To ask the Secretary of State for the Environment what level of inflation he assumed in fixing his total standard spending for local authorities for 1991–92; and if he will make a statement.

Our proposals for the local authority finance settlement take account of what the country as a whole can afford. They do not assume any particular level of inflation. Our proposal for total standard spending is the level needed in cash terms in 1991–92 to provide the standard level of service taking into account all relevant factors.

Is the Secretary of State aware that most of us know that the level at which the assessment has been pitched is 7·8 per cent? With the current rate of inflation at about 10·9 per cent., even my poor school mathematics suggests that there will be a 3·7 per cent. gap between the assessment and what local authorities will be forced realistically to plan for in their budgets. Is the Secretary of State aware that good local authorities, such as mine, Kirklees in West Yorkshire, will be forced to make drastic cuts in expenditure on essential services, to lay off staff and to push up the poll tax to a rate at which they will be capped? Does he realise what he is doing to good local authorities with his plans?

As I recall, the standard standing assessment of the hon. Gentleman's constituency will increase by 18·4 per cent. next year. The level of local authority spending this year represents a 25 per cent. increase in two years. We are proposing an increase of nearly 13 per cent. in the external financing going into local authorities for next year. If the hon. Gentleman thinks that we should give more taxpayers' money to local government, I should be interested to hear how much more, who will pay for it and whether the shadow Chancellor of the Exchequer has accepted his figure.

When my right hon. Friend talks to local authorities, will he remind them of the enormous savings that they can make by cutting waste and inefficiency? The Audit Commission has identified savings of £1·3 billion, of which only half have been achieved, with no help from the Labour party.

My hon. Friend is entirely correct. Recently, the Audit Commission suggested that there was scope for savings of about £100 million in energy efficiency. In a study of sickness absence in some London local authorities it pointed out that the six worst could save £27 a year per community charge by reducing sickness absence to Confederation of British Industry average levels. There are substantial savings for local authorities if they listen to the Audit Commission and implement its proposals.

Nevertheless, is not it ridiculous for the same Secretary of State in the Department on the same subject, that is, local government finance, to use two widely differing inflation rates—an artificially low rate for local government spending commitments and the full, true rate of 10·9 per cent. for setting the business rate? Is not it one of the nonsenses that we understand the right hon. Member for Henley (Mr. Heseltine) will sweep away? Will the Secretary of State support him in that or would he rather resign than do so? Or, will he be back here next week under new leadership to say that the poll tax was, after all, a terrible mistake?

I am delighted to discover that, despite a recent outbreak of democracy in the Labour party, the hon. Gentleman is still in his present slot—I think more or less. Let me say something about the comparisons that he made. Thanks to the uniform business rate, businesses will not be clobbered by high-spending Labour authorities, as they used to be. Over the past decade, businesses have regularly been fleeced by Labour local authorities, which is why their rates bills have gone up by more than the rate of inflation year after year. The hon. Gentleman is still remarkably coy about telling the House by how much he thinks the external financing of local authorities should have been increased next year and he should tell us where that money would come from.

To ask the Secretary of State for the Environment what consultations he has had with the chairman of the National Rivers Authority about the condition of the River Thames and its tributaries in London.

It is for the National Rivers Authority to decide how best to use its statutory powers in order to secure acceptable river quality standards.

I congratulate the Government on setting up the NRA and thereby tackling problems long neglected. I draw my hon. Friend's attention to the sorry state of the River Wandle, which flows through my constituency. That river will not be familiar to many hon. Members, but it is a tributary of the Thames once described as the busiest industrial river in the country. Will my hon. Friend give material encouragement to those of us who are striving locally to upgrade and improve the river?

I compliment my hon. Friend on taking the personal initiative of bringing together the local authority, voluntary groups and the NRA in a group that I feel should be affectionately known as the "Wandles of Wimbledon". I am extremely keen to encourage the NRA to help my hon. Friend in whatever way it can. I recommend that he makes contact with the regional manager of the NRA. Whatever help it renders will be made easier as a result of the substantial increase in funding that we announced last week.

Will the Minister pay tribute to the London county council and the Greater London council for all the work that they did to ensure that the Thames is probably the cleanest urban river in Europe? The efforts by people in Newham to clean up the River Lea were spoilt by the dumping of a large amount of industrial oil into the river. How many prosecutions have been taken out in the past 12 months against the irresponsible people who still pollute our rivers in London?

I cannot give the specific number that the hon. Member seeks now, but I shall write to him on that matter. He will know that the NRA, which the Government were responsible for setting up, took action only the day after it was formed against the Shell oil company for polluting the River Mersey with oil from a fractured oil pipe and the company was subsequently fined £1 million. That made everybody sit up. There have been several similar examples throughout the year and they will continue.

I am most reluctant to single out the GLC for praise, but several initiatives have been taken, not least by the water companies and the NRA, which have played a significant part in cleaning up the Thames.

Is my hon. Friend aware that thousands of my constituents who care deeply about the environment of the historic and beautiful stretch of the River Thames at Twickenham will be most grateful to my right hon. Friend the Secretary of State for the Environment for calling in a planning application to construct a large food shop beside the Thames, a plan that the autocratic Richmond upon Thames council had intended to push through against the wishes of a large majority of my constituents?

My right hon. Friend is happy to accept my hon. Friend's congratulations and is most grateful.

To ask the Secretary of State for the Environment how the increase in rates support grant for 1991–92 will be identified to cover the cuts in the direct subsidy payable to local authorities to cover community charge and housing benefits; and if he will make a statement.

The estimated cost of the change to local authorities in England is £68 million. The Government propose to increase the moneys that they provide by about £3 billion, or nearly 13 per cent. The change is more than adequately provided for.

Is the Minister aware that in Barnsley the amount of direct subsidy has been reduced by about 3 per cent? Is he further aware that at the same time its revenue support grant has decreased from £28 million to £25 million, at a time when the authority has to deal with the effects of the Environmental Protection Act and other legislation that comes on stream next year as well as with pay rises, some of which have already been agreed, of 9 per cent? How can the Minister identify in that settlement where Barnsley has received adequate resources to fund community charge benefit? How does he expect the authority to set a poll tax in the face of all the reductions in grant?

The hon. Gentleman makes partial use of his statistics and I shall give him some others. The standard spending assessment for Barnsley—that is the amount that we consider it appropriate for Barnsley to spend—has been increased by 19 per cent. The total amount of external finance from the Government has been increased by 8 per cent. I explained to the hon. Gentleman in my main answer that an extra £3 billion will be provided to local authorities next year and that that is nearly 13 per cent. extra. It is clear that the rate of inflation between April next year and the following April will be in single figures. All the matters that the hon. Gentleman mentioned have been well and truly catered for.

Will not my hon. Friend be a little more honest with the House?

Oh!

Order.

I said, "a little more honest", Mr. Speaker, over my hon. Friend's use of the term "external finance". Is not my hon. Friend confusing the uniform business rate contribution with what in the past have been moneys given under rate support grant, and basically supporting the view of the hon. Member for Barnsley, Central (Mr. Illsley)? Is not it true that many areas have suffered a substantial reduction of the sum that they received from central Government under the RSG and that that is being masked by the increase in the business rate contribution, which, instead of coming from local government to local government, is coming from central Government?

I should have thought that the important feature is the total moneys that local authorities will receive from central Government sources, which now include the national non-domestic rate. In Macclesfield, the increase is 19 per cent. That is because the people of Macclesfield will not be expected to put £50 each into the safety net next year. That gives Macclesfield a magnificent opportunity to set a low community charge next year.

Did the Minister discuss with his hon. Friend the Minister for Housing and Planning the housing benefit implications of that policy? Given the announcement made by his hon. Friend only the other week, it will have a catastrophic effect on the leaseback scheme of private houses to both housing associations and local authorities. Does not the Minister realise that many more families will be pushed into bed-and-breakfast accommodation and that the bill for that will be passed on to the poll tax payer? We have the absurdity of the Government ending a scheme that they wanted to encourage while at the same time increasing housing benefit and poll tax bills. Is not it time that the Department began to talk to individual Ministers within it and came out with a coherent policy instead of a contradictory one?

I see nothing catastrophic or harmful to local authorities, local authority tenants or community charge benefit claimants in what we propose. The amount of direct subsidy is being reduced from 97 to 95 per cent., and the balance is being made good within the SSAs, which have risen by an enormous amount, as even the Opposition must admit.

Will the Minister take the opportunity of clarifying the confusion in my constituency about the community charge?

Poll tax.

The poll tax. The Conservative party in Northern Ireland has said that the poll tax is good for us in Northern Ireland and that it wants to extend it to Northern Ireland. On the other hand the aspirant leader of the Conservative party said today that he wanted to abolish it in Great Britain. What is the future of the poll tax?

The Government's policy is that the community charge applies in Great Britain but not in Northern Ireland.

To ask the Secretary of State for the Environment if he will make a statement on progress in collecting the community charge in Coventry.

At the end of September, 82 per cent. of charge payers in Coventry had begun paying. No doubt that figure will move towards 100 per cent. during the next five months.

May I, on behalf of, I hope, the whole House, congratulate my hon. Friend on his welcome appearance at the Dispatch Box?

Whatever legitimate arguments there may be among some of us about the financial arrangements for the new system this year, we are all agreed that taxation should be collected and that it should be paid. Does not my hon. Friend agree that Coventry has done rather well, despite the opposition of some Coventry Members? Of course, it has not done quite as well as Taunton Deane in my constituency.

Is my hon. Friend aware that the majority of law-abiding people deeply resent the prospect of having to pay more next year because of those who default? Should not the capping mechanism take that into account?

Of course, it is true that both Taunton Deane and Salisbury have done rather better than Coventry. Some 94 per cent. of people have started paying and some 50 per cent. of the projected yield has been collected. It is also true that the poorest will suffer if people such as Members of Parliament do not pay their community charge.

I pay tribute to the great city of Coventry, especially on a very special day for that city, for achieving payment of its community charge very close to the national average.

Mr. Nellist—[HON. MEMBERS: "Hear, hear."] Order.

I join the Minister in marking the fact that, 50 years ago tonight, some 600 people died in Coventry and several thousand houses were either damaged or destroyed. Of all the remarks made about Coventry that the Tories could have made today, of all days, the remarks about defaulters by the hon. Member for Taunton (Mr. Nicholson) were the last that we expected.

Is the Minister really so confident that Coventry is the only city where, since 11 July, defaulters have appeared in large numbers in the magistrates courts—100 people a day in July, 200 a day in August, 500 a day in September and 1,000 a day in October and November? They were dragged before the courts because the Tory poll tax in Coventry and everywhere else is the most unpopular tax in the country. Is the Minister also confident that in two weeks' time his new leader will have him at the Dispatch Box defending the poll tax?

