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Ms Abbott: I have listened with rapt attention to a fellow alumnus of Harrow county grammar schools. The right hon. Gentleman spoke about morale among public servants. Is he seriously suggesting that morale was better before 1997?

Mr. Portillo: It is wonderful to see my schoolfriend here. Yes, I am seriously suggesting that morale was better then--the hon. Lady ought to be deeply shocked by that. Because she is a true believer, she genuinely believed that the problem with morale in the NHS and teaching was caused by a Conservative Government. She had in her mind the soothing idea that, as soon as Labour came to office, those problems would be put right, but she must admit that she has been disappointed.

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There was no occasion under a Conservative Government when three quarters of GPs said that they would be willing to resign their NHS contracts; that simply did not happen. We did not have four-day weeks in many schools, as we have today, because we did not have as big a crisis with teacher morale as we do today. My unequivocal answer to the hon. Lady is that, however she describes the situation four years ago and however much it horrified her, she must now grapple with the fact that morale in the public services is worse today than it was four years ago. Unless the Government can free themselves from their ideological shackles, I do not expect them to make much progress. I do not deny for a moment that, following its defeat, the Conservative party will have to work hard to win the public's confidence on services to the public. We will do so with an open mind and a willingness to study what works elsewhere.

The Government's economic policy during this Parliament may be dominated by the question of the euro. Recently, it was curious to see the Government campaigning for re-election, supposedly wanting to focus on the economy, but unable to tell the public whether or not their economic policy was based on the premise that Britain would have its own currency and set its own interest rates. The Conservative party learned during the election that most people agree that Britain should have its own currency, but we also learned that, for now, the issue is not uppermost in most people's minds; they will take an interest in the question of currency if and when there is a referendum. For now, they want us to address their main concerns of education, health, transport and crime; we should listen to what they say about those issues.

I am glad that this week we shall see the emergence of two groups representing business people, one group in favour of having our own currency and the other against. This is a good time for a debate between business groups. The arguments about whether giving up our currency would be good or bad for business are not by any means the whole issue, but they are clearly an important part. The Conservative party's views, and the views of those in the party who disagree with the party leadership, were set out clearly during the election campaign and, in my view, can now be given a rest.

In the previous Parliament, the Government enjoyed good luck, on which I congratulate them. My worry is that, during that short four-year period, when global conditions ran in their favour, they developed a sense of invulnerability, which is the enemy of prudence. They eroded Britain's competitiveness and committed us to levels of public spending that will erode it further. They are indifferent to the balance of payments problem and unconcerned about bureaucracy growing like a leylandii--[Interruption.] It is a fast-growing plant or, more exactly, a tree that can be a great nuisance to one's neighbours.

When the Government talk about the need to reform services--

The Financial Secretary to the Treasury (Mr. Paul Boateng): The Opposition do not know much about horticulture.

Mr. Portillo: Representing Chelsea, I resent that very much.

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The Government talk with forked tongue about the need to reform services. Each briefing that the Government give the media points us in a different direction. They favour radicalism one day, the next day they pour scorn on any change to the arrangements that were set in place in the 1940s.

I foresee another four years during which the public will be disappointed by a Government who will be unable to live up to the expectations that were raised during the election campaign. For the Conservatives, it must be four years of hard work on the policy areas where we have failed to convince, on the issues that matter most to the public. Under whatever leader the party may choose, I am confident that that work will be done.

5.10 pm

Mr. Martin O'Neill (Ochil): We usually come to the Queen's Speech with a sense of relief that the general election is over. Given the performance of the right hon. Member for Kensington and Chelsea (Mr. Portillo), it is clear that the show will continue for some time. It is rather depressing that, rather like the Bourbons, Conservative Members have returned to this place having forgotten nothing and having learned nothing.

It is depressing that a debate on the economy, on industry and, understandably, on social services should, from the Conservative standpoint, be unspecific about the nature of improvements in social services. They have not shown that any lessons have been learned over the past four or five weeks about improvements in conditions of business, competitiveness and enterprise.

Conservatives continue to hammer on about regulation and the burden that it imposes on business. When I talked to business people in my constituency during the election, I was relieved--given past experience, I was somewhat surprised--by their response to questions about the Government's handling of the economy. Indeed, there was almost praise. I would be going too far if I said that Labour was given a dazzling write-up, but there was not the hostility of the past. There was frustration among many traditional Conservative-supporting business people that they could no longer support the party that they had backed for most of their adult lives.

