HC Deb 05 December 1995 vol 268 cc140-265
Madam Speaker

I must tell the House that I have selected the amendment in the name of the Leader of the Opposition to the first Ways and Means motion. It may be convenient if at this stage I also announce that I have selected the amendment in the name of the Leader of the Opposition to the motion on public expenditure which is being debated together with the Budget resolutions.

3.35 pm
The Deputy Prime Minister (Mr. Michael Heseltine)

My right hon. and learned Friend the Chancellor of the Exchequer had three principal objectives in his Budget: first, to maintain the Government's determination to make this country the enterprise centre of Europe; secondly, to enhance still further the priority that we give to three vital public services—education, the health service and the battle against crime—while reducing overall public expenditure as a percentage of gross domestic product; and, thirdly, to pursue the Government's objective to allow people to keep more of their own money through a programme of significant tax cuts. I pay tribute to my right hon. and learned Friend for producing a Budget that achieved all three of those objectives. He has delivered a Budget that will get borrowing down, secure our reputation for governing responsibly and in the national interest, and continue to promote a sustainable, lasting recovery.

I referred to our determination to build in this country the enterprise centre of Europe. We have recognised as a Government—perhaps more frankly than any other Government—that over the past 100 years, our position as a trading nation, from about 1860 onwards, has been one of relative decline. As a Government, we inherited in 1979 an economy heading for still more serious decline—structurally unsound, grossly overmanned, seriously unproductive and ridden with industrial disputes. It was widely acknowledged that in 1979 this country was the sick man of Europe.

Today, we are among Europe's fastest growing economies. The United Kingdom grew faster than G7 average growth in 1993 and 1994, and we are set to do so again this year. The International Monetary Fund expects us to join Germany at the top of the G7 growth league in 1996. The Organisation for Economic Co-operation and Development has praised the change. Its survey of the UK noted:

the UK's sweeping structural reforms are yielding dividends in a more flexible, competitive, and less inflation prone economy.

Mr. D. N. Campbell-Savours (Workington)

The Minister refers to sweeping structural reforms. Has he noted the sweeping structural reform in my constituency, where an American company, Campbell Soups—60 per cent. of its share capital is owned by one family—was able to take a decision which closed one of the most advanced food-producing plants in the country, owned by Home Pride, effectively wiping out 123 jobs at a stroke? Home Pride was profitable last year; it made £4 million. The entire food industry is outraged, and my constituency is outraged, yet the Government stand back and do nothing. Who is going to step in to stop such companies wrecking the local economy in my constituency? If the right hon. Gentleman has any honour, will he stand at the Dispatch Box and join me in appealing to the British people to boycott the products of the company—Campbell soups and Fray Bentos corned beef—so that it knows that we will not stand aside and watch it wreck a constituency such as mine?

Mr. Dennis Skinner (Bolsover)

So much for inward investment!

The Deputy Prime Minister

Of course I do not like unemployment being created in any constituency in any circumstance. I take the point made by the hon. Member for Workington (Mr. Campbell-Savours) seriously. Was he saying that a future Labour Government would become involved in preventing companies from closing down? Would a future Labour Government be prepared to offer subsidies to such a company? Is that one more—

Mr. Campbell-Savours

rose—

The Deputy Prime Minister

No, I will not give way. This is a question not for the hon. Gentleman, but for Front-Bench Members of his party. What faces us today is old Labour anticipating old demands that it will make to a future Labour Government. Perhaps the deputy leader of the Labour party will tell us how much money is tucked away in the coffers of a potential Labour Budget to save jobs in the circumstances that the hon. Gentleman has described.

I noticed another characteristic of old Labour when the hon. Member for Bolsover (Mr. Skinner) spoke against inward investment, cynically attacking one of the most successful aspects of the British economy.

Mr. Skinner

Why does the right hon. Gentleman not carry out his promise of a short time ago, when he talked at the Tory party conference about intervening before breakfast, before dinner and before tea? Why, in this respect, does he not intervene before the soup?

The Deputy Prime Minister

As the hon. Gentleman knows, I and my right hon. Friends have intervened time and again and the result has been that there have been more than 4,700 inward investments into this country which are creating or safeguarding 700,000 jobs. That is the sort of intervention in which we believe, creating an enterprise economy which is making us the most successful enterprise centre of Europe.

It is interesting that this is the new Labour party. At any sign of success, any inward investment by overseas companies or any decision to cause a redundancy, the Labour party is up in arms with indignation. There is nothing new about the Labour party. Labour Members are the oldest men and women, psychologically, in British politics.

Several hon. Members

rose—

The Deputy Prime Minister

There is no point in my giving way when the Labour party has given way to every intellectual argument that this party has paraded over the past 16 years. Labour Members—the whole lot of them—do not realise that they are intellectually flat on their backs.

The people of this country must make a decision. Do they want this country's economy to be judged by the standards of the Labour party, or by the standards of the men and women running the world's most successful international companies who, in the freedom they enjoy, are choosing to invest in this country—a country that the Tories have made the most successful in Europe? Which is the right judgment? Should people choose Labour's restrictionism, which harks back to yesterday, or the Tory party's bringing the investment that will create prosperity and jobs tomorrow?

Mr. Ronnie Campbell (Blyth Valley)

The Deputy Prime Minister closed the pits and put 30,000 miners out of a job. Why are new mines now being opened in the north-east of England? Why are companies opencasting half my county? Why is that happening when the right hon. Gentleman put 30,000 miners on the dole?

The Deputy Prime Minister

I took that most uncomfortable decision for the same reason as Labour Ministers took exactly the same decisions year after year after year, in the unhappy circumstances when they sat temporarily on the Treasury Bench. They took that decision—as I did—because the industry was uncompetitive. The reason why the hon. Member for Blyth Valley (Mr. Campbell) can point to the fact that new mines are being opened, new opportunities are being created and coal is being exported is that under the private sector, the coal industry is competitive. That is the transformation which has come about.

Mr. William Cash (Stafford)

Bearing in mind the fact that I voted against the coal proposals to which my right hon. Friend has referred, but moving further forward, does my right hon. Friend accept that the Labour party demonstrates its utter hypocrisy by continuing to cavil and complain about how we are running the economy, when the Labour party was behind the exchange rate mechanism and is in favour of further integration into monetary union? Will my right hon. Friend say here and now that the United Kingdom will never go back into an exchange rate mechanism? It is precisely because we are outside that system that we are now competitive and have all the growth to which my right hon. Friend has rightly referred.

The Deputy Prime Minister

Now that my hon. Friend has reminded me of the facts, I recall that he disagreed with me on the issue of the coal mines. But the day when my hon. Friend and I agree on all aspects of policy will be a day for the Tory party to rejoice from one end of the country to the other. I only suggest to my hon. Friend that he should use his considerable rhetorical skills not to attack the record of the Government but to attack the Labour party, which will otherwise take the place of the Government.

