisted on a negative external financing limit which forced Thames water authority to put up its prices by about twice the rate of inflation. Interference with local decision-making is a major contributor to the scandal of unnecessary price rises in these important parts of the economy.

There is an even greater evil. Many of us used to think that the ultimate in selfish cruelty was the forced feeding of Strasbourg geese to provide pate de foie gras in fashionable restaurants. The fattening of public utilities to enable the Government to sell them off to people who have wealth to spare for such investments is an even greater cruelty inflicted on poor families and on people on moderate wage levels who have to pay the higher prices so that the Government may make dramatic sales of the public utilities to their friends and to the better off.

I do not believe that even the Prime Minister's Fleet street knights will be able to disguise this scandal for much longer. The electorate will cotton on to it or smell it out soon. It is a shoddy device aimed — I think unsuccessfully — at enabling the Government to make spectacular cuts in income tax on the eve of the election.

I remind the House what the Treasury and Civil Service Select Committee had to say about this sort of dodge in its third report earlier this year:
"We are also concerned at the Government's insistence on using nationalised industries' finances to offset public expenditure … it seems likely that the nationalised industries will resort to using their monopolistic power to raise prices."
That is exactly what has happened. It is happening throughout the whole range of nationalised and public utility prices which are mentioned in the motion. The Confederation of British Industry has observed with acerbity on the penalties which large industrial users of energy have to pay as compared with their competitors.

There is another aspect of state-administered prices which must be mentioned, because it is important for our younger generation and it is not mentioned in the motion. My right hon. and hon. Friends regard the recent increases in dental charges as a savage blow to good health and sensible preventive medicine. Since the present Prime Minister came to power, dental charges have increased from £7 to £17 for a treatment, plus an open-ended 40 per cent., which could make treatment cost as much as £110. That is an absurd way to encourage heathy practices among younger people.

We need a proper mechanism for controlling and monitoring the pricing policies of nationalised industries and all other nationwide public utilities. The alliance,

given the opportunity, would ensure that all nationalised industry and public utility prices of nationwide application would be subject to specific and affirmative detailed approval in the House and to continuous monitoring thereafter.

I am a little surprised at what the hon. Member is saying about a national price for electricity and gas. Surely he is aware that although, in Scotland, especially in the west of Scotland, electricity and gas prices are marginally lower than in other parts of the United Kingdom, the total amount spent in a year on energy by people in that area is 20 per cent. higher than in the south of England. Surely that difference ought to be taken into account.

Yes, indeed, and the matter should be debated in the House. Nothing that I have said, as the hon. Gentleman will find when he reads Hansard tomorrow, suggests there should be a uniform price throughout the country. The pricing policies of these industries should be debated fully and not on some obscure order late at night. They should be subject to major and proper debate.

I must protest at the shoddy procedure into which the House has slipped recently — debating the public expenditure White Paper on a take note motion. At the end of such a debate, the Government—the Secretary of State for the Environment is the worst offender—take the House's decision as meaning approval of everything in the public expenditure White Paper. That is contrary to the facts, because the House merely takes note of the White Paper. It is also contrary to reason, because a vast area of public expenditure, including estimated local government expenditure, cannot possibly be settled in one or two days of debate. The proper procedure is to disentangle those various items into their separate components and to debate and vote on them on a substantive motion.

We shall not get out of this dreadful plight until the management of the economy is put on a realistic basis and the Government's targets are employment, prices and the exchange rate. Until there is a greater disposition to encourage locally administered pricing and local control of services, we shall not get the best bargain or the best value for money for taxpayers and ratepayers. Because the Government have signally failed on this count, Liberal Members will join the Labour segment of the Opposition in the Division Lobby tonight.

5.15 pm

The circumstances of this debate are extraordinary The public would be forgiven if they were not aware that this afternoon's debate has been called by the Opposition because they feel there is an important subject to debate. But what do we see? One duty shadow Minister on the Front Bench, I believe two Opposition Whips and someone who sits there more in hope than in anger. Such is the seriousness with which the Opposition treat this debate.

With respect to the intervention from the television personality—

I would not praise him—no, Sir.

Not surprisingly, I oppose the motion and support the amendment. It is also not surprising that the Opposition have the nerve to table a motion in these terms. I well understand that oft-used phrase, "It is politics, lad." The Opposition must think that we are a nation of fools if they expect us to believe that, with Labour in government—Heaven forbid — public sector prices would remain steady and all would be well with the long-term health of the nation.

I recall a certain right hon. Opposition Member saying after the last general election that the Labour party had promised to spend 17 billion without any thought for how such enormous expenditure could be funded. He then implied that the electorate were not fools and rejected Labour's manifesto. We are two years on and the Labour party is at it again, in the vain hope that just enough people will fall for such irresponsible and undeliverable nonsense.

During the past two years, no matter what subject is being debated, the Labour party has announced that, if it were in government, it would spend X amount more. If we sat down with pen and paper and added up all these X amounts we would probably exceed the 17 billion that the right hon. Gentleman to whom I referred said was bogus in the first place. The Government have been involved in the rise in gas, electricity and water charges and, if we are honest, why should they not? They are national resources and their use and management are the long-term, if not day-to-day, concern of the Government of the day. The absence of any cost balance between the competing types of fuel under the last Labour Government left commercial and domestic consumers in an unreal and unstable position.

The House will recall that, under Labour, the cost of gas to domestic users was reduced in real terms but that commercial users faced massive increases. My right hon. and learned Friend the Chief Secretary to the Treasury mentioned those increases. I suppose that it can be said, without fear of contradiction, that there were short-term votes to be had but long-term damage to industry—but then, the Labour party rarely concerns itself with the long term. The problems of industry, if the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) is to be believed, began only in 1979.

My own company relied heavily on the constant supply of steam for its manufacturing process. We had a dual-fired boiler—we could switch instantly from gas to oil—originally to cover us against strike action. We would have had a triple choice if it had been technically possible or available. That was around 1972. The point I am making is that we were lucky, we had and made a choice while there was time. Many commercial users did not and they were stuck with an expensive fuel source, either because at that time gas simply was not available or the demand to be converted to gas was refused. Then, in a couple of years, as the House knows, the Labour Government increased gas charges for industry in real terms by, I believe, 112 per cent.

I said that we were lucky. Indeed we were. We had a commercial advantage in those years over other users. But I am not sure that it was fair or just, and certainly it was not in the national interest. Energy prices are the concern of what ever party is in government and so long as the guidance is objective and rational I see no criticism of that involvement.

I pay water rates, like everybody else, and I do not like it any more than they do. I find it extraordinary, however, that demands for greater investment in our water supply and sewage and for environmental provision are wholly at variance with the implications by Her Majesty's Opposition that the cash for those provisions should not be generated from within the water industry. The money has to come from somewhere. That is not to say that I like the present method of assessment of water rates — I most certainly do not — but the principle that the industry should generate its own resources is not, in my view, unreasonable.

I take it that the reference to rents is directed to the public sector of council properties; again I say, why not? We have seen much hand-wringing on this subject. It will be recalled that the hon. Member for Bootle (Mr. Roberts) said that when he was chairman of his local authority's housing department rents remained static. He forgot to consider that there was perhaps a link between his policy of static rents and the deplorable state that he admitted his housing stock got into. Clearly, the lack of a sensible renting policy led directly to a decline in the quality of the housing stock in the hon. Gentleman's constituency.

I believe that it is sound common sense in both the long and the short term to have a rent policy that provides the necessary income to ensure that housing stock is kept up to scratch and provides the necessary surplus to ensure security and make proper environmental provisions on all estates and in all flats and tower blocks. Whatever party is in government then has the duty to ensure that those who cannot meet those reasonable rents get the necessary financial help. Static rents and declining standards of provision help no one — certainly not those in need. Furthermore, an aggressive right to buy policy produces much revenue for a local authority with which to improve the position of those who, for whatever reason, wish or have to stay in rented accommodation.

The hon. Member for Copeland (Dr. Cunningham), the hopeful shadow Minister, laughs.

I thank the hon. Gentleman for giving way. The reason I was smiling was that he was suggesting that capital receipts from the sale of council houses were available to local authorities at their discretion. He clearly does not understand the policies of the Government he is supporting, because he must surely know—he ought to know—that capital receipts are more heavily controlled and restricted by this Government than ever before and that councils cannot spend their own money in the way they want.

Perhaps, if the hon. Gentleman had been listening instead of dreaming of greater things, he would recall—he can check Hansard tomorrow—that I said quite clearly "produces much revenue for local authorities". If he will stop grinning for just two seconds, I should like to point out to him that the revenue gain from the right to buy policy in my local authority was greater than the subsidy lost as a result of Government policy. This has nothing whatever to do with capital receipts. Perhaps if the hon. Gentleman studied his subject a little more instead of trotting out the usual knee-jerk reaction to capital spending, he might be able to contribute a little more accurately.

I emphasise that, in our local authority, the profit—not capital receipts—that flowed from the right to buy more than made up for any loss of subsidy.

I am puzzled by the criticism of bus fares, because I believe that the Opposition are on very shaky ground here. Certainly, from my own experience, this Government have not forced local authorities to put up bus fares.

I live in Nottingham, a most beautiful city, in the centre of this fair land.

Most sensible local authorities have raised bus fares in line with real costs, inflation and the need for sensible provision for capital replacement. I see nothing wrong in that policy and therefore certainly cannot see how any criticism of the Government can be made. But some authorities—the hon. Member for Leeds, Central (Mr. Fatchett), who sits in hope and anger, will probably say, "Hear, hear," to this—have simply said, "Where are their votes? Let us dump the rising cost of provision on to the rates. Let commerce and industry pick up the bill; they do not have a say in local affairs." That, sadly, has been the practice in the republic of Sheffield and in other areas like it.

I come to yet another item on this agenda. I, too, have a mortgage and I, too, do not like the higher charges. Buying one's own home is the best investment of one's life and, if it is a strain to begin with, at least it is a declining cost in real terms on an increasing asset. If recent statistics are anything to go by, my advice to council tenants is to make a start now. The current situation, because of high interest rates is holding house prices static. We should make no mistake, however—interest rates will come down and house prices will then rise. So I say again to council tenants that they should make a start now because, whoever is in control of their local authority in future years, one thing is absolutely certain—rents will rise substantially over the lifetime of their mortgage and those who are paying rent will at the end have nothing to show for it.

Does the hon. Gentleman give the same advice to the 13 per cent. of the council house tenants in my constituency who are unemployed, with only unemployment benefit or supplementary benefit? Does he say to them that they should start to consider purchasing their houses?

I should like to be able to say yes to the hon. Gentleman. However, I do not believe that there is any logic or sense in saying that if everybody cannot have something, nobody should have it. I hope sincerely for a rapid decline in the percentage, of unemployment in the hon. Gentleman's constituency and I hope that in due time his constituents will be able to buy their own homes. I also hope that the present system, with the Government helping even the unemployed to buy their own homes by means of assistance on mortgage interest, will be supported. I hope that the hon. Gentleman will agree that that is a right and proper provision.

On this matter of mortgages and mortgage interest rates, I do not think that we should forget the reality that, while higher mortgage charges are short-term pain for some of us who pay them, they often represent for others—frequently old-age pensioners with just a little bit put by — a little bit of much-needed extra income. That other side of the mortgage equation is often forgotten. I am not sure what the figures are, but I believe that about five or six times as many people have a little money in building societies as are currently borrowing from those societies.

Most important of all, if all these matters were held down by simple Government intervention and funded, as indeed they would have to be, by higher direct or indirect taxation, we would find that we had embarked on yet another horrendous upward twist to unemployment—and that national tragedy is monstrous enough already. We may have a long haul, but I believe that over the past few years the policies that a Labour Government would have imposed would have been ruinous. Our sound money policies are the best long-term future for this country and for all concerned.

5.31 pm

It is always fascinating to engage in a debate when what one intends to say has been trailed with so much interest by the previous speaker. Before replying to some of the points made by the hon. Member for Nottingham, South (Mr. Brandon-Bravo), I wish to refer to the speech of the hon. Member for Colne Valley (Mr. Wainwright). I was disappointed to hear the announcement of a split in the alliance that was so evident at the end of the hon. Gentleman's speech. He said that the Liberals would be supporting the Opposition tonight, but he could not speak for the Social Democratic segment of the alliance. I am not surprised that he cannot speak for the Social Democrats. It is a difficult task, given that the nature of that organisation is such that only one person speaks for it. It is sad that there should be such a sharp division in the alliance, particularly at a time when, to some extent, it may be trying to paper over the cracks.

The hon. Member for Colne Valley has sung the praises of cheap public transport. That delighted me, because I am a great believer in the political process of conversion and persuasion. It is a pity that the hon. Gentleman is no longer present. If he were, he would recall that, when the Labour party was elected to office in west Yorkshire in 1981, very much on the basis of a public transport policy, it had to seek a supplementary rate to implement that policy, and it may come as no surprise to learn that it ran into certain opposition from Liberal councillors. The memory of the hon. Member for Colne Valley may be somewhat clouded on this issue, or perhaps it is useful to talk about a Liberal commitment to cheap transport while forgetting its record in other respects.

It could be that the argument advanced by the hon. Member for Colne Valley (Mr. Wainwright) for decentralisation and regional and local decision taking extends to Liberal policy matters as well.

That is a valid point. Many of us read the Liberal newsletters with interest, which reveal differences up and down the country, and, indeed, from ward to ward. However, I shall not be tempted into going down that path as it takes us away from the major issues in the debate.

The hon. Member for Nottingham, South made several points that to some extent I dispute. On capital receipts and the right to buy, it was peculiar that he did not bring himself up to date with the current regulations. That point was made by my hon. Friend the Member for Copeland (Dr. Cunningham).

Earlier this afternoon, I went with a delegation of tenants from Leeds to see the Minister for Housing and Construction. He asked, "How much money will Leeds raise this year in terms of capital receipts?" He was told that it would be in the region of £5 million, but that only £1 million could be spent. Given the keen interest of the hon. Member for Nottingham, South in the sale of assets, I should have thought that he would be keen to ensure that local authorities should be able to spend much more than 20 per cent. of the sum raised in that way.

The hon. Gentleman appears to be even less informed than his hon. Friend the Member for Copeland (Dr. Cunningham). I was not talking about capital receipts. When a council house is sold and a local authority acts as the estate agent and building society, that authority makes a profit on the interest, just as a building society does. I assure the hon. Gentleman that in Nottingham that profit, which has nothing to do with capital receipts, is about £7 million—well in excess of the loss of Government grant.

Many studies of Nottingham would challenge those figures and suggest substantial revenue losses there. I was referring to the capital implications arising from the sale of houses in terms of capital receipts.

The hon. Gentleman also talked about bus fares and said that Labour authorities had held down for cheap, short-term political gain. That is strange. If it was for cheap, short-term political gain, why did the Government run away fom this year's metropolitan county council elections in areas which operate cheap transport policies? If his argument was so correct, would it not have been appropriate for the Conservative party to hold those elections and to put that view to the electorate in order to gain support? I am convinced that there would have been an endorsement of the cheap fares policy among many county councils, but the Government removed the right to vote from 13 million people.

Subsidised public transport may well be of great help to industry. Indeed, there is evidence to suggest that such policies are popular not only with the electorate but with commercial interests in city centres. In areas that have pursued such policies, there has been very little opposition from commercial interests. Therefore, it may be worthwhile for the hon. Gentleman to pursue those matters further.

The Chief Secretary regularly spoke of sound finance, to which he seemed to attribute a sacrosanct definition. That may well be the subject of much argument, but I make the assumption that there is a sacrosanct definition that allows us to understand exactly what sound finance means. To make that concept a reality in terms of managing the economy, one must turn sound finance into pounds and pence in relation to the PSBR, targets for monetary growth and various other measurements of monetary aggregates.

I indict the Government not for getting caught up in damaging dogma, but for the fact that, even in terms of their own dogma, they have been regressive and redistributive, and have pushed the burden of their policies on to the weakest members of our community. If a figure for the PSBR is needed and it is decided that it should be sacrosanct and cannot be altered, one can arrive at it by various means. In other words, the objective can be set, but the means can vary.

The Government cause the public anxiety because their methods push the burdens in one direction. We have discussed rents, mortgage costs, water rates and the cost of fuel. Those burdens have increased as a result of Government policies. The Government have no need to go in that direction, even on the basis of their own targets, but the means chosen are redistributive. It is a simple test to consider those burdens alongside the cuts in taxation for the rich in our society. The burden has been taken off the rich and has increased on those least able to carry it. That is my indictment and the country's indictment of the Government.

It appears that the hon. Gentleman is honest enough to admit that taxes will have to increase if a Labour Government come to office. In fairness to the hon. Gentleman, he is prepared to consider a problem which the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) avoided. The hon. Gentleman has implied an increase in the PSBR. Will he tell us by how much the next Labour Government—if there ever is one—would increase the PSBR?