Former Conservative voters did not support the Conservative party because they felt that the party was singing from a hymn sheet that, if considered relevant, was certainly discordant with present times. When it came to addressing the need to improve competitiveness, it was felt that the Conservatives had little to offer.

Many of us have had discussions with friends from America. Some of us have had the opportunity to visit the United States to see how the economic revolution of the 1990s and the first part of the present decade has progressed. It is important that we learn--the process has already started--that it is no longer the business of government to create a climate in which failure is punished. Individuals who have been unfortunate to see their businesses go down should not be denied the opportunity to start afresh. It is common in the US for it to be said, "Perhaps it is better to give money to people who have failed in business because they have learned the harshest and severest of lessons in the hardest way. At least these are people who know what the world is about."

The Conservative party does not say anything about how to help industry and to make life easier for individuals whose businesses, for whatever reason,

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have gone through difficulty. Given the bankruptcies, disruption to businesses and loss of housing, for example, that was commonplace in the 1990s, especially in the early part of that decade, one would expect Conservatives to begin to examine the issues.

The United Kingdom also has the problem of attracting money to business. One of the interesting and encouraging aspects of the past four years is the renewed enthusiasm for backing small, start-up businesses. The Chancellor has gone a long way in helping to bring venture capital to many fledgling businesses. I welcome his success with the European Union and the Commission in gaining agreement on the venture capital funds for regional development that he will make available. That is the final piece of the jigsaw for regional development agencies, which will not only have funds of their own, but be able to afford access to additional moneys for businesses that need support and assistance.

It has already been said that perhaps the most telling aspect of the Government's approach was shown by one of their first actions in the early days of the previous Parliament when they established the independence of the Bank of England. The shadow Chancellor made an interesting point about lengthening individuals' service on the Monetary Policy Committee, but only for one term. Perhaps we should consider that. Closer attention could be paid to aspects of the MPC's activities and terms of reference, but it is early days in the Parliament and we have only four years' experience to draw on.

The Bank of England's findings and outpourings now enjoy a special status. Last week, the Financial Times reported that it had pointed out the dangers of the two-tier economy: the successful, dynamic business and financial service sector and the sluggish, deteriorating manufacturing sector. There are qualifications of that stark divide. Indeed, several financiers from across the political spectrum, who have written a letter that appears in today's Financial Times, point to the threat to our financial services of remaining outside the eurozone for too long.

Opening the debate is worth while, because, in the previous Parliament, Labour Members at least paid insufficient attention to the impact of our absence from the eurozone on the manufacturing sector. It is fair to say that the biggest problem was not our absence in the 16 to 18 months of its existence, but the high value of sterling and the impact on exports to other eurozone countries.

In the past, Ministers said that our competitors--for example, the Federal Republic of Germany--had to contend with a high or overvalued currency, and that the Germans coped with that for many years. Like the United Kingdom, Germany had low inflation and interest rates, but it also had a climate that was conducive to high investment in staff and equipment. Our understandable reluctance to introduce training levies to fund skill improvements or to create additional skills is no excuse for not using fiscal instruments such as tax credits to finance training.

The Government have correctly identified the digital divide as one of the major barriers to employment mobility. They have been imaginative and supportive in introducing tax relief on computers and help with information technology training, but surely it is sensible

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to extend such schemes to ensure that support is provided when new equipment that incorporates IT is introduced, for example, in engineering. Greater assistance could be given with training and providing training grants for firms that use new equipment.

My interests in the area are documented, and I am not engaging in special pleading, but the Government ignore at their peril the present plight of engineering and manufacturing. It is certainly fair to say that too much of the potential profit, which would be the source of such investment, is being denied because margins are being slashed to sustain price competitiveness with other contenders in the eurozone. The failure to invest means that any short-term benefit that could be gained from price cutting will soon be lost as our competitors with a lower cost base invest using resources denied to us.

All the bold initiatives in the enterprise for all programme, which I welcome, will require more time and support as soon as they can be put into place. Twelve months ago, some of us were saying that we hoped that the gap between the pound and the euro would narrow: our optimism was, sadly, premature. That is due in part to the continued attractiveness of sterling and the dollar, and in part to the lack of confidence that many people have in the structure and control systems of the eurozone, particularly in relation to the European central bank.

As I said earlier, one of the Government's great successes has been the Monetary Policy Committee. I wish only that the countries of the eurozone had the courage to adopt a similar framework. Whether we must await changes in structure or the achievement of the five goals to the Chancellor's satisfaction, if we have to devalue and change to become members, Ministers must grasp that nettle.

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