Several hon. Members

rose—

The Deputy Prime Minister

I think that it is only fair that the Opposition spokesmen should have a chance to speak in the debate, as opposed to allowing the whole thrust of Labour party policy to be dictated by its Back Benches.

Mrs. Ann Clwyd (Cynon Valley)

Will the right hon. Gentleman give way?

The Deputy Prime Minister

I am being fair to the Labour party because I understand that it cannot make up its mind which way to vote tonight. Perhaps I should give Labour Members more chance to debate these matters between themselves. I will not give way to the hon. Member for Cynon Valley (Mrs. Clwyd); she will forgive me. The fact is that international opinion and world commentators now praise the remarkable changes that have occurred in the British economy. To quote only one, the chairman of BMW said earlier this year:

structural change has made Britain by far the most attractive place to invest in Europe. The fact is that the change is happening in manufacturing, the service industries and in the vital super-highway industries of tomorrow. The people who have to make the judgments upon which so many jobs and so much investment depends know that the British economy under the Conservatives offers the best tax climate, excellent industrial relations, low inflation and a climate of enterprise which the Government are systematically extending and expanding year after year.

There can be no clearer indication of the success of our policies—it is one that was at the heart of the Labour party's preoccupation—than the fact that unemployment has fallen by almost 750,000 over the past two and a half years. The United Kingdom now has more people in work than any other major European Union economy.

I shall expand on some aspects of the Government's continuing agenda of competitiveness, to which the Chancellor referred in his speech. I shall start with the deregulation initiative and the burdens on industry. After the outstanding work of the task forces, first under Lord Sainsbury and now under Francis Maude, far more than 1,000 regulatory provisions have been earmarked for repeal or amendment. Some 500 will have been dealt with by the end of this month, and many more are in the pipeline.

We are now saving companies hundreds of millions of pounds per annum, which of course feeds through into enhanced competitiveness, investment and jobs. Out of the hundreds of regulatory provisions, I shall give the House three examples. First, merely by simplifying the food temperature control regulations, the Government will have helped save industry about £40 million a year. Secondly, we have increased the proportion that charities can invest in equities from 50 to 75 per cent. On the charities' own estimates, that could increase their investment returns by some £200 million a year. Thirdly, the simplification of trade marks legislation is already generating savings of some £30 million a year.

I am pleased to announce today the progress that we have made on a major area of regulatory concern—bringing in greater joint working by the Inland Revenue, the Contributions Agency and Customs and Excise to make dealing with Government more straightforward and less burdensome for business. Anyone in business will know that every year, two heavy documents arrive, one explaining the tax system, the other explaining the national insurance contribution system: two systems, two organisations, two sets of inspectors, two documents.

Today, Peter Wyman, senior tax partner of Coopers and Lybrand and a member of Francis Maude's task force, has agreed to oversee and drive forward the project of joint working between the Inland Revenue and the Contributions Agency and to ensure that this delivers real early benefits to business. We are talking about concrete things that really matter to people who run businesses: like having just one initial audit visit covering both PAYE and national insurance; like a single telephone help line to deal with queries and to cut out the duplication of paperwork. Peter Wyman will bring exactly the external experience and perspective that we need for this task.

I referred earlier to our inward investment. One third of all inward investment in Europe is now based here. Forty per cent. of all American and Japanese investment in Europe is here—world-class companies transforming management practices, our employment prospects, our research expertise and our export markets. This investment from overseas, together with very optimistic forecasts for domestic investment, is helping the transformation of our economic prospects. But there is more to it than that.

Mr. Ian Bruce (South Dorset)

Does my right hon. Friend believe that if the Government were to sign a sweetheart deal with BT allowing it to compete against the new entrants into the cable market, we would get the information super-highway built quicker? Would that have the effect of cutting off inward investment from such companies?

The Deputy Prime Minister

I would be grateful if my hon. Friend would bear with me. I had it in mind to return to that subject a little later in my speech.

This is not just about our industrial and commercial base. Britain is being modernised and rebuilt in what will be seen in perspective as the greatest period of urban renaissance since the 19th century. None of this is luck; it is as a deliberate consequence of the strategies that the Government have pursued.

First, trade union reform and the privatisation of our nationalised industries played a critical part in restoring the wealth-creating ethos in this country. They have become established here despite the in-built resistance at every stage of the Labour party, which is characterised now only by its abject surrender on all those major issues of principle for which it fought so hard in the 1980s.

Mr. William O'Brien (Normanton)

Will the right hon. Gentleman give way?

The Deputy Prime Minister

No, we know into which Lobby the hon. Gentleman went all through the 1980s. We know the record.

The fact is that our reforms in the restructuring of our economy and the privatising of our industries have become so entrenched here that they are the subject of intense investigation across the world. There is virtually no country today that is not exploring and experimenting with the ideas that we developed in the 1980s. They are established here and admired across the world. The fact is that we are moving on to new ideas that again will become part of the world culture change.

Mr. Tony Marlow (Northampton, North)

Talking about new ideas, or perhaps rehashed old ideas, my right hon. Friend has been discussing regulation and competitiveness. I understand that there are one or two parties in the House—or even three—that have a proposal for a Scottish Parliament. What would that do for the competitiveness of industry and deregulation in Scotland? My right hon. Friend may intend to deal with that later, but if he does not, perhaps he could tell the House what he thinks about it.

The Deputy Prime Minister

It is difficult to be sure how much extra tax it would lead to because I would have to know how much extra tax was going to be imposed by a future Labour Government across the national economy. As I understand the specifically Scottish dimension, the cost of an assembly in Scotland would be of the order of 3p. That, I think, is the tartan tax. That, broadly, would be the sort of cost that the people of Scotland would have to pay. The effect on inward investment in Scotland would be dramatic, but it would, of course, be hugely advantageous to England, Northern Ireland and Wales, because we would get the inward investment that socialism in Scotland would deter from going there. Those are the obvious consequences of a Scottish assembly, and that is why I do not expect to see it happen.

We are now pioneering further developments that will affect the culture of public and private sector co-operation on a world scale. The first of those is the progress and vast potential of the private finance initiative. The Chancellor of the Exchequer and the Secretary of State for the Environment made it clear last week that we will also be extending the reach of another Government innovation—challenge funding. In many ways, the cultural shift implied in challenge funding is among the most pervasive and ambitious of our proposals.

I well remember, 15-odd years ago, the hostility that greeted the concept of the urban development corporations, the enterprise zones and the urban grant. But once again, as in so many other areas where we have pioneered, others have been forced by events to follow the lead that we set. We have seen, and will see through regional challenge, city challenge and the fund for the single regeneration budget, billions of pounds of investment from the private sector being levered in by the stimulus of public money to regenerate and revitalise our inner cities.