My city of Plymouth suffered similarly during the last war, so I do not need any lessons from the hon. Gentleman. Coventry began issuing statutory reminders in June and held its first magistrates court hearing in July. It has not encountered any problems with court hearings. After an initially slow start, it increased the number of summonses to 1,000 a week. That figure has now reduced to 500 a week because Coventry has obtained most of the liability orders that it needs.

Does not the impact of non-payers, especially those who can and should pay but simply will not, concern people not only in Coventry but throughout Britain? This year, sensible limits have been imposed on what local authorities can spend. Will my hon. Friend assure the House that next year, it will not be possible for local authorities simply to add on a large sum to make up for those who will not pay?

It is interesting that under the previous discredited rating system, some 30 per cent. of people needed reminders. It remains true today that those who do not pay increase the burden of local taxation on those who do.

I, too, congratulate the Minister on his appointment. I feel almost diffident about asking my question as it will put his new job on the line. Will he ask the Secretary of State whether he thinks that the people of Coventry agree with the new Secretary of State for Education and Science, who on the radio earlier today suggested that we did not need a leadership election to understand that the Conservative party has a problem with the poll tax? He went on to say that it was a problem that the Conservative party needed properly to address before the general election. Does the Minister agree that the issue needs addressing properly, and if so, how will he do that?

The problem has been addressed for the past 20 years. I gather that my right hon. Friend the Member for Henley (Mr. Heseltine) is promising jam tomorrow in much the same way as the Labour party has. It has done nothing but promise jam tomorrow. It is about time that we heard a little more about its plans. It is important to remember that about £3 billion extra external financing has been made available this year, as I am sure the hon. Member for Coventry, North-East (Mr. Hughes) will recognise.

rose—

Order. If the hon. Gentleman looks down the Order Paper he will see that, with luck, I shall be able to call him later.

To ask the Secretary of State for the Environment what predictions his Department is making concerning the rise in average temperature over the next 10 years.

The intergovernmental panel on climate change estimates that, as a result of human activities, average global temperatures will increase by 0·2 deg Celsius during the next 10 years. The uncertainty range of that estimate, which does not take account of any natural climate variability, is 0·15 deg and 0·3 deg Celsius.

Does the Secretary of State agree that, as far as measurement is possible, that is the highest increase in the past 10,000 years? [Interruption.] This is a serious matter and I hope that the Secretary of State and other Conservative Members will treat it seriously.

Is the Minister aware that that is the highest increase in the past 10,000 years measured from air samples in the Antarctic and that in order merely to contain current levels of concentration we would require a 60 per cent. drop in emissions of greenhouse gases, primarily carbon dioxide? In those circumstances, does the Secretary of State agree that it is necessary to take much stronger and more urgent action to cut the emissions of greenhouse gases and to promote afforestation schemes and the protection of the southern ocean and the savannah grasslands, which are the major areas where the change from carbon dioxide to oxygen takes place?

As the hon. Gentleman will doubtless know, there was an extremely successful conference last week in Geneva at which we reached an outline agreement on climate change and global warming, which should lead to the start of negotiations on a climate change convention next February. The science is not quite as the hon. Gentleman described it, but one of the encouraging features of last week's conference was not only the commitment to action by all states, but the fact that, I think for the first time, nobody disagreed fundamentally with the scientific conclusions that were advanced.

Does my right hon. Friend recall that recently on this important subject the Labour party committed itself to phasing out nuclear power and to a greater use of coal as against gas, at the same time bringing forward a still earlier timetable for stabilising carbon dioxide? Will my right hon. Friend confirm that those do not add up and that that is simply a sign of scientific ignorance among Labour Members?

They certainly do not add up. The Labour party is the only organisation outside the executive committee of the National Union of Mineworkers that thinks that coal is cleaner than gas. It has also said that we can secure the environmental objectives and the goals that we want at virtually no cost. That is frankly dishonest and I hope that the Labour party will face up to some of those problems rather more honestly.

In view of what the Secretary of State has just said, will he confirm that he wanted to accept the European target on the stabilisation of carbon dioxide emissions by 2000 and that it was the Prime Minister who intervened to insist that the target date should be 2005? Perhaps while the Secretary of State is answering that question, he will also tell the House whether he agrees with the right hon. Member for Henley (Mr. Heseltine) that the Government could do better in their action on global warming and that Britain should play a more positive role in the development of EC environmental policy.

I know of no one at the Geneva conference last week who did not think that we played an extremely prominent and helpful role in securing agreement. If the hon. Lady had spoken to some of the European Free Trade Association, European Community, and other Organisation for Economic Co-operation and Development members, she would have found that that was the case. As to agreement within the Community, despite the astonishing intervention of hon. Member for Dagenham (Mr. Gould), the shadow spokesman on the environment, in writing to every other European environment Minister, very few of whom had heard of him, to urge them to try to isolate us at that meeting, we secured a wholly satisfactory outcome which recognised the different problems and programmes of a number of European countries. The agreement enabled Britain and EFTA to give a strong lead at the Geneva conference, which ensured that it was as successful as I hope that the hon. Member for Dagenham would wish.

Bearing in mind the Government's positive lead, will my right hon. Friend pay tribute to the climatic research unit at East Anglia university, which has done excellent work on global warming? Does he agree that a sober and scientific appraisal of the facts is needed, rather than party political posturing?

The unit to which my hon. Friend draws attention has done outstanding work. That is recognised not only in Europe but beyond. I am delighted that, as a result of the public expenditure settlement announced last week in the autumn statement, we are substantially increasing the funding of environmental research on climate change and other matters.

Is the Secretary of State not aware of the despair felt by many environmentalists because the Government are content merely to stabilise emissions over the next 15 years while other members of the European Community—such as Germany—are clear that they can reduce emissions by 15 or 20 per cent. by 2005? If Germany can do that, why cannot we do so? Is not that another example of short-term national political considerations being placed at the forefront of international environmental considerations? Where is the principle?

The hon. Gentleman may not know that, according to returns made to the International Energy Agency, six European countries have not declared any stabilisation or reduction targets for carbon dioxide. Different countries have different sets of problems and some of those with a high input from nuclear energy find certain issues rather easier to resolve than we do. The hon. Gentleman should also be aware that the Germans are talking about an orientation, rather than the pledged target that we have set.

To ask the Secretary of State for the Environment what is the Government's latest prediction of the levels of nuclear waste to be disposed of in the United Kingdom in the years 1990–95.

About 125,000 cu m of low level radioactive waste will be disposed of to Drigg during the next five years.

Is the Minister aware that the Chernobyl incident released about 50 million curies of radioactivity, and that we already have 5,000 million curies of high-level radioactive waste stored at Sellafield? Is not it foolhardy to continue importing such waste from other countries in even greater amounts over the next five years when we do not know how to dispose of that which we already have?

We do not import radioactive waste. We import spent nuclear fuel for reprocessing and since 1976 all contracts provide for the eventual return of the waste arising to the countries concerned.

Will my right hon. Friend confirm that reducing our nuclear energy production and burning more coal would create more waste products such as carbon dioxide, which causes global warming, and that far more radiation comes from spent ash than from the sort of manageable waste produced by the nuclear power industry?

That is a fair point. Every industry and every form of power generation should take responsibility for its emissions.

To ask the Secretary of State for the Environment if he has any plans to revise the criteria by which to gauge the appropriate standards required for discharges to coastal waters; and if he will make a statement.

On 5 March, my right hon. Friend the Secretary of State announced that in future all significant discharges of sewage to coastal waters would receive at least primary treatment. It is now for the relevant regulatory bodies to apply this policy to individual discharges.

Further to that announcement, the Minister may be aware that there has been a controversial proposal for a main drainage treatment works at Inverness. Following the environmental assessment, the original proposals have been shelved, as they would clearly have been in breach of the guidelines, and the costs involved to bring a treatment works up to a suitable standard will probably be more than twice those originally envisaged—well in excess of £10 million. Will the Minister and his right hon. Friend the Secretary of State therefore lend a sympathetic ear to local authorities such as Highland region, which will have to incur such huge costs for future generations, and will he encourage the Scottish Office to do likewise?

Experience has taught me that planning applications for sewage treatment works are invariably controversial, as are those for landfill or incineration sites. I shall, of course, bring the hon. Gentleman's remarks to the attention of my right hon. and learned Friend the Secretary of State for Scotland.

Does my hon. Friend agree that one of the principal causes of pollution in coastal waters are rivers into which waste is discharged? Will he ensure that there are adequate controls not just in this country but throughout Europe and that they are especially applied to countries that border the Rhine, which contributes more to pollution in the North sea than any river in this country?

In so far as my hon. Friend's question referred to the United Kingdom, I accept entirely that he is right. As a result of measures introduced in the Water Act 1989, regulations are tougher than they have ever been. Secondly, the Environmental Protection Act 1990 will ensure a far tougher regime, especially part I of the Act which will tighten standards for those who pollute air, land or water. That will be effective. It may also please my hon. Friend to know that several proposals that will emanate from Europe will be based on our experience and the legislation in the Environmental Protection Act. Not only is our example replicated throughout Europe, but the same standards will apply in what might be described as a level playing field.

Will the Minister confirm that the level of nuclear discharges from Sellafield today is one hundredth of what it was in the 1970s?

I am not in a position to confirm or to deny that figure, but so that we do not fall into the trap of scaremongering—I know that it would never cross the hon. Gentleman's mind to indulge in that—I can tell the hon. Gentleman that any accident which may occur, or any releases into the atmosphere from Sellafield., are minuscule compared with the nuclear releases from natural sources such as rocks. We ought to get this whole thing in proportion.

To ask the Secretary of State for the Environment if he has any plans to introduce a standard disaggregation formula which will identify separately the amounts being raised by county and district councils as regards the community charge.

The proposed community charge bill for 1991–92 will be simpler and easier to understand. It will show more clearly than this year which are the overspending councils and which are the prudent ones.

Is my hon. Friend aware that in Ipswich the Labour-controlled borough council and the Conservative-controlled county council are unable to agree for what share of the community charge they are respectively responsible? Does he appreciate that without a standard disaggregation formula there will continue to be such disputes and it will be that much more difficult to establish more accountability?

The Bill that we propose to introduce next year will, I hope, meet my hon. Friend's concern. Had that Bill been enacted this year, it would have shown clearly that Suffolk council was responsible for 77 per cent. of the total spending by the authorities in my hon. Friend's area and that Ipswich borough council was responsible for an overspend of £97 on its standard spending assessment. That is nearly 100 per cent. more than it should be. If overspending of that kind continues next year—I hope that it will not—it will appear on next year's bills.