I get somewhat disappointed with the hon. Gentleman. He rises regularly with enthusiastic questions, but one feels that he wastes most of his energy getting up and it is not reproduced intellectually. If the hon. Member had been listening, he would have realised that I was arguing within the limitations of the sacrosanct dogma of the Government. Many other arguments could be made, and I am sure some of my hon. Friends will make them.

According to the Government, rates have become a major domestic burden. The Government tell us that the rate burden is so great that they will do something about it. The Prime Minister has rates at the top of her agenda, although I suspect that football hooliganism and violence have now taken over. The Government have not yet produced any legislation on rates. The abolition of rates was at the top of the agenda in 1974, 1979 and 1983, and I suspect that it will be in 1987. Rates have become an acute embarrassment to the Government as a direct result of their policies.

The projection by the Chartered Institute of Public Finance and Accountancy for 1985–86 is that local government expenditure will increase by 2·9 per cent. That is considerably less than the rate of inflation. However, the average domestic rate bill is estimated to increase this year by 9 per cent. We have an increase in spending of 2·9 per cent. but an increase in the cost to the domestic ratepayer of 9 per cent., which is above the current rate of inflation. As the Under-Secretary seems to acknowledge, the individual ratepayer is paying more but getting less value in services. Those who have served in local government will recognise that that means pressure from ratepayers and tenants for better services, yet the squeeze continues and the bills and rents go up. The Government have forced a reduction in services, but at the same time they have forced the average domestic ratepayer to pay more. That has come about because, given the sacrosanct nature of the Government's targets, they have cut central Government support to local government, thus forcing up rates and reducing services. The Government are thrashing around trying to find an alternative to rates, but they are creating problems in the current rating system.

The Government could get rid of many of their problems with the rating system if they would give back the money that they have taken from local government, but they are not prepared to do that. They have reduced the level of rate support grant funded from 62 per cent. under the Labour Government to about 46 per cent. now. That vacuum, created by the Government, is pushing up rates and increasing the burden on individual ratepayers. The Government must explain to the country why they have adopted a policy of rate increases above the rate of inflation.

No one disputes that rate support grant has diminished, but I hope that the hon. Gentleman will be honest enough to admit that the process began under the Labour Government. More specifically, will he confirm that, despite a reduction of rate support grant in percentage terms, his city and mine, like others with special needs, have had additional specific grants and are thus no worse off and that the combination of rate support grant and additional specific grant means that many programme authorities are better off than before? Does he admit that that is true?

I think that that is very far from the truth. The equation certainly does not work in that way in Leeds. Like so many other cities, we have lost money as a result of the Government's cuts in rate support grant.

I make the challenge once again. Why have the Government followed a deliberate policy of pushing up rates? If rates are a regressive tax, why are the Government increasing them? The Government's pricing policy is redistributive from the poor to the rich. The Government have not yet answered that indictment, but sooner or later they will have to do so. Moreover, I suspect that if the hon. Member for Nottingham, South goes to the Minister on this, he will get a correction rather than confirmation of his claim.

I repeat, if the Government are so concerned about local government finance and the rating system, why will they not give local authorities a chance and give back the money that they have taken from them?

Government policy on public sector housing costs and rents is equally absurd and redistributive from poor to rich. At 1983–84 price levels, public housing subsidies in England and Wales amounted to £1,852 million in 1979–80, but only £391 million in 1983–84. In other words, the Government have taken £1,500 million out of public housing subsidy. In so doing, they have pushed up council house rents, again placing the burden on those least able to afford it.

I warn my hon. Friend to be prepared for more Conservative interventions of the asinine character that we have seen so far. One wonders where they come from and whether it is the role of civil servants to brief Tory Back Benchers on their inaccuracies.

On a point of order, Mr. Deputy Speaker. My hon. Friend the Member for Great Grimsby (Mr. Mitchell) has raised an important constitutional issue and I ask you, Mr. Deputy Speaker, to resolve it. It is my understanding that every Back Bencher in this place enjoys equality. That applies whether the individual sits on the Government Benches or on the Opposition Benches. If a Minister is prepared to assure me that I can approach those who sit in the civil servants' Box to consult them on figures, I shall be prepared to accept that the action of the hon. Member for Nottingham, South (Mr. Brandon-Bravo) was legitimate. If I am told by you, Mr. Deputy Speaker, that it would be out of order for me to talk to those who occupy the civil servants' Box, an important issue will have been raised.

I cannot see any Boxes. If an hon. Member goes behind my Chair, he is outside the House. If an hon. Member does so, who he talks to and what he does have nothing to do with me.

Further to that point of order, Mr. Deputy Speaker. I can assure you, Mr. Deputy Speaker, that I had a conversation with those in the civil servants' Box and that no questions were asked.

On a point of order, Mr. Deputy Speaker. Is it in order for Labour Members to introduce filibustering tactics to spin out the debate when one of their colleagues is addressing the House?

The hon. Gentleman's point of order is bordering on the bogus. He is committing the sin of which he is complaining.

In a sense, Mr. Deputy Speaker, I am grateful for your ruling. I accord with it, of course. You cannot see what happens behind your Chair, but if anything happens behind it that educates Conservative Members, that activity has a value. That is the point that I was about to make to my hon. Friend the Member for Great Grimsby (Mr. Mitchell).

Before I was interrupted by the points of order, I was saying that cuts in housing subsidies and rents have increased and that the consequent burden has been placed on those least able to carry it. The total spent on public housing has declined by about 28 per cent. since the Government took office. That is a sign of the low priority that the Government accord to public sector housing.

The cuts and the administrative chaos that has been created by the Government should be a cause of concern for Conservative Members. The social security reviews tell us that there has been a sharp increase in the money spent on housing benefit. The forerunner to the housing benefit scheme was the rent and rate rebate scheme, the cost of which was £1,380 million in 1979–80. By 1983–84 the expenditure on housing benefit was £3,790 million. The latest estimate of expenditure on housing benefit for 1984–85 is £4,160 million. The benefit will be taken up by about 7 million households. That means that basically one in three households would be claiming housing benefit. By taking money away from public sector housing in terms of rate subsidy, the Government will cause many more people to claim housing benefit.

The Government are saying that they cannot afford to continue the housing benefit scheme and that they will have to make cuts in it. The direct result will be more and more people finding themselves with housing costs that are difficult to meet and with burdens that are difficult or impossible to carry. Again, that will be the direct result of Government policy.

There have been increases in rents in the public sector and local government finance has been cut. There have been savage increases in water rates. When the Chief Secretary to the Treasury said that the rate of return of the water authorities was under 2 per cent. and that the target set in the White Paper of 5 per cent. was not being met, I was fearful that that was the prelude to an announcement of even further increases in water rates in subsequent years. Water rates are yet another example of the burden that is being carried by those least able to bear it.

The effect of the Government's economic policy can be described only as socially divisive. It has deliberately increased unemployment, and unemployment has been used as a tool of economic management. The Government's economic policy has pushed up prices in a way that again can only be described as socially divisive. At the same time, the Government have given priority in their taxation policy to benefiting the rich and the very rich. A Government who behave in that way stand indicted before the public. The Government's priorities are wrong and need to be reversed. The reality is that they can be reversed only when the Government are kicked out of office and we have a Labour Government who are committed to social justice and economic efficiency.

5.55 pm

It is interesting that, in a debate on prices called by the Opposition, the only Labour Back Bencher to participate in the debate so far, the hon. Member for Leeds, Central (Mr. Fatchett), should make an interesting speech about local authorities and housing finance.

The hon. Gentleman is interjecting from a sedentary position, as he does frequently in Committee. Essentially, the hon. Member for Leeds, East made a speech about local government and housing finance.

I have only just begun my speech. I am sure that the hon. Member for Glasgow, Cathcart (Mr. Maxton) will be able to catch your eye, Mr. Deputy Speaker, if he wishes later to contribute to the debate.

Perhaps the hon. Member for Leeds, Central was as surprised as my right hon. and hon. Friends and I were when the Opposition chose inflation and prices as a subject for debate. For Conservative Members, it is rather like being asked to debate crime with the inhabitants of Wormwood Scrubs. The Opposition have chosen an astounding subject for debate.

It might be useful to remind the hon. Gentleman of the motion that appears on the Order Paper in the name of my right hon. Friend the Leader of the Opposition. The motion refers to the Government

"intentionally increasing public sector prices".
It refers to a range of items, including rents, rates and water charges. Those items are central to the motion. It is a sign of the priorities of Conservative Members when they take the view that water charges, rents and rates are not important to the British people.

I was not trespassing on your authority, Mr. Deputy Speaker, in suggesting that the hon. Gentleman was outside the terms of the motion. However, it is interesting that, in a debate that is generally about prices—certainly one would gain that impression from those who have spoken from the Front Benches—an Opposition Back Bencher should address himself to the narrow topic of local authority finance, interesting and relevant though that is.

As my right hon. and learned Friend the Chief Secretary to the Treasury observed, although the increase in the RPI tipped 7 per cent. this week — the Opposition were fortunate that that should happen shortly before the motion came before the House—that percentage is lower than the increase for every month of the period that the previous Labour Government were in office.

My right hon. and learned Friend could well have responded to the debate by putting that fact on a continuous tape and playing it for 20 minutes. It is all that needs to be said in answer to the assertion that a Labour Government would do better in controlling inflation. It is perhaps for that reason that there are so few Labour Members in the Chamber. Perhaps I should be more charitable and assume that they are filling the Labour benches at Ascot. On reflection, if that were so, the hon. Member for Great Grimsby would be there.

Under the previous Labour Government, the retail price index increased by over 100 per cent. and the average increase was 15 per cent. a year. Over the past five years of this Government, it has increased by 50 per cent. If one takes account of the fluctuations that have been caused by changes in the mortgage interest rate, the increase has been about 5 per cent. for over three years. Our inheritance from the previous Labour Government was an increase in the RPI of very nearly 20 per cent.

That was not an inheritance. The Conservative Government increased the RPI when they took office in 1979.

When the Conservative Government took over from the previous Labour Government, inflation was rising. After the Conservative Government had been in office for four months, inflation was 17·5 per cent. Almost anyone who studies these matters will agree that that was the result of the policies of the Labour Government. The Government have been successful in bringing inflation down to 5 per cent. and in keeping it pretty steady at that level. That is a considerable and creditable achievement by the Government. It is difficult for Conservative members to take criticism on that front from those who succeeded in doubling prices over a period of five years. It is particularly galling to take it from the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), who was Secretary of State for Prices and Consumer Protection for much of that period.

We should not forget that a partner in that duet of Secretaries of State during those five years was the present president, I believe, of the SDP. In October 1974, she told us that inflation was running at, I think, 8·4 per cent., only for us to find out about six months later that it was running at more than 20 per cent. The only thing that temporarily reduced inflation under the Labour Government was the intervention of the IMF. By the time the Labour Government left office, inflation was once again rising and a considerable number of blank cheques were left for their successors to pick up. To put the right hon. Member for Sparkbrook back in charge of prices and inflation in order for him to have a second go would be a bit like the Irishman who lost £100 on the cup final; £50 on the match and £50 on the action replay.

The Opposition make a great deal of nationalised industry prices, so it is worth looking at our respective records in two or three cases. Nationalised industry prices are important to the consumer, and are a substantial element of industrial costs. The motion criticises us for increases in the electricity tariff. In the past three years, electricity prices have risen by an average of 2 per cent. a year, but they rose by the now well-known figure of 2 per cent. every six weeks under the last Labour Government.

Under this Government, there has been a fall of 8 per cent. in real terms over the past three years. The one utility where the Opposition can claim to have reduced prices, or at least not to have increased them by much, is gas, and more specifically, domestic gas prices. However, the Labour Government deliberately suppressed domestic gas prices and increased industrial gas prices. Indeed, they increased industrial gas prices by more than 100 per cent. in real terms during that period. That was a very shortsighted and self-defeating policy.

The policy led, by 1979, to selling gas to domestic consumers at a loss, which cannot make any sense. It was also nonsense for the importance of such elements as efficiency and resource allocation in industrial costs, the creation of employment and the holding down of prices in the industrial sector. There is fairly good authority for that in the Labour Government's Green Paper on energy policy, which was published when the then Secretary of State for Energy was the present right hon. Member for Chesterfield (Mr. Benn). That Green Paper said:
"Energy prices should give both customers and producers reasonably accurate signals about the cost of energy supply. Under-pricing encourages consumers to waste scarce resources and may discourage additional supplies."
None of us could claim to be able to put it any better than that.

The Conservative party was left to correct that situation when it came into office, and it has done so. But it is worth reflecting on what happened to some other nationalised industry prices between 1974 and 1979. The cost of telephone calls rose by 200 per cent., of rail fares by 153 per cent., of domestic coal by 150 per cent. and of the post by 133 per cent. Given the Labour party's record, we do not need any lectures or instructions on nationalised industry prices.

Despite our differences in approach to other matters, all hon. Members would like to see inflation fall still further. No doubt there are almost as many opinions as there are economists, but we could probably all agree on a shortlist of inflationary causes. I believe that they fall into two groups: those that affect the demand side, and those that affect the cost side. On the demand side, I would put money, the creation of credit and to some extent wages. On the cost side, I would say that wages are perhaps the biggest factor, although commodity prices and interest rates are also involved.

On the demand side, the expansion of the money supply and the rate at which consumer credit is created are obviously enormous factors. There are a variety of causes for them, such as the level of the public sector borrowing requirement, the level of interest rates, the rate at which bank lending is expanding, loan demands, credit terms and so on. We have a certain amount of control over some of those factors. For example, we have some control over the level of the PSBR. We also have some qualitative controls that we can exercise over consumer lending.

In addition, taxation policies can have some effect. Unfortunately the hon. Member for Colne Valley (Mr. Wainwright) is not in the Chamber at present, but he took issue with me over what was the main factor in the level of interest rates. I believe that, although we have some control and influence over domestic interest rates through domestic economic policies, it would be a terrible mistake to assume that we could buck the trend of worldwide and American interest rates, particularly when there is some doubt about oil prices and their importance for the strength of the pound and our balance of payments. Unfortunately, such things are outside our control.

A variety of market forces, both national and international, are at work. If the money supply is squeezed too hard, the velocity of its circulation simply increases to compensate for that. Thus, although there are some elements of control which we are using, there are also some factors over which we do not have any control. In addition, we have very limited control over other factors.

On the cost side, many commodity prices are also largely outside our control, except to the extent that the exchange rate influences their performance as input prices to British industry. We have considerable influence over the prices of commodities produced in Britain and particularly over the prices of nationalised industry products such as energy. In such cases, one person's price is another person's cost, and it is vital to try to keep nationalised industry prices as low as possible and to try to keep rises reasonable, so that they do not become an exorbitant cost to the industries or their customers. This Government have made considerable progress in improving the efficiency of nationalised industries in an effort to keep down industrial costs.

The reduction in corporation tax, which represents a substantial cost to companies, businesses and producers, and the reduction in national insurance contributions for employers are very positive steps towards controlling price rises. However, I should like us to go a little further with employer's national insurance contribution. Wherever the Government have a direct influence over industrial costs, they would do well to exercise it as much as possible in a downward direction. That would also have a beneficial effect on employment, and there may be more that we can do there.

The difficult question is that of wages. Unit labour costs are a vital ingredient in our international competitiveness. High wages are fine if they are earned in increased productivity. If they are earned from profits, that is fine. However, if they are paid in a way that results in price increases, they must inevitably end up being inflationary. Under the last Labour Government wages rose by 140 per cent. During the same period, we saw output fall by 4 per cent. That must be a recipe for inflation.

We must see a general moderation in wage and salary rises in the private sector, because the interrelation of unit costs and international competitiveness is vital. One of the big factors, particularly under the Labour Government, was the enormous upward pressure on wages that was generated by the trade unions. Unfortunately, we now see the Labour party in opposition supporting almost every wage demand that comes along, regardless of its merits, or of its consequences for inflation or the competitiveness of the industry involved. Labour Members know from their experience in government that they cannot go on doing that. That is what eventually landed them in a lot of trouble. Moderation is a vital factor in controlling inflation.

The control of pay in the public sector involves some other considerable, but different, difficulties. It will be difficult to continue to maintain a level of general wage increases in the public sector that is considerably below that in the private sector. It was reasonable to expect to do it for a certain period, as there are other compensating advantages in the public sector, but we cannot go on for ever. We must look at ways of trying to find a more flexible framework for discussing, and deciding on public sector pay increases.

