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Volume 164: debated on Thursday 11 January 1990

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To ask the Prime Minister if she will list her official engagements for Thursday 11 January.

This morning I presided at a meeting of the Cabinet and had meetings with ministerial colleagues and others. In addition to my duties in the House, I shall be having further meetings later today.

Does my right hon. Friend agree that irresponsible wage claims unrelated to productivity will, if granted, lead to higher inflation, an erosion in the value of savings and the destruction of jobs?

My hon. Friend is quite right. If our wage costs rise faster than those of our competitors, our competitors will get the orders and the jobs. The movement of wage costs is disturbing. On the last available figures, for the second or third quarter of last year, United Kingdom wage costs were up by 6 per cent; those of the United States were up by 2 per cent; West Germanys were up by only 1 per cent; Japan's were down by 1 per cent; those of France were down by 3 per cent. and those of the Netherlands were down by 4 per cent. Those figures mean that all those concerned with getting orders and jobs in this country must have a careful look at keeping wage costs down.

Will the Prime Minister tell us how far she is prepared to blame herself and her Government's policies for the rate of inflation?

As the right hon. Gentleman is aware, we have made it quite clear that there was too much money in the system for our output and therefore steps had to be taken to correct it—and they are being taken. I should point out that a rate of inflation of 7·6 per cent. was regarded as so low by the previous Labour Government that they had ambitions to get down to it.

But when it is the Government's deliberate policy to keep mortgage rates and interest rates very high, to increase electricity prices and fares arid shortly to impose both the business rate and the poll tax, is not the director general of the Confederation of British Industry absolutely right to say that inflation is the Government's fault?

No. Inflation happens when we have too much money in the system, which means that we are taking more out in money than we are putting in in output. That has to be corrected by two means. The first is by interest rates and the second is by keeping a tight fiscal policy. We are doing both.

Will my right hon. Friend comment on the old-fashioned attitude of some trade union leaders who have not learnt lessons of the 1979–80? Will she reject the view that an increase in productivity automatically justifies a pay increase? It may be that productivity is rising in an industry but demand is falling. In those circumstances, a pay increase may not be justified.

I agree with my right hon. Friend. The first rule is that wage increases must not outstrip productivity. As my right hon. Friend said, the other rule is that increased productivity comes from substantially increased investment of capital, so there must be a return on capital. Another rule should be that increased productivity should result in price reductions. The consumer is entitled to reductions if we are to remain competitive.


To ask the Prime Minister if she will list her official engagements for Thursday 11 January.

I refer the hon. Gentleman to the reply that I gave some moments ago.

Can I remind the Prime Minister of the views that she expressed during a previous inustrial dispute? She said that she believed that the three emergency services—the police, the fire service and the ambulance crews—should have their pay negotiations taken out of the industrial arena and settled on the basis of a pay formula. Given the obvious merit of the ambulance crews' case, their overwhelming public support and the division in the ranks of the right hon. Lady's Government, is there any reason, other than her own love of confrontation, why there should not be a settlement of the ambulance dispute based on her own idea of a pay formula?

I do not accept the early part of the hon. Gentleman's comments. The ambulance crews' pay should be settled by reference to the NHS. The matter went before the Clegg commission, which rejected the claim that it should be settled on the same basis as the police and the firemen.

The pay claim dates back to last April. Some 84 per cent. of NHS employees settled last year's wage claims at 6·5 or 6·8 per cent. None of them were prepared to put the patients' interests at risk. It would be unfair to them to give in to those who refuse to settle through the Whitley council machinery.

My right hon. Friend may recall that at precisely this time last year I expressed my fear at the availability of crack spreading in our inner cities. One year later she will be aware of the escalation of the problem and the increased haulage of cocaine. In the light of those events, will she take the opportunity to reiterate the Government's determination to take every initiative possible to crack down on drug pushers? Does she have a message for young people who may be tempted to take drugs?

I agree that crack is a new and damaging form of cocaine. Last year Customs seized more cocaine than heroin, which shows that it is on the increase. We are co-operating, through the economic summit, to do everything possible to stop the laundering of the cash from drug trafficking. As my hon. Friend knows, we are supporting the efforts of President Barco of Colombia—[Interruption.]

Of course hon. Members cannot hear as they are making so much noise.

