§ 3.30 p.m.
§ The Chancellor of the Exchequer (Mr. Anthony Barber)The first Budget of a new Parliament should be an occasion not only for fixing the rates of taxation for the coming year. It also provides the opportunity to take stock of the economic progress of our nation over past years and to set the new direction for the years ahead. For almost a quarter of the Members of the new House of Commons, this will be the first Budget debate in which they have participated. And recalling the first Budget Statement that I endured as a new Member, it seemed to me that it might be helpful if, at the outset, I were to give some indication of the course I shall follow this afternoon in what must, inevitably, be a rather long statement.
I shall begin with a review of recent economic trends and of the main economic problems which confront us. Next will come a consideration of the economic prospects for the future, and my general assessment as to what the management of the economy requires at the present time. I shall then outline my proposals, beginning with monetary policy and various other measures and a number of changes in taxation. Finally, I shall put forward certain far-reaching proposals for reform.
It will be agreed throughout the House that for many years, under one Government and another, the economic performance of our country has been poor. Over these years we have become accustomed 1359 to unfavourable comparisons with other industrial countries—slow growth, recurring balance of payments weakness, faster-than-average inflation, a low rate of investment, a falling share in world exports, and increasingly bad industrial relations. These are problems not for government alone but for the whole nation. What is needed is a new realism and a new determination: a new awareness of where the ruts we have been following will lead us and a new national effort to change the direction.
If we are realistic we should recognise that, unless there is a change in the trend—a change not only compared with the last five or six years, but with the trend over the last two decades and more—the prospect is that by 1980 our standard of living in this country will have fallen considerably behind that of most of the countries of Western Europe. Before too long, I hope that we shall know the outcome of our application to join the E.E.C. I have never doubted that, given fair terms, this historic venture would bring us great economic benefits in the longer term. But, whether we go in or whether we stay out, it remains essential to improve Britain's economic performance.
I would not pretend that our deep-seated problems can be overcome quickly, or that one Budget can transform the situation. But Budgets, as we all know only too well, are concerned with taxation; and I believe that one of the most important factors affecting the economic climate in this country is the system of taxation, and the burden of taxation. It would be naive to claim that the tax system is the sole cause of our poor performance as far as growth is concerned, but it is certainly an important factor.
Our system of taxation in Britain has many good points. It is fair as between one taxpayer and another; it is held in good repute and as a result is relatively little abused.
But it also has many defects. It has grown up in a haphazard fashion over the years and it has become ever more complicated. The very multiplicity of its provisions adds to the work not only for the Revenue Departments but also 1360 for taxpayers and their advisers. I should know because for five years I practised at the tax Bar, and I was never short of work!
But there is a more serious aspect of our particular system of taxation. Too often it stultifies enterprise. Too often it discourages the pursuit of profit. Too often it penalises savings, on which the nation's wealth and the growth of our economy so largely depend. Moreover, the difficulty of understanding it adds to the feeling of the oppressive and ever-growing burden of taxation.
And so, over these past eight months, much of my time has been spent, together with my Treasury colleagues and the Revenue Departments, in a comprehensive review of our taxation system. It is no longer good enough merely to tinker with the existing system. What is needed is a plan for radical reform over the next few years. And these must be our aims. First, to reduce the present excessive burden of taxation. Second, to simplify the system, to reduce the number of taxes and to make them more intelligible and easier to work. Third, to encourage initiative, enterprise and effort. Fourth, to encourage people to save more by reducing the present fiscal penalties on savings. And this is the year we must start.