Perhaps the hon. Gentleman can explain why, for example, in the recent Army pay settlement, those holding the most senior ranks seemed to obtain a much higher percentage than those who hold the most junior ranks. Indeed, it would seem from recent industrial settlements that those who are chairmen and managing directors of very large public companies obtain much higher percentage pay increases than those who produce the goods on the shop floor. Does the hon. Gentleman not agree that there seems to be an inequality in our society these days, in that, the higher up someone gets, the more likely he is to receive an enhanced rate of pay? Those at the bottom of the pile seem to get very little.

I do not know about that, but it is a perhaps unfortunate fact that senior executives among the top three or four executives in major international companies work in an international market. If we do not pay the salaries which they can earn abroad, they are likely to move abroad. That has already happened. The salaries paid here are nothing like as high as in the United States. I agree that that creates an extraordinary discrepancy, but few people can command such large salaries.

The cost to a large company of paying its chairman £100,000 is minuscule compared with the cost of giving all its employees a 10 per cent. pay rise. Raising unit labour costs has an impact on the international competitiveness of a company. The argument by the hon. Member for St. Helens, South (Mr. Bermingham) is valid, but he is really talking about a public relations exercise which does not have enormous economic consequences.

If artificial efforts are made to hold down the salaries of top executives, many of them will move to the United States where they will be paid considerably more.

It would be interesting, in the context of both private and public sector pay, to know exactly how the Labour party proposes to deal with the problem. I understood that the hon. Member for Copeland (Dr. Cunningham) was to reply on behalf of the Opposition, but perhaps the hon. Member for Birmingham, Perry Barr (Mr. Rooker), who is present now, can tell us. We know that the Labour party favours an incomes policy because the right hon. Member for Sparkbrook has mentioned it on several occasions and that usually causes him trouble in some parts of the Labour party. He says that he does not favour a coercive incomes policy but he has said:
"We ought to become the party of an incomes policy, but I do not want a statutory incomes policy and I do not want a coercive incomes policy."
Exactly what kind of incomes policy does he want?

The nub of the debate should be to ask which party has the best chance of bringing inflation down. The Conservative Government have succeeded in bringing it down from nearly 20 per cent. to 5 per cent. Which party has the best chance of bringing inflation down from 5 per cent. to zero? It is obvious that that is more difficult than bringing it down to 5 per cent.

Is the best prospect to be found in the continuation of the present Government's policies? The answer must be yes. With the promotion of efficiency in the public and private sectors, a sound public sector financial policy with the public sector borrowing requirement and public spending under control, with a reasonable control over the money supply and bank lending, and with moderate wage demands, we have a reasonable prospect of reducing inflation to well below 5 per cent.

What is likely under a Labour Government? Their record is not good. Public spending would rise enormously, and probably go out of control if history is anything to go by, with serious consequences for the PSBR and the money supply. There would be further nationalisation and the active promotion of inefficiency in the nationalised industries. That is what happened under the last Labour Government and history has a horrible way of repeating itself. Loose money would be in pursuit of low interest rates. Taxes would be high and in the early years of a Labour Government substantial wage increases would be granted. All that would be incredibly bad for prices and inflation.

The evidence is there. The Labour Government's record is very bad and ours is very good. [Laughter.] Opposition Members laugh because no arguments are left at their disposal. Our record is good. We have succeeded in bringing down inflation to 5 per cent.

To think that a future Labour Government would be good for prices requires one to ignore all the evidence. The Opposition cannot sell that argument to the House. They have not succeeded in selling it to the electorate and while they have no policy on wages other than to dance to the tune of their puppetmasters, they are unlikely to do so.

With inflation, as with other aspects of economic policy, the proof of the pudding is in the eating. I am afraid that the right hon. Member for Sparkbrook tastes no better now than he did when he was Secretary of State.

6.15 pm

I welcome the opportunity to take part in the debate, because it allows us to talk about the problems experienced by ordinary people in our constituencies. Few of my constituents lie awake at night worrying about the PSBR, GDP, the medium-term economic strategy or monetary aggregates. They and many people throughout the country are most worried about how to balance the family budget each week. That task has been made more difficult by Government policies on many of the issues to which the motion refers.

I shall pick just three of the issues from the broad and attractive menu set out in the motion. First, I shall deal with Health Service charges. Everyone who is realistic about the Health Service accepts that some charges are a regrettable necessity, but the scale and frequency of the increases made by this Government impose a considerable burden on many ordinary people.

The increase in charges introduced on 1 April this year was the seventh since 1979. The prescription charge stood at just 20p in 1979, and now it is £2. That is a tenfold increase in six years, which inevitably causes ordinary people problems.

Is not the hon. Member for Woolwich (Mr. Cartwright) forgetting that the biggest percentage increase in prescription charges was in 1968, when the leader of his party was a Labour Minister? He did not feel the need to resign. Will the hon. Gentleman put the issue in context by reminding the House that prescription charges were introduced by Hugh Gaitskell, a Labour Minister?

I have said that any realist accepts the need for charges. The Labour Government cancelled charges in 1964 and promptly reintroduced them in 1967. That is what I mean by being realistic. The hon. Member for Teignbridge (Mr. Nicholls) is a fair man, so I am sure he will accept that massive, rapid and frequent increases in charges cause problems.

Perhaps the Government believe that because of exemptions in the Health Service charging system there is no serious impact on patients. That is not the view of the experts. The British Medical Association, hardly a revolutionary body, says that it regards the charges as
"a further erosion of the National Health Service and a further restriction of the service."
The BMA says that it is concerned that some people who should go and see their doctor might well be deterred because of the scale of Health Service charges.

A similar comment was made by the British Dental Association, which said that the charges might persuade people to have their teeth extracted and not conserved because extraction is cheaper than filling. It added that the charges
"set dental health back a generation."
The experts think that high charges have an impact on those who have to find the money.

Perhaps the most interesting comment was in the Daily Telegraph of 13 March, which said:
"Conservative Governments have seemed equally unsure whether they related prescription charges to the cost of living, the cost of drugs or the rate of inflation."
The Daily Telegraph decided:
"There is nothing scientific or principled about it."
That interesting judgment underlines the point that I am making about the impact on ordinary people.

Hon. Members have referred to charges for essential public services such as gas, water and electricity. Those of us who live in the Thames water authority area would agree that the TWA has not been a much-admired institution among consumers. However, the campaign which the authority and its chairman put up against the Government earlier this year with respect to water charges won it a great many friends among ordinary consumers.

The original Thames water authority board was reduced substantially in October 1983 and was replaced by a new board of 15 people appointed by the Government. One of the new board's objectives was to run
"the authority as a major well-run business."
To execute that objective the board produced a plan for the current financial year involving a reduction in borrowing of £18 million and capital investment of £121 million to make improvements in the system. Most importantly, it involved increases to the consumers of only 3 per cent. I believe that most consumers would have regarded that as a good piece of business and one that carried out the duties which the Government gave to the authority.

The Government had a different view. They demanded that the authority should make higher profits and larger debt repayments and, as a result, that the increase to the consumer should be 10 per cent. rather than the 3 per cent. proposed by the authority. The TWA predicts that, if the Government's longer-term plans come to fruition, the Treasury will be able to cream off £270 million from Thames consumers in 1985 prices. The authority says:
"Not surprisingly the Board of Thames argues that this includes a tax on water."
There has been a similar approach with respect to gas. The gas levy, which is a separate charge in addition to the taxation that is paid by the gas industry, produced more than £521 million in 1983–84. In the two years 1982–83 and 1983–84 the gas levy produced almost £1 billion for the Treasury. The public expenditure White Paper suggest that in the three years to 1987–88 British Gas is expected
"to remain self-financing after paying over £2,900 million in gas levy and taxation".
There are 16 million gas consumers, and the levy costs about 3p per therm on the overall charge of 40p per therm.

A similar situation is developing in the electricity industry. The London electricity board has told me that its prices are about 5 per cent. higher than they need to he to fulfil its statutory obligation to break even. Because of the Government's policies, London electricity consumers are paying about £3 more every quarter than they need pay.

Conservative Members have argued that these price increases are less than the increases under the Labour Government. They totally miss the point. Clearly, consumers do not like paying high prices, but I think that they are prepared to accept them if they know that they are forced on the utilities concerned because of external pressures. I think that consumers resent the idea that they are paying more than they need pay simply to provide a back-door source of funds for the Treasury. Managers of the industries concerned resent that as much as, if not more than, the customers.

The idea of using essential public services, such as gas, water and electricity, as a means of collecting a hidden tax is extremely unfair, because that taxation falls much more harshly on the less well-off. The results of that pricing policy can be seen in many cases — for example, heating. Many of us who represent inner city constituencies know only too well that many people can no longer afford an adequate level of heating in their homes. Many of the problems of condensation and dampness in local authority blocks of flats stem from the fact that people can afford to heat only one room and cannot afford to heat, say, the bedroom. No doubt the advice given by local authorities to those of my constituents who talk about the problems of condensation is sensible, but it is hardly practical. They are told to switch on the heating and open the windows. One might as well tell people to burn pound notes, because that is not practical advice. Imposing higher prices than are necessary so that the industries can be used as milch cows for the Treasury results in much hardship for ordinary people.

I agree with those Opposition Members who have argued that the major cause of the growth in the rates bills during the lifetime of this Government has been the Government's policy of reducing the proportion of local authority expenditure that is met by central Government from 61 per cent. in 1979 to less than 49 per cent. during this financial year. I believe that this approach will continue and that a great many problems will be faced by a number of ratepayers because of some of the proposals in the Green Paper "Reform of Social Security". The impact of rents and rates on the most needy households was understood by the independent review team, which said:
"100 per cent. help with housing costs for those on the lowest income is the only fair way of meeting their needs within the present vagaries of the housing market."
The Government accepted that point when it came to rents but they certainly did not do so with respect to rates. The Green Paper states:
"The Government's view is that, while domestic rates continue to be a significant element of local authority spending, every household should be required to make some contribution towards them."
The Green Paper suggests that every supplementary benefit claimant should meet about 20 per cent. of his rates bills. We have been given no sign that that additional burden on supplementary benefit claimants will be compensated by an equivalent increase in their income support scales. Even if that were done, the compensating help would be given only on a rough averaging basis. It would certainly leave many supplementary benefit recipients with higher than average rates and paying out more in rates than they receive in supplementary benefit. That must mean that they will face the risk of debts and hardship.

Hon. Members on both sides of the House have frequently commented on the fact that the burden of rates falls most harshly on single pensioner households. We all have examples in our constituencies of single pensioners—often widows—living in a home on their own and paying exactly the same rates as the better-off family next door which has more than one breadwinner. That unfairness will become harsher if the Government persist in extending it to those pensioners who now receive 100 per cent. rate rebates. We are talking about substantial numbers of pensioners. The Association of Metropolitan Authorities estimates that in London and the metropolitan areas alone 1 million pensioners in households qualify for 100 per cent. rate rebates.

The policy of imposing part of the rates burden on supplementary benefit recipients also has implications for families in which the parents are in low-paid jobs or are unemployed. There is a large number of such people. In inner London, one child in four comes from a family that is dependent upon supplementary benefit. In other metropolitan areas, such as Manchester and Liverpool, the figure is as high as three children in every 10.

The Government argue that there is a case for placing this element of responsibility for rates on individual consumers, irrespective of their income, in order to increase the accountability of local government. The independent review team rejected that argument, saying:
"there is little evidence to suggest that low-income households have any real control over their housing costs."
Many hon. Members know from practical experience that few tenants distinguish between the rates element in what they pay in rent and all other charges that go to make up the total. The Government's approach will mean more hardship if people must meet that rate element irrespective of their income.

Another aspect of the Green Paper will involve additional hardship. This is the proposal to combine the rent and rate assessment for housing benefit in one taper. This is bound to hit owner-occupiers particularly hard when they have only their rates bills to pay. Their benefit will be withdrawn at a much steeper rate than has been the case in the past. This will be a problem for about 1·5 million owner-occupiers, most of them pensioners. They are the sort of thrifty people who have provided for themselves throughout their working lives. They will now find themselves hit hard by the new approach of the Government.

The London Housing Aid Centre's analysis suggests that the rate rebate proposals alone will mean cuts in benefit for perhaps 5 million recipients. Worse still, many people will totally lose their housing benefit. The review team suggested that there would be a 15 per cent. cut in the housing benefit caseload. That implies 1 million people being taken totally out of the housing benefit system. Other estimates have suggested that as many as 1·8 million claimants will lose housing benefit altogether.

That is an insensitive approach to the problem and it demonstrates again the Conservatives' lack of concern to share burdens in a reasonable way, as we have seen in many of their policies in the last six years. For that reason, all alliance Members will unite in voting for the Labour motion and against the Government on this issue.

6.32 pm

I have always been a believer in thought transference. It was therefore particularly pleasing when the Chief Secretary returned to the Chamber, having received through the means of extra-sensory perception the news that I was about to speak.

I congratulate my right hon. and learned Friend on his excellent tour de force, putting succinctly all the facts of real life, includig the way in which people suffered under previous Labour rule — something that often gets forgotten. At my request my right hon. and learned Friend repeated one of his bon mots, and tomorrow I shall tear from Hansard the pages on which appear his speech and keep them, if not next to my heart, in my notebook, because they will provide useful ammunition.

Having given my right hon. and learned Friend that bouquet, he will be less attracted to me when I tell him that I am supposed to be leaving right now, accompanied by my hon. and recently knighted Friend the Member for Bury St. Edmunds (Sir E. Griffiths), to address several hundred people in my constituency. I hope that hon. Members will forgive me if I am not able to stay for long after my remarks, particularly as I shall ask a question and not be here to receive the answer.

We have learnt something this evening of the Liberal party's policy on prices and incomes, and we have had a glimpse from Labour Members of their party's attitude towards a prices and incomes policy, although they gave us only a view through a chink in the door.

My question to my right hon. and learned Friend is connected with charges by the nationalised industries. Can he explain why, when the Post Office controlled the telephones and wished to spend, say, £500 million on new capital investment, it might have been difficult for permission to be given for that money to be spent? Indeed, the Post Office might have been told to defer that investment. However, if British Telecom wants to invest, say, £500 million on identical equipment, there is nothing to stop it from doing that. Indeed, it is all virtue. I have always been mystified, as a small business man, by the way in which the Government do not seem to separate capital and revenue expenditure. I had hoped that a change in that attitude would occur.

I should at this stage declare an interest, being a director of a water company. I make that declaration because I wish to discuss water charges and possible reorganisation of the industry. I have always taken the view that the water industry and other nationalised industries should, from revenue, save and make a greater contribution towards the capital investments that they wish to make.

Government policy, recently announced, calling for the upping of the return on such investment is right, although the ground may not have been sufficiently prepared before the ideas involved in that policy were made known. I have not thought it right that with substantial, or even moderate, new capital investment, water authorities should be expected to borrow the money. That has been the tradition over the years. I speak on this issue for myself and not as a spokesman for the water companies or water authorities. Might not the simplest way of dealing with the issue be to introduce into the water authorities—not in one go, and not wholesale privatisation—arrangements to put them in a similar position to statutory companies, which the water companies now are? That would have a major advantage. They would, within the statutory limitations, be able to invest in the water industry and borrow money on the open market. By that means, they would not cause worry in respect of increasing the public sector borrowing requirement.

Will the hon. Gentleman give the House an assurance that he would not wish to see his proposal extended to Scotland, where we do not have water authorities? The water authority is the local regional council, elected by the people, and by that means the water is under the democratic control of the local authority.

I am grateful to the hon. Gentleman for that intervention. Having taken part in the Committee proceedings on the Water (Fluoridation) Bill, I now know more about the water industry in Scotland. My comments refer to the non-Scottish water companies, although if immense success resulted from a limited amount of private enterprise being injected into the water authorities, that might influence the people of Scotland to demand similar privileges and advantages for themselves.

I make that suggestion as a contribution to the debate because I believe that a degree of private enterprise in the water industry would be of great advantage. However, in view of the monopolistic position in the supply of water, the same competitive edge does not exist to enable a new type of water authority or company, reorganised, to be competitive in its prices and services to the people.

I congratulate my right hon. and learned Friend again and hope that the realities of modern life, about which the Government have been very successful in educating people, will continue to be reinforced and that further progress will be made in facing real problems in a real way.

6.40 pm

I will not pursue what the hon. Member for Harrow, West (Sir J. Page) said, because I was hoping to give a few encouraging words to the Conservative wets whom I hoped would be speaking in order to put more pressure in their pipes and more holes in their spray. The wetness of the hon. Member for Harrow, West was professional only, so I will not follow up that argument. The Conservative Members who have spoken have been the dries, dredged in by the Whips and provided with Central Office briefing sheets on the rate of inflation from 1974 to 1979 as compared with the rate of inflation since then.

Will the hon. Gentleman inform the House how many hon. Members on the Labour Benches are not either Front Bench spokesmen or Whips?

I am not, and I think that there are two of us.