No one who has any experience or understanding of east London, Tyneside, Clydeside, the Tees, Merseyside, inner Birmingham, central Manchester or Cardiff bay can question that it is Conservative policies which have transformed those formerly dispirited urban areas. They have done that by creating a genuine public-private partnership, which has added hugely to what the public sector could ever have been able to afford.

We have not just created a physical renaissance—we have changed the culture of co-operation at local level. We have forced the inward looking, self-serving local Labour authorities to work effectively in partnership with their local communities, which they have been elected to serve.

Challenge funding has brought the Government, local authorities, training and enterprise councils and the private sector together. Regional challenge involves the European Commission in the same process. As a consequence of such partnerships, those involved have overcome differences and worked together for the benefit of the entire community. In order to win the competition for challenge funds, local authorities must now consult and involve their local communities. They must talk to tenants, teachers, the police and the industrial and commercial communities as they develop their plans and their priorities.

That is the politics of progress. That is how one truly builds the concept of one nation in the most deprived parts of our country. That change has been brought about because the Government have changed the assumptions that local authorities can simply expect to use taxpayers' money to finance irresponsibility and dogma.

The Secretary of State for the Environment has now proposed an expansion of challenge funding in local authority capital programmes. Shortly, the President of the Board of Trade will announce the result of the competition for the £160 million available under the regional challenge, which we have run with European funds.

Mr. Terry Lewis (Worsley)

Bingo and scratch card economics again.

The Deputy Prime Minister

I cannot help but notice the continuing murmuring of anti-enterprise slogans from the Labour party. The most interesting thing about sitting on the Conservative Benches is to note that the only thing that ever excites the Labour party is yesterday's slogans. The more the leadership of the Labour party talks about new Labour, the quieter the Labour party becomes. The more it lapses into yesterday's jargon, the more hysterically reminiscent it becomes of the old Labour party I know and love. [Interruption.] I should have thought that with so much self-evident success, benefiting the Labour constituencies of this country—[Interruption.]

Madam Speaker

Order. I refer to Mr. Campbell. I will have some order now from the Opposition Front Bench below the Gangway.

The Deputy Prime Minister

I am referring to falling unemployment, which now creates derision among the Opposition. I am talking about inward investment in their constituencies and the hon. Member for Bolsover (Mr. Skinner) sneers. My right hon. Friends spend hour after hour trying to persuade companies to come here instead of the south of Ireland, Germany, Holland or anywhere else and all that we get from Opposition Members is sneering at the results that bring jobs to their constituencies.

That is characteristic of what we know about the Labour party. They are never happier than when they are talking Britain down. The Labour party has latched on to the 1995 world competitiveness report. It is a report in which Chile comes top for having corporate boards which safeguard proper practices and Peru is thought to be the second most likely country in the world to have a low inflation rate in the next 12 months, despite the fact that the present inflation forecast for Peru in 1995 is 20 per cent. To cap it all, it is a report in which public confidence in financial intermediaries in Colombia surpasses that in all G7 countries except Canada.

Not content with that piece of fantasy, the Opposition turn desperately to some of the OECD figures that the Government used in the competitiveness White Paper. The OECD figures do not help them enough, so what do they do? They stick Hong Kong and Singapore into the OECD league tables of GDP per head and select the position just above the United Kingdom in which to put them. They have no idea as to whether they should put them there, so they do whatever suits their political propaganda.

The Opposition are not comparing like statistics with like, but that does not matter. It may not fit the facts, but it serves the narrow, knocking purpose of the Labour party. They leap about and start crowing that the United Kingdom has apparently slipped from 13th position in 1979 to 16th now and when they include Hong Kong and Singapore, it is 18th. However, they overlook inconvenient facts, as they always do. We might explore whether the Opposition are prepared to get rid of the unemployment benefits and the welfare benefits that we have here but do not exist in Singapore in order to raise the investment levels in Britain to those in Singapore. Perhaps that is new Labour policy, and that is how Britain's competitiveness is to improve, but we might be let into the secret this side of a general election campaign. Perhaps they have it in mind that people should live in conditions characteristic of those in some of the fastest growing economies of the far east. If they would be prepared to allow those housing conditions to exist here, people should be entitled to hear about it.

Mr. John Prescott (Kingston upon Hull, East)

This is absurd.

The Deputy Prime Minister

I am not absurd; it is absurd that the Opposition are attempting to compare Britain with those two economies for their own narrow, selfish party purposes, although they were not included in the OECD figures.

Even if one were talking about the events of the 1980s and 1990s, and considering the countries that were included, in 1979 we were the sick man of Europe. Nobody seriously argues with that. I cannot believe that the Opposition would defend it; that would imply that they wanted to go back to it. They certainly would go back to it, but they do not want to imply that intention.

In 1979 we inherited the disasters of restrictive practices, rampant inflation and soaring debt. Thanks to that legacy I concede at once that we slipped to 19th place in 1981. I wholly fail to understand how anybody can imagine that in the immediate aftermath of the winter of discontent we could have seen anything other than the deterioration of the British economy. Where the whole game plan comes unstuck is that from 1981 onwards, we have worked painstakingly and steadily to right the effect of those years of decline. We have achieved something that the socialists opposite never achieved—real, lasting success. While Labour fiddles with statistics, we have been tackling the competition head on.

Mr. Prescott

It is not us who have been doing the fiddling, such as on the unemployment statistics.

The Deputy Prime Minister

Use the word "fiddle" and the deputy leader of the Opposition wakes up. That is his stock in trade, and he is expert at it. I suggest that he calms down because I shall be coming to the deputy leader in a few minutes. Give me a minute or two to deal with the facts before we get to the right hon. Gentleman.

Since 1981, we have seen a significant recovery in this country's status as a world economy because we have systematically put in place the conditions for competitiveness. Although Labour has changed its language, it has changed none of its instincts or ambitions. Labour in the end is the party of the producer, not the consumer. It is the party that will always serve the interests of organised labour as opposed to the interests of the market place. In the end, the Labour party will put its interests above those of the nation at large.

If anyone wants to understand how little Labour has changed and how little it understands of the responsibilities of government—and of how one does not fiddle in Government—consider the point raised by my hon. Friend the Member for South Dorset (Mr. Bruce). The leader of the Labour party stitched up a deal with BT, which he announced with maximum publicity at the Labour party conference. If we in Government behaved like that, we would be in the courts for abusing our legal restraints. No wonder the right hon. Member for Sedgefield (Mr. Blair) has been spending his time ever since trying to persuade the cable companies, which we encouraged to invest billions in Britain, that he had not done a deal with BT. The right hon. Gentleman cannot have it both ways. Either he has done a deal with BT that no one in the Government could do within the constraints of the law, in which case the right hon. Gentleman does not have any idea of the responsibilities of government, or he has not done a deal—in which case he deceived the British people into believing that he did. With the Opposition, if votes are for sale the price is of no regard.

