BUDGET STATEMENT (Hansard, 14 April 1964)

§ The Chancellor of the Exchequer (Mr. Reginald Maudling)

I described the theme of last year's Budget as expansion without inflation, expansion at a rate that can be sustained, and I said that its purpose was to do the Government's part in achieving the 4 percent. growth rate that we had already accepted as our target in the National Economic Development Council. This year I have the same theme and the same purpose.

The economy has developed in the last 12 months much as I then anticipated. Although last year's Budget was described as timid and cautious, it has been followed by an expansion at the annual rate of at least 5 percent. in total production and a fall of over 150,000 in unemployment. Trade is buoyant; business confidence is high; investment in industry is gathering pace. There is no room for doubt about the vigour and scale of expansion.

The task this year is to ensure that this expansion continues at a rate that can be sustained without inflation. We have been eating into the reserve of capacity and, in the process, we have achieved the rate of growth to which I have just referred. Before 1964 is out, this reserve will have been brought fully into use and we must, therefore, aim, in the course of this year, to set the economy on the rate of expansion which can be maintained through the regular growth of productive capacity.

As the Progress Report of the National Economic Development Council said: Output cannot continue to increase indefinitely at the present high rate since this depends to a considerable extent on the bringing into use of under-employed resources and is more than the average rate required to achieve the growth programme during the rest of the period to 1966". In other words, the purpose of this Budget is to achieve a smooth transition from the recent exceptionally rapid rate 240 of growth to the long-term growth rate of 4 per cent.

This, then, will be my main theme. Before I turn to it I want to repeat the procedure I adopted last year, which proved convenient to the Committee, by dealing, first, with a number of incidental matters, including certain tax changes which must be dealt with now, but which are extraneous to the main economic argument.