I welcome the motion because it does the important job of getting away from the world of abstractions, jargon and alphabet-soup letters with which we deal in this place—the PSBR, the M3, the MO, the PSL, all those bogeymen created by the City to frighten Governments and make them panic-stricken about abstractions — to the preoccupations of real people and what affects ordinary lives. That is the pressure of Government—enforced cost increases in the basic services provided by Government or local authorities—in other words, the kind of things that matter in Grimsby rather than those that matter in the City of London.

On those basic matters, the Government's record in using prices particularly the prices of fuel, as a form of taxation, pressing heavier prices on ordinary people, as distinct from the tax burden on their friends which they have been so concerned to lighten in their six years in power, has been one of increasing misery, demonstrable in every item listed in the motion. The prescription charge increased massively after their Government denied in their 1979 manifesto that they would carry them through.

They promptly increased the prescription charge, and it has increased again well ahead of the cost of inflation. This has placed a particular burden on those people at the margin who do not qualify for free prescriptions and who find them an oppressive burden. Rates are up 169 per cent. from 1978–79 to 1985–86, and 82 per cent. in real terms. This is a wholly unacceptable rate of increase. Nationalised industries' charges, in particular the basic fuel charges for gas and electricity, have gone up faster than the cost of living, because they have been used as a form of taxation. The test is whether they have gone up faster than the cost of living. On that test, the Government have been using them in that fashion. Council house rents, transport costs and water charges have increased substantially and are about to go up again, thanks to the change in policy.

Hanging over it all are increased interest rates, and particularly mortgage rates, which are up 4 per cent. since the election. On an average mortgage of £20,000, £40 per month extra is paid by householders, not to the Government but to the financial community—the banks, the building societies and the interests of finance—because of the Government's curious illogical position that, to defeat inflation, prices and interest rates must go up.

Those interest rates have become a cross on which not only British industry but British householders and the British population, including anyone buying anything on higher purchase, are being crucified. That applies particularly this year. That is a tax on every man, woman and child in the country for no purpose, strangling the economy and the household budget. All those increases are regressive tax increases. They are more painful to those who have less and who are therefore hit harder. They are easily carried by the better-off sections of the community that the Government represent, but they hit severely the people that Labour Members represent, the middleman and the ordinary person.

It is particularly insulting that the Government should be carrying through this shift in purchasing power and imposing such burdens on people, because they have given away in tax concessions, especially over capital taxation, to the better off section of society about £3,000 million every year, while imposing increased charges through this machinery on those least able to bear them. All this hurts the quality of life of the mass of people, making life meaner, harder, shabbier and more of a struggle. This is doubly sordid compared with the give-aways to one section of society, that small wealthy class which essentially the Tory party represents and which has benefited so lavishly from what the Government have done.

One critique of the Government's performance, and perhaps a superficial one, is that all this is a confidence trick. In other words, the Government set out to cut taxes and, finding that they could not do it in the easy, glib way that they said they would, they decided to do it by optical illusion, by shifting burdens, by shifting deck chairs around on the Titanic, by increasing the charges of nationalised industries, by increasing indirect taxes and by putting up taxation. However, it would be superficial to make an attack on those grounds.

At this stage, the increases in costs and interest rates represent something more significant. The Government have not achieved the real cut in taxes that they said they would achieve, and they have not effected a cut in interest rates. The Government said that their obsession with cutting public spending and increasing the charges of nationalised industries to hold down the public sector borrowing requirement was dedicated to bringing down interest rates. Real interest rates currently are, I think, the highest since the war. They are certainly at record levels and much higher than the interest rates of our major industrial competitors. Thus, the Government have not achieved the objective of their policy.

These increased costs and interest rates are a symptom of the total failure of the economic policies on which the Government were elected—a failure which, to be fair, the Opposition pointed out from the start. We said that the policies would never work, but perhaps the country has to experience the pain and agony before the lesson comes home. Perhaps we have to have this tragic experience, in which, because of the failure of the Government's policies, what are now blithely called blips are becoming a way of life. There is a blip in the figures every month. The Minister assures us that it is abnormal and that things will soon be back on course, but the trend in inflation, interest rates and unemployment is ever upward despite the hope that these are just blips.

The light at the end of the tunnel that Ministers have been glimpsing now for four years, as is rapidly becoming clear, is the light of an approaching train. There is no light at the end of the tunnel in which the awaited downturns in these atrocious figures become consistent upturns. The Government clearly have been and are pursuing a mirage which they will never grasp and which will never materialise. This failure will result in the end of the Government. They may have two or three years in which to hang on to power but, because their policies have failed, there must be three years of a downhill run in which there is now no possibility of turning round. The only way to get out of the trap and the mess is to change the policies, but the Government have made a virtue of never changing and not turning round. The only way out is to turn round, and if they will not turn round, it will be a downhill run for them and the country.

There is now no possibility of pulling rabbits out of a hat. Tragically, nobody can take the Prime Minister—who has imposed these policies on the country and her Cabinet—by the elbow and say, "Enough is enough, we have to change and turn round, as Mr. Macmillan did in 1962, if the Government are to be saved." A change is unlikely to save them, but even if it could, it is impossible because of the domination of this overwomanned Government by the prejudice of the Prime Minister.

There is no way out for the Government, although it is clear that all the holes into which they are stumbling—the holes of poll taxes rather than rates, of SERPS and of the abolition of the metropolitan counties — have all been dug by one person in the Government. They can get out of them by the elimination of that one person, but there is nobody man enough to move in that direction, so I shall not pursue the argument. That is the reality of the trap in which the Government are stuck.

The strategies on which the Government came in—monetarism and incentive — have failed. They could never work, because the Government were essentially imposing not a considered, worked-out philosophy that had a prospect of changing the country's fortunes, but a morality. Under the guise of that philosophy, the Government were imposing a morality, a discipline, a tightening and toughening of the restraints. They were proposing a massive deflation through the over-valued pound.

The Government talked about sound money. It is appropriate that the Prime Minister should talk about sound money because she has more of it than most people, so its soundness is more important to her than to other sections of the community. What they were talking about was an over-valued sterling that strangled British industry, reduced our share of world trade and financed a flood of imports to destroy jobs.

As soon as a Government become obsessed not with the real economy — jobs, growth, manufacturing, exports, expansion and survival in a competitive world — but with the abstractions of the PSBR, M3 or whatever it has changed to lately—I gather that it is MO and that the Government are controlling MO because it represents only banknotes and banknotes are being taken out of circulation or are falling to pieces, so MO has come down, which is the Government's one success in their money supply policy—and manage the economy so as to control those abstractions, they inflict ruin and damage on the real economy, jobs and unemployment. That is what they have done with the massive deflation and high interest rates to achieve those targets. That is the opposite of what was necessary, and that is what has produced these increased charges.

The only way to cut the burden of taxation, to ease the burden of welfare and to allow the economy to carry the burden of public spending is to expand the economy—making it grow, getting more jobs, and making our industry more competitive and able to survive in the world. That is the real economy of jobs and exporting.

By growing, I do not mean the faltering growth of the past couple of years, which is really a bounce back from the extent of the deflation inflicted on the economy in 1980–81, or being dragged along as we have been in the wake of the American recovery. I mean a recovery stimulated and primed in this country. The Government have done the opposite, and all else follows from that.

It is true that, when the Chancellor took over after the last general election, he saw a way out. That was to pretend that the pound was not important and he had no exchange rate target, and then to let the pound go down — in other words, to walk backwards towards growth while pretending to do something else. He did that behind the Prime Minister's back—he had to do so, because she is obsessed with the exchange rate against the dollar and wants it to be the same when she goes out as it was when she came in, although it will not happen.

At the same time, the Chancellor was running an accommodating money supply by subterfuge — by gobbling up commercial bills and by overfunding so as to keep down M3. He was doing both those things until January this year, when the market sussed him out. It realised what he was doing and the consequences of it in their financial terms. At that point, the Prime Minister intervened. She could not face parity with the dollar. She intervened, interest rates were jacked up massively and the pound subsequently went up.

The increase in the value of the pound has tightened the noose around the neck of the British economy once again. The noose, which was easing, has been tied on increasingly hard. The increased value of the pound will not only make life more difficult for us in the American market, where we are still quite competitive, but will make it excruciatingly, agonisingly more difficult for us in the European market, which the Government say is so important to us. In January, the pound was still over-valued in real terms against the deutschmark. Compared to the last quarter of 1976, it was over-valued by about 40 per cent. The fact that it has appreciated against the deutschmark, the yen, the franc and the lira since then will make it far more difficult for us to survive in a market in which we were already running a horrendous deficit in manufactured trade.

The Government are trapped because they cannot make the economy more competitive unless they get the pound down, but they cannot get the pound down, against the European currencies in particular, because they fear that that will increase the rate of inflation, which is already rising, and because the Prime Minister is obsessed with exchange rates. At the same time, they must get the economy more competitive because our unit labour costs are rising more rapidly than those of any of our competitors.

Effectively the Government are trapped, and with them the British economy. With that trap, the brave experiment ends. It means the end of the line for the experiment. It means a long dying whimper at the whim of the bankers for the Government and the country. Everything else that we are debating today follows from the trap in which they are now. It follows that nationalised industry charges must be increased, as they have been, and the increases will go on because the Government need to raise more taxation. They will not do that, because they are obsessed with tax cuts, so they will increase charges. It follows that the flogging off of nationalised assets that belong to all of us will have to go on at the kind of ludicrous prices with the ludicrous commissions that the Government have been giving away over the past few years, simply so that the Government can survive financially. That is not prudence, wisdom or competitiveness. There is no change if one flogs a public monopoly off to make it a private monopoly. There has been no increase in competition.

The cuts in welfare implicit in the Green Paper published two weeks ago will be massive, because the Government are trying to finance an increasing burden of expenditure to cope with increasing unemployment on a shrinking productive base, and that cannot be done. Unless we expand the production base, we cannot finance the increasing burden of unemployment. One could solve two problems by expanding the base and bringing down unemployment, but the Government will not do that because they are trapped.

The cuts that must still come this year will have to be heavy. Despite the Chancellor's apparent finality, the Government are now embarked on a programme of cuts that will cause agony for Tory Back Benchers and for the country. Believe it or not, the right hon. and learned Member for Dover (Mr. Rees) will be disposed of because he is too kind-hearted and nice to carry through the necessary cuts. The Whitelaw star chamber will have to be beefed up and given more muscle. It will have a jamboree.

I go along most of the way with my hon. Friend, but I just cannot believe what he has said about the Chief Secretary to the Treasury.

No more will we hear those merry quips and japes in the Finance Bill Committee, no longer will we hear the friendly kindly remark from the sober-minded right hon. and learned Member for Dover because he is too kind to carry through the excruciating cuts that are now necessary.

I think Woodrow Wilson said that the essence of conservatism was to say nothing and to ask one's grandfather. The essence of the Government's policy is to say nothing, do nothing and axe one's grandmother. That is the scale of the cuts. The Government have been pursuing these policies for six years. It is all very well for Conservative Members to ask what the Labour party would do, and to go on about the horrendous inflation of 1974, but these policies have been applied for six years. When shall we see the rewards? When will we see what the Government said the policies would produce? When will we see the lower interest rates to which all the cuts in the PSBR have been dedicated? When will we see the lower unemployment, which was implicit in the promises made in 1979? When will we see inflation vanishing, in the way in which the Chancellor had been describing? If inflation were completely eliminated, what would bring growth? Growth does not merely spring like a phoenix from ashes. Inflation does not abate automatically; the abatement must be generated, pumps must be primed, and money must be spent. There is nothing in a zero inflation figure which will bring growth.

When will we see a lower inflation figure, and the revival of our economy and manufacturing industry? When will our share of world trade increase, and replace the long whimpering decrease which has occurred every year since the Government came to office? A share already too low has been whittled away by the destructive policies of the Government. We shall not see those aims, becasue the reverse is happening. Inflation is increasing, interest rates are at record levels, unemployment continues to rise and manufacturing continues to suffer. What can stop that? What can the policies deliver?

In economics, virtue, discipline and morality are not rewarded. It is not merely a question of chanting slogans about sound money and doing nothing, but of investing, encouraging, stimulating, spending and competing for expansion and growth, yet the Government are not doing that. They are only inflicting pain and discipline on us. Economics is not for a Sunday school. We live in a hard cold world, and the Government have harmed the real economy of the country.

It is no use talking about small businesses replacing the massive job losses in big business, unless the Government provide the climate and framework for expansion, the stimuli, and low interest rates for small businesses to flourish. The Government's policies can never work. They could not have worked, and we warned the Government of that from the start. These policies have been a long tragedy for the country.

The Government came to office desperate for power, and the Prime Minister was blinkered by her prejudices. The essence of the Government's strategy in 1979 was: "If only people would be more like the Prime Minister, all would be well." The Government were so blinkered that they did not see that they were defending, in terms of incentives, PSBR cuts, and lower inflation, policies which directly favoured the Prime Minister and her friends, and which placed the sacrifices, inevitable in the depression that the policies generated, on the section of society least able to bear it—the poor, the old, and the ordinary. They are all suffering under the charges which we are lamenting today. They have the rough end of the stick and must pay the increased bus fares, rents and gas, electricity, rates and prescription charges. Life for those people has become more of a struggle, meaner, shabbier and more bitter. That is the Government's final crime against our people.

The essence of the Government's achievement has been to make our country shabbier and meaner, and to set us on a course different from that of the rest of the world—from the wealthy European Community countries, expanding America, and growing Japan. Ours is a unique case of self-inflicted agony and decline, with the sacrifices of that decline placed on those that cannot bear them. The sacrifices are carried by the poor, those who carry the burden of interest rates and the mass of the people. That is what the Government have achieved in their six years.

Now we are witnessing one of those rare and massive changes in the mood of the country which occur in British politics when our people begin to realise what the Government's prejudices, follies, simple ignorance and sheer wrong-headedness are doing to our economy. The tide is turning, as it did between 1961 and 1964. Although the Government have two years, that change in mood makes them irrelevant, out of date and out of court. Those who bear the sacrifices, who see that society has not improved as they wish, and that the Thatcher follies have failed, will throw out the Government in two or three years' time. The Government will probably stay on until the bitter end, and the end will be bitter. That mood is building up and is irresistible.

Disraeli attacked Gladstone's Government as a range of exhausted volcanoes, but the present Government were never big enough, nor had enough fire in their bellies to be volcanoes. We are seeing a row of squeezed pimples and boils on the body politic of the Government Front Bench, whose evil pus has been squeezed by what they have done to our society. That is what the Government are. That is their level, and size. The British people realise what has been done and how horrendous the Government's mistake has been. There is no chance now that the Government will change, but the people will take their revenge because they have been betrayed and because the sacrifices made necessary by that betrayal have been placed on their backs.

7.7 pm

I am a comparatively new Member, having been here for just over two years. I had a slight advantage in knowing a little about the House before I came. I had always thought that a good day was an Opposition Supply day because that was when the Opposition carefully selected their subject and the Government had their back to the wall and were indicted. I thought that today of all days would be such a day because the Opposition, in their wisdom, had chosen to debate prices and to take on the Government on the Government's ground. I expected to hear high drama today.

I came into the Chamber at about 3.30 and heard the speech of the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley). I am a stranger to the usual channels that operate in the House, and I do not know, nor wish to know, anything about the way in which the Opposition choose their subject. It seemed that the speaker had been chosen, rather than the topic. The Leader of the Opposition had his day yesterday, and presumably today it was to be the Deputy Leader. I suppose that he was thought to know something about prices as he had been responsible for them for three years, and I thought that I might have a chance to inform myself and to end up knowing a little more about prices. I came and listened, but I am none the wiser.

Today we have had not high drama, but a remarkably serene debate, until the hon. Member for Great Grimsby (Mr. Mitchell) rose to his feet. We then heard a great deal of hot air. However, I suppose that when talking about energy prices hot air is appropriate.

The hon. Gentleman has spent the opening minutes of his speech lecturing us on how this is not turning out to be a great day. He could do us a favour and make a great speech and make our day.

I am grateful to the hon. Gentleman for his encouragement. I shall do my humble best.

I had hoped that there would be a lifting of the veil by the Opposition. They have spent a great deal of time telling us that they will form the next Government. I thought that we were heading towards the time when we might be told a little more about what they are proposing. Are they a party of price controls? Do they favour a statutory price control policy? As part of that, do they favour a statutory wages policy? These are matters on which the right hon. Member for Sparkbrook has been delphic, to put it kindly. He did not lift the veil.

The motion mainly concerns price increases imposed by nationalised industries. That is something into which politicians have delved far too often. Governments inevitably have to delve into that matter, and I suppose that where Governments delve, Parliaments must follow. It is a difficult subject. Let no one pretend that any Government of any party have ever found it easy.