We are supporting those who wish to cut down the growing of and trafficking in cocaine in Latin America. There will be an international conference in London in the spring when, in conjunction with other Governments, we shall consider ways to try to cut the demand for drugs. We shall tell our young people about the dangers of taking drugs in the hope that we can prevent them from being tempted to take them.


To ask the Prime Minister if she will list her official engagements for Thursday 11 January.

I refer the hon. Gentleman to the reply that I gave some moments ago.

Why is it that, according to ministerial answers, between now and the year 2013 the student loan scheme will cost the British taxpayer £2,170 million more than the present student grant scheme that it will replace?

There are obvious reasons. On a loan scheme, money is paid out for many years before money is returned. As it is returned—[Interruption.]

I should hardly have thought that the hon. Member for Don Valley (Mr. Redmond) would need to ask the question. When the money is returned it will enable us to put more back into education.

Given my right hon. Friend's absolute determination to defeat inflation, what does she think of the idea, apparently supported by the governor, deputy governor and former deputy governor of the Bank of England, that a statutory obligation to maintain the stability of money should be placed on the Bank of England?

That obligation should remain as part of the Government's duty. As my right hon. Friend knows, there are two ways of achieving the goal. The first is by keeping money tight, which can be done only by interest rates. Secondly, it could also be achieved by tight fiscal policy—[Interruption.]

Order. I am aware that there is a problem with the microphones. It is difficult to hear.


To ask the Prime Minister if she will list her official engagements for Thursday 11 January.

I refer the hon. Gentleman to the reply that I gave some moments ago.

Does not the Prime Minister understand that if her policy is to increase interest and mortgage rates it is obvious that people at work will demand higher and higher wages to pay for those higher interest rates? Is it her view that there is no alternative to that strategy—if so, it means that the wage demand escalation taking place is irreversible—or does she have some other secret policy which she is unwilling to disclose to the House; a sort of informal incomes policy based on the threat of higher and higher unemployment?

Wage costs and wage claims and their settlement are matters for industry. We hope that workers will take into account the fact that if wage costs price their products out of the market, workers price themselves out of jobs. The alternative to using the right policies to deal with inflation—interest rates and a tight fiscal policy—is to let inflation rip. That would result in far more unemployment than the steps we are presently taking, through which we have created more jobs in this country than ever before.


To ask the Prime Minister if she will list her official engagements for Thursday 11 January.

As we are to some extent still a nation of shopkeepers and my right hon. Friend was born and brought up above the shop, as I was, what message does she have this week for those small businesses and shopkeepers worried about uniform business rates?

First, the amount raised from the business rate next year will be the same as this year plus inflation and, therefore, there will be no real increase in the business rate. My hon. Friend knows that there have been some changes in the business rate, one cause of which is the first rating revaluation since 1973. That has given rise to nearly three quarters of the increase in rates and would be an object lesson for anyone wanting to apply it to a domestic rating revaluation. My second point involves the way in which the business rate is collected. Because of those two factors the increases will be applied over a transitional period of at least five years so that the larger businesses do not pay more than 20 per cent. extra in real terms and the smaller ones no more than 15 per cent. in real terms each year during that period. It will be the first time that businesses have had an assurance about rates. It will be of great benefit to those manufacturing businesses and shops in the north and will help them to keep their costs down and get their jobs up.

While on the subject of shopkeepers, will the Prime Minister give her support to the "Parents Against Tobacco" campaign launched this week? Does she realise that its surveys reveal that more than 50 per cent. of shopkeepers are still prepared illegally to sell cigarettes to children under 16? What steps will she take to ensure that the law is enforced or, better still, strengthened, to provide an effective blockade between the tobacco industry and our children?

As the right hon. Gentleman knows, the law is enforced by the police. We have already taken some steps. For example, in conjunction with the European anti-cancer campaign, I announced a programme of £2 million for anti-smoking advertisements aimed at teenagers. That was launched on 11 December 1989. Although far too many young people between the ages of 11 and 15 still smoke, fortunately, the numbers are falling. Only about 8 per cent. smoke now, compared with 13 per cent. in 1984. We give our full support to the "Parents Against Tobacco" campaign. It will keep careful note of where cigarettes are sold to young children and give the information to the police. Knowledge of the campaign should already serve as an effective deterrent to those shopkeepers who perhaps do not take sufficient care to ensure that they do not infringe the law.