John Major was invited to comment on the security of Norman Lamont's position by Sam Galbraith, Labour MP for Strathkelvin and Bearsden, who asked whether, in view of continuing uncertainty in the money markets, 'the current Chancellor' would be presenting not only the March Budget but also the December Budget. 'I cannot imagine anyone other than the Chancellor presenting a Budget,' Mr Major replied to the great amusement of nearly all MPs save Mr Lamont. Though the Chancellor tried to shrug off the ambiguous reply, he appeared hurt and the Prime Minister gave him a comforting pat on the knee.
Mr Smith urged the Prime Minister to step in and save the British truck and van manufacturer Leyland DAF, matching any rescue by the Dutch and Belgian governments of the parent company in the Netherlands.
Contrasting the uncertain future facing 5,500 Leyland DAF workers and 10,000 in supply companies with the sumptuous setting of Mr Major's speech on Wednesday in St James's Street, London, Mr Smith said: 'In the real world outside the Carlton Club people see a government lurching from one muddle to another, whether it is interest rates, defence cuts or workfare.
'Can the Prime Minister not get one simple objective and stick to it? Leyland DAF is a vital British interest and it ought to be secured.'
Mr Smith called for an undertaking that if the Dutch and Belgian governments rescued their parts of the truck company, the British government would do at least the same for Leyland DAF.
But Mr Major said: 'We are not prepared to spend taxpayers' money to provide working capital to companies in difficulty. Many private companies need more working capital from time to time. It is simply not realistic to expect the Government to provide it. That approach was tried in the 1960s. It failed. It was tried in the 1970s. It failed. That is the economic reality the Labour leader should face up to.'
Earlier, during Treasury questions, Mr Lamont warned the markets to remember that interest rates could go up as well as down. He welcomed the cut in Germany's Lombard rate from 9.5 per cent to 9 per cent, but said it should have taken place earlier.
Pressed from the Labour benches on when the Government might go back to managing the exchange rate, Mr Lamont said: 'The Government have made it clear again and again that we do not seek a devaluation of the currency.
'But we have made it clear that interest rates will be set according to a range of factors; that includes domestic money conditions, asset prices, particularly house prices, but also the exchange rate.
'Exchange rates will continue to be among the factors that we take into account in assessing interest rates and markets should remember that interest rates can go up as well as down.' Mr Lamont defended last week's cut in UK interest rates from 7 per cent to 6 per cent as consistent with low inflation and sustained recovery. But Sir Peter Tapsell, Conservative MP for Lindsey East and a banking consultant, pointed out that Wednesday's cut in Japanese discount rates to 2.5 per cent was followed by a strengthening of the yen.
'This demonstrates it is the quality of industry and the level of investment in research and development which ultimately determines exchange rates, and not political manoeuvres by politicians often with limited commercial experience, as exemplified by the disastrous experiment with the exchange rate mechanism and the unrealistic convergence criteria of the Maastricht treaty.'Reuse content