We maintain the fiction that there is an arm's-length relationship between the Government and nationalised industries, that the Government set the targets and that the nationalised industries simply continue to operate in a commercial way to meet the targets and to render to the consumer the services which they are statutorily bound to render. But how are the Government to determine, in so far as they have the power, the pricing policies of nationalised industries? I understand that there has been a certain amount of consensus on that point. My right hon. and learned Friend the Chief Secretary quoted at some length from the energy policy Green Paper produced by the right hon. Member for Chesterfield (Mr. Benn) in 1978, which said:
"It should be the aim of nationalised industries to secure something in the region of a 5 per cent. return on capital."
That 5 per cent. is calculated on the same basis as that on which the Government operate today — a current-cost basis. Not many nationalised industries manage that. I understand that the Government operate the same broad principle, that they set their targets in terms of a return on capital. It does not matter what the percentage is, it is the broad principle of setting a target for a term.

Nationalised industries are not, and never can be, subject to ordinary commercial pressures, especially when they operate, as most of them do, as monopolies. I do not know whether 5 per cent., or 1·5 per cent. for the water authorities, or 2·75 per cent. for electricity, or 4 per cent. for gas, are the right returns, because I am a politician, not a business man. If I had wanted to meddle with the running of a nationalised industry, I would have gone into that business rather than into politics. That is one of the ghastly problems with the whole range of nationalised industries. We take them into the public sector and they end up being meddled with by politicians.

Will the hon. Gentleman comment on the Government's gas levy, which is being forced on the British Gas Corporation? Last year the Government raised the sum, directly from consumers of gas, of £522 million. That is a direct energy cost put on by politicians. How does that policy align itself with the hon. Gentleman's remarks?

The hon. Gentleman's point supports my case. When an industry is taken into the public sector it is subject to Government control, and politicians will meddle. Nationalised industries are a tempting source for politicians to meddle with. They are a little bag of goodies, and who can blame politicians if they dip their hands into it? I want politicians to get out of business and industry and leave them to operate in the private sector where they belong.

Will my hon. Friend reflect on the fact that there is not necessarily an equation between setting a target for a contribution to the Exchequer from an industry and the price level imposed by that industry? For example, the British Gas Corporation reached an agreement with its unions in 1973 that it would phase out the use of private sector contractors for the laying of small-scale pipelines, irrespective of whether that was efficient. That is still happening. There is no great drive for efficiency in the BGC along the lines that would keep down prices while making a contribution to the Exchequer.

My hon. Friend makes a valid point. When a utility or an industry remains in the public sector, it is not subject to proper competitive pressures. Even within a natural monopoly there are many ways to introduce competition. The first step towards that must be to remove the utilities from the public sector and return them to the private sector where they belong.

I have one point of agreement with the hon. Member for Great Grimsby, who I know is a compassionate and even fanatical follower of competition. He said that if we transferred a monopoly into the private sector we would often not be better off. I think that we would be a little better off, but not as better off as we could be. I am concerned about the Government's intention to transfer British Gas en bloc to the private sector. I would rather it was broken up so that some limited competition could be introduced into the system.

If we start—as I hope we will before too long—to talk about selling the water authorities to the private sector, I hope that we can obtain a competitive framework. One possibility would be to lease the capital utilities to someone prepared to bid for them, someone prepared to contract to operate the industry in an area for, say, five years at a given charge to the customer. The customer would know where he was and the operator would be subject to competitive pressure, because he would know that in five years other people would bid against him. That is one way to obtain a proper competitive pressure in the system in order to protect the rights of the consumer.

Is my hon. Friend aware that that is precisely what happens in France, where nearly half the water supply is provided by private contractors operating the plants on behalf of local authorities of all political persuasions, including Communist?

Once again I am grateful for my hon. Friend's deep and wide knowledge of this subject. It is an eminently practical solution to a problem which needs addressing in the near future.

I want to discuss the way in which electricity prices have operated. There is always a temptation for politicians to meddle with the pricing processes of nationalised industries. That has not always been beneficent, but almost always the opposite. Mention has been made of the way in which the last Government manipulated gas prices, perhaps to try to buy support by artificially holding down the price of gas to the domestic consumer and artificially increasing it to the industrial consumer. There was the inevitable consequence of the loss of jobs in those industries affected by artificially high energy costs.

The Opposition were unwise enough to include electricity prices in their indictment of the Government. I make no apology for reiteraing a point that has been made. It is a commonplace, but that does not stop its being true. Under the last Labour Government electricity prices rose by 2 per cent. every six weeks. Under this Government they have risen by 2 per cent. over the last three years. That is a good record for the Government.

There is one way in which electricity prices could be reduced. Of the fuel used to generate electricity, 75 per cent. comes from the National Coal Board.

The hon. Gentleman says that it is 80 per cent. I bow to his superior knowledge. As a proportion I expect it to diminish slightly, although the CEGB will continue to buy the same bulk volume from the National Coal Board. The CEGB could buy that coal more cheaply elsewhere. There is nothing magic about British coal that makes it perfectly suited to generating electricity in Britain. Much of the coal used by the CEGB could be bought more cheaply elsewhere. It is not even as though the NCB is making a profit by selling the coal at a high price. Electricity prices could be reduced if there were a reduction in the price of coal.

I represent a coal mining constituency and 4,000 coal miners. I also represent some 50,000 consumers of electricity. There is a strong connection between the two. It is often the same people in the Opposition who in one breath complain about high electricity charges and the damage that they are doing—in high-flown phrases the hon. Member for Great Grimsby referred to the Conservative party putting the boot in on pensioners and those least able to pay — yet in other circumstances complain about pit closures and moving from high-cost pits in the coal industry to low-cost capacity. They should be able to see that the two are directly related. It is only by getting out of the old high-cost coal mines and into low-cost mines that we can begin to get the cost of coal down, and hence reduce the cost of electricity.

The motion that we are debating in this serene fashion covers a wide range. I have touched on only one or two aspects. When the Opposition have a chance for calm reflection, I think that they will come to the conclusion that they have chosen badly today. They have tried to take on the Government on the Government's favourite ground. A cursory examination will show that when the Labour party was in government it had a bad record on prices. The record of this Government is not perfect; no one can pretend that. Inflation at 7 per cent. is far too high, but it is worth repeating that it is a lot lower than the figure for the lowest month under the last Labour Government. This may be the last debate on this subject in Opposition time. It would serve the Opposition well to call it a day on this one.

7.24 pm

I am tempted to ask the hon. Member for Warwickshire, North (Mr. Maude), as I am also a relatively new Member, about a colliery in his constituency. At the time when he and I dealt in Committee with the Coal Industry Act 1983, that colliery, according to the report of the Monopolies and Mergers Commission, was making a loss. Has the hon. Gentleman checked whether it is now making a profit?

The two large capacity coal mines in my constituency are making good profits. Two are making small losses. Everyone in the coal industry in Warwickshire knows that in not many years' time the two loss-making collieries will close. There is no secret about that. In one pit village there have been rumours for 60 years that the pit would close the following year. It probably will close within the next few years. There is nothing dreadful about that. The people there do not regard it as the end of the world.

I am glad that the hon. Gentleman has said that. I should be pleased to have his support for keeping uneconomic collieries open because of the consequences to the communities and the need for employment opportunities in that area.

What the hon. Gentleman said does not ring true if we consider the rising cost of energy. About 80 per cent. of electricity generation is done by coal bought in this country. Yet in 1983–84 the CEGB still made a profit of £623 million. In those circumstances, it should remain a public corporation. It should keep in balance and not be a burden on the public sector, but that does not mean that it should make profits of £623 million.

In the same year the British Gas Corporation made a profit of £668 million. Most of that profit comes directly from consumers, although the British Gas Corporation can make some revenue by providing services in the private sector. Last year there was a gas levy of £522 million.

The profits of the energy undertakings must be set against the 92,000 cut-offs of electricity in domestic households that took place from December 1983 to December 1984. In over 4 per cent. of those cases the householders were pensioners. We are talking about 4,000 pensioners' homes which may have the energy supply cut off because the householders cannot afford to pay the bills.

In many cases the standing charges are a burden. It is an absolute scandal that both the gas and electricity undertakings can make such huge profits while making high standing charges. Until five years ago many householders did not have to live on state benefits and were not classified as being on the poverty line. One of the major growth areas in the last five years has been the number of households that have to rely on state benefits.

The Labour party has been saying consistently that when the energy undertakings are making such high profits, standing charges are too high. Pensioners and people on low incomes should not be under threat. I am sure that at some time every hon. Member has been approached by someone who was under threat of having the gas or electricity supply to his house disconnected. I have many times, and I have not been a Member of Parliament long. Only this week I tried to help a constituent, who is now unemployed and was about to have his supply disconnected. The Government must stop interfering by forcing levies on consumers. They should recognise that they are merely creating more upset in homes that can do without the pressures of present energy charges.

Bearing in mind his objection to their profits, where does the hon. Gentleman suggest that new investment in the gas and electricity industries should come from?

I am talking about profits over and above what is being invested. I could go on at length about the British Gas Corporation, but I shall save it until about November when we shall debate the matter in great detail. We should consider how the British Gas Corporation has been attacked in the past five years and has been stopped by the Government from going into areas where it could have earned more revenue to invest.

Rising energy costs have been made worse by many of the Government's actions, not least the 1984 Budget which put VAT on building alterations and central heating equipment. That was disgraceful. There have been indirect increases in the prices of petroleum products. In May 1979, 44·8 per cent., or 39·9p, of the price of a gallon of petrol was tax. In January this year, 54·3 per cent., 102·6p, of the price of a gallon of petrol was tax. That was an increase of more than 9 per cent. The price of derv affects public transport and the moving of food, and hence food prices. The tax on a gallon of derv has increased 3 per cent. since 1979. That is another example of the Government increasing prices when they should have been lowered.

Worse, there have been increased charges in the National Health Service. Prescription charges £2 as from 1 April. On 25 April 1979, the Prime Minister said that the Government had no intention of increasing prescription charges. They have increased by about 1,000 per cent. since she said that. It is easy to say that 75 per cent. of prescriptions are exempt from charges, but many people have difficulty getting exemption certificates. I recently came across a person who is £1·21 short of getting exemption. He was told that if he collected the five prescriptions that he gets each month in one week, there would be no problem and he could claim the money back. He has had those prescriptions for years, but getting £10 together in one week is extremely difficult for somebody who has lived on state benefit since coming out of the armed forces.

Dental charges also increased earlier this year, and they particularly affect people on low incomes. The matter did not get much debate in the House, although it deserved more than the increase in prescription charges because 90 per cent. of people who need treatment after a free inspection pay the full basic amount, which has increased to £17. The costs of crowns, inlays and bridges—an expanding area of dental treatments — have also increased between 6 and 10 per cent. That is substantially higher than the rate of inflation, although inflation is now higher than when the increase was announced.

Since 1979, there has been a massive increase in council house rents. Nobody can deny that the increase was started by the Secretary of State for the Environment. Whitehall has directly forced rents up. I never thought that I would experience that.

The hon. Member for Warwickshire, North mentioned water rates. About five months ago, I received a memo from the Yorkshire water authority complaining about its being forced to increase water rates by 12 per cent. per annum for three years. That instruction came direct from Whitehall. People find it difficult to get rebates of water rates. It is disgraceful that Ministers should force up water rates when people are getting nothing like the same increase in income or state benefits.

A worse example of shoving public sector prices up is the Government's ideological attack on local government and the rate support grant. They have forced local authorities to decide, for example, whether home help provision should remain, whether elderly people who live on their own must be left completely alone or whether home helps will have to charge. Local education authorities have been forced to increase the price of school meals or to do away with them altogether.

My local authority, the Rotherham metropolitan borough council, has lost more than £24,000 in the last five years through the attack on the rate support grant. That money has had to be found by ratepayers and by cutting back services and losing some council jobs. It does not help to see local authorities having to put up prices and make charges for services such as meals on wheels, which, by good housekeeping, they were formerly able to provide to people in need.

In 1979 the Government laid great stress on the right of people in this country to be home-owners and the right of council house tenants to buy their own homes. I notice that they have not done so much shouting about private tenants having the right to buy their homes as well. However, they shouted again in 1983 about how they felt that the people of great Britain had the right to own their own homes.

My hon. Friend will remember that not only are they not shouting about private tenants having the right to buy — which, if they were true to their principles, they would give them—but, because of cuts in improvement grants, they have actually been forcing people out of private ownership and private rented tenancies into the public sector and therefore putting a greater burden on public sector housing.

That is quite true.

I want to recall what has happened since the 1983 election and the increase in the mortgage interest rate. The mortgage interest rate in this country at the present time is 6 per cent. higher than in the countries that we normally term our main competitors, such as America and West Germany. The Government, who claim to be the friends of people who want to own their own homes, have failed miserably to keep down interest rates and to protect the interests of the many people whom they encouraged to take on mortgages.

An average mortgage of £20,000 means a payment for every 1 per cent. increase in the mortgage interest rare of an extra £10 a month. So a person with an average mortgage since the last general election, when I came into the House, is paying an extra £40 a month.

That will go on record as one of the major ways in which the Government failed to honour their commitments as far as home ownership is concerned. I have not checked the figures recently, but I have done so over the past two years, and they reveal that the number of people who are having to surrender their mortgages and lose the houses that at one time were sold by public bodies, such as the National Coal Board or local authorities, is constantly growing.

If the Government fail to take action to stop the rapid rise in mortgage interest rates, they will get everything that they deserve at the next general election, because people who voted for them and their ideological slogans about home ownership will find that they have been led up the garden path and put into the hands of the moneylenders—the friends of Conservative Members.

7.43 pm

If the debate has not shed very much light on the subject, we have at least learned one thing—that it is going to be the Labour party's policy when they fight the next election to choose those areas in which it has been most signally unsuccessful and then have the nerve to attack the Government for the successes that have achieved in those fields. We can sympathise with the Labour party in this, because if they had to debate a motion like this tonight on their own successes in office they would never get the thing off the ground.

The hon. Member for Rother Valley (Mr. Barron), in a spirited speech, went through a number of points, trying to suggest that it was the Labour party which had something to offer the electorate. To hear a member of the Labour party proclaiming himself the champion of the home owner and those who are struggling to pay their mortgages is quite incredible. One only has to think of the proposals made recently by the hon. Member for Oldham, West (Mr. Meacher), which were going to take away income tax relief for those who have mortgages—although when the implications of that were realised by his colleagues, they quickly shut him up. But that showed as nothing else could what the real attitude of the Labour party is to income tax relief for house owners. We saw an element of it also in 1983, when one of the last acts of the Labour Opposition before the last election was to ensure that the Government's Budget proposals for increasing the amount of income tax relief for those with mortgages were blocked.

The hon. Gentleman talked about council houses and tried to suggest that there was something dishonourable, or not very praiseworthy, in the Conservative party's attitude to them. It must be borne in mind, however, that our legislation which enabled council tenants to buy their own homes has led to a massive increase in house ownership. I refer the hon. Member to a document which is still an excellent read—and indeed an excellent buy at 60p—entitled "The New Hope for Britain", to see what threats the Labour party had in store for those who purchased their council houses. If the hon. Gentleman wants to remind himself about that he need only look at page 23, the last paragraph in the left-hand column.

The hon. Member has not said that householders were a lot better off under the last Labour Government than they are now. I understand from the press that my hon. Friend the Member for Oldham, West (Mr. Meacher) was talking about mortgage tax relief for people on salaries of £20,000 a year-plus. If that is true—I do not know if it is—would that not be correcting the massive imbalance in personal taxation since 1979, when this Government have been giving massive tax cuts to people with salaries of £20,000 a year-plus?

If the hon. Gentleman wants to know what his hon. Friend had in mind, he had better ask him. It was clear to anyone who read his proposals that they represented a threat to the principle that a person is entitled to income tax relief if he is purchasing his own home.

The hon. Member for Rother Valley chided the Government and cited the American experience. I wonder if he would want this Government to approach unemployment in the way in which it is approached in America — where, after six months, the rate of unemployment benefit, or the American equivalent, is reduced to such a level that if a person does not then take the work offered, he suffers real hardship, in a way that would not be countenanced in this country. That is one part of the American experience, but it is typical of the hon. Gentleman to choose one aspect of the American experience and ignore the things that go with it. If the hon. Gentleman were standing up in the United States Congress tonight he would find his political views so far to the left of what he would be hearing there that he would not get a very good reception.

The hon. Gentleman picked up the question of prescription charges. It really is remarkable to hear the Labour party now talking about the evils of prescription charges. They were first introduced—as I am sure the hon. Gentleman knows — by Hugh Gaitskell. The biggest increase ever was in 1969 under a Labour Government. The hon. Gentleman tried to brush aside the fact that 75 per cent. of the prescriptions are filled free. All those members of society that we would all agree should not have to pay prescription charges are exempted. From what the hon. Gentleman has said, one would expect him to approve of the way prescription charges are now applied, because those who cannot afford it do not pay them and those who can afford it do. We see that approach everywhere we look—both in the motion and in what has been said in the debate.

