§ 3.35 p.m.
§ The Chancellor of the Exchequer (Mr. James Callaghan)The immediate object of this Budget Statement is to seek the authority of Parliament for the measures announced by the Government to improve the unsatisfactory balance of payments. It came as a shock to me on the day of assuming office to learn that the prospective overseas deficit in 1964 might be as large as £800 million.
I had forecast that the deficit would be substantial, but did not think that it would be as bad as that. Nor, apparently, did the right hon. Gentleman the Member for Barnet (Mr. Maudling). Last week he told us that on the basis of the first half-year's figures, which showed a deficit of £340 million, he had expected a deficit on the full year of £600 million.
For the sake of comparison I remind the Committee that the deficit in 1960 was no more than £446 million; but that this led the right hon. and learned Gentleman the Member for Wirral (Mr. Selwyn Lloyd) to impose in 1961 a credit squeeze, a pay pause and other measures which led to the slowing down of British industry and a high level of unemployment. On our first weekend, when the present Prime Minister formed his Administration, we determined that we would not tread that path again.
I have also found myself faced with the urgent and immediate task of holding talks with the International Monetary Fund and the leading member countries to ensure that a loan of several hundred million pounds will be available to help cover the current year's deficit when required. I agree with the right hon. Gentleman the Member for Barnet that this kind of borrowing is the least objectionable way of making sure that an inevitable deficit is covered; and we shall use, if we have to, the funds that will be made available.
1024 But borrowed money must be repaid in due course, and heavy criticism lies on those who have had full charge of our economic destinies for 13 years—and if I hear the words "American loan" mentioned by the Opposition, allow me to remind them that that loan was contracted immediately after the end of the Second World War at a time when the country was bankrupt and that it was borrowed in order to save our people from a situation that would have been worse than that of a defeated country. It was not negotiated when we had been in power for 13 years.
I do not want to hold an inquest about the events of the last 13 years today, nor about why action which should have been taken earlier this year was not taken, but there is no doubt that delay in holding the General Election has made it more difficult for the incoming Government to take remedial action. Certainly, no one on either side of the Committee can deny that the Government have inherited a disagreeable economic situation that is not of our making and for which the full responsibility lies with the right hon. Gentleman opposite.
On the day of assuming office the further information was published that the crude trade gap for the month of September alone amounted to £111 million—a pretty barren inheritance. We have made a determined and vigorous start to overcome these problems, but let no one believe that the initial measures to curb imports represent either a long term solution or indeed our policy in matters of international trade. We want lower trade barriers, not higher; and the duties that have been imposed are of an emergency character to stop the drain on our reserves. They will be reviewed, reduced and removed as soon as our balance of payments is in a healthy position.
However, I wish to do more this afternoon than to seek Parliamentary approval for the necessary Ways and Means Resolutions governing the import charges and the export rebates. With the indulgence of the Committee I should like to give a clear indication of the way in which the Government's policy will develop in future Budgets in order to achieve our aim of breaking free from these periodic crises that have dogged our economy.
The Budget, although of great importance, must dovetail with the general 1025 economic policy of the Government as outlined by my right hon. Friends the Prime Minister and the First Secretary in their speeches on the Gracious Speech. It is my task to use the Budget to ensure that demand in the economy is neither so strong that it overloads the productive system and causes bottlenecks nor so weak that our factories are working short time and unemployment grows. Secondly, I must use the taxation system to ensure social justice for those who stand in need.
Thirdly, the Government, by all means in their power, including the tax system, must encourage the redeployment of resources in the most efficient manner, whether by means of capital allowances or in other ways, so as to ensure that resources are used where they will give the most efficient return and support our policies of regional development. Fourthly, the taxation Statutes themselves must be reviewed and revised to ensure that they do not hamper the enterprising and that they do not permit a few to escape paying their fair share by taking advantage of loopholes.
The complexity of the tax machine, as others have discovered before me, limits the room for rapid manoeuvre; I cannot ask the Board of Inland Revenue to perform miracles, although its competence is such that it seems able to do the next best thing. Nevertheless, I hope that by the end of this afternoon the Committee will feel that we have made a beginning with these tasks.
In all these ways budgetary policy must contribute to our objectives: a healthy foreign balance, stable prices and full employment, social justice for the needy, fair play for all taxpayers, sound planning of public expenditure, rewards for the energetic and sustained economic growth. These are all fields of activity in which the Government play a substantial r ôle. These objectives are important not only for their own sakes, but also in creating the climate that will make possible the achievement of an incomes and prices policy. No country in the world has yet achieved this, but great rewards await the country that can first secure such a policy. That is why the First Secretary, the Minister of Labour and I are making this venture our earliest task and it is my duty today to ensure that my budgetary policy does not 1026 thwart our joint activities, but, on the contrary, does everything possible to help them.