One of the responsibilities of my right hon. Friend the President of the Board of Trade is to preside over the regulatory climate and to operate, objectively and on advice, within the law. I have received a letter from the hon. Member for Sheffield, Central (Mr. Caborn), who is an Opposition spokesman and could find himself in a responsible position and required to study evidence and listen to advice, in taking a wholly analytical and detached view of problems put before him—for that is the job that the hon. Gentleman shadows. Before the hon. Member for Sheffield, Central received any independent advice or heard what the regulators had to say, he wrote to me:

Bskyb is abusing its market position by restricting consumer choice and disabling potential competitors. I read in the newspapers that the deputy leader and the Leader of the Opposition ordered the hon. Member for Sheffield, Central to withdraw that letter. After all, what is the point of flying all the way to Australia to suck up to the executives of the Murdoch empire if one's official spokesman back home is trying to carve up one piece of that empire at the same time as one is trying to win votes in Australia? I will give Mr. Murdoch a simple word of advice. Before he listens to the organ grinder, he should keep his eye on the monkeys back home. Nothing shows more clearly what Labour would be like in power and that it has no idea of the responsibilities within which a Government must operate. Labour is not fit to govern.

Mr. Richard Caborn (Sheffield, Central)

rose—

The Deputy Prime Minister

Of course I will give way to the hon. Gentleman. I will get the letter.

Mr. Caborn

While the Deputy Prime Minister is getting the letter, I can tell him that legal advice was taken on the BT deal by the Select Committee. In fact, we took three sets of legal advice. We were told that the proposals in the Select Committee report were attainable, and that is what my right hon. Friend the Leader of the Opposition said.

I suggest that the right hon. Gentleman might do better in government if he did some of the things that he suggested when he was in opposition. I also suggest that if he revisited his book "Where There's a Will", he might gain more backbone to take on the Treasury—as he said that he intended—and that might be helpful in the future.

The Deputy Prime Minister

I am glad that I gave way. I read the Financial Times and—

Mr. Caborn

We have read the book.

The Deputy Prime Minister

If the hon. Gentleman had read my book, he would not have made such inane observations.

If the BT deal announced by the Leader of the Opposition in his bravura performance was real and of value, why is he now telling the cable industry, to quote the Financial Times—[Interruption.] I shall give way if anybody wants to tell me that what the Leader of the Opposition told the Financial Times is not true.

The Opposition cannot have it all ways. What the Leader of the Opposition said at the party conference was designed to give the impression of a deal that would change the world. What he said today to the cable companies "at a private meeting"—not on the platform at the Labour party conference, not at a great gathering of the Labour party and with no trade unionists there to check the minutes—was

that BT would only be allowed access to the market after 1998 if it presented a detailed programme for the construction of a nationwide "broad-band" cable network—the so-called information superhighway.

Mr. Caborn

That is what the Select Committee said.

The Deputy Prime Minister

We are talking not about what the Select Committee said, but about what the Leader of the Opposition tried to con the British people into believing at the Labour party conference. Obviously, he was trying to have it both ways. If the right hon. Gentleman had been in government, he would have been in the courts—and the Opposition know it.

The Budget debate has had the flavour of the old Labour party. One after another, Opposition Members have been demanding higher levels of public expenditure. The hon. Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) wanted a community action programme. The hon. Member for Falkirk, West (Mr. Canavan) demanded investment in the construction industry. The hon. Member for Bradford, South (Mr. Sutcliffe) wanted —20 for the disabled. The hon. Member for Cambridge (Mrs. Campbell) wanted more family credit. The hon. Member for Edinburgh, Leith (Mr. Chisholm) wanted regional development agencies.

Opposition Members want policemen, money for roads, housing benefit, money for education, investment, money for lone parents and more overseas aid. Their wishes were all summed up by the hon. Member for North-East Derbyshire (Mr. Barnes) when he said:

Greater expenditure is justified in many areas."—[Official Report, 29 November 1995; Vol. 267, c. 1283.] All that at 10p in the pound income tax!

I am not surprised that the hon. Member for Dunfermline, East (Mr. Brown) cannot answer the questions that have been put to him by my right hon. and learned Friend the Chancellor and other colleagues. One after the other they have intervened, but they have received no answers. Not only is the Labour party not fit to govern, but its sums do not add up.

Mr. A. J. Beith (Berwick-upon-Tweed)

Will the right hon. Gentleman answer a question that will be in the mind of a typical teacher in his constituency? "If I am to get £9 more a week out of the Budget, I would need a pay increase of 4 per cent. If I got a pay increase of 4 per cent., schools would not get another £848 million because that entirely depends on the teachers' pay settlement being much lower. Which do I take?" Surely the same Budget cannot offer both.

The Deputy Prime Minister

The right hon. Gentleman is perfectly capable of understanding the Chancellor's language. My right hon. and learned Friend referred clearly to the average income rising by £9 a week next year. He said time and again that that increase takes into account a range of factors, such as wage settlements, bonuses and overtime earnings, which will vary as between companies, employees and industries. That is bound to be the position, and everybody understands it, but the fact is that we have a conflict: a shadow Labour Chancellor who cannot answer any of the questions, and a Labour party that is determined to try to seek increased expenditure in programme after programme.

I was interested to see a question that was tabled by the hon. Member for Edinburgh, South (Mr. Griffiths), which read:

To ask the Chancellor of the Exchequer what would be the cost in a full year of introducing a new 30 per cent. tax band on £3,000 of income above the basic rate band; and what would be the yield from introducing a 60 per cent. upper rate at a 40 per cent. rate limit of (a) £50,000, (b)£70,000 and (c)£100,000."—[Official Report, 2 November 1995; Vol. 265, c. 426.] If that was an idle question from some relatively new and inexperienced Labour Back Bencher, I doubtless would do my best to draw that to the attention of the House, but it may not have quite the credibility that it has when it comes from a Labour Front Bench spokesman. What possible interest has a shadow Treasury spokesman of the parliamentary Labour party in asking the Treasury to calculate the product of a 60 per cent. upper rate tax band? Is it idle curiosity, or is it to help with the arithmetic? If it is the latter, it would help the shadow Chancellor to answer the questions, but at least we should know that this side of a general election campaign. [Interruption.] I read out the question. I did not get it wrong. [Interruption.] The hon. Gentleman is a Front Bench spokesman. [Interruption.] If I have revealed that I was not sure that the hon. Gentleman was a Treasury spokesman, have I revealed something else: that there is a split between hon. Members on the Opposition Front Bench—between the Treasury trying to keep expenditure down and some other departmental responsibility trying to find the money to pay for increased expenditure? I do not mind which way it is; all that I tell the people of this country is that the Labour party is planning a 60 per cent. tax rate and it is doing the calculations on that basis.