The Labour party now claims to be the champion of the old-age pensioner, but it has forgotten that it was the party which was so stuck for cash that it had to abolish the Christmas bonus. It has forgotten that it was the party which changed from the historic method of assessing pensions to the forecasting method. That was not designed to help the pensioner, because in due course Mrs. Barbara Castle pointed out in her memoirs that it was done purely and simply to save money. In fact, she described it as "dishonourable".

The last Labour Government introduced legislation to link the rise in old-age pensions to earnings rather than prices, but in three years out of five they had to get out of that legislation. When a former Labour Secretary of State for Social Services was chided for not taking the earnings link into account, he said, "Oh no. We had to take it into account, but there was no obligation on us to get it right." Wherever one looks, it is clear that it is in precisely those areas where the Labour party's record is worst that it has sought to attack us.

At times it is extremely difficult to work out precisely what the Labour party is saying about prices in the public services. Is it saying that those prices should never go up? If one is seeking inspiration, or even some light relief, one can turn to the Labour party's manifesto at the last election, which said that, were it elected, it would freeze all council house rents for a year. Why a year? Why not nine months or 15 months? What would have happened in the meanwhile to the expenses that would have been borne by the taxpayer? What about the increased costs for repairs, maintenance and servicing of the debt? Where is the logic in saying, "We will freeze rents for a year."? What does that tell us about a sensible and responsible attitude to maintaining costs in public industry?

Does not the hon. Gentleman realise that we said that we would freeze rents for a year to give us sufficient time to work out the future of housing finance policy? Had we been elected, we could not have sorted that out in a matter of weeks. It would have taken a year. That was a sensible and fair proposal.

I am prepared to accept that the hon. Gentleman thinks that that was the position, but the more accurate version of events was that that would be a good vote winner among the people to whom Labour was supposed to appeal. The singling out of that one tiny point in overall housing policy and the offering of such an obvious and manifest bribe cannot bear any other interpretation.

The only way in which to assess rising prices is to look at the rate of inflation. This debate has revolved around one central point that I put to the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), which he did not address. Whatever one says about the current temporary increase in the rate of inflation, the fact remains that under the last Labour Government there was no month in which the rate of inflation was as low. We believe that it has now peaked, but given that that has been achieved without dividend, price or wage controls, one begins to have a framework in which one can assess what the Labour party has on offer and what we have on offer.

The depressing thing is that there is nothing new in what the Labour party has said. Even worse, there is not the slightest sign that it has learned anything from its own history. That point has already been made several times and it will have to be made again, because the Labour party still does not realise it.

We are being criticised for a rise in electricity prices of about 6 per cent. over three years, which contrasts with a rise under Labour of about 2 per cent. every six weeks. The Labour party may say, "Look what we achieved on gas prices." During the period of the last Labour Government there was a price reduction of about 19 per cent. for domestic gas users, but there was an increase of about 112 per cent. for commercial gas users. It ought to be self-evident that in the end one does not do the domestic consumer any good by selling him gas at a loss and by penalising industry which will inevitably pass that price increase back to the consumer.

Even if one does not accept that argument, but believes in penalising the business user while letting the domestic user off lightly, it is clear that at the time the Labour party did not believe in it. Its Green Paper on energy policy, published when the right hon. Member for Chesterfield (Mr. Benn) was Secretary of State, clearly stated:
"policies will be working under a severe handicap if price signals are not pointing in the same direction."
Whatever one thinks of the principal argument, what can one say of a Labour party that adopted a policy in which it did not believe?

To hear the Labour party talk about price rises in the nationalised industries, one would think that while it was in office such prices did not go up aggressively. But they did—telephone calls by 200 per cent., electricity prices by 163 per cent., rail fares by 153 per cent., domestic coal by 149 per cent., finished steel by 136 per cent., second-class postage by 133 per cent. and gas by 69 per cent. That is the reality of what the Labour party achieved when in office.

Having listened to the entire speech of the right hon. Member for Sparkbrook, one still does not know what the Labour party now has on offer. One can gain an indication from the last Labour party manifesto, and when pressed in an intervention, the right hon. Gentleman to some extent gave the game away. Labour's manifesto — the longest suicide note in history—stated:
"Give powers to a new Price Commission to investigate companies, monitor price increases and order price freezes and reductions … Take full account of these measures in the national economic assessment, to be agreed each year with the trade unions."
The national economic assessment is presumably the unworthy successor to the social contract, which was neither sociable nor contractual. It is also the worthy successor to the concordat, and it is not surprising that the Labour party has not referred to that. The dictionary definition of concordat is a composition made by a bankrupt with his creditors. That just about says everything there is to say about the way in which the last Labour Government conducted their arrangements.

That is the profoundly depressing thing about the Labour party. To be fair to the alliance, it is at least prepared to admit the errors of its ways, although it is not prepared to do anything about them. The hon. Member for Woolwich (Mr. Cartwright) said that in an imperfect world prescription charges would have to be levied, yet he criticised our prescription charges even though they are lower than those which were levied when many of his hon. Friends held office in the last Labour Government. In a remote way there may be some hope for the alliance, but there is no hope at all for the Labour party, which has clearly shown that it is incapable of learning anything at all from its history.

All it has offered are the same policies and remedies that have failed in the past, and there is not the slightest reason to think that they will ever succeed in the future. Labour Members need not take my word for that, because I am mindful of a good speech made at a party conference some years ago, when it was said:
"We used to think that you could just spend your way out of recession and increase employment by cutting taxes and boosting government borrowing. I tell you in all candour that that option no longer exists; and that in so far as it ever did exist; it worked by injecting inflation into the economy. And each time that has happened, the average level of unemployment has risen. Higher inflation followed by higher unemployment. That is the history of the last 20 years."
That speech was made by the last Labour Prime Minister, the right hon. Member for Cardiff, South and Penarth (Mr. Callaghan).

If the hon. Gentleman has only scorn to pour on the Labour manifesto and the Labour party conference, why has he spent the past 15 minutes using them to avoid having to defend the massive increases in public sector pricing since the Tory Government came to power?

I have referred to the Labour manifesto because, since then, Labour Members with memories long enough to remember when Labour was in office and who still crave office have done their best to ensure that the public forget what was in their manifesto. In those circumstances, it is legitimate and honest to point out that, in so far as it has been possible to prise out of Labour Front Bench spokesmen what a future Labour Government would have in store, it is clear that they have learnt nothing whatever in the meantime. I make no apologies for quoting the words of the last Labour Prime Minister, because the sad fact is that the Labour party has moved on from the days when its senior statesmen recognised common sense when they saw it. The right hon. Member for Cardiff, South and Penarth was an example of that, but he is not here today.

Because the Labour party has nothing new to offer, a Labour Government would mean more of the same. Not only the rich but the middle classes in the broadest sense of the term would be squeezed, as they always have been. The same old policies would mean the same old inflation and the disabled, the poor, the sick and others on fixed incomes would suffer most as a result. The right hon. Member for Sparkbrook talks about squeezing the rich. That is all very well for him, for Labour party grandees and minor light essayists who are earning so much that they can afford to be squeezed and make a virtue of it and still have enough left over. The pity is that if we ignore people in that position and consider those in the real world, there is every reason to believe — and no reason to believe otherwise — that if a Labour Government come to power at the next election they will simply do what they have always done, and that is far too high a price to pay.

8.2 pm

I pay tribute to the Labour Government for many of the policies that they carried out, although I do not deny that I went on marches against public expenditure cuts when Labour was in power. Even if we had the same old policies, my constituents would offer up a great prayer of thanks that at least we had a Government who cared, with much lower unemployment rates and a far higher standard of public services than we have now. But we shall not have the same old policies. We shall have new policies.

The hon. Member for Teignbridge (Mr. Nicholls) said that one of his interests or recreations is historical research.

No, historical. If the hon. Gentleman was a genuine student of history, he would know that the term "concordat" had a much wider meaning than that which he tried to give it. For instance, the use of the word in the history of the Roman Catholic Church is quite different from that suggested by the hon. Gentleman. I shall not, however, go any further down that historical road.

It is true that many people do not pay the current exorbitant prescription charges, but the existence of these charges merely adds to the poverty trap. A man who gets a 10p pay rise may suddenly find that he has to pay the £2 charge for prescriptions for himself, his wife and his teenage children, so his 10p pay increase may cost him a great deal of money.

Does that mean that the hon. Gentleman will support the social security Green Paper, which proposes that benefits should be based on net income rather than on gross income so that the poverty trap which the hon. Gentleman rightly describes will disappear?

On prescription charges, my answer is to get rid of them altogether and go back to a Health Service that is free at the point of use to all within it. That is the best way to organise the Health Service.

The hon. Member for Teignbridge berated the Labour party for defending the old-age pensioners. If the Government had not excluded the earnings-related element from the pension increase calculations, pensioners would have £4 per week more than they now have. That action was taken by the Conservatives, not by the Labour Government.

My hon. Friend should not take the hon. Member for Teignbridge (Mr. Nicholls) too seriously. The hon. Gentleman suggested in his small contribution to the debate that 20p per prescription before the 1979 election was somehow a greater charge than £2 per item in 1985.

That is why I suggested that the hon. Gentleman's interest was in history rather than in mathematics.

Talking of inflation, one or two things should be made clear. In this context, insufficient attention has been paid to unemployment. Conservative Members may ask what that has to do with inflation. The percentage rate is not the only measure of inflation. Inflation is about what people can buy with the money that they receive each week and whether they will be able to buy as much next week and in subsequent weeks. For the individual, the largest inflationary factor may be unemployment. If a person earns £190 per week, which I understand is the average household income, and pays £10 per week for electric light and heat, his electricity bill represents about 6 per cent. of his income. If he suddenly finds himself on £45 unemployment benefit or supplementary level he will still have to pay the electricity bill, but it will represent about 25 per cent. of his income. Indeed, the electricity bill is likely to be bigger because an unemployed person spends a great deal more time at home than a person who goes out to work. Unemployment thus creates inflation for the individual, and even Conservative Members cannot deny that the creation of unemployment has been part of the Government's economic policy.

I am sorry that my hon. Friend the Member for Great Grimsby (Mr. Mitchell) is no longer present, as I have to disagree slightly with some of his comments. He referred to the failure of the Government's economic policy, and I think that he was probably right, but there are times when I am not so sure. The economy is not an end, but a means by which to obtain social and political ends. I am not convinced that the Government are not achieving their social and political aims, which are twofold.

First, they want to create an ever better and more secure standard of living for the small wealthy class that gives them so much support. The Government have been extremely loyal to their most loyal supporters and have given them more or less what they want. They have given them higher incomes. I gather that the Government will be embarrassed when they release the details of the salaries of those in the upper echelons of the nationalised industries. It is probable that the report will reveal salary increases that are way above the general rate of the increase in earnings and the rate of inflation. I gather that the Government are delaying the publication of the report. It will be rather interesting to see what happens when it is published. However, the Government have satisfied the needs of their most loyal supporters. Secondly, the Government want employers to play their part in establishing a low-pay economy for the rest of the people. They want trade unions to be suppressed. They think that unemployment is a tool by which they can put down the unions.

I am not convinced by the argument that we must be wary in thinking that the Government have failed to achieve their economic and political objectives, but there is something in it. I am not sure whether the Government will achieve exactly what they set out to do. Of course, in a democracy the people will get rid of them at the next general election.

The hon. Member for Teignbridge suggested that our consideration of inflation should be confined to the rate at which it is running. That is inaccurate. Our consideration of inflation should be much more sophisticated. First, the poorer someone is, the harder he will be hit by inflation. The prevailing rate of inflation will, in effect, be higher for those who are poor than for those who are rich. One of the anomalies of our society is that the poorer someone is the more likely he is to pay for the goods that he acquires. I have in mind those who are unemployed who live in large council house schemes and who do not have the ability to own a freezer or a motor car. Those who are in that position have to use the corner shop, where, on average, prices are much higher than in supermarkets. Such people cannot buy in bulk, so they have to shop daily. That means that they pay a higher price for everything that they purchase.

Is the hon. Gentleman aware that many supermarkets run buses so that people can be taken specifically to their supermarkets? This means that those who live out of town can shop at a supermarket.

I accept that there are some stores which operate buses, but they are few and far between. I know that most of those who live in a large housing scheme in my constituency do not use a supermarket bus. The bulk of them have to shop daily, and consequently have to pay higher prices for the goods that they purchase.

Does my hon. Friend accept that when the Transport Bill is enacted many people who do not live on main and popular bus routes — I accept that those who live on or near such routes may benefit from the Bill—will be forced into the position that my hon. Friend is outlining? In other words, they will be forced to use more expensive shops as a result of Government legislation.

My hon. Friend makes a good point. The poor often have to pay higher prices for the goods that they buy. Secondly, a much larger percentage of their income is used to buy items which, to use an economic term, are inelastic. They spend a higher percentage of their income on the services provided by public utilities than do others within our society.

I hope that I shall not embarrass the hon. Gentleman too much by saying that I agree with everything that he has said about the effect of inflation on the poor and the vulnerable. Everything that he has said about that is absolutely right. However, he is presumably content that under the previous Labour Government inflation peaked at 25 per cent. Even now, when inflation is at a peak of 7 per cent., it is better than the rate achieved by the previous Labour Government at any time during their period in office. Given his compassion and concern, that is the problem to which he should be addressing himself.

The hon. Gentleman tends to forget that there was an inflation rate of 19 or 20 per cent. following the election of a Conservative Government in 1979. However, I do not necessarily blame all inflation on the Government who are in office. The two large increases in oil prices in 1974 and 1979 have been major causes of inflation over the past 15 years. That applies to Britain and to the world generally.

I contend that housing costs for the poor are higher than for those who are wealthy. That can be said of electricity and gas charges, and of the charges that are made for other forms of heating. The poor pay more for the use of public transport as a percentage of their income than do others. They cannot spend large sums in areas where, in part, the rate of inflation has been kept down. I am thinking of consumer durables such as television sets, video recorders, home computers and cameras. The same can be said of holidays abroad. The level of inflation in those areas is considerably lower than it is in basic foodstuffs. It is lower, too, than the self-imposed inflation that the Government have introduced to the public service sector. The Government have imposed inflation upon us, and especially upon those who can least support it. It is that element of their policy to which I object most strongly.

It seems that I shall be the only Member representing a Scottish constituency to participate in the debate. The effect of inflation on energy costs — for example, gas and electricity charges — is greater in Scotland than in England, although I accept that the average energy cost per therm for gas and electricity tends to be lower in Scotland than in the rest of the United Kingdom. However, regard must be had to climatic conditions in Scotland. The same can be said of northern England. Climatic conditions become more unfavourable the further north one goes. This means that the energy burn over the year of someone living in Scotland is considerably greater than that of someone living in the south. For example, a person who lives in Glasgow spends 20 per cent. more on energy throughout the year than someone living in Bristol, and someone living in Aberdeen will spend 30 per cent. more.

There are other differences. Basic foodstuffs in Scotland, especially in the west of Scotland, are higher in price than those in the rest of the United Kingdom. The price of such items in Scotland is even higher than in the south-east. When addressing ourselves to inflation we must give more consideration to these factors.

The Government are implementing policies that are designed to increase the level of inflation. They are doing so deliberately and they disregard the problems that the people have to face. I have dealt with the problems of higher electricity, gas and transport charges as well as the problem of higher rents and rates.

There are those who argue that many of the basic items in a household budget are paid for by the Government when unemployment strikes. The Fowler review, if its findings and recommendations are implemented, will make it harder for the poor to ensure that the basics in life are paid for by the Government. That will apply especially to housing benefit.

One of the promises on which the Government came to power was that they would increase the difference in income between a man who worked and a man who was unemployed. I remember that promise being made at the 1979 general election. It is curious that the Government's policies are reducing the gap. Whenever there is an increase in bus fares, the man who has to buy a bus ticket to travel to work finds that the differential between himself and someone who is unemployed is decreasing, and not increasing. The unemployed person does not have to pay that bus fare. Thus, the Government are again reneging on that promise.

I am sorry that my hon. Friend the Member for Leeds, Central (Mr. Fatchett) is not in the Chamber, because he pointed out that the average rise in local authority costs was 2 per cent., whereas the average rise in domestic rates was 9 per cent. Of course, he was talking as a Member of Parliament for an English constituency. This year, the average domestic rate rise in Scotland is 16 per cent. That is the average. There are people who will pay 2·9 times more than before. I accept that the Government have agreed to a rebate on the proportion that is over three times the amount paid last time, but people will still have to pay enormous increases in their domestic rates.

