HC Deb 21 March 1972 vol 833 cc1390-418

Motion made, and Question proposed.

That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision m connection with finance; but this resolution shall not authorise the making of—

  1. (1) amendments of the enactments relating to purchase tax, other than amendments for or in connection with the abolition of the tax, and other than amendments making the same provision for chargeable goods of whatever description, or for all goods to which any of the several rates of tax at present applies; or
  2. (2) amendments of the enactments relating to selective employment tax so as to give relief from tax—
    1. (a) by way of exemption from, or a reduction in the rate of, tax except in respect of all persons of the same descriptions relevant for determining the rate of the employer's flat-rate contribution with which the tax is combined, whether that contribution is under the National Insurance Acts or under the corresponding enactments in Northern Ireland; or
    2. (b) by way of providing for payments to employers of an amount equal to the whole or a specified part of the tax paid if the proposed provision—
      1. (i) is in respect of employers in, or at establishments in, part only of Great Britain; or
      2. (ii) extends to employers in, or at establishments in, Northern Ireland; or
      3. (iii) is in respect of all persons in any particular description of employment in all parts of Great Britain, and relief in respect of the whole of the tax paid could be given in respect of that description of employment by an order under section 9(1)(a) of the Selective Employment Payments Act 1966 adding that description of employment to the employments to which section 1 or 2 of that Act applies; or
    3. (c) by adding or removing any employer to or from the employers to whom section 3 of that Act applies, or
    4. (d) by amending the provisions of Schedule 1 or Schedule 2 to that Act.—[Mr. Barber.]

5.38 p.m.

Mr. Harold Wilson (Huyton)

I will begin as last year by congratulating the Chancellor on the great clarity and the agreeable manner with which he explained his proposals and the philosophy underlying them. His speech was certainly long and must have been arduous. He showed no signs of strain, and I think he kept his clarity and lucidity until the end. Perhaps the highest praise of all, which I think is appropriate, is that he introduced at various points sparkling elements of the best Yorkshire humour, not excluding at one point, the macabre.

I believe that the whole House will want to congratulate the right hon. Gentleman on at any rate some of the ways in which he has chosen to disburse the remissions of taxation and the increased public expenditure, faced as he is—he has taken full advantage of it—with the paramount necessity of reflating the economy in a major way at this time to deal with the slump and the intolerable level of unemployment.

The whole House will applaud the right hon. Gentleman's reproduction of investment grants. We condemned him in October, 1970, for scrapping them. In every debate on unemployment my hon. Friend's have demanded the restoration of investment grants, and now he has, in effect, restored them. It was a pity that he could not quite find it possible to mouth the word "grants" when he told us of his decision.

The right hon. Gentleman will be glad that in addition to the vociferous and full-throated cheers from his hon. Friends, particularly when he sat down, on this occasion—this is rare for any Chancellor—there were almost equally enthusiastic cheers from hon. Members on this side of the House for his announcement of the restoration of investment grants.

The right hon. Gentleman will realise that there is more rejoicing in the Kingdom of Heaven and on the Opposion benches over one sinner that repenteth, particularly when he is a right hon. sinner.

One must, however, ask how many jobs have been lost during this period as a result of the wrong decision on investment grants, a decision against which we warned the right hon Gentleman. How much unnecessary uncertainty has been caused to industry? While we welcome the restoration of investment grants, fresh calculations will, of course, have to be made by industry.

We hope that the right hon. Gentleman's words about R.E.P., which were singularly carefully phrased, mean that he is on the run there as well and that by the time he next faces the House he will be ready once again to say that he accepts what we told him.

It is probably right, in relation to free depreciation—we shall, of course, need to give careful consideration to this matter before my right hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins) addresses the House tomorrow—that in such a year there should be a general incentive, bearing in mind the state of the economy and, above all, the magnitude of the recession and the rate of unemployment with which we must deal.

It is such that this is a year when the right hon. Gentleman could take a chance in this connection. He was, however, the first to say, when he made his announcement this afternoon, that one of the arguments was the narrowing of regional differentials, which is why he announced the other regional changes.

We must ask the right hon. Gentleman in regard to the regional changes that he has announced—we welcome some of them at any rate—whether all his proposals would be acceptable and allowable under the rules of the Common Market as they are tightening up in respect of regional policies.

The whole House will, of course, welcome the right hon. Gentleman's decision to increase pensions. Today pensions are, despite last October's increase, no higher in value than they were in October, 1969; and it is clear, considering the erosion that will occur between now and October, that 15s. in old money or 75p in decimal currency will not be very much.

I understood the right hon. Gentleman to say that this will be paid for mainly by contributions in equal amounts. I believe that he was indicating that 82 per cent. of the cost would be paid for by contributions from employers and workers.

Mr. Barber

A large proportion will be paid by employers on this occasion; the Exchequer contribution will remain the same at 18 per cent.

Mr. Wilson

That is how I arrived at the figure of 82 per cent. I am obliged to the right hon. Gentleman for that correction.

I think that this year there is a case, considering what the right hon. Gentleman has available and what he needs to make available, for having at any rate a short period with a higher Exchequer contribution, knowing that in the matter of pensions every penny awarded conies into current expenditure and, therefore, helps to stimulate the economy in a way which, for example, tax remissions on the highest incomes do not.