It is appropriate that the Minister referred earlier to the Coventry war experience. I draw attention to another aspect of the 1939–45 war. I wonder whether the Minister has read about the Nuremberg trails. If he has, he will have learnt that war criminals said that they tortured people to obey the law and that they murdered people to obey the law. Does the Minister agree that they were not obligated to obey an immoral law and that similarly no hon. Member is obligated to obey an immoral law and thus absolve himself or herself from responsibility to constituents suffering untold hardship as a result of the imposition of the poll tax?

I am not sure what the hon. Gentleman's question has to do with the disaggregation formula. However, like other hon. Members, the hon. Gentleman is paid a salary by the taxpayers of this country in order to make laws. He is not paid a salary by the taxpayers of this country in order to break laws, or to urge others to break them.

Do the very refreshing and enlightened remarks by the Secretary of State for Education and Science this morning suggest a new and realistic approach to the poll tax?

My hon. Friend the Member for Staffordshire, South (Mr. Cormack) was one of those who were kind enough during the summer of this year to contribute to the Government's review of the community charge. That review is now complete. I thank my hon. Friend again for the very important contribution that he made to it.

Has not the hon. Member for Ipswich (Mr. Irvine) highlighted yet again the problems and disadvantages of the poll tax? Is not it time for the Minister and his ministerial colleagues to line up behind the right hon. Member for Henley (Mr. Heseltine) and say, "Let's scrap it altogether?" When will they learn the lesson?

First, my right hon. Friend the Member for Henley (Mr. Heseltine) has said no such thing. Secondly, my hon. Friend the Member for Ipswich (Mr. Irvine) raised a serious point and got a serious answer. So far as I could judge from my hon. Friend's expression, he was satisfied with the changes made by the Government in the Bill as they were precisely the kind of things that he was looking for.

To ask the Secretary of State for the Environment if he will provide the most recent figures which are available on the compliance of bathing beaches with the European Community bathing water standards.

To ask the Secretary of State for the Environment what percentage of designated United Kingdom bathing waters currently complies with the European Community bathing waters directive; and what was the comparable position in 1979.

To ask the Secretary of State for the Environment if he will provide the latest figures which are available on the compliance of bathing beaches with the European Community bathing water standards.

The 1990 results show that 77 per cent. of the 446 identified bathing waters in the United Kingdom met the directive's coliform bacteria standards this year. This compares with 76 per cent. of 440 waters in 1989 and 66 per cent. of 27 waters in 1979.

In view of the long time scale involved, what guarantees can the Minister give that measures to bring beaches up to current EC standards will be sufficient to cope with the improvement in those standards, as they will not be static? What consultations has the Minister had with local authorities and what additional resources is he giving to improve beaches? Furthermore, what steps is he taking to lower the discharge levels of nitrates and phosphates into the marine environment?

My right hon. Friend the Secretary of State and I announced previously the United Kingdom's national target would be 100 per cent. compliance by the year 2000. I am pleased to say that that target has now changed and I am able to announce from the Dispatch Box that we believe that we shall achieve 100 per cent. compliance by 1997. I know that the hon. Gentleman will welcome that. It will involve a capital spend to ensure that the treatment of the waters is brought up to standard. Our record in the United Kingdom is extremely good. I would find it extremely difficult to believe that any other member state would have 100 per cent. compliance by 1997.

I was pleased to hear of the improvements announced by my hon. Friend the Minister. Can he say whether the improvements extend also to the beaches of north Wales because it does not look like it or smell like it? Is he aware that we in north Wales do not think much of the idea of long sea outfalls as a long-term way of curing the problem of pollution of our beaches?

The target date that I gave earlier applies to all bathing waters designated in the United Kingdom. Therefore, it applies to Wales. I have further good news for my hon. Friend and the House. Later this afternoon my right hon. Friend the Secretary of State will be announcing details of an accelerated programme which will ensure that we meet our target by 1997. That will apply to Wales as well.

The Minister has announced a 1997 deadline for bacterial standards on beaches. On what time scale will the Department consider discharges to rivers? Will there be serious consideration of the impact of the growth of algae in the North sea on the marine environment and fish life?

It is the same target. The point raised earlier by my hon. Friend the Member for Cambridgeshire, South-East (Mr. Paice) has an effect on coastal waters. We are talking about two directives—the bathing water directive and the municipal waste water directive, which is not yet in its final form but which we hope to agree in December. The target date for the municipal waste water directive I would guess—I think that it will be confirmed next month—will be the year 2000. As I have said, the date for 100 per cent. compliance with the bathing water directive is 1997.

Does my hon. Friend agree that a crucial element in meeting both the standards is investment in sewage treatment? Does he agree that one of the effects of the privatisation of water and sewerage has been the liberalisation of such investment from the Treasury? Does he agree that that preserves us from the danger of a sudden swingeing cut in investment such as occurred under the previous Labour Government?

My hon. Friend is absolutely right. I would go further and say that it is only as a result of privatisation that we have a massive £28 billion investment programme which will be invested over the next 10 years by the newly privatised water companies. I have to assure my hon. Friend that neither I nor any Minister in any Government could find that sort of money from Her Majesty's Treasury. It is interesting to hear the carping from Labour Members with regard to the privatisation of water, as when they were last in office they cut the amount of assistance given to the water authorities.

Does the Minister recall that Britain's wholehearted adoption of the bathing water quality directive came about only after the European Commission threatened the Government with legal action in the European Court of Justice? That is on record. Further, does not the new accelerated programme to meet standards by 1997 result from the action that is currently pending in the European Court? As the Government have the legal responsibility for water standards, what contingency plans do they have to effect an even quicker implementation of the standards and at what cost to the water consumer?

I am sorry to say that I have never heard so much rubbish in all my life. If we are talking about facts, let us look at the facts. When talking about compliance with the bathing water directive, the House should be reminded that when the previous Labour Government were in office between 1974 and 1979 they did nothing—absolutely nothing. They never designated one single bathing water. Not one beach was covered by them. It is a bit rich for the hon. Member for Bridgend (Mr. Griffiths) to try to lecture me or anyone on this side of the House about what this Government are doing. The accelerated programme is the finest in Europe. The trouble with Opposition Members is that they delight in pulling the nation down and selling it short. That was the view expressed by the hon. Member for Dagenham (Mr. Gould) in the letter that he sent to European Community Ministers. It is an absolute disgrace.

To ask the Secretary of State for the Environment whether he has any plans to meet the chairman of English Heritage to discuss his cathedrals initiative.

Lord Montagu has told me that the provision of £11·5 million over the next three years for grants towards repair to cathedrals will enable us to establish the scheme on a really sound footing. My officials are discussing the basis of the new grant scheme with his officials and with the church authorities.

rose——

On a point of order, Mr. Speaker. Is it in order for two Tory Members to be running a book?

Order. We are dealing with an important issues of English heritage.

I refer to cathedrals, Mr. Speaker. I am grateful to my right hon. Friend for acknowledging that the repair and maintenance of cathedrals is beyond the resources of cathedral authorities. As those great institutions enjoy affection and respect far beyond merely churchgoers and are monuments to our national heritage, is not there a case for increased public support to ensure that they are maintained properly?

I agree with my hon. Friend. I am sure that it is right that public appeals and private donations will remain the major source of funds for the repair of cathedrals, but it is right also that the state should play a role by using grant to lever in private finance. That is the objective of our new scheme. As I said, we shall be spending £11·5 million on the scheme in the next three years. The scheme has been widely welcomed by churchmen and by others who visit our great church buildings, though I recognise that the repair of cathedrals is not uppermost in everybody's minds this afternoon.

I endorse the view that public money should be spent on those great works of art and great assets for the country at large. Does the Secretary of State agree that, as he has undertaken to endorse the principle that public money should be spent on those great buildings, it would be better to do that and leave market forces to obtain money for Trident, for example? Instead of leaving cathedrals to raise money by flag days, we could use flag days for spending on nuclear weapons. The £9,000 million saved could then be spent on pensions, the national health service and a little bit on cathedrals.

The hon. Gentleman must have heard the Leader of the Opposition say on a number of occasions that the Labour party now believes in market forces. That is what we are told again and again. The hon. Gentleman must therefore be a continuing embarrassment to those responsible for trying to burnish the image of the Labour party.

To ask the Secretary of State for the Environment by how much the Government have increased funding to the Countryside Commission since 1979; and how funding will be increased in the next three years.

Since 1979, grant in aid to the Countryside Commission has more than doubled in real terms to £25 million this year. The commission will lose its responsibilities in Wales from April 1991, but its grant for England is planned to rise to more than £30 million next year and £41 million over the following two years.

Does my hon. Friend agree that the Countryside Commission has done particularly well from a financial viewpoint under the Government of my right hon. Friend the Prime Minister? Does he further agree that the additional funds provided by the Government have enabled the Countryside Commission to plant more trees, which is particularly important to the people of Kent and my constituents who suffered considerably from the loss of trees as a result of the 1987 storms?

My hon. Friend is quite right. The chairman of the Countryside Commission has warmly welcomed the sharply increased funding that we plan for the years ahead. It will enable the Countryside Commission to undertake several new initiatives and to continue the Task Force Trees programme, which will help to replace trees lost in the storms earlier this year, including in Kent.

Is the Minister aware that we join in welcoming the increased subvention for the Countryside Commission, but are still concerned about whether the money made available will enable us to make sufficient progress on access to the countryside and rights of way, an issue which was very properly identified in the White Paper but does not seem to be making much progress? We are also concerned about the continuing problems of common land. Will those two problems, which are of much concern to many people who use the countryside and who want access and rights of way, receive greater priority as a result of this and future settlements?

I am glad that the right hon. Gentleman acknowledges that the Countryside Commission has done well under this Government. He mentioned the right of way network. I confirm that it is an announced aim of the Countryside Commission to bring into good order our entire network of rights of way—all 140,000 miles of it—by the end of the century. As regards common land, I refer the right hon. Gentleman to the statement that my hon. Friend the Minister made in recent weeks.

My hon. Friend will be aware that the Scottish headquarters of the Countryside Commission is in my constituency, not far from his Scottish home. He will realise that under the Prime Minister and this Government the Countryside Commission has been responsible for vast improvements in access to many of Scotland's more beautiful parts, with the introduction of car parking and other facilities such as camping and caravanning. That has been the result of the generous attitude adopted by the Prime Minister and the Government.

I am delighted that Scotland is to get its own Nature Conservancy Council. I was sad, but not wholly surprised, that that was resisted every step of the way by the Labour party. Doubtless that attitude will have been noted in Scotland.

To ask the Secretary of State for the Environment how many council homes have been started by local councils in the current year.