Of course, the Labour party may try to suggest that one is raising claims about its policy that cannot be substantiated, but in the real world its own party members are asking the same questions. I happened to notice what the hon. Member for Hackney, North and Stoke Newington (Ms Abbott) said on the "Today" programme:

Gordon— I would be more respectful if I was referring to the shadow Chancellor—

can say anything he likes if he thinks that is going to win the election. When Labour is in power they will be looking for other priorities apart from tax cuts". I have to say, of course, that the hon. Lady is a young and enthusiastic Member of the Labour Back Benches, so perhaps again we can dismiss it as an isolated occasion, but I have always been interested in the old hands who have been around a little longer, one of whom is our old friend the right hon. Member for Chesterfield (Mr. Benn), who was on the "Clive Anderson Talks Back" programme. [Interruption.] I understand that Labour Members do not want to hear it, but hear it they will, not just from me but from their right hon. Friend. Let me quote what he said:

The Labour Party doesn't want to cause trouble because we want to get this bunch of crooks out of Government." [Interruption.] We can unite the Labour party on that. He goes on to say:

And that's absolutely right". Now get the cheer ready, boys.

And then when we come to power, then you'll find the Labour Party is the same … party as it's always been. So there we have it—a party determined to egg up expenditure at every moment; a shadow Chancellor refusing to answer any of the questions; a shadow spokesman asking for calculations of the product of 60p in the pound income tax; and the old hands of the Labour party saying, "Let them say what they like as long as we get into power, then we will revert to type."

I am not telling the Labour party anything that it does not know. It knows that the shadow Cabinet is torn apart by the traumas of the debate that is going on—the shadow Chancellor talking about 10p in the pound income tax.

Mr. Campbell-Savours

Hear, hear. That is a very good policy.

The Deputy Prime Minister

Well, the hon. Gentleman should go and tell the shadow Foreign Secretary that, because he blew his top when he first heard about it.

Mr. Campbell-Savours

No, he did not.

The Deputy Prime Minister

Yes, he did.

Shadow Chancellor talks about denying welfare payments to those people who do not present themselves for work. The shadow Chancellor just did not tell his colleagues in advance, so the shadow Foreign Secretary flipped his lid when he was first told.

The only thing that can be said for the deputy leader of the Labour party is that, as no one ever tells him anything, he cannot be blamed if anything goes wrong. I do not want to give the House a misleading impression about the deputy Leader of the Labour party. I do not want to give the impression that just because no one talks to him they do not love him. It has become abundantly clear through the media of The Times that at least someone loves the deputy leader of the Labour party.

I was intrigued today to see that a young lady, Fleur Adcock, has written a little poem to the deputy leader. It reads:

In the dream I was kissing John Prescott— or about to kiss him; our eyes had locked and we were leaning avidly forward, lips out-thrust, certain protuberances under our clothing brushing each other's fronts, when my mother saw us, and I woke up. I must say, it was a merciful release for somebody.

We are back with the essence of a Budget which has left the Labour party floundering with a wholly inadequate response. It is a Budget which will deliver an extra £9 a week to the average income in Britain. It is a Budget which has seen us pursue our priorities of extra expenditure on the health service, on education and on the police. It is a Budget which has seen us march on a journey which is intended to take us to our 20p in the pound tax rate. It has revealed, by the Labour party's abject inability to make up its mind which way to vote tonight, that it is a party of opposition and not fit to govern.

4.22 pm
Mr. Peter Luff (Worcester)

On a point of order, Madam Speaker. I would appreciate your guidance on a matter of some importance before the right hon. Member for Kingston upon Hull, East (Mr. Prescott) rises to move the amendment on the motion on public expenditure. The amendment in the name of the leader of the Liberal party, which has not been selected, includes an honourable declaration of interest by the hon. Member for Gordon (Mr. Bruce). The amendment in the name of the leader of the Labour party includes a call to switch resources

to investment in transport from the cost of rail privatisation". Would not it have been helpful if the right hon. Member for Kingston upon Hull, East had also declared his interest arising from his sponsorship by a rail union?

Madam Speaker

I have made my views known on this matter before and I shall not get further involved in it. The hon. Gentleman has raised such issues before, and I refer him to the Official Report.

4.23 pm
Mr. John Prescott (Kingston upon Hull, East)

I beg to move, as an amendment to the motion, in line 4, after `tax', insert

`other than in respect of value added tax on fuel and power for domestic or charity use'. The amendment gives the House an opportunity to vote again on the issue of VAT on domestic fuel.

It was sad to listen to the Deputy Prime Minister today. I have much respect for the right hon. Gentleman. He has written a lot on many issues; I am in common accord with him on some, and in strong disagreement on others. But he rather treated the House to a speech that did not address the issue. It was more in accord with the circus than with a debate in the House of Commons. I am sad about that, because I believe that the right hon. Gentleman is capable of making a more serious speech about the important issues involved in the Budget. The Budget debate is one of the most important debates in which the House engages in discussing the nature of the economy and the prosperity of the country.

The Deputy Prime Minister is, in fact, more concerned with being the chief propagandist of the Tory party, an art in which he proved himself proficient today. We have heard of the fiddling of statistics from a Government who have fiddled the unemployment figures—among others—to such an extent that the responsibility for recording those figures has been taken from the Department for Education and Employment and given to the Central Statistical Office. At least they are now reported more honestly.

The right hon. Gentleman's speech was indeed a propaganda speech. It continued much of the argument that he advanced on this morning's "Today" programme, when he spoke of the "sacrifice" that had to be made if we were to achieve the success to which he referred this afternoon. It is not a sacrifice made by millionaires such as the right hon. Gentleman, and the many other millionaires who have done very well under 16 years of Tory government. It is the low-paid—people who desperately need assistance—who have suffered, and have borne the heaviest tax burden.

I find it offensive that it is those who have made the decisions in Cabinet who have benefited from those decisions, while launching an attack on people who desperately need the protection of a minimum wage. That is little enough to expect when more and more people are being driven down into poverty pay. That is what has happened in the 16 years of this Tory Government, and it is a disgrace to the country.

Yes, a sacrifice has been made; but it has been made by the millions whom the Government have put out of work, often by deliberate acts of policy. Millions of low-paid people have been denied the protection of a minimum wage, and driven into poverty pay by exploitation.

Mr. Bob Dunn (Dartford)

Would the right hon. Gentleman be prepared, on behalf of his party, to guarantee jobs for those who become unemployed as a result of a minimum wage?