We welcome the right hon. Gentleman's announcement about bequests to charities. The widow's relief for the matrimonial home has been widely canvassed, and as the cost of houses increases all the time—it now stands at an almost ruinous rate; the cost of house valuations is also going up—there is a serious burden on the widow and, in some cases, on the widower.

In looking at the question of negative income tax, it is fair to say that this matter has eluded the ingenuity of successive Chancellors. We shall study the Green Paper, and, if the right hon. Gentleman feels that he now has a scheme which looks as though it might work, then we agree that he is right to refer the matter to a Select Committee, and we shall support that proposal.

It is to be expected that income tax will be used to make the major attack on the recession. I am sure that it is right not to do it by the standard rate but to attack it by allowances, especially at the lowest levels. We appreciate the speed with which the right hon. Gentleman is anxious to make this attack—I am not referring to the magic date of 3rd May—and the need speedily to attack the unemployment problem.

This means a big variation in the amount of relief between some of the higher incomes and the lower ones, and this will be an issue to which my right hon. Friend the Member for Stechford will be directing his remarks tomorrow.

Mr. Barber

If I have understood the right hon. Gentleman aright, perhaps I should make it clear that the improvement in the allowances gives precisely the same amount to everybody above the new threshold. In other words, the surtax payer gets no more than the standard rate payer.

Mr. Wilson

I am glad to hear that, and I have no doubt that there will be tables showing the figures.

Mr. Barber

Of course.

Mr. Wilson

Obviously, we have not had a chance to examine these tables. My right hon. Friend the Member for Stechford will be dealing with this issue. Meanwhile, I thank the Chancellor for his intervention.

We shall look with great care at the right hon. Gentleman's share option proposals. Many of us will start with deep suspicion about the relief for bank interest, particularly at a time when there is a great deal of borrowing from the banks which is going not to industry but to individuals for property speculation and to buy land and force up land prices.

I must make it clear that we shall give total and unremitting opposition to V.A.T. The right hon. Gentleman will be aware of our views on this. Our reasons have been clearly put by my right hon. Friend the Member for Stechford, my hon. Friends and others in past debates, both before and during the last General Election. I was not certain from his speech whether the right hon. Gentleman's V.A.T. proposals will be incorporated in the Finance Bill or in a separate Measure this summer.

Mr. Barber

The proposals will be in this year's Finance Bill.

Mr. Wilson

I am grateful for that information.

I have congratulated the Chancellor on the cheers he got from his supporters. I have noticed in recent months that they have been a little more hard to come by and a little less full-throated when Ministers have been addressing the House. There can be no doubt, however, that the right hon. Gentleman received such cheers this afternoon, and they must have been extremely agreeable to him.

Those cheers would have been more agreeable if these generous tax concessions and the other changes which the right hon. Gentleman has made had come as a result of, shall we say, the Government's stewardship of the last two years and not as a result of panic necessity to spend our way out of unemployment.

At the time of the last election hon. Gentlemen opposite were going to reduce taxation by reducing expenditure. They have not done so. [Interruption.] They had a little try early in October, 1970, with school milk, prescription, school meals, museum charges, and the rest—including, of course, investment grants—but that is not the reason why the right hon. Gentleman has been able to make such dramatic and spectacular announcements today.

What is happening now, of course, is that the 1 million unemployed—many observers say that, in real terms, there are 3 million unemployed, representing about 10 per cent.—have made it necessary for the Chancellor to take this action.

In a speech which was hailed with great enthusiasm by hon. Gentlemen opposite, last year the Chancellor told us that his measures would increase national production to the rate of growth of productive potential; but they have not. In my remarks after the Chancellor's Budget Statement last year I warned him that it was a Budget which would not look the same, despite the enthusiasm of his hon. Friends, two or three months later, and indeed, it did not. It was within about two months that the Government lost the Broms grove by-election, and within six weeks suffered the biggest reversal in local government elections at any time since the war.

More important, I warned the right hon. Gentleman a year ago that it would not increase production or reduce unemployment. When I quoted the old gag about it being more difficult to push a piece of string than to pull a piece of string, hon. Gentlemen laughed and jeered last year. But the right hon. Gentleman has been trying to push that piece of string ever since, with Budget and mini-Budget, and he has failed. Now we have a million unemployed, which the Conservative Party denied would happen but which we forecast would happen by January of this year. Indeed, it was within six months of that Budget, in July last year, that he knew he had failed and had to produce a mini-Budget. He promised that that would have an effect on the unemployment figure in a couple of months. We know that that estimate has proved wrong. That is why, belatedly, he has to move on so large a scale today.

The House will form its own view of whether what the right hon. Gentleman has now announced is adequate. Certainly it is much too late to have avoided the social misery and hardship caused by the right hon. Gentleman's failure to act in time and adequately last year. He knows that what he has done today is against the background of the heavy unemployment figure, of the highest ever juvenile unemployment since the war—70 per cent. up over the last year—of investment at the lowest ebb for years and 10 per cent. down on last October-December, and of industrial production, from the figures published last week, no higher than it was in the spring of 1970, two years ago.