Local authority housebuilding is currently running at a rate of 7,000 starts a year. Housing associations are the major providers of new subsidised housing for rent. We announced last week that funding of housing associations will increase to more than £2 billion by 1993–94.

Is not the stark reality that since the Government took office the building of council houses has dropped catastrophically, that homelessness is rising steadily, that the number of people on council waiting lists in big cities is growing all the time, whereas it was falling in 1979, and that many building workers are being laid off as the slump deepens?

The stark reality is that about 40,000 households are in temporary accommodation. At the same time, there are about 100,000 empty council houses, mainly in Labour-controlled authorities. That is the real scandal of the housing problem, which we intend to put right by attaching conditions to the vast housing subsidies that we give to councils.

Is it right to condemn people to live in council houses for the rest of their lives, paying rent until the grave and having nothing to leave their children? Is not it preferable to pursue our present home ownership policy and to help housing associations?

My hon. Friend is right. That is why our policy of right to buy has been such an enormous success, with more than a million households that would not otherwise have done so now owning their own houses. It is also why we shall be experimenting in Basildon with the rent-to-mortgage scheme.

Does the Minister recognise that there is a strong connection between the decline in the supply of all sorts of rented housing over the past 11 years and the inexorable rise in homelessness? Has he had an opportunity to read the report prepared recently by the Tory-controlled London Boroughs Association, entitled, "A Crying Shame—The Child Victims of Homelessness"? That report calls for a supplement to the inadequate £250 million allocation for homelessness and the relaxation of controls on capital receipts and it calls for local authorities to be allowed to bring into use long-term vacancies in the private sector. What does the hon. Gentleman intend to do about that?

What I want to do about the 600,000 empty houses in the private sector is to reinvigorate the whole private sector by totally changing the attitude to landlords. My problem is that if the Labour party ever returned to power, it would introduce new controls which would completely kill off the rented sector. The number of houses per head of population has risen considerably in the past few years. Because of the break-up of marriages and various other social forces, there are pressures on housing. That is why we have vastly increased the money that we are spending on the homeless, both single people and families. This Government have done more than any other Government to focus money on the homeless.

I must announce to the House that I have selected two amendments—that in the name of the Leader of the Opposition and the amendment, for Division only, in the name of the leader of the Liberal Democrats.

On a point of order, Mr. Speaker, about the selection of amendments. I wish to stress that I speak on behalf not only of the Scottish National party but of the nationalist parties and the party led by the right hon. Member for Lagan Valley (Mr. Molyneaux). As you know, we fully understand and appreciate the procedures which preclude you from selecting amendments today, other than those that you have specifically chosen. But you are aware also that this is a pluralist House and that it is necessary to debate all the different aspects and attitudes in the House. I therefore wonder whether it is possible for you to support the other minority parties in asking the Procedure Committee to look at the possibility of from time to time selecting amendments in the name of the members of those parties.

I am grateful to the hon. Lady, but only the Scottish National party has an amendment on the Order Paper today; the Ulster Unionist party and Plaid Cymru do not. The hon. Lady should take up herself with the Procedure Committee the question of giving authority to the Chair to call a third amendment for Division. Today I shall be as helpful as I can be in calling members of the minority parties to put their point of view in the debate.

I must also announce to the House that, in view of the large number of right hon. and hon. Members—mostly right hon. Members—who want to participate today, I shall put a 10-minute limit on speeches between 7 and 9 o'clock. But I ask those who are called before then to try to ensure that their speeches are not much longer than that.

I beg to move, at the end of the Question, to add:

But humbly regret that the Gracious Speech seeks to continue economic policies which have caused recession, falling output and investment, rising unemployment, high interest rates and a massive deficit in the balance of payments; deplore the continuing confusion and disarray in domestic economic policies and towards the future economic and social development of the European Community; and call upon the

Government to prepare for the competitive challenges of the Single Market after 1992 by adopting an industrial strategy which promotes sustained investment in the manufacturing sector and encourages industrial innovation through the application of science and technology, to exploit fully the potential of the neglected regions through a vigorous regional economic policy and a modern transport system, and to provide the new opportunities in education and training which are crucial to Britain's economic recovery and future prosperity.

When debating the Gracious Speech as we do in this House each year, we do not confine ourselves to a textual analysis of the often anodyne language contained in it. We look to other material, to additional evidence, to establish what Government policies are and are intended to be over the forthcoming Session. What Members find persuasive by way of additional evidence is very much a matter of individual choice, but for my part I turn for guidance to the Chancellor of the Duchy of Lancaster in his capacity as chairman of the Conservative party. Each year he sets—dare I say it—the style, if not the substance, of the Conservative party conference, with the carefully calculated slogan that hangs over the conference during the whole of its proceedings.

In 1989 the slogan was:

"The right team for Britain's future".

The right hon. Gentleman buttressed the message by quoting Henry's exhortation to the troops at Agincourt:

"He which hath no stomach to this fight,

Let him depart".

There was a consequence which Henry had not foreseen, which was that most of them did depart. There has been the biggest change in ministerial offices in the post-war political history of this country.

Looking back on it now, admittedly with the luxurious benefit of hindsight, we see that the right hon. Gentleman clearly had a talent for irony which we had not properly recognised heretofore. I doubt whether there has been a time in post-war politics when there have been so many ministerial changes. It would be repetitive to read out a long list of the senior ministerial changes, occasioned by the confusion and disarray within the Government, which have occurred since the right hon. Gentleman's stirring slogan was first revealed. But this does remind us how important it is to attach proper significance to the slogan that he gives us each year.

This year, the right hon. Gentleman tackled new ground. The slogan was: "The strength to succeed". Again with the benefit of hindsight, I believe that he should be credited with prescience as well as irony. How did he know that this very day a struggle for the succession would be announced? The very question that will agitate Conservative Members over the next weekend is: who will have the strength to succeed to the leadership of the Conservative party? How did the right hon. Gentleman know all this? How did he know that this matter would be of such concern to his party?

I have been giving consideration to whether we might offer the right hon. Gentleman a slogan for next year's Conservative party conference. Perhaps he should hold a competition among his hon. Friends to see who could come up with a slogan as prescient and ironic as its predecessors. One or two come to mind. "The challenge of leadership" might be one. Perhaps "Combating unforeseen circumstances" might have a certain charm in certain quarters; but the one that I feel most attracted to is "Catching the train to Europe". I offer the right hon. Gentleman the option of putting either a question mark or an exclamation mark after that slogan.

The trouble is that the confusion and disarray which has surfaced in the turmoil of ministerial changes has finally burst through into a direct challenge to the Prime Minister by the right hon. Member for Henley (Mr. Heseltine)—and by who knows who else, in the weeks to come. There will be a fierce struggle in the Conservative party over style, substance, personalities and policies and it will be so serious that it will divide the Conservative party not just for the next week or so, but for a very long time ahead.

However, today we are considering the Government's economic policies, a subject which is the cause of almost as much distress as the Conservative party's internal division. We begin our consideration with the current state of the economy, which is in a recession. What is more, that recession results directly, as we have frequently argued, from the Government's errors in economic policy, some of which, I will argue later, bear a striking similarity to previous errors by previous Conservative Governments.

In the exchanges following the Chancellor's autumn statement, I was taken to task for insisting that the Government should admit the truth about our present economic situation and for pointing out the truth—that we are in a recession. I was glad to note that, a few days after that, in "The Money Programme" the following Sunday, the Chancellor appeared to accept—in a qualified way—that we are in a recession.

People who watch the Chancellor answering questions in this House and who saw him on "The Money Programme" will be aware that the right hon. Gentleman's tactic has been to query the definition of recession. He says that there are so many definitions of recession: how do we assess whether we are in one? He slips from one definition to another rather like a bird flying around a cage looking for a statistical perch to alight upon temporarily, or for some convenient resting place. The Chancellor says that some people say one thing while others say another.

The Chancellor was not always so coy. When he gave evidence to the Treasury and Civil Service Select Committee on 4 December last year, my hon. Friend the Member for Hackney, North and Stoke Newington (Ms. Abbott) asked the Chancellor directly:

"What is your definition of a recession?"

The Chancellor replied:

"I think I would take as a definition of a recession the one that we have traditionally accepted and that is a reduction in gross domestic product over a measurable period of time, probably two or more quarters, although there is no formal and wholly agreed definition of recession. That is the sense in which I would use the term: a reduction in GDP over perhaps two quarters, a six-month period … If we have a reduction in GDP over a measurable period of time then I think it is reasonable to begin thinking in terms of a recession, but that is expressly not what we are forecasting at the moment."

We have a definition of a recession and a forecast that a recession would not happen.

An important table in the autumn statement, table 2/2–11, predicts the economic prospects for 1991. That table is entitled

"Gross domestic product and its components".

It states that, for the first half of 1990, for the GDP at factor cost, the average measure is 180·3. It drops in the second half of the year to 178·2. In the first half of 1991, it is 178·3 and it then rises rather mysteriously in the second half of 1991 by two full points. The consequence of that is clear. The autumn statement forecasts, according to the Chancellor's predictions, a drop in the level of output not only for two quarters, but for four quarters in succession.

By the Chancellor's own definition and prediction, are we not in an extremely serious recession? We should have a lot less nonsense from the Chancellor, who queries and quibbles over whether we are in a recession. We know we are in one. All the companies and businesses in our constituencies are aware of that, and the Chancellor's statistics prove that we are in one. Why cannot the Government come clean about that?

We are also aware that we are in a recession as a result of other things that the Government are predicting. Only a few months ago, the Budget predicted that manufacturing output would increase by 0·75 per cent. in the first half of next year. The Chancellor now predicts that it will fall by 0·5 per cent. over the whole of next year. In the Budget, investment is forecast to decline by 0·75 per cent. in the first half of next year. However, the autumn statement predicts that it will fall by 1·75 per cent. in the whole of 1991. In the budget, exports were forecast to rise by 5·5 per cent., but that has been revised downwards to rise by 2·5 per cent. The figures for manufacturing production released yesterday confirm the downward trend and the pattern of negative growth.

The Government's record on prediction is just as bad as their record on economic management. However, prediction is important because the only message in the Conservative party's shop window—if we could get the Government to admit it—is that, while things may be bad now, it will not be long before they will get better because we shall see everything improve in the years ahead.

We remember the hype of the so-called economic miracle when the then Chancellor of the Exchequer, speaking from the Dispatch Box in the 1988 Budget debate, told us that we had overhauled what was then West Germany and were on track for catching up with Japan. It has been the persistent standard trick of the Conservative party grossly to exaggerate achievements and unrealistically to minimise the potential downturn when their policies run into it.