As in England, there is a teachers' pay dispute in Scotland. Teachers rightly feel that their salary increases have not kept pace with inflation. Indeed, I know of a senior teacher who is not far off retirement. He lives in a decent house in a decent area of Glasgow, but the salary increase of 3·5 per cent. which the Government are prepared to pay would not even cover the rise in his rates bill this year, let alone any other price increases. Most Conservative Members will not suffer greatly from price rises. The percentage of their incomes that is spent on Government-imposed increases in the public sector and in public services which are well above the level of inflation is minute compared with the percentage spent by the poor people of my constituency.

For real people, the Government have made life more miserable by increasing unemployment and imposing cuts in public services. People live in public and private sector housing which is poorer than it was in 1979. The hon. Member for Teignbridge said that nothing more could be offered. Surely he is not trying to boast that the Government's economic policy has been good for the people of this country or that people are better off under this Government. The people of this country, and particularly my constituents, are poorer, live in worse housing, have poorer public services and face higher health costs than before. They are desperate to see the end of this Government. I assure the hon. Gentleman that the opinion polls in Scotland are right, and that Conservative Members will be looking for a shadow Secretary of State for Scotland from among the English constituencies after the next general election.

8.23 pm

It is a great pleasure to speak in the same debate as the hon. Members for Great Grimsby (Mr. Mitchell) and for Glasgow, Cathcart (Mr. Maxton), as I shall deal with some of the points with which they dealt.

My constituency is, of course, nowhere near Cathcart, but is is within three or four miles of Great Grimsby. I often enjoy reading the comments of the hon. Member for Great Grimsby in the Grimsby Evening Telegraph. Indeed, seldom a day passes when that populist Member is not talking about the ordinary man—[Interruption.] I do not know whether he is popular. Hardly a day passes without him talking about the effect of the Government's policy on the ordinary man — a subject that he dwelt on at length today.

The burden of the speeches of both hon. Members was that the Government are so blinded by their adherence to economic dogma and to concepts such as the PSBR, inflation and their "friends in the City"—as Opposition Members call them—that they are leading the country's economy to destruction. I think that the hon. Member for Cathcart said that the economy was not an end in itself but a means to an end. Of course I agree with that. We are concerned with concepts such as the PSBR, academic though they may be, because such concepts directly affect the ordinary people of Grimsby and Gainsborough. They directly affect those ordinary people, because a high PSBR will lead to high interest rates and high inflation.

It is strange that the motion, which I have read carefully, should deal with prices but fail to mention inflation. It is surely common sense that it is impossible to hold down prices if the Government have not succeeded in holding down inflation. I am sorry that the hon. Member for Great Grimsby is not in the Chamber to hear my comments, but perhaps he will read about them in the Grimsby Evening Telegraph tomorrow. Indeed, I am sure that his speech will be in that paper.

It is a pity that the hon. Gentleman thinks of inflation as an academic policy. Perhaps he does not want to talk about the Government's record on inflation, because he knows that the Government have reduced it to a quarter of the level that it reached under the last Labour Government. They have succeeded in doing that without having to have recourse to the prices and incomes policy to which the Social Democrats and Liberals are wedded. Incidentally, I am sorry that there are no SDP or Liberal Members in the Chamber. The Government have also succeeded in reducing inflation without having to have recourse to dividend or price control.

The Government have not used unemployment. Rather, they have adopted sensible policies. They have looked at the PSBR and succeeded in reducing interest rates and inflation, thus making Great Britain more competitive in world markets.

In recent weeks, the Opposition have made great play of inflation rising to 7 per cent. Surely, that rise points to the need to be even more circumspect in our management of the economy and to ignore the policies of higher Government spending that the Opposition have asked us to pursue today. They would inevitably lead to a higher PSBR, higher interest rates and eventually higher inflation.

The increase in inflation to 7 per cent. is a result of the strengthening dollar. As hon. Members have said, that has forced the Government to increase interest rates. It shows that we must continue our policies and that we must exercise great care. But the long-term prospects for Great Britain remain good. In May, raw material and fuel prices fell by 1·1 per cent., which is the best figure since 1982. As my hon. Friend the Member for Teignbridge (Mr. Nicholls) said, inflation is still lower than in any month under the Labour Government. At the end of Labour's period of office, the trend was decidedly upwards.

Thus, I say to the hon. Member for Great Grimsby that the PSBR is not an academic subject, but is of concern to his ordinary voters in Great Grimsby. The hon. Gentleman refused to look at the facts and figures for the PSBR. For 1985–86, the PSBR is £7 billion or 2 per cent. of gross domestic product. That is as low as it has been since 1971–72. In 1975–76, it was £10·7 billion, and rising. Incidentally, shortly after that, the hon. Member for Great Grimsby was first elected to the House with a very small majority. In 1979, his majority increased to about 6,000. However, as a result of the successful policies pursued by the Conservative Government between 1979 and 1983, his majority fell from 6,000 to a matter of hundreds at the last election.

On that basis, perhaps the hon. Gentleman can explain why my majority rose from 1,700 to 4,250.

Perhaps it was because the hon. Gentleman was no longer opposed by my skilful hon. Friend the Member for Southend, East (Mr. Taylor). I can speak only for the area that I represent. I think that it is strange that the hon. Member for Great Grimsby's majority should fall so dramatically between 1979 and 1983. His majority fell to the level at which it stood when he won a by-election when the Labour Government were in office and the PSBR was high.

Opposition Members have told scare stories about VAT on children's shoes and food. They were inaccurate, just as the scare story about VAT in tonight's motion is. Indirect tax changes have little effect on the retail prices index.

Increases in indirect taxation have enabled the Government to reduce direct taxation. The hon. Members for Great Grimsby and for Cathcart allege that the Government are concerned only about the rich. I tried to intervene earlier, but the hon. Member for Great Grimsby would not give way. If we are concerned only with the rich, why are personal allowances 20 per cent. higher than they were when the Government came to office?

Personal allowances help everyone—the low income earner as well as the high income earner. Why is it that 1·25 million fewer ordinary people now pay tax than when the Government came into office? Is that because the Government are concerned only about protecting the pockets of the rich? That is an absurd claim, which is not borne out by the facts or by the Conservative Government's record in raising the tax thresholds for low-paid workers.

The hon. Member for Great Grimsby gave the impression that the economy was grinding to a halt. The facts do not bear that out. This is the fifth year of growth. The growth rate has been 2·5 per cent. each year since 1981. The forecasts are that the United Kingdom will have the fastest growth rate in Europe.

There is no shortage of demand. The country's problems are related not to a shortage of demand, but to the failure of British industry to meet the demand in the home and international markets. Retail sales were up 4 per cent. in the three months to April this year.

In 1984 we experienced the fifth year of current account surplus trade in world markets. We have created 600,000 new jobs since 1983. We have created more jobs than the SDP promised to create in its manifesto, in which it also said that it would increase the public sector borrowing requirement by £2 billion.

I am sorry that the SDP spokesman, the hon. Member for Woolwich (Mr. Cartwright), was not present for the earlier part of my speech. He will not have heard my warnings about increasing the PSBR.

We hear a lot about the increase in gas prices. How did the Labour Government hold down gas prices between 1974 and 1979? They held prices down at the expense of the industrial consumer—and the industrial consumer provides jobs in Great Grimsby and Cathcart. The industrial consumer in those areas was subsidising the domestic consumer in Surrey.

We do not hear much from the hon. Member for Great Grimsby about the 30 per cent. of householders in rural areas who have no gas supplies. I represent a large rural constituency consisting of 170 parishes and covering over 750 square miles. The village where I live, in the middle of my constituency, does not have a gas supply. Some villages in rural Lincolnshire were subsidising the domestic consumers in the urban areas, and the industrial consumer was also subsidising domestic consumers. That could not be allowed to continue.

Electricity prices have increased under this Government. No one welcomes that, but it is an economic reality. Under this Government electricity prices have increased by only 6 per cent. in the last three years. Under the Labour Government, electricity prices increased on average by 2 per cent. every six weeks.

Our gas prices are the lowest in the EEC. Since 1983 gas prices have risen only twice—by less than tie rate of inflation. The Government's policies are encouraging a sense of conservation. Under Labour, between 1974 and 1979, domestic gas prices rose by 19 per cent. and industrial gas prices rose by 112 per cent.

Water charges are of interest to my constituents. I have received letters expressing anxiety about increased charges by the Anglian water authority. The rate of return for water authorities is only 1 per cent. We are asking the Anglian and other water authorities to increase that return to 1·4 per cent. in 1985–86 and to 1·7 per cent. in 1986–87. I do not think that that is too much to ask.

The targets compare with the rate of return for other nationalised industries. The figure for the electricity supply industry is 2·5 per cent., for the gas industry it is 4 per cent., and for British Airways it is 5·7 per cent.

A current cost rate of return averaging 9 per cent. for major non-oil industrial and commercial companies in the private sector in 1983 was reported in the Bank of England Quarterly Bulletin published in September 1984. Making every allowance for the special circumstances and responsibilities of water authorities, a rate of return of between 1 and 2 per cent. is in no way excessive. I am sure that the House shares that view. The improved rate of return, while reducing the water authorities' demand on public sector borrowing, will also finance an increase in capital expenditure of £80 million, or 12 per cent., in the present financial year. Further real increases in capital expenditure are likely in the following two years.

The average increase in water charges in England in 1985–86 will amount to less than 17p per week. Water charges account for only about 1 per cent. of the average householder's budget. That puts the matter into perspective. I am sure that the public will therefore support the Government's determination to force water authorities to achieve a higher rate of return. Unless they achieve that rate, it will not be possible to privatise the water authorities.

My constituents will support a privatisation policy. The Government's programme of privatisation measures, of which the sale of shares in British Telecom is the best example, shows that privatisation leads to increased efficiency, enterprise and competition and to greater employee involvement through share ownership by the work force.

In Lincolnshire we have a proud record of self-employment and of people becoming involved in their own industries. I remain confident that the Government's policies on gas and electricity pricing, on water charges and on privatisation, far from leading to the Government's demise, as the hon. Member for Cathcart alleges, will lead to a resounding Conservative victory at the next election.

8.38 pm

I have read the Opposition's motion and listened to my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley), who stuck rigidly to the motion. He set out in detail where the Government are going wrong in relation to representing all the people in the nation. The Government amendment tries to describe what has happened and what will happen in the future in the interests of the nation.

Having looked at the Opposition motion and the Government amendment, I come to the Chief Secretary, who presented the Government's case. He reminds me of what happens at Sunday markets. More often than not, those markets include auctioneers. I have another name for them—I call them Flash Harrys. The Chief Secretary made a Flash Harry contribution. We know what will happen during the next couple of years and what will happen when we have our first opportunity to get rid of this Government and put in their place people who are really interested in acting for all the people, not just a few.

The Chief Secretary's speech clearly showed where everything has gone wrong. People in the lower income groups are suffering. In a flashy contribution, the right hon. and learned Gentleman tied up the problem with a blue ribbon in the hope that he would get away with it. He and his Government will not get away with it. I shall tell the few Conservative Members who have sat here during almost all of the sitting—[HON. MEMBERS: "What about the Opposition?"] I have the Floor. When the Conservative Benches are full, as at Prime Minister's Question time, I have looked along each row and thought how many Conservative Members are involved in financial institutions. That is the problem. They do not know anything about the practical side of life and about how the ordinary folk live. Their minds are stuck on finance all the time. That is where their minds are, even when they go to bed.

The hon. Gentleman has already spoken and had his bite. Other hon. Members want to have a bite as well. The hon. Gentleman happens to be one of those hon. Members who have their heads stuck in the financial institutions.

Labour Members clearly understand what is happening, and they do not want any more. The people are demonstrating and saying in no uncertain terms that they have had enough of what the Government are doing. This is particularly so in the towns where by-elections are held.

Massive profits have been made from gas, yet the Government are making the authorities increase prices at a time when that money is not needed. The same is true of electricity. The electricity authorities have been told to increase charges. I do not want a brush-off from the Secretary of State on this issue.

What a story there is to tell about water. The Severn-Trent water authority was instructed by the Government to increase water rates by 12 per cent. What did the chairman of the Thames water authority say when the authority was instructed to increase water rates by 9 per cent.? He said on television, "We need only a 3 per cent. increase." Yet, once again, water rates are being bumped up for the ordinary folk. Never mind about the rich; they can look after themselves. This Government do a good job of looking after them. The ordinary folk will have to meet the bills that the Government have forced on the public authorities.

About three years ago, I told the House that this Government would be the first to achieve a price of £2 a gallon for petrol, and they have done it. They can do anything with their massive majority. They do not realise what this means, because their heads are stuck in the clouds and financial institutions. When petrol prices are increased to that level, every price in the shops is affected because of the cost of transportation. The Government are half asleep. They cannot see that side of the argument. In fact, they do not want to see it.

Hon. Members have referred to prescription charges. The Secretary of State for the Environment, who is a former Secretary of State for Social Services, is sitting on the Treasury Bench at the moment. He played a big part in the increase in prescription charges. He should be ashamed of himself. The right hon. Gentleman can grin, but this is a serious matter. When he was Secretary of State for Social Services, the Government were planning behind closed doors — no doubt the right hon. Gentleman will deny this, but the many leaked documents have informed us of what happened—to charge patients for going to a doctor. The right hon. Gentleman may deny it, but we know that it is true. This is the way in which the Government make the ordinary people pay.

What about rates and local authorities?

That is right. We shall probably refer to him again in relation to increases in rates and prices. Because of the reduction in RSG, rates have had to be boosted—

I shall not give way.

Because of the reduction in RSG, local people will have to put their hands in their pockets again to pay for increased rates.

Before the 1979 election, the Conservative party said that there should be less Government control. The present Secretary of State for Defence was bawling and shouting — just as I am doing now—that there should be less Government control. I remember when the present Secretary of State for the Environment was speaking from the Dispatch Box one night and Mr. Speaker could not control this place. He had to adjourn the House for 10 minutes. The Secretary of State was saying that local authorities had to increase their rents by £2·50 a week. He set a precedent. Previously, local authorities had determined their own rates. The Secretary of State wanted a massive rents increase, and this has continued ever since under his administration.

I shall not give way. Will you tell the hon. Member for Nottingham, South (Mr. Brandon-Bravo) to sit down. Mr. Deputy Speaker?

I do not deny that the sale of council houses is a good measure. Nevertheless, we have had arguments about it. What has happened? We do not hear Conservative Members talk about their surgeries. I shall tell them about the people who have bought their council houses. They have come to my surgery on a Saturday morning and told me that they cannot keep up with the repayments because of the Government's policy. The Government are driving people from their homes. This is happening in the public and the private sectors.

These serious subjects are not funny. We are talking about a Government who are doing the wrong thing and making life rough for the lower income groups. The message is getting through. The people of Britain have had a bellyful of Conservative policies and they do not want much more of them.

I recall listening to some comments made one night by the right hon. Member for Old Bexley and Sidcup (Mr. Heath) when the present Home Secretary was speaking. We were told that the nation was getting up off the floor and that the economy was improving. The right hon. Member for Old Bexley and Sidcup said that, in his view, we had not yet reached the bottom. I fear that, even now, we have not yet reached the bottom. The trouble is that, the longer the recession lasts and we have Conservative policies, the worse the situation becomes.

What the Government are perpetrating today is a racket, a con trick. I regularly visit pensioners' groups and hear their complaints. I tell them what the Conservatives are doing. Among their complaints is the present situation of TV licences. Friction is bound to be generated among elderly groups when some pay only 5p and others have to pay the full whack. My hon. Friends and I twice tried to persuade the Government to remedy that state of affairs, but they refused to take action, complaining that public expenditure had to be reduced. They can find millions for the rich, but cannot help the poor pensioner.

Standing charges represent an enormous rip-off. Whenever the Treasury is looking for money, standing charges are increased, and those in the lower income groups and the pensioners suffer. They must find the extra money to finance the idle rich—that is what I call them — who are raking in the money at the expense of the poor.

I made a discovery the other day, which I trust will be noted by Conservative Members. I gather that an allocation of cheap EEC butter was made to the House of Commons. Despite the salaries that we in Parliament receive, 1½ tonnes of EEC butter came here. I did not notice any price reductions in this place. It is disgusting that cheap butter should come here. It should have gone elsewhere, where it was needed.

Is it not a fact that the Government would sooner give cheap butter to Russia to feed their troops than to Britain's old-age pensioners?

My hon. Friend makes a valid point. We frequently hear the Prime Minister — in this place, on television and at meetings — referring to the "rotten Russians" and saying that we must stand up to them. She claims that we must have nuclear weapons so that, if necessary, we can knock them about a bit. As the Government are party to the EEC, why are they permitting butter to be sold to Russia at 10p per lb?