Mr. Prescott

I will not take any lectures from any Tory Member about the level of employment, but I give the hon. Gentleman this guarantee: we shall be committed to putting employment at the top of our list of objectives as a Labour Government. We believe that there are certain things that the current Government could do now to return more people to work, rather than allowing them to waste away on the dole. I am talking about real jobs, not the "skivvy" jobs offered by the Budget.

That is the challenge for us, and we readily accept it. I might add that it was a Labour Government who, after the war, produced full employment for the first time, despite the opposition of the Tory party of the day. That is a matter of record.

Mr. John Townend (Bridlington)

If by some mischance the right hon. Gentleman manages to gain power, will he and his party bring back the national dock labour scheme, which ruined the port of Hull and turned it from the country's third port to its 15th? Hull is now recovering, and has doubled its trade since the Conservative party did away with the scheme.

Mr. Prescott

The hon. Gentleman is living in the past. Let me tell him what I would bring back: I would bring back a minimum wage, which would help an awful lot of employees in his shop who are earning very much less than that wage would be. Can the hon. Gentleman honestly say that those people are at least guaranteed the level of wages introduced by the Wage Councils Act? No, he cannot. He should look at his own business before he starts lecturing us about the conditions of people in jobs.

A week has gone by since the Chancellor announced the 18th Tory Budget. The common theme—this year's Budget is no exception—is that these are Budgets for recovery. Every Tory Chancellor has said at the Dispatch Box, "This is another Budget for recovery." Lord Howe said it in 1983; the right hon. Member for Kingston upon Thames (Mr. Lamont) said the same in 1992. According to the Government, we are always recovering, but we can never quite shake off the illness from which the country has suffered over the past 16 years.

We have had time to study the Budget much more closely since it was announced last week, and we have had judgments from the media, economic experts, industry and hon. Members. It is clear from the general view that the Budget has failed to meet the needs of the nation. According to The Sun:

It was about as inspiring as a cold kipper. The Daily Mail questioned:

Where's the magic? The Daily Express announced:

It's too little, too late. Those quotes are just from the Tory press, never mind anyone else. The CBI's welcome was distinctly lukewarm, and even senior members of the 1922 Committee are critical of the long-term failure to cut public expenditure and taxes even further. As most people have agreed, the Budget is the first step towards a grubby attempt to win the next general election.

After the biggest tax hike in history in 1992, what has the Chancellor done to redress the balance? What principles are behind his new tax policies? Are they honest? No, they are deliberately misleading. Are they sustainable? No, and they show no desire to secure a more prosperous economy and greater employment. Do they reward hard work and provide opportunity? Certainly not in terms of providing real jobs and training. Are they fair? No, they are not.

The Chancellor of the Exchequer (Mr. Kenneth Clarke)

I am glad that the right hon. Gentleman has had a chance to study the Budget. Last week, I asked the shadow spokesman for Trade and Industry whether there was any tax reduction in the Budget that her party opposed. I asked her whether there was any spending ceiling in the Budget that her party would increase. She found those questions difficult, and was unable to answer either of them. The right hon. Gentleman says that he has studied the Budget. Which tax cuts does he propose to vote against, and on which services will he advocate more spending?

Mr. Prescott

We have made it very clear that we disagree with the Budget's general strategy. I am moving an amendment to reduce value added tax on fuel. That is an important step, and hon. Members disagreed with the Government and supported us on that matter. We will undoubtedly approach taxation in a fair way. The Government do not. For the past 16 years, they have followed an unfair and regressive tax system. That is why we shall be fundamentally different.

In the context of spending, we shall operate much more fairly the private finance initiative, which I was one of the first to advocate. [Interruption.] Conservative Members think they have discovered private finance initiatives, but when we spoke about them in the House, the Government constantly told us that we could not have them. The Chancellor will certainly confirm that. We disagree with the strategy, and we have made it clear that we disagree with the Government's taxation principles. We shall vote accordingly.

The Budget hides multitudinous unfairnesses. Some 5 million people on benefits will not share in the 1p in the pound tax cuts or the widening of the 20p band. [Interruption.] The Deputy Prime Minister said that his objective and that of the Chancellor was to reduce the burden of taxation. I am afraid that is not the case, because it has been increased, even on the Chancellor's figures. The overall tax burden has increased, and the Chancellor agrees that people are £670 worse off than they were after the last Budget. By any measurement, that shows that, on their own criteria, the Government have failed to be fair on taxation.

Mr. Kenneth Clarke

The right hon. Gentleman is again drifting away from the point. He cannot just be against a Budget strategy but not against any of its measures. A Budget is a combination of tax reductions that allow people to keep more of what they earn and what they save, and a series of public spending judgments about how much will be spent on each service. It strikes a balance between the interests of allowing people to spend their own money and providing good-quality public services.

Is there any tax decision or spending decision in the Budget with which the right hon. Gentleman's party disagrees? If not, how can he oppose the Budget strategy? He is just saying that he does not have an opinion at all on the Budget's contents.

Mr. Prescott

I can well understand why the Chancellor of the Exchequer continually wants to explain his Budget: the rest of the country has certainly not understood it, and gives it the thumbs down. We have an entirely different strategy from the Chancellor. For example, the Government have made great play—he keeps talking about it—about the windfall tax that my right hon. Friend the Leader of the Opposition proposed, which they disagree with, but it is a proposal. We identify that extra tax with jobs, and we are entitled to do that.

We disagree with the judgment exercised by the Government in cutting the resources in the training sector, which is vital. We disagree with the judgment in respect of the reduction in public expenditure. We disagree with the Budget's fundamental drift and direction, and we are entitled to do that. We are called the Opposition at this stage, not the Government, and we are discussing the Government's proposals.

The Budget hides a multitude of unfairness. Five million people on benefits will get no share of the Government's 1p in the pound tax cut or of the wider 20p band, yet those people must still pay VAT on fuel. In Britain, deaths from hypothermia are much higher than in Scandinavian countries, where climates are colder. Today's cold weather reminds us that pensioners cannot afford to turn up their heating as easily as we can in the House of Commons.

It is a disgrace, and an indictment of the proposal in the Finance Bill to cut £30 million from the energy conservation budget, that that money could have been used to put people back to work in decent jobs, providing energy conservation so that pensioners could live with a little more heat and a little less insecurity. That is what we call jobs and social justice, where we meet the need for a real job and for people who are desperate simply to have the essential requirement of decent heat in winter. That is one clear example.

If the Chancellor really had some money to spare, would it not have been fairer to the old, the low-paid and the unemployed to cut VAT on fuel? That is what we will offer the House the opportunity to do. Again, it might be the only tax reduction that has ever been forced on the Government, apart from last year's VAT cut, when the Government were prevented from putting up VAT on fuel. We will give the House the opportunity to do that again.