Let us consider the Government's forecasting on inflation—that "temporary blip" which occurred in 1988. We remember that same Chancellor telling us not to worry because it was just a monthly phenomenon, a blip which would soon blip away like one of the little dots that appear for a passing second on a television screen, a minor irritant, no more—just a passing detail. We know what happened. We have had inflation at distressing levels ever since.

We know that the forecast for 1988 turned out to be 62 per cent. wrong and that the forcast for 1989 turned out to be 30 per cent. wrong. We know that the autumn statements last year and this year are 100 per cent. wrong. Last year at the time of the autumn statement, the Chancellor of the Exchequer stood at the Dispatch Box and told us not to worry because inflation would be 5·75 per cent. now. What is it? Nudging 11 per cent. That is the Government's record on forecasting. People are asked to rely on those predictions and assurances that things will be better next year. We have been told exactly the same story in previous years.

The Chancellor of the Exchequer relies on the retail prices index coming down. I should hope it will come down next year. I hope that inflation will not be at these record levels next year. Indeed, the Government would have to do all the silly things that they have done in the past year all over again in order to maintain it at an RPI level of 11 per cent.

There was a time when the Chancellor found the RPI an awkward statistic. That was when, to quote the right hon. and learned Member for Surrey, East (Sir G. Howe), the Chancellor was using his "considerable talents" to explain away the Madrid conditions. He felt that there was a problem with the RPI. He had all sorts of other definitions of inflation. There was the rather ingenious "proximate rate" which made a fleeting appearance during what one might call the Madrid season, which appears to have come to an end. We also had the "underlying rate". As I understand it, there are two versions of the underlying rate. One involves stripping out the mortgage rate; the other is a bit bolder, and involves stripping out the mortgage rate and the poll tax, which gives an even better underlying rate. Obviously, the British people cannot strip out either when it comes to paying bills.

What criteria are we to apply next year to this year of recovery? The Chancellor was asked that very point by my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) during the exchanges on the autumn statement. My right hon. Friend asked:

"When the underlying rate was less than the RPI, the Government made a great deal of it. Now that it is likely to be more than the RPI"—

as has been predicted for next year—

"may we have his forecast of the underlying rate of inflation, excluding mortgage interest, at the end of next year, the fourth quarter?"

The bland reply from the Chancellor of the Exchequer was:

"As the right hon. Gentleman knows"—

here is sugar to the pill—

"—he is a very distinguished former Treasury Minister"—

that is undoubtedly true—

"—the underlying rate of inflation has never been published, for perfectly understandable reasons."—[Official Report, 8 November 1990; Vol. 180, c. 127.]

Another of the Chancellor's endearing tricks is to invent new conventions and rules whenever it suits him. He should tell the Central Statistical Office that the underlying rate—the RPI minus the mortgage rate—has never been published for understandable reasons. I have in my hand a copy of the document which it issues every month on inflation figures. One column states, "RPI—all items" and another states, "RPI—except mortgage interest payments". The answer to my right hon. Friend's question is set out precisely month by month.

No.

There can be no dispute about it. The figures for the RPI minus mortgage interest rate payments are in the Central Statistical Office handout. It looks as if we may have to wait for an explanation until the right hon. Gentleman makes his speech.

Why on earth is it difficult to forecast the underlying rate of inflation? I suggest that it is not impossible, that it is just a matter of discretion and that the Chancellor wants to keep vague the criteria that apply. He used to find the RPI uncomfortable and he thinks that it might he in his favour next year; so he wants to go by that and abandon his previous preferred alternatives. [Interruption.] As he is explaining it to the Prime Minister—and there is no doubt that that is necessary—perhaps he should give us the benefit of that advice. We might take it, unlike the right hon. Lady. The Chancellor is treading on stony ground, as is shown by the record of his predecessors in trying to explain matters to the Prime Minister.

If I had any doubt that the underlying rate is an important issue. I would rely on the evidence of the Chief Secretary to the Treasury, who did not bound to his feet recently, who said on the radio programme "PM" on 11 May that the

"underlying rate was the real thing that matters."

If he is right, let us know what the underlying rate will be next year.

The Chancellor of the Exchequer has said various things about this. For example, in June he said that the

"rate of inflation appears misleadingly unreasonable".—[Official Report, 7 June 1990; Vol. 173, c. 772.]

If it is, he can put it right by giving us the proper criteria. If he does not tell us what criteria we should adopt, we shall not know whether we are back on track, as he says we shall be.

One of the real problems affecting the Government in their handling of economic policy and one of the reasons why there is a leadership contest in the Conservative party is the Government's lack of credibility. That is felt not only by the electorate—something we all know from the responses of our constituents and can see in the movement of the opinion polls—but in the financial markets, which do not believe the Government or their economic purposes. We have seen that in the way that the Government entered the exchange rate mechanism.

Substantial additional evidence of the lack of credibility of the Government and their economic policy was provided by the right hon. and learned Member for Surrey, East in his remarkable statement to the House yesterday. We know now that the Prime Minister agreed in principle to join the exchange rate mechanism only when she was cornered by the Chancellor of the Exchequer and the Foreign Secretary and threatened with their resignations unless we joined the ERM. We did not know that before the remarkable speech made by the right hon. and learned Member yesterday. Now, we know that the Prime Minister was taken at pistol point to sign up to join.

Nonsense.

If the right hon. Lady thinks that it is nonsense, then she is casting doubt on the credibility of the right hon. and learned Member for Surrey, East. I should prefer him as a witness.

We also know, from that dismissive phrase used by the right hon. and learned Gentleman about the Chancellor of the Exchequer using his "considerable talents" to explain away the Madrid conditions, how seriously they were taken by senior Ministers. They knew that it was hocus-pocus from the start. They were there to allow the Prime Minister to look as if she were getting gently off some hook. They had no intention of tempering the Madrid conditions, which is why they were slung away when the decision to enter the ERM was taken.

People know perfectly well, because they have memories, that in that famous Walden interview, the Prime Minister said that the ERM was a higgledy-piggledy system.

Quite right.

That sedentary intervention came from one of the Prime Minister's more noted supporters. The No Turning Back group has temporarily found its voice.

The next stage in the credibility problem will come with the hard ecu. I have been listening to various apologists on various sides of the argument appearing on radio and television with great frequency, last night, this morning, over lunchtime. One can hardly turn on a radio or a television without a Cabinet Minister or some other senior figure from the Conservative party offering his views on who should be Prime Minister. Some of us think that that might be something in which the electorate might be interested. For the moment, however, we are denied the test and we have to listen to a parade of views.

Ministers all say one thing, however, and that is this: "There is no real problem about the way forward into Europe because we have the hard ecu, and the hard ecu solves all problems." Does it? There is a fundamental question which we have raised in a previous debate and we shall raise it again today: is the hard ecu an alternative to the single currency or an alternative means of achieving it?

The right hon. and learned Member for Surrey, East reminded us yesterday of the Prime Minister's dismissive view of the hard ecu when she reported after the Rome summit. I believe that he said that there was a casual comment and an impulsive answer. I do not know how he would classify it—probably he would say that it was both a casual comment and an impulsive answer—when the Prime Minister said that the hard ecu was not likely to be widely used.

After a little research, I discovered that, when the Prime Minister returned from the Dublin summit in June, when I think the hard ecu proposals were first presented to the other colleagues, she was asked about these matters. She said:

"Our proposals"—

that is, for the hard ecu—

"would lead to a common currency which people could choose to use more or less as they wished, or they could continue to use their own currency. I do not believe that that formula could develop into a single currency." —[Official Report, 28 June 1990; Vol. 175, c. 493.]

That is fine. So far, so good. The right hon. Lady said that the formula could not develop into a single currency.

We have had various evasions on the subject by the Chancellor of the Exchequer, but I shall not bore the right hon. Gentleman by going through them. I turn instead to the evidence given to the House of Lords Select Committee on European Communities by the Financial Secretary to the Treasury, whom I am glad to see in his place. He was asked about the Government's proposals for the hard ecu. We have him speaking on behalf of the Government while giving evidence to a Select Committee:

"One goes down the path which our proposals map out and can go on from that to a single currency. I think that is the important point to get across, and perhaps this has not yet been fully understood."

I do not think that it has been fully understood by the Prime Minister. The Financial Secretary to the Treasury added:

"I would go on to argue personally that the next stage of having a single currency"—

notice "the next stage of having"—

"could actually happen more quickly by going down this path than by going down any prescribed institutional path, setting up institutions at rigid dates, and trying to make it all happen

that way. That is a personal view and I could well be wrong about it. You could certainly mount a powerful argument that it would be a quicker path."

What is it? Is it a path to a single currency or is it not? If it is, is it a quicker path or a slower path? Well, it could be. Some say one thing and some say another. It is no wonder that the right hon. Member for Henley (Mr. Heseltine) said at lunchtime today, apparently, that the Prime Minister's difficulty is that she cannot unite the Cabinet behind her European policy. I tell the right hon. Lady that she will not find unity in ambiguity in the way in which she is seeking to approach these matters, by saying that some say one thing and some say another.

The right hon. and learned Gentleman is on dodgy ground.

There can be no more dodgy position than the Government's position on Europe. Fundamental ambiguity lies at the heart of the hard ecu proposal. It is a simple point—

Will the right hon. and learned Gentleman give way?

No.

Does it or does it not lead to a single currency? Is the hard ecu intended to be a failure as a policy, or a success? We want an answer to that question during the debate. Unless the question is answered, there will remain a lack of credibility on the part of the Government.

Will the right hon. and learned Gentleman tell us whether the Opposition are in favour of a single currency and a central European bank?

I set out my views on those matters earlier, in the debate on the exchange rate mechanism. [Interruption.] The Chief Secretary knows that I can speak for myself. As I said during the debate on the exchange rate mechanism on 23 October—

What was that?

The right hon. Gentleman was present for the debate, so he heard what I said.

I did not understand.

That is a different matter. Comprehension is entirely a matter for the right hon. Gentleman, and I cannot assist him on that. I can only explain and hope that he comprehends.

Tell me again.

We have told the Government time and again, as I did on 23 October, that at a time

"when the gap between Britain's performance and that of other members of the Community is so wide, it would not be prudent to commit ourselves to an irrevocable exchange rate or to a single currency."—[Official Report, 23 October 1990; Vol. 178, c. 273.]

We have made our views clear. The economic position into which this country has been led by the Government's economic policies is such that there would be a grave risk at this stage if we were linked to an irrevocable exchange rate—[Interruption.] Conservative Members may not like the policy that I articulate, but they should not claim that it has not been articulated, because I have clearly done so.