Is my hon. Friend aware that, in addition to giving the Russians butter at concessionary prices, for five successive years the EC has allowed the Russians to double their purchases of wine at about 4½p a litre, presumably to promote alcoholic euphoria?

My hon. Friend is obviously an expert on the subject. I am obliged to him for that intervention, because I did not know that fact. It is clear that, the more one talks about these problems, the worse the situation becomes.

When the present Foreign Secretary was Chancellor of the Exchequer, he was questioned about how much was involved in the black economy, and he replied that the figure was about £4 billion. When asked what he intended to do about it, especially from the income tax point of view, he replied that he did not have the money to put more people on the job of chasing up the money that was due. He had just sacked 160 people from the Treasury; they could have investigated the matter.

We are still in much the same situation, with the black economy as large as ever. All that income tax is owed by people who get away with it, while the ordinary workers pay their tax through PAYE. It is clear that those getting away with it contribute to Conservative party funds. As always, the Government are looking after their own kind.

The hon. Member for Teignbridge (Mr. Nicholls) spoke about history. My hon. Friend the Member for Glasgow. Cathcart (Mr. Maxton) replied to that speech, but even he did not go back far enough. It is clear, for example, that the policies that were being pursued in the 1920s by the then Tory Administration are the very policies that are still being pursued by the Conservatives. History is repeating itself.

I must comment on the remarks of the hon. Member for Gainsborough and Horncastle (Mr. Leigh), who took a swipe at my hon. Friend the Member for Great Grimsby (Mr. Mitchell) and spoke of my hon. Friend's majority. As usual, the hon. Member for Gainsborough and Horncastle got it wrong. I agree that my hon. Friend's majority fell at the last general election, but we have had the Conservatives in office for the last six years and, as part of their actions, we have had boundary changes. Those changes, as usual, have been in favour of the Government of the day. Some rich Tory areas were included in Great Grimsby, and down went my hon. Friend's majority.


I will not give way to the hon. Gentleman, who made his point, which I have disposed of.

The people of Britain have got the message. They have had enough. They have had a bellyful of the lot who are now in power. The sooner we get the opportunity to kick them out, and put our lot in, the better off we shall all be.

8.58 pm

I apologise for not being in my place for about one and a half hours of the debate. I hope that during that period something more enlightening was said than I heard during the opening stages of the debate.

Having read the motion and heard the opening remarks of the right hon. Member for Birmingham. Sparkbrook (Mr. Hattersley), I was not sure which side to support. I was in a bit of a quandary. It appeared to me that the Labour party was being converted to the fight against inflation and that I might have to lend it my support in the Lobby. However, I was wrong on two counts. First, the Opposition were not converted to the fight against inflation. Only three or four Opposition Members were present in the Chamber. Half a dozen Opposition Members are present now, but this is a major Opposition attack and it is the Opposition's 15th allotted day.

The Conservatives do not need massed ranks on their Benches to defend themselves. This is not a Government motion, with all the Conservatives being wheeled in to vote for it. This is a major Opposition attack, during which three or four Opposition Members have been present. Of those Opposition Members who have been present, most have had no policies to offer, but merely humbug—the same old humbug that we have had from the Opposition over the last few years. We have had humbug over inflation from the party which continually presided over an inflation rate of more than 20 per cent. when it was in office.

My hon. Friend will recall that for most of the time the only five Opposition Members present on the Back Benches were four current Whips and one ex-Whip.

My hon. Friend is right. That is why they attempted to filibuster. They have nothing else to offer.

We had humbug over inflation, and humbug over taxation from the party which promised to tax the rich until the pips squeaked. The hon. Member for Oldham, West (Mr. Meacher) believes that the rich are families with incomes of £15,000 to £20,000 and over.

We then had humbug over electricity prices from the party which put up electricity prices by 2 per cent. every six weeks when it was in office.[Interruption.] Sedentary interventions from Opposition Members will serve only to delay me further. If Opposition Members had spoken more shortly, there would be more time for other Back Benchers to speak.

We had humbug over mortgages from the party which hates home ownership and which fought against 1 million people in the country owning their own homes. The final example of humbug was over water rates from the party which urges the Government to spend more on water infrastructure.

There are many matters which I could mention, but I wish to mention only one. It was not referred to by any Opposition Members who spoke, because the Opposition do not like mentioning it. I am referring to food prices. During their period in office the Labour Government presided over inflation rates of 18 per cent. in 1974, 26 per cent. in 1975, 23 per cent. in 1976, 17 per cent. in 1977 and 10 per cent. in 1978. Food prices, which always rise at only half the rate of inflation, were creeping up at exactly half those rates. When Opposition Members talk about the misery of the unemployed and the poor, it should be borne in mind that food prices are a major contributory factor and are rising at only half the rate of inflation.

The final point that I make so that Opposition Members may be allowed to continue the humbug with which they began the debate is this. I asked the Chancellor of the Exchequer in a written question some weeks ago to give the relationship between food prices and the average incomes for the ordinary average industrial worker in 1973–74 and now, because that is the crucial point. Do people today have to work longer and harder to buy the basic foodstuffs than before? The answer is no. If one considers every major commodity — milk, eggs, beef, pork, lamb, back bacon, chicken, butter, cheese, tomatoes—one sees that the ordinary average worker can pay for those commodities today by working for a fraction of the time that he had to work in 1974. The only exceptions are sugar and potatoes. That is a typical point, and one which has been ignored by the Opposition.

Food prices are the most important part of the fight against inflation. Those who are most affected are the poor, pensioners and those on fixed incomes, and they will be protected by our guarantee to increase social security benefits by 7 per cent. The country and the House owe a debt of gratitude to British farmers for keeping food prices at half the level of inflation. [Interruption.] The Opposition cannot stand that. That is why they do not mention it.

I hope that my right hon. Friend will pay attention to the level of food price increases in the country, which are only half the current level of inflation of 7 per cent., and to the fact that that figure is much less than the figure in any month when the Labour Government were in office. I know that the hon. Member for Kingston upon Hull, East (Mr. Prescott) cannot stand my telling him that when the Labour Government were in office the rate of inflation, every month, was greater than it is now. That is a fact, and it will not go away when I finish my speech.

I hope that my right hon. Friend will not tolerate the humbug that the House has had to tolerate during the four or five hours of the debate. The people of this country are better protected by this Government and by their control of inflation than they would be by all the ratbag nonsense that we have heard from the Opposition.

9.4 pm

This debate has been about prices, but it has also been about the Conservative Government's philosophy and the practical implications of that philosophy for the people of Britain and the British economy. It has been a somewhat mixed debate. There have been a number of combative speeches from both sides of the House. A few minutes ago, I was feeling rather sorry for the hon. Member for Penrith and The Borders (Mr. Maclean) because I thought that he would not be called to speak. I regretted that quietly, but when he was called, I regretted that more, because his time was not effectively used.

The House has again heard the well-rehearsed Tory arguments against public service provision, against the cost of such services and about the need to reduce public expenditure. The debate has provided another opportunity for us to demonstrate the huge and increasing gap between current Tory thinking and Labour party policies about the future provision, finance and cost of services that are not only essential for social well-being in a plural democratic society but for the economic success of the country.

Since 1979, and increasingly since 1983, we have seen a remorseless attack on the public services so necessary for people's everyday lives — their housing, energy, education, health, transport and local government. Through deliberate acts of policy, the Government have forced people to expend more of their family incomes to pay for such services, while increasing the tax burden on everyone except the highest paid in our society. Those points have been made effectively by my hon. Friends the Members for Glasgow, Cathcart (Mr. Maxton), for Leeds, Central (Mr. Fatchett) and for Great Grimsby (Mr. Mitchell).

While we renounce that approach and the whole market forces philosophy of the Government, and the social market policies of the alliance as well, we complain that even now the Adminstration seek to disguise the true nature of their intentions from the country. Nowhere is that charge more true, and more clearly illustrated, than in the Government's treatment of the social security review and the tawdry attempts to withhold figures and deny Parliament and the people the truth.

As a central part of that political philosophy, the Government continue to shift burdens from the well-off, the large income earners, to those less able to bear them. As a cornerstone of Tory policy, like all previous Tory Governments, the Administration undermine the foundations of community provision and introduce higher charges at the same time, requiring people to pay more for a less effective, and often lower-quality, service.

In addition to this attack on the belief in public services and the indifference of Conservatives, which we have seen amply demonstrated in the debate, to the consequences for millions of people who have no choice but to use those services, Ministers argue that, for economic policy reasons, such charges are essential. I was astonished by one facet of Conservative contributions to the debate. In the time that I was in the Chamber, not one Conservative Member mentioned unemployment and its consequences.

I may not have heard all the hon. Gentleman's speech, so I apologise. However, I did not hear any Conservative Member talk at any length about the consequences for the nation or for individuals of the inexorable growth in unemployment as a result of six years of these policies.

The Prime Minister, perhaps above all, has made, and continues to make, grandiose claims about her Government's approach, but the reality is different. No matter how fine the phrases or quotations from St. Francis, the talk of more freedoms and more choice, the rhetoric is a million miles from the facts. The facts are that the Government's policies blur decency and kindness, breed ill will and discontent, and cheapen human life and our society. The Government have acted deliberately and directly to increase prices across the rang of family expenditure, as the record of the past six years clearly demonstrates. VAT has doubled, and there has been a tenfold increase in prescription charges. The hon. Member for Teinbridge (Mr. Nicholls) in an aggressive attack on the Labour party, said that prescriptions did not cost as much as they did under the Labour Government. Yet under the Labour Government a prescription cost 20p, whereas they now cost £2 per item. That seemed a strange bit of economics or even simple arithmetic to me.

With such cuts, the Government have cynically cast aside their election promises. Housing costs have rocketed for all families, whether they pay rent and rates or mortgages and rates. Indeed, the Government have deliberately forced up rents, mortgages and rates. Average rents have increased by more than 166 per cent., and in some areas by much larger figures. Some Tory councils subsidise the council's activities by making huge transfers from the housing account, thereby effectively taxing local council house tenants. In addition, more and more of the costs of maintenance and repair fall on the tenants as financial support for local authorities to maintain their housing stock is reduced.

My right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) said that mortgage interest rates are at record levels and have been consistently high throughout the Government's term of office. Rates have been deliberately forced up by the systematic reduction in rate support grant, which has been continued by the Secretary of State for the Environment. That view is held not only by the Opposition, as some Conservative Members have suggested, but by the Audit Commission, the Comptroller and Auditor General, a Select Committee and every local authority association.

Average weekly rates payments, including water charges, have risen from £3·19 in 1978–79 to £8·27 in England and Wales. In Scotland, the increase is even higher, from £2·54 a week to £7·63 a week—a threefold increase. That is a measure of the impact of the Government's policies on housing costs to millions of families. At constant prices, those figures represent a weekly extra cost of £2·20 in England and Wales and £2·70 in Scotland.

Those additional costs, which are the deliberate and inevitable result of Tory policies, strike at the heart of family budgets and family life. It is no wonder that a major consequence in the public sector and among owner-occupiers is that 3·5 million houses are now in an unsatisfactory state of repair, as the right hon. Gentleman's Green Paper on improvement grants confesses on the first page. It is no accident that a second consequence of these policies is that homelessness is on the increase.

Does the hon. Gentleman accept that, as a direct result of the Government's policies, the right to buy produces for 50,000 families in Nottingham a rent reduction of £3·60 a week? That is the value to the housing revenue account in a city such as Nottingham of the profit from the right to buy. I have tried more than once to get the hon. Gentleman to understand the difference between capital receipts and the revenue benefit that flows from them.

If the hon. Member for Nottingham, South (Mr. Brandon-Bravo) says that that is true in the city of Nottingham, I believe what he says. I am not suggesting that he is trying to mislead the House. I assume that he is referring to the Labour-controlled Nottingham city council when he talks about the good administration of the city's affairs. As for his point about revenue and capital receipts, of course I understand the difference — [Interruption.] I regret that the hon. Gentleman, from a sedentary position, is being offensive even though I gave way to him. If I misheard what he said earlier, I apologise, but I thought that he was making a spurious point and I said so.

I was making a point about the deteriorating state of the national housing stock and about homelessness increasing. The Royal Institute of British Architects — hardly a bastion of Socialism—in a recent publication described what it saw as "decaying Britain." It said:
"The Government's attitude to the built environment can best be described as conditioning people to the death of the places in which they live, work and bring up their children."
That is a graphic description of what is happening to the built environment in Britain.

Yet worse is to come. We learn from the Green Paper that improvement grants are likely to be reduced in scope and value, thus exacerbating the decline in the nation's housing stock. In addition, between 3 million and 4 million pensioners and families face extra burdens with their rates because the social security review suggests that in future they should contribute up to 20 per cent. themselves. They are currently receiving 100 per cent. rebates because of their low incomes. They include about 1 million pensioners.

Over the same period, the record is similar for energy charges—a tax on gas, public transport fares, charges for school meals—where they still exist—and, under some Tory authorities, additional charges for home helps and meals on wheels.

I was much taken by comparisons with what has been happening with energy prices and rising costs between the last Labour Administration and the present Government. Every Conservative Member — including the Chief Secretary — carefully omitted to mention that between 1974 and 1979 there was a world energy crisis. Oil prices were being hiked up by colossal amounts. Britain had massive import bills for oil running into billions of pounds. The Chancellor and the Prime Minister—and, indeed, everyone on the Treasury Bench — have enjoyed a unique opportunity among western industrial nations. We are the only country in the western industrial world to be self-sufficient in energy—to be producing more oil than we need and even, currently, to be producing more than Saudi Arabia. It is a massive advantage and a huge difference between the circumstances in the middle to late 1970s and those of the present time.

The reality is that that massive opportunity is being recklessly squandered by the Government. We have it on good authority—it has been confirmed by Conservative speakers today—that the Government's stated intention is that more of the same is to follow—what of the intended claims for this philosophy and its attendant economic nostrums. Millions of people are worse off than ever before; unemployment is rising inexorably; investment and industrial output has slumped—that is the price that the country has paid for the failed economic doctrines of Thatcherism.

I contrast starkly what the Chancellor said during the general election campaign about unemployment—that it was likely to fall. His best estimate was that unemployment would go down. Shortly after his appointment he was interviewed on the television programme "Face the Press". In boxing parlance, he was caught cold. I have the transcript here and I shall quote the right hon. Gentleman verbatim. When he was asked about his promise that unemployment would fall he said:
"I didn't believe with, with ah, ah, particular confidence, I just said that speaking purely personally, ah, my ah best guess was that there was a good chance that that might happen. Ah, it's very very difficult to — to predict the course of unemployment".
Having recently been promoted to his important, senior position in the Government, that was what the right hon. Gentleman had to say. The story has been different since that interview. Ever since then, and ever since the right hon. Gentleman's appointment as Chancellor of the Exchequer, unemployment has continued to get worse and worse and worse. That is the biggest price that the people are paying for the failed economic doctrines of this Administration.

It is not as though the goals look like being achieved in the time scale of the right hon. Gentleman's famous medium-term financial strategy. In regard to the Government's claims about public expenditure, in 1979 it was taking 39·5 per cent. of national income. Last year, it took 42·5 per cent. The Government, having committed themselves to the control of public expenditure, are presiding over the taking of a bigger share of the national cake.

In Britain, in 1979, inflation was 0·6 per cent. above the OECD average. In 1985 it is 1·4 per cent. above that average. Taking the figure of 100 for national income in 1979, in the OECD, national income has risen on average by 9·7 per cent.; in Britain the rise has been 3·9 per cent. In 1979 unemployment in Britain was 5·5 per cent. compared with the OECD average of 5·1 per cent.; today the British figure is 13·5 per cent. and the OECD average is 8·2 per cent. Those are the records of the Government in international comparisons. The goals are not being achieved and they do not look like being achieved.

The Prime Minister in opposition once said of the Labour Government:
"The Labour Government loves to blame every ill and error on nameless world trends."
Now she enjoins us to consider world conditions. We do. Her record is miserable when compared with the top six industrial nations which are equally, if not more, adversely affected by prevailing world conditions than Britain, particularly because of our energy self-sufficiency. Not one of those countries — the United States, Canada, Japan, the Federal Republic of Germany, Italy or France — has enjoyed the massive economic boost and the security of self-sufficiency in energy that Britain and this Prime Minister, alone of all Prime Ministers, have enjoyed.

The British people are told to be patient. In 1981, in 1982 and again in 1983, the right hon. Lady, the present Foreign Secretary and, more recently, the present Chancellor of the Exchequer all forecast recovery and success for their policies. In his contribution to the debate, the hon. Member for Gainsborough and Horncastle (Mr. Leigh) urged people to be patient. He said that, in the face of the difficulties, the Government should go on being prudent; Patience and Prudence—a pair of Tory twins in tweeds and twinsets.