An awful lot of Conservative Members have made it clear that they support that. Why? Because they think that it is a more progressive way of tax than the regressive measures that identify much of the Government and Budget proposals.

Mr. Alex Salmond (Banff and Buchan)

I agree wholeheartedly with the right hon. Gentleman on VAT on fuel, and I will join him in the Lobby this evening, but will he explain why, when the Scottish National party and its allies gave the House the same opportunity on 21 January this year, he and his colleagues abstained, calling it a cynical ploy? Why was it a cynical ploy in January and right tonight?

Mr. Prescott

The hon. Gentleman must make his own judgment on this matter. We have given the House an opportunity to vote, and we are the only party that is likely to achieve victory. If the SNP and other political parties join us, we will have achieved that objective, and many pensioners, people who are dependent on heat, will be very pleased that again the Labour party has led the way in making another tax reduction.

The Deputy Prime Minister

rose—

Mr. Prescott

Ah.

The Deputy Prime Minister

Why was it a cynical ploy in January and the whole Opposition strategy tonight?

Mr. Prescott

I keep getting an explanation as to why it should be. I stick to my argument, which is that we have put the case and given the House an opportunity to cut VAT from 8 per cent. to 5 per cent. As the House knows, we cannot reduce it any further than that, because of the requirement of European Community regulations. We will provide the House with that opportunity.

These Budget tax cuts are unfair, dishonest and typical of many of the Tory tax proposals: the more one has, the more one gets. These tax proposals give nothing to millions of people, but their tax burden keeps increasing. Despite what the Deputy Prime Minister has said, the burden has increased from 34.7 per cent. of gross domestic product to 36.5 per cent. this year. Does he accept that figure? I assume that he does—they are the Government's figures. He suggests that the Government's objective is to reduce the overall tax burden, but nothing in the Budget reduces that burden. Even on the Chancellor's projections, it increases the burden.

Mr. Nigel Forman (Carshalton and Wallington)

What did the Leader of the Opposition mean when he told the CBI recently that, under a Labour Government, there would be no return to the old penal rates of taxation, such as 80 per cent? Did he mean a return to 70 per cent. or 60 per cent?

Mr. Prescott

We have made it clear that we will not return to penal rates of taxation. The hon. Gentleman has a reputation as someone who is concerned about the less fortunate in our society. Perhaps he should concern himself with the penal rates that affect people on welfare—if they take work, an 80 or 90 per cent. penalty is imposed on them. I wish that as much attention was paid to that problem as Conservative Members pay to penal rates or the top rate of tax.

We will make a judgment on the different levels of tax rates at the appropriate time. My right hon. Friend has taken an important step forward by stating our policy on the lower end of rates. I understand that Conservative Members are arguing whether 10p or 15p is practical. It is certainly practical in other countries. It is an important step towards measurable wealth which will help us to find the best ways to get people from welfare into work. It is an important point, and I shall deal with it in more detail later.

Mr. Marlow

Are the right hon. Gentleman and his party considering at some stage increasing the top rate of tax from 40 per cent? If so, what parameters is he thinking about?

Mr. Prescott

We will make a decision about that level of tax at the appropriate time. It is fair to assume that there will be another Budget before the general election, and I do not know what the Chancellor will include in it. We have an obligation to make clear, at the appropriate time, our precise approach to taxation at all levels of income.

What characterises this Budget is that the Chancellor gives with one hand while he takes away with the other. Council tax, car tax, petrol tax and cigarette tax are all going up—while for a few top earners there will be huge pay increases. They will be hundreds of pounds better off, yet the average family will be £670 a year worse off than they were at the last general election—and that is before the rise in council tax is taken into account. As many of my hon. Friends have said, it is a 7p up, 1 p down Budget. It is unfair, regressive and a flop.

Mr. Michael Fabricant (Mid-Staffordshire)

rose—

Mr. Prescott

I do not have much time, and I have given way a number of times already.

At the end of the Budget speech, the Chancellor boasted that it would put Britain on course to becoming the enterprise centre of Europe—a soundbite if ever I recognised one. On what basis does he claim that, when the public sector borrowing requirement will be £29 billion—£6.5 billion higher than the right hon. and learned Gentleman predicted a year ago? I am worried by the Chancellor's promises, because every time we have measured his promises against reality, he has been way off target. The PSBR is an example of that.

The PSBR is going up, inflation is rising, growth is slowing down, and the balance of payments is deteriorating despite a massive 25 per cent. devaluation. The Government have made great play about Labour Governments and devaluation, yet they introduced a 25 per cent. devaluation in one go, and then claimed the credit for the increase in exports.

With such a devaluation, there should have been a trade surplus—but that has not happened under this Tory Government. Instead, there is an increasing deficit in the balance of trade. It is the slowest investment recovery from any recession this century. Investment in manufacturing—that crucial area of wealth creation —is 20 per cent. lower than it was in 1979, and it is falling as a proportion of gross domestic product. It is a catalogue of failure.

The Deputy Prime Minister made great play about the world prosperity league. The right hon. Gentleman's own report, "Competitiveness: Forging Ahead", published this year, contains a table showing that Hong Kong and Singapore have overtaken Britain. The right hon. Gentleman suggested that Hong Kong and Singapore had done well because they did not provide the sort of unemployment benefits or housing programme that Britain provides.

Will he tell me which of the following countries—they are all ahead of us in the prosperity league—do not have unemployment benefit or a housing programme: Luxembourg, United States of America, Switzerland, Japan, Belgium, Norway, Denmark, Canada, Iceland, Austria, France, Germany, Italy, the Netherlands and Australia? All those countries have done better than Britain. Will he tell us which one of those countries does not have a housing programme or does not pay unemployment benefit? Can he tell us that, or was he mistaken in his remarks?

The Deputy Prime Minister

I was talking about Singapore and Hong Kong.

Mr. Prescott

The right hon. Gentleman was talking about those countries that had done better than Britain, and he suggested that Singapore and Hong Kong had done better because they did not pay unemployment benefit or have a housing programme. I do not know whether he reads his Department's publications. Obviously not: otherwise, he would know that all the countries I mentioned have done better than Britain. It is nonsense for him to suggest that that has anything to do with benefits or the social costs involved in providing decent housing.

Another interesting fact is that almost all those countries have a minimum wage. Why have they done better than Britain when the Government say that a minimum wage would be a problem for our economy? The people who make that claim should face facts. Most of those countries have a minimum wage, but they do far better than Britain in the world prosperity league. Does the right hon. Gentleman look at the evidence and take it into account, or does he just ignore it? A few years ago, the right hon. Gentleman used to believe in a minimum wage. He has changed his mind. However, the principle is still right, even if he has moved away from it.