I am grateful to the right hon. and learned Gentleman for giving way in the middle of his entertaining speech. If he ever became Prime Minister—and he has more chance of that than the Leader of the Opposition—would he go to Europe to negotiate, and perhaps move forward to stage 2, when no one could explain exactly what was meant by stage 2? Our Prime Minister is not that sort of person; she wants to know the detail. That is the difference between the two parties.

The hon. Gentleman should not worry about the leadership of the Labour party. He will have a major problem over the weekend trying to decide who to vote for as the future leader of the Opposition—

She is sitting on the Front Bench.

That is absolutely right. The hon. Gentleman, not for the first time, accidentally points to the truth. The Prime Minister is sitting on the Front Bench and she may win the leadership struggle, but not the next election, and will then take up office as Leader of the Opposition. I know that it is a chilling thought. At least 100 Tory Members—although the figure may have risen since lunchtime—will find that a fearful thought.

The hon. Member for Littleborough and Saddleworth (Mr. Dickens) says that he cannot understand stage 2 and, what is more, that the Prime Minister does not understand it. In that case, they should ask for the proposals to be clarified. They should not simply walk out of meetings and denounce other people: they should ask intelligently for the proposals to be clarified. They should put questions with persistence, intelligence and perspicacity—but, as the right hon. and learned Member for Surrey, East advised and admonished them to do, they should continue, within the structure of the European Community, to make Britain's case understood. They should employ constructive diplomacy on behalf of our country.

The real problem in the context of the European Community and the real problem in the context of our domestic economy are virtually one and the same—it is the weakness of our economy after 11 years of Conservative government. I have already mentioned the illusion—

The right hon. and learned Gentleman says that we should not worry about the Opposition, but some of us are worried because 180 members of his party—which is practically the whole of his party—believe in the Labour Common Market safeguards committee, which is in total opposition to monetary union and membership of the exchange rate mechanism. Is that the right hon. and learned Gentleman's position?

If the right hon. Gentleman is reduced to that sort of remark, which is both pathetic and inaccurate, we can well understand why he had such a short ministerial career, even in a Government headed by the Prime Minister. We are accustomed—[Interruption.]

Order. Hon. Members should settle down.

As I was pointing out before I was irrelevantly interrupted by the right hon. Gentleman, the big difficulty we face, as he must know—

The right hon. and learned Gentleman explained that it was his view that we should not have a single currency in Europe for the moment. He did not think the time was right. Is there a difference in principle between his policy and the Government's policy on whether we ought to have a single currency?

I am not clear what the Government's policy is. Is it the Government's policy to have a single currency? [Laughter.] The right hon. Gentleman should stop laughing and address himself to that question. Given our economic conditions, it is premature to decide whether we could be involved in an irrevocably fixed exchange rate. That is the crucial river that has to be crossed. Once that river is crossed, it is difficult to see how one could cross back.

I am told by some Conservative Members that the hard ecu is an alternative to moving to a single currency, and by others I am told that it is a quicker way of getting to a transitional mechanism for moving towards a single currency. I deduce that some members of the Government want a single currency and others do not. We have made it absolutely clear that we would like to see established a number of matters on economic and monetary union which we think are essential components of the type of economic unity within the EC that we want to see. One is a strong regional policy which helps to preserve economic and social cohesion—[Interruption.] Perhaps we could rise above the level of schoolboy remarks from the Financial Secretary.

I do not understand how Conservative Members can think that the social cohesion of the EC is such a light matter. In the EC, 11 members think that it is sufficiently important to be regarded as one of the major objectives. It is one of the objectives of the Single European Act, for which Conservative Members voted in the House.

We want to give substance to the ambitions that were enshrined in those proposals for the EC. Of course we want to see a strong regional policy. We also want to see a strong social dimension to the EC, which is why we want to see the social charter, and the social action programme coming on its heels, which the Government seek to block against the wishes of the other 11 members of the Community. That is why we want to see changes in the way in which we decide environmental and social policies.

That policy cannot be encapsulated in one sentence: it is an extremely complex and difficult matter which Labour Members take seriously because it is important for Britain's future. It is a matter on which, according to the right hon. Member for Henley, the Cabinet cannot unite and on which the Government will never be able to unite the country.

Let me put to the right hon. and learned Gentleman the proposition that the hard ecu is, in essence, a swift path to the river that one would have to bridge to reach the single currency on the other side. It is a swifter way to arrive at that point of decision. Is the right hon. and learned Gentleman saying that there are circumstances in which he would say that he was satisfied on the conditions for a single currency, or is he saying no to that? In other words, are there circumstances in which he would be willing to give up Britain's unilateral control of its own economic policy?

Yes, answer.

The hon. Gentleman, who is a member of the No Turning Back group, might allow me to reply.

We do not support the proposal for the hard ecu, which is a fundamental issue of ambiguity in the Conservative party. The right hon. Member for Chingford (Mr. Tebbit) takes the view that he does only because he does not fully comprehend the trick that has been played on Conservative Members by the Foreign Office and others in producing a hard ecu with the purpose of leading to a single currency. When I last spoke on that issue in the debate about the exchange rate mechanism, the right hon. Member for Chingford was sufficiently concerned to ask questions of the Minister then addressing the House, and he was right to be so concerned. However, I cannot answer hypothetical questions about the future.

We will judge progress by the way in which we can achieve a proper regional structure for the European Community and for the social dimension. More important than all of that is the capacity of this country's economy to converge to the European standard. It is one thing to contemplate monetary arrangements of that kind if one has a strong economy, but quite a different thing if one has a weak economy, such as that being run by the present Chancellor of the Exchequer.

One would think from the tenor of the questioning that there is no ambiguity or conflict of policy in the Conservative party. If that is so, why is it having a leadership election? If Conservative Members are all agreed on European Community policies, it is passing strange that the right hon. Member for Henley has chosen to plunge his party into the most divisive leadership contest seen since the end of the war—and perhaps even in the history of the Conservative party. They cannot get away with it as easily as that. It is a question that fundamentally divides the Conservative party, and unless Tory Members can reconcile their differences, it will lead them into continuing difficulty.

The right hon. and learned Gentleman should look behind him. Labour Members do not understand him, and neither does the Leader of the Opposition.

Conservative Members seated behind the right hon. Gentleman certainly do not understand him.

We should address the fundamental problem affecting Britain here and now—apart from what may happen in developing the economic European Community in four, five, six or seven years' time. Stage 2 is only projected to start in 1994, and further proposals will not come forward before 1997. Anyone would be hard pressed to put a date on some of the decisions that must be made. Nevertheless, they are important decisions, and will have to be taken by the Government of this country at the appropriate time. Meanwhile, here and now—in 1990—there is much that we can do to prepare for our future in the Community, by sorting out the basic problems in the British economy.

Thank goodness that the illusion of 1988—the notion that we had overtaken West Germany and were pressing hard on Japan—has, for reasons of embarrassment, ceased to be advanced by Conservative Members. The truth is that Germany is well ahead of us, France is significantly ahead of us, Italy is overtaking us, and Spain is coming up behind. That is the fruit of 11 years of Conservative stewardship of our economy.

The economy will not be put right by the policies in the Gracious Speech, whose most alarming aspect is that it promises no change in Government policy. Now, at the end of a decade, we have a massive balance of payments deficit, the highest interest and inflation rates of any industrialised country, and rising unemployment.

It is not the first time that Britain has faced economic problems under a Conservative Government. I occasionally read publications produced by the City—some from institutes that are sympathetic to the Conservative party, but others that are more objective. The Greenwell Montagu gilt-edged research paper, "UK inflation in the 1990s", highlights the tendency of British Governments

"to over-expand demand and to preside over periods of over-rapid expansion, mistaking them for the beginning of the catching up of British economic performance with those of our competitors and the beginning of a virtuous circle."

We have not heard those phrases from the Conservative party.

The report continues:

"There have been three phases of this sort, all of which had serious consequences.

(a) Maudling's dash for growth 1963–64;

(b) Barber's boom, 1972–73;

(c) The Lawson boom, 1986–88."

We are back in the stop phase of stop-go economics for the third time under Conservative guidance of the British economy. The Government tell us, as we are stuck in the stop of yet another stop-go following the depressing and worrying cycle of economic mismanagement, that we will soon be back on track.

How can we be back on track when, even in the midst of a recession in 1990–91, the Treasury predicted a balance of payments deficit of £11 billion? Under the previous Chancellor, it was argued that the terrible balance of payments figures were the result of excessive demand and a so-called investment boom. Those are not occurring in 1990–91, yet we still have massive balance of payments deficits.

Does it never occur to the Government that we need a change of policy, not merely because it has not worked under this Government but because it has not worked under previous Conservative Governments? We end up in difficult economic situations, and the Labour party has to be elected to deal with them. It has happened before. The cycle mentioned by the learned authors of the Greenwell Montagu report is not complete. Usually it has to be completed by the British electorate. We are facing such a problem now and we shall have to tackle the underlying problems of the British economy. No one seriously believes that this is some minor matter of a mismatch of demand and supply. There are serious structural defects in the British economy, which require a supply-side policy to deal with them.

As, regrettably, unemployment rises in the regions and nations of Britain, the need for a regional policy will become more manifest, and its neglect even more apparent. Just before I came into the debate today, I met representatives of 500 workers of James Howden, a company in Renfrew in Scotland. Five hundred people are facing redundancy there in a modern factory, which was opened by the Prime Minister in 1981 and which is widely regarded as having the best of technological excellence. Five hundred people will lose their jobs. That is what is happening in Britain today.

Let not the Government tell us that there is no recession and that this is some temporary problem—let them look into the faces of the people who are facing redundancy and tell us. Let the Government understand the consequences of their economic policies. This is not really an academic matter, as it affects the living standards and life opportunities of all the citizens of this country. The longer we continue to neglect the fragile technological base of British industry, the longer it will take us to match our competitors and to get up speed for Europe. The longer we neglect education and training the more difficult our problems will be.

In another report that I came across, Mr. David Lomax, the group economic adviser for National 'Westminster bank, described the Government's training record as "execrable". I do not think that any Opposition Member has thought of such a dismissive and abusive term, and that quarter is not entirely unsympathetic to the Government.

In powerful speeches yesterday, my hon. Friends the Shadow Education and Employment Secretaries outlined the major defects in Government policy and the Labour party's proposals for proper education and training. As we prepare for 1992, it is crucial that we get those things right, that we pay attention to building up the technological base of British industry, that we have a strong and vigorous regional policy and a new commitment to education and training, and that we give the manufacturing sector of the British economy the place it should have had during the neglected decade of the 1980s.

