§ The Chancellor of the Exchequer (Mr. James Callaghan)I must, therefore, say a word about the economic plan. I shall not trench on the speech of my right hon. Friend the First Secretary of State, who will be saying more tomorrow about the policies which he is working out to achieve our long-term objectives. But there are three points I must briefly make now, as they are intimately bound up with my Budget.
First, in the Government's view, a Budget conceived and operated as the most immediate instrument of long-term objectives can and should make a great positive contribution to them. They are the counterpart of my Budget strategy and, coupled with them, the Budget itself can give the economy an aggressive forward thrust.
Secondly, the way to put the economy on a progressive and sound footing, with 282 resources effectively and profitably employed in the right places, thus avoiding "stop-go", is to have proper planning., This must identify the points where openings for faster industrial growth are greatest and where resources can most effectively be redeployed. It must also cover incomes policy as an essential means of getting fairness and of keeping our costs in line.
Thirdly, we must within a short period shift resources into activities which assist the balance of payments. The Government cannot accept that our task is complete when room has been made for what is required, in the hope that the results will somehow or other seep through into exports. We have had enough of that process in the past decade. Our aim now and in the longer-term is to establish an orderly and articulated policy designed to move as rapidly as possible sufficient resources into improving our trade balance. In order to do both this and to achieve faster economic growth we must redeploy resources in a positive way.
The decision to cancel the TSR2 is an earnest of this determination. Although there will be a significant number of redundancies in the aircraft industry, employment conditions generally are at the moment very favourable. There is an intense demand for highly skilled men of the kind who are working on this project, as has been shown by the eagerness of employers to recruit the men who have been released by our earlier aircraft decisions. Naturally, the fullest consultations with the trade unions and management are taking place. My right hon. Friend the First Secretary of State and other Ministers will be ready to act so as to ensure that there is the least possible delay in absorbing all who become redundant into employment where they will contribute to exports and the growth of the economy.
An essential condition for redeployment is a proper system of redundancy payments on a national basis. As the Committee already knows, my right hon. Friend the Minister of Labour has introduced a Bill to provide for this purpose. I can give some small help in this. Payments of this kind are at present taxable as ordinary earnings where the employee has a contractual right to them. I propose at a later stage of the Finance Bill, 283 if progress with the Minister of Labour's Bill warrants it, to provide that payments under his Bill—which will be lump sum payments—will be freed of this liability to tax. This tax-free scheme will make a significant contribution to the redeployment of manpower.
Again, I can help with regional policy. This is a key element in the planning of the Department of Economic Affairs and the Board of Trade. It will correct distortions in the pattern of development in the country, bring into use neglected resources, and remedy the economic waste and social hardships which this country can neither afford nor tolerate.
I propose to give a special measure of assistance to local authorities in the less prosperous areas or, indeed, in entire regions. My right hon. Friends the First Secretary of State, the President of the Board of Trade and the Minister of Housing and Local Government will be considering the areas to benefit from the concession. Until recently, all local authorities were able to get 20 per cent. of their long-term borrowing, or up to £100,000, whichever was the greater, from the Public Works Loan Board. I recently decided to raise the 20 per cent. to 30 per cent. I now propose that authorities in the areas eventually selected should be allowed to anticipate the arrangements which we hope to introduce later for all authorities and should be able to get up to 50 per cent. of their long-term money from the Public Works Loan Board this year. I am at present allowing for this purpose a further £40 million for Exchequer loans to local authorities, bringing the net total to £360 million.
This is money which the local authorities would otherwise have had to borrow on the market, and the change does not, therefore, make new demands on our resources.
§ Sir William Robson Brown (Esher)May I ask one national question? In view of the cancellation of the TSR2, do the Government propose to buy the American TFX instead?
§ Mr. CallaghanI have already told the Committee that my right hon. Friend will be speaking later this evening if he catches your eye, Dr. King. I think that it would be for the convenience of the 284 Committee that I should proceed with the economic aspects. I would only say, in passing, that it would be wrong to isolate this as a military question. It is both an economic question and a financial question.
§ Sir Alec Douglas-Home (Kinross and West Perthshire)Because it is an economic question and financial question, and as the right hon. Gentleman has told the Committee that he expects to achieve savings from the cancellation of the TSR2, is it not right that we should know what will be put in its place, if anything?
§ Mr. CallaghanOf course, it is right that the Leader of the Opposition and the Committee generally should know. I hope that they will not feel that it is an undue inconvenience to wait from five o'clock until seven o'clock.