As well as the world prosperity league, we should study what the OECD has said—an organisation that the right hon. Gentleman claims has said Britain is doing well. I accept that it has said some good things, but it has also said some bad things. It, too, has leagues, and they show that employment in Britain is lower than it was in 1979, that Britain has plunged to 21st in the investment league, to 24th in the skills league, and to 35th in the world education league.

Those figures show the total and chronic failure by the Government to provide the essentials to make Britain a prosperous country. That is why Britain is falling down the leagues: we do not train our people sufficiently, and we do not give them a good enough education. We do not invest sufficiently in our industries. All that has happened while the Government have been in power, and it has contributed to our dismal fall from 13th to 18th in the world prosperity league. In addition, most of that happened while the Deputy Prime Minister, in previous jobs, has been in charge of competitiveness. He has been in charge of that area of policy over the past five or six years, but it has been nothing but a dismal failure. I do not know whether the fact that he is Deputy Prime Minister will make any difference. Perhaps he can now take on the Treasury. We hope that Britain's position will improve, but our judgment is that the Budget will not do anything to bring that about.

The international tables are clear proof of the long-term failure of Tory economic policy, yet the Chancellor thinks that it will put Britain on course to be the enterprise centre of Europe. What will the Budget do to reverse Britain's decline? Nothing. All it has done is give us new theories and new targets.

In the 1980s, we were plagued by the theories of Friedman and the money supply—now generally discredited. Now we have the target of reducing public sector expenditure to below 40 per cent. of GDP. We are told that, if only that can be achieved, we will have the self-sustaining, non-inflationary growth the Government talk about continually. Do they not realise that it is not just how much they spend, but where they spend it? Labour spent money on investment and kept people in work. There were fewer than 1 million unemployed when the Government took office.

It is sheer arrogance for the Government to say constantly that somehow they have improved the employment situation—the number of unemployed people has risen from 1 million to 2.5 million, even by the fiddled figures. If the Government remain in power, there is the possibility that we will go into the next century with more than 2 million people unemployed. That is not only morally unacceptable, but creates massive problems with public finances which we are now trying to address. We are identifying the problems of failure.

We have to make it clear that the Tories—apparently spend more on keeping people out of work than using it to get them back to work. That is one of the essential differences between the Labour party and the Tories. They have cut public investment and increased public consumption—despite the enormous opportunities for investment. In the history of this country, no Government have ever been blessed with more resources in such a short period—from the £100 billion that they have taken from North sea oil to the £120 billion from privatising nationalised industries at a knockdown price.

That money has largely been wasted on keeping people on the dole. No Government in our history have had such resources, or, indeed, ever had such an opportunity to do something about fundamentally changing the relationship between investment and consumption to achieve greater prosperity in this country. That has always been our case, and the problem which we have always tried to address. It is not easy to deal with politically—I readily accept that—but, with such vast resources, the Government had an opportunity to make that change. No other Government would have squandered those resources like this Tory Government.

As last year's excellent report on manufacturing competitiveness by the Select Committee on Trade and Industry—chaired by my hon. Friend the Member for Sheffield, Central (Mr. Caborn)—said, investment is the key. The Committee catalogued the decline in manufacturing, which it said was due to the lowest levels of investment, training, qualifications and skills among our people. It pointed out where the failures lie.

If one reads the report's conclusions and looks at what this Budget—and the one before—have done, one sees that it has made no recommendations along the lines of those suggested by the Committee designed to deal with problems in reversing the decline in our manufacturing industry. The Government have ignored the Committee's recommendations. We have to invest if we want the economy to grow. That is the crucial variable in every successful economy which one studies. We need long-term investment in capital, infrastructure and people.

In Germany, Japan, the United States and any other major competitor country, investment, with an industrial strategy, is the key to economic prosperity. Why should industrial strategy be considered an ideological difference between the parties in Britain, when Governments of the left and right in various successful countries have managed to deploy a proper role for Government in developing one?

Indeed, the right hon. Gentleman who is now the Deputy Prime Minister has often advocated the case for such a strategy. I thought that he was right to do so, and I wait to see whether he is successful in his new job in challenging the rather short-term view of the Treasury which has often dictated matters.

Mr. Fabricant

Will the right hon. Gentleman give way?

Mr. Prescott

No.

Such a strategy is also the key in the Asian tiger economies, about which the Chancellor and the Prime Minister often talk, and on which the Deputy Prime Minister is so keen. In those economies, public and private finances work together in partnership, and the Government have a proper role to play. That is true of Singapore, as it is of Hong Kong. Any visitor to those countries notes that their deserved prosperity is as much to do with public as private investment. That is also true in Italy and Norway and a number of other European countries, because they invest more in capital and people. It is about not simply wages, but skills and productivity.

It is a mistake to suppose that the inward investors of whom we hear so much, and whom we welcome, come to Britain to take advantage of low wage rates or to dodge the social chapter. That is just not true. If that were the case, why has three times more investment left this country than come into it in the 16 years of Tory government? Of course, in a global economy, money flows in and out, but one cannot make the judgment that the money coming into this country is doing so simply because of cheap wages, and that the money leaving countries is because their wage levels are usually higher than ours. One cannot assume that that is somehow an indictment, and that we must therefore aim for the lowest costs with lower wages, and get rid of the social chapter. Such conditions have often been present in the countries where the money has gone.

Inward investors come to Britain because of the international advantage, and we should recognise that. Such an advantage is often down to our language —a common language and culture. Of course, we are also close to Europe. Those are the reasons why companies invest in this country.

r. Fabricant

On that very point, will the right hon. Gentleman give way?

Mr. Prescott

indicated assent.

Mr. Fabricant

That demonstrates that persistence pays off. I am grateful to the right hon. Gentleman for giving way. Does he think that one of the reasons—just one—why companies invest in this country is that we have the lowest rate of corporation tax? While we are at it, does he support the 1p reduction in income tax, given that a year ago he said that he would not support the Labour party if it were ever to go down the road of cutting income tax?

Mr. Prescott

I thought that the Whips gave out only one question, not two. I shall deal with the first one. Again, if one looks at the OECD figures and the levels of taxation, whether corporation or personal, one sees that no common criteria produce a successful result. In some countries, conditions are very different. From the evidence, one can see that even those countries with high corporation tax have done better in getting more people back to work and attracting more investment. In some cases, low taxation has had that effect. [Interruption.] I suggest that the hon. Gentleman looks at the OECD figures—

Mr. Fabricant

I have.

Mr. Prescott

I am afraid that he has not looked very carefully—

Mr. Fabricant

I have.

Madam Deputy Speaker (Dame Janet Fookes)

Order. I deplore seated interventions, espec