The Opposition intend to build for success in Britain and in Europe. We have a vision of a fair society in which world class public services provide the best of facilities for all our citizens—a society in which care and compassion are active ingredients in social policies and where those least able to help themselves are given a helping hand by the rest of the community. We shall fight for that vision within Britain and within the European Community, but we also know that Britain cannot achieve these ambitions, which we hold on behalf of all our people, without a strong economy. That is why we shall tackle the problem of rebuilding the British economy patiently, purposefully, determinedly, year in and year out. [Interruption.]

Order.

I shall explain to Conservative Members how we shall do so, and set out our targets for the supply-side regeneration of the economy. I shall set out what we have in mind. I fear that the Conservative party's problem is not merely one of comprehension, but one of understanding what the people of this country want. They want a strong economy and a fair society. Other European Community countries seem to be able to achieve those aims. The British people want that deeply, passionately and urgently. That is why they are turning in such large numbers to the Labour party, in order to make sure that a Labour Government are elected at the first available opportunity.

Fond though I am of the right hon. and learned Member for Monklands, East (Mr. Smith), we have just heard the shallowest speech from the Opposition Front Bench for years. Stale jokes and cheap gibes are no policy for any Opposition who ever hope to form a Government. The right hon. and learned Gentleman spelt out his usual long litany of criticisms of the Government, but he did not set out in any detail, or in any sense at all, clear policies on what needs to be done.

In "Meet the Challenge: Make the Change" and in "Looking to the Future", the Labour party claims to have a selection of policies of which it is proud. So proud is the Labour party of those policies that Opposition Front-Bench spokesmen hardly ever mention them. What we get from them is absolutely nothing at all about the success of British industry over the past decade. They do not congratulate British industry on its record investment over the past decade. They never mention the dramatic improvements that British management and the British work force have brought about in terms of increased productivity. The trouble with the Labour party is that what is good for the country is bad for it, and it recognises that all the time.

Will the right hon. Gentleman give way?

I shall with great pleasure give way to the hon. Gentleman a little later.

The right hon. and learned Gentleman referred to the quotation by my right hon. Friend the Member for Mole Valley (Mr. Baker) from Shakespeare's "Henry V". As I listened to the right hon. and learned Gentleman it was another, lesser-known poet, rejoicing in the name of John Gay, who sprang to my mind. John Gay was a master of burlesque. The right hon. and learned Gentleman may recall that he wrote:

"I know you lawyers can, with ease,

Twist words and meanings as you please;".

[Interruption.] Opposition Front-Bench spokesmen seem to be remarkably boisterous when their policies have no credibility whatever.

The right hon.and learned Gentleman mentioned the underlying rate of inflation. Of course we published in our document both the retail prices index and the underlying rate of inflation after the event. That is the information that he had. What I said to the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), which he will understand as a former Treasury Minister, was that we never forecast the underlying rate of inflation for a sound economic reason. As we forecast the retail prices index, if we were also to forecast the underlying rate of inflation it would be possible to calculate interest rate assumptions, with very severe market effects. The right hon. Member for Ashton-under-Lyne understands that. It is a pity that the shadow Chancellor of the Exchequer does not understand it, too.

Will the right hon. Gentleman answer a simple question? How should we judge whether or not he is successful next year—by the retail prices index or by the underlying rate of inflation?

In due course the right hon. and learned Gentleman will see by both measures, and by the producer price index, how successful we are. The way to judge the success of policies is to see what the outturn of those policies is. I am content to be judged in that way.

The right hon. and learned Gentleman also referred, with a total lack of self-knowledge, to what he rather crudely called "Lawson's boom". I seem to recall that in 1987 and 1988 the right hon. and learned Gentleman was asking for ever lower interest rates to increase demand.

I understand why the right hon. Gentleman did not wish to give the underlying rate. It is the same argument as was used against giving the retail prices index and unemployment figures many months in advance. Of course, we have the autumn statement, which gives much more information and I could not understand why he was so coy about giving this further information to the House.

It was precisely for the reason that I have just given. If I gave the underlying rate of inflation forecast and the retail prices index forecast, it would be easy for anybody to calculate interest rate assumptions. The right hon. Member for Ashton-under-Lyne will know that that is not an attractive proposition.

The right hon. and learned Member for Monklands, East made a great deal of the short-term problems that he perceives we have. He ignored the growth that we have had over the past eight years, the growth this year and the growth that we shall have again next year. Alas, he neglected to mention that. Of course, he wants to portray prospects as black as he can because he knows that, when inflation is heading down, we shall return to sustainable growth and a stronger economy.

That is what concerns the right hon. and learned Gentleman. He knows that economic success for his country will mean political failure for his party. He knows very well that recovery is not just possible but probable because the underlying economy is incomparably stronger than it was a decade ago. Industry knows that, too. Last week John Banham addressed the Confederation of British Industry conference and said:

"We must believe in ourselves and build on what has been achieved … We must not let our present difficulties obliterate the memory of the past 10 years. And this is precisely what is in danger of happening."

Indeed it is. It is partly because Opposition Members see party advantage in denying the changes and improvements of the past decade.

We should not be blind to the improvements that have taken place. Business investment has risen dramatically.

Manufacturing investment?

Over the three years to 1989, business investment rose by 45 per cent., which is an unprecedented increase. It is hardly surprising that that is not sustainable at this stage of the economic cycle. However, even assuming the modest downturn that we forecast this year and next, business investment will still be over 50 per cent. higher than when the Government took office in 1979. Over the past decade, the economy has grown faster than France or Germany. That is the first post-war decade in which that has happened. Also, living standards have risen enormously, with the real take-home pay of a married man with two children up by a third since 1979.

This is a fraud.

I ask the Leader of the Opposition, who is muttering: which of those improvements are inaccurate and why do he and his right hon. and learned Friend never acknowledge them? Why do not they offer some real hope for our prospects in the 1990s? My statements are accurate and the Leader of the Opposition knows it.

rose—

I shall give way a little later.

I do not believe for a second that those achievements will vanish. They are fundamental and they will last. With other supply side improvements, they will improve Britain's economic fortunes throughout the 1990s. Do not be deceived. Our prospects in the medium and longer term remain excellent. In the 1990s we shall see the huge investment of the past few years bearing fruit as new capacity comes on stream; provided that firms remain competitive by containing their costs, it will continually help to close the current account deficit.

I am wholly determined that the British economy will be ready for the challenges that lie ahead of us in the 1990s. I am wholly determined that we shall take the difficult decisions necessary now to ensure that it is. That is why we joined the exchange rate mechanism. That is why we shall stick with the tough policies that we have pursued and why I have no intention of reducing interest rates until I am satisfied that it is safe to do so.

rose—

I shall give way in a moment.

High interest rates, although painful, are bringing the slowdown in demand that is necessary to reduce inflationary pressures. As for our forecasts, as the right hon. and learned Member for Monklands, East who now clearly reads so much that is published in the City, will know, the overwhelming majority of analysts now agree with our forecast that inflation will come down next year to around 5·5 per cent. by the fourth quarter, and we intend then to keep it there.

Does the Chancellor agree with the former deputy Prime Minister who said yesterday that failure to enter the ERM in 1986 had been inflationary and had led to inflation?

No, Sir, and for the reason, which should appeal to the hon. Gentleman, that if we had entered the exchange rate mechanism at that time, we should have done so at a rate against the deutschmark of about 3·30 and 3·85. I am not convinced that it would have been the right time to enter. The right time to enter was when we entered. The moment the opportunity was there, we took the opportunity on the first available occasion when I judged that it was safe to do so.

On entering, will the Chancellor tell us whether he is prepared to take out his bat first wicket down?

So far as I am aware, the opening batsman is well played in and will stay there, I hope, for a long time to come.

The current account deficit, to which the right hon. and learned Gentleman referred and in which he has apparently lost interest, so narrow is his span of interest, is now narrowing as a result of the low growth of import volumes combined with a substantially stronger growth of exports.

It was £16 billion.

The hon. Gentleman says that it was £16 billion. He is the hon. Gentleman who, at one stage, was forecasting that it would be more than £20 billion this year. So much for accurate forecasts.

Will the right hon. Gentleman give way?

I shall give way to a former Lambethan.

On the record of changes over the past decade, will the Chancellor comment on the fact that over that decade the proportion of our GDP going in exports has dropped by 3·5 per cent. of total GDP? Is that not the problem we face? What does the right hon. Gentleman propose to do to change that?

As the hon. Gentleman will know, the trend has been reversing itself, and exports have been growing substantially faster than imports over the past year or so and are projected to continue to do so. The expansion of growth of demand, actually sucked in more imports that domestic supply could not produce, but with the collapse and reduction of demand, it is moving back into equilibrium at a rapid rate.

The slowdown in the economy points again to the trade deficit narrowing still further next year to around 1·75 per cent. of GDP.

Will the right hon. Gentleman give way?

If the hon. Gentleman will forgive me, I have already given way more often than the right hon. and learned Member for Monklands, East. If he behaves himself, I may give way to him later.

That trade deficit compares, for example, with Spain's current account deficit of 3·5 per cent. of GDP, which perhaps puts ours in a better perspective.

As I made clear to the House last week, we intend to continue to maintain a tight fiscal stance both to support monetary policy and to squeeze inflation. By the end of 1990–91 we expect to have repaid £29 billion-worth of public sector debt over four years. That will save £2·75 billion in interest payments every year, the equivalent of a penny-ha'penny off the standard rate of income tax. We now expect a lower debt repayment this year than I had forecast in March at the time of the Budget, and lower than we enjoyed last year. But it is perhaps not only unusual but remarkable and encouraging that, at this stage of the economic cycle, with activity weakening, our central forecast for debt repayment amounts to £3 billion. Germany, for example, so often quoted against us as a virtuous economy, is likely to have a deficit this year in excess of 3 per cent. of GNP, while France's deficit this year is likely to be about 1·25 of GNP.

As the autumn statement showed, we have not loosened our grip on public expenditure. We have made the difficult choices that were necessary and are not accommodating fully the higher than expected inflation either this year or in the planning totals that my right hon. Friend the Chief Secretary negotiated for the next three years. Instead of seeing a surge in the ratio of public expenditure to national income, as we have in past economic downturns, our plans maintain a stable ratio until 1993–94, when we expect it to resume its downward movement.

Despite that restraint, within the overall settlement we have been able to keep our word and have not reneged on the spending commitments that we made. There has been room for more resources to be allocated to key areas, especially to protect the more vulnerable groups in society. We have been able to maintain the real value of benefits that are paid to 10 million pensioners and 11 million people on income-related benefits; we have been able to increase spending on health between this year and next by £3 billion, which is a real increase of 5 per cent.; we have enabled British Rail and London Regional Transport to spend nearly £750,000,000 on safety measures in the next three years; and there has been an increase in provision for capital expenditure of £1·5 billion.

Nor, in addition to those increases, have we overlooked the self-evident uncertainties in the world economy or at home. In view of those, we have set aside higher reserves in the next three years—up to £10·5 billion in the third year.

rose——

Will the hon. Gentleman forgive me? I want to make a little progress.

While Opposition Members speak at length about the problems that we face, as we saw from the right hon. and learned Member for Monklands, East, they are a little less clear, to put it kindly, about how to solve them. Their industrial strategy would not do so.

Will the right hon. Gentleman give way?

If the hon. Gentleman behaves himself, later.

Labour's industrial strategy amounts to a familiar programme of detailed intervention.

This is the House of Commons.

The right hon. and learned Gentleman says that this is the House of Commons. As he is sitting on the Front Bench, perhaps he should behave as though it were the House of Commons. Is it not interesting that every time we get to Labour's policies, Labour Members seek to disrupt whomsoever is at the Dispatch Box? Is that not because they know precisely what is in their policy documents, and what political poison it is? I am perfectly prepared to stay here until they keep silent so that we can discuss the policies that they will not talk about. In their document——

rose——

As the hon. Gentleman is unable to contain himself, I shall give way.

I thank the Chancellor for at last giving way. Will he answer the question put by my right hon. and learned Friend the Member for Monklands, East (Mr. Smith): Is the economy now in recession, or is it not?

If the hon. Gentleman is aware of the classic definition of recession—two quarters of falling output—he will know that it is impossible to know until we have the output figures for those two quarters, and we do not yet have those figures. If he wishes to know whether I think that it is probable that there will have been a downturn in output over two quarters, I have said several times that I think that it is probable. But I shall not know until the output figures are produced, and neither does the right hon. and learned Member for Monklands, East.

Let us return to Labour's industrial strategy. In its document, "Meet the Challenge, Make the Change", there is the quite extraordinary admission—this is from the new model Labour party—that the market can be tolerated only

"providing the Government regulates it."

So much for supply side socialism and for the new model Labour party. I dare say so much, too, for the right hon. and learned Gentleman's agreeable lunches in the City, if it reads his document.

He is chewing now.

The right hon. and learned Member for Monklands, East spoke for a long time—he is probably very hungry.

What of the policies that would bring about this industrial renaissance from Labour? Let me tell my right hon. and hon. Friends what they are: a new national investment bank, a series of tax incentives to encourage investment, an enhanced regional policy, a British technology enterprise fund and, of course, and not to be missed, an increased role for regional enterprise boards and development agencies, all peopled with Labour's placemen.

Some hon Members with long memories may think that that list has a familiar ring to it, and so it should. For medium-term industrial strategy, read Harold Wilson's national plan. The new terminology, brushed up and dusted down, may better fit the 1990s, but the policy would not. It failed in the 1960s and 1970s and would be equally disastrous if it were ever tried again in the 1990s.

The right hon. and learned Member for Monklands, East mentioned unemployment. As for the labour market, this is a time when domestic conditions, reinforced by membership of the ERM, demand both wage flexibility and wage restraint. The whole of Europe seeks such flexibility—except, of course, the Labour party. I quote from "Looking to the Future". The Labour party argues that

"there are … dangers in flexibility"

for the labour market. Perhaps Labour thinks that there are merits in inflexibility. The whole of Europe is wrong and the Labour party is right. The Labour party has proposed its old friend, a minimum wage, at two thirds of national male average earnings, which would cause the loss of thousands of jobs for people on modest incomes—so much for Labour's plans for the vulnerable.

Can my right hon. Friend estimate to what level manufacturers' costs would rise because of that policy and the effect on inflation if we were to have a Labour Government?

I cannot do that. Although I carefully read the Labour party's document, alas I found no such costing in it to show that.

Of course, the right hon. and learned Member for Monklands, East is right to say that he wants more investment and more saving. I wholly agree. That is certainly the right objective. The question is, how shall we get it? We shall certainly not get it with his policies—not with plans to increase capital gains taxes, to introduce a new form of capital transfer tax and to reintroduce an investment income surcharge. I offer this thought to the right hon. and learned Gentleman—one cannot encourage savings by penalising the saver. One does not encourage investment by damaging saving. All Labour's tax incentives would achieve is a distortion of investment decisions, damaging the quality and quantum of investment and reducing the return that it yields. 'That is what happened under the Labour Government in the 1960s and 1970s, yet Labour wants to try it again—no doubt, a crypto-policy.

Labour's medium-term industrial strategy amounts to three things: savings—Labour will tax them; investment—Labour will distort it; the labour market—Labour will cripple it. All that is quite apart—[Interruption.] It is much more in the Queen's Speech than anything that the right hon. and learned Member for Monklands, East said. All that is quite apart from the fact that the Labour party has no credible policies to tackle inflation. Labour would not use a tight fiscal policy or high interest rates—that much is clear. For Labour, interest rates at any level are always too high and public expenditure at any level is always too low.

For a while, the Labour party tried to shore up its credentials by saying that it would join the ERM, although only—let it be noted—on conditions that would transform the whole system. Now that option has gone. Labour now has only one distinctive policy left—the imposition of credit controls—and even that is withering away. The right hon. and learned Member for Monklands, East admitted that controls would not be "hermetically sealed". I think that saying that they would not be "hermetically sealed" is his way of admitting that they would not work. They would not. That is why they have been ditched all over Europe—by the French, the Italians, the Dutch and the rest of Europe.

In recent months, policy on Europe and the debate on economic and monetary union have occupied centre stage. That is not surprising, for there is a great deal at stake in economic and monetary union. But the rapid push towards the Delors version of economic and monetary union owes almost everything to pressures for closer political integration in the Community and very little to the fundamental need for deeper economic and monetary integration. That was the message from the Rome Council, but it is the wrong way to approach such important and far-reaching decisions. What is needed is a constructive, practical and pragmatic approach. That is the approach that the Community has been following over the past five years or so. It has built on the undoubted discipline of the exchange rate mechanism, with the deutschmark providing the anchor. The result has been an impressive degree of convergence on low inflation in much of Europe.

Our proposals are—agreed by the whole Government—to continue that successful evolutionary approach in the further moves now under discussion towards economic and monetary integration.

Will the right hon. Gentleman be a runner in the second ballot for the Tory leadership? Will he make that clear?

The hon. Gentleman is in no position to yell from a sedentary position. There is not even agreement on the Bench upon which he sits on this issue. [Interruption.] Labour Members might as well agree with our policy, for it is clear that their party has none. That is why we have put forward our proposals for a European monetary fund and a parallel currency. They are practical and realistic and they will promote convergence and economic integration beyond stage 1. Most important, they will enable the 12 member states of the Community to move forward together. That is an important development.

The fact that some European figures attack our proposals should not worry us. They do so because our proposals are gaining ground—[Interruption.] The Opposition may not like it, but there is no point in people attacking policies that are not gathering ground. It is because our policies are gathering ground that some people attack them. I believe that they will win more adherents as the intergovernmental conference gets down to details. One of the points upon which we and our partners agreed at the Rome Council was that there needs to be a substantial next stage, which should involve the further development of the ecu. At present, the only worked-up proposals for stage 2 are ours and the Spanish proposals, which are built upon ours and are similar to ours.

The IGC, which starts next month, will determine the future direction of the Community. It is therefore of enormous importance not just for this country but for the Community as a whole and for the wider Europe. We face some difficult negotiations—that is undeniable—but the House should remember that we are in the middle of the process. The IGC has not yet started. There is a long way to go. We should not underestimate for a second the strong desire both here and among our partners that we should not be sidelined in any way. Our European partners want the United Kingdom in the centre of the Community. We have played a leading role in recent years in the creation of an open Community based on free trade and the abolition of barriers.

Our partners know that, and they know, too, that that would not have been achieved but for the leadership of my right hon. Friend the Prime Minister. I am convinced that we can and should continue to play that constructive and central role and that we shall be able to agree on a way forward on economic and monetary union that is acceptable to all 12 member states and, crucially, equally acceptable to right hon. and hon. Members who have a direct interest in what is determined.

We must not trivialise the debate. The Leader of the Opposition, when asked about a single currency—perhaps one of the most important issues before the country for years—said:

"We can certainly have the Queen's head on our currency. I would be very much in favour of doing that."

That is nice to know. It is good to see a precise appreciation of these complex points, but when pressed on that and asked whether he thought that as long as the Queen's head was on the coin it would not matter if there were a common currency or a single currency, the right hon. Gentleman said:

"That is the whole point that Leon Brittan and Jacques Delors and everybody else has made."

Actually, it was not: their points were altogether deeper, but let that pass.

Do not the Opposition comprehend the seriousness of this issue? The Delors report advocates a single monetary policy controlled by a non-resident bank that might be independent and not answerable to national Parliaments. That would be imposed by politicians, not decided by choice. Do not the Opposition realise that, whatever is stamped on either side of a coin, that coin must have a single unvarying value in terms of all other Community currencies? Those are issues of vital importance to Parliament and our future, and they deserve much more than the right hon. Gentleman's glib answers to questions that he does not understand. He clearly does not understand what he would commit us to were he in government. He would simply follow the lead of others and join the end of the queue without having the faintest idea what he was queueing for: "The other 11 people seem to know, so it must be right—we will join the queue." That is the limit of the right hon. Gentleman's understanding.

We know what is at stake, however: the whole future direction, composition and nature of the European Community. I believe that we must be a part of it, building, developing and shaping it. Our partners believe that too, which is why I am confident that we shall be able to negotiate a way to success in the intergovernmental conference that starts shortly.

The current slowdown in the economy is in no sense comfortable but it is absolutely necessary, and once it is over, once inflation is heading downwards again and growth is picking up, as will happen, we shall put our problems behind us and begin to build on the formidable array of our achievements of the past decade. For when people get the chance to choose once again between a party that has principles and a party that has abandoned them, between a party that delivers freedom and a party that inhibits it, between a party that builds prosperity and one that merely seeks to redistribute it, I believe that they will vote for the consistency, courage and conviction with which my right hon. Friend the Prime Minister has led this country so successfully for so long.

On a point of order, Madam Deputy Speaker. I seek your advice about remarks made by the Leader of the Opposition during my right hon. Friend's speech.

When my right hon. Friend was giving the House some statistics about the increase in business investment in the past few years and the relative success of the British economy compared with France and Germany—[Interruption.]

Order. I must hear the point of order, and the hon. Gentleman must come to a point of order with which the Chair can deal.

Once my right hon. Friend had given those good news statistics, the Leader of the Opposition was distinctly heard to say that they are a fake. That was clearly a reflection on my right hon. Friend and his officials. Would the right hon. Gentleman care to withdraw the remark?