The right hon. Gentleman knows that, in addition to the steps he is taking in relation to the cost of living, a big rate increase is coming next month. He knows that the wholesale price index is turning upward again, and that we have the twist of the inflationary spiral through the Housing Finance Bill, and the Scottish Bill, which I was very surprised he did not announce today would be dropped from further progress in the House. The right hon. Gentleman has house prices rocketing 21 per cent. in London and the South-East over the last year, and farm land prices. We have all these factors, and the prospects of V.A.T., on which we shall be asked to legislate.

Today's post-Budget euphoria will pass, except in Central Office legend, as it did last year. In a panic the right hon. Gentleman has done some good things, and we congratulate him on that. He has done nothing to cure the debilitation, the anaemia, that he and the Prime Minister have brought to British industry, British workers and British society.

5.53 p.m.

Mr. Wilfred Proud foot (Brig house and Spenborough)

Before congratulating my right hon. Friend on his Budget, I have some words of pity for the Leader of the Opposition, whose task gets more miserable each year of this Tory Administration.

My right hon. Friend the Chancellor Budget in the Guinness Book of Records, must surely be included after today's The total boost that he has given the economy is absolutely correct. He will earn the title "The first of the big spenders". This is right in our economic situation as it is today.

Before the debate, I bothered to go to the Library to dig out the prognostications of the T.U.C. before each of the last three Labour Budgets. It is most interesting to see their recommendations. In 1963 the T.U.C. wanted a wealth and gift tax. In 1969 the T.U.C. wanted a wealth tax. In 1970 the T.U.C. wanted the threshold of income tax to start at £11 a week, because then the point at which people started to pay income tax was £6.25, and the T.U.C. was very worried in 1970 about the 600,000 people then unemployed. I can only say that the T.U.C. should look at its previous declarations and at what the present Tory Administration have done in 18 months and decide which side its bread is buttered and who is giving it the best deal in life.

I am sure that everyone will be delighted to see how the Government are taking up the recommendations of the Bolton Committee. It is not just a matter of helping the small men in business, important as that is, but it really matters for the areas of high unemployment in the regions. The Bolton Report pointed out that small businesses employed a larger number of older people in proportion and a larger number of women. In today's context, that is very important.

Today the House looked rather thin for a Budget Day; the Gangways were empty. I suppose the occasion was discounted by the Press. We have not been talking about whether we should have growth or not. The Chancellor has gone quite correctly for growth. In that he is completely right. I was delighted by his aside about the new belief amongst journalists and people in the media, and the carping about, "If we have growth we shall hurt the environment." The people in the media, all probably from higher income groups, all certainly from higher education groups, do not know what it is like to be a worker in this country. We will raise their standard of living. When they sit in their ivory towers and say that we must have no more growth because our environment will be worsened, they are men with red flags in the way of the van of progress. I hope that the Budget has put them firmly in their place.

The forecasting takes place in the Treasury and nightly in all walks of business-life and is never totally accurate. The more one is involved with forecasting the more one realises that it cannot always be 100 per cent. accurate. The politicians are more lumbered with this problem than any other section of the community because if they make a forecast it is automatically taken to mean a promise of performance, and that can never be right.

When I read the Economist, the Financial Times, and so on, and see that the National Institute for Economic and Social Research has a model of the economy and that the Treasury also has a model of the economy—I remember my right hon. Friend the Foreign Secretary was chided for having a box of matches to work out what would happen to the economy—I suppose that in this respect they are virtually electronic matches! But I have an awful feeling that business and government have never really utilised computers yet.

They should use them on the possible alternatives when they play with their models. Another of my fears is that they do not believe what the computers tell them when the computers try to forecast the future.

I am sure that my right hon. Friend the Chancellor of the Exchequer today has kicked the computers in the seats of their pants and has played his hunches. He is completely right to do exactly that.

Regarding the theatrical content of the annual Budget, I have spoken out many years ago against an annual Budget. In a complex society such as ours the economy should be capable of alteration during the year, and my right hon. Friend has done that.

The public are absolutely bamboozled by this. The party opposite pushed taxes up and up. As Budget day approached the man in the street anticipated it with fear and trembling. He did not really know why the taxes were being taken from him. I am sure that now that these huge tax cuts are coming he is just as mystified as to why we, in 18 months, have been able to chop taxes as much as we have done. Perhaps that is a simplistic way of looking at it. But I should have thought that that was how people feel about it, and that economic management is beyond many.

I am delighted that my right hon. Friend has gone in for incentives—to use them in business, towards economic growth, and for people at work. The income tax cuts are the ones that matter every time. I look forward to 3rd May with anticipation. This will help not only growth but also in getting rid of unemployment.

I bothered to check on some figures today which are meaningful. I am surprised that hon. Gentlemen opposite did not welcome the tax cuts. They shouted, "What about the unemployed?" Let me tell hon. Gentlemen opposite—as the Tatler called me a grocer—just exactly how this will work.

I will give some examples. My daughter is aged 18 and earns £12 a week. She started work six months ago and now pays £1.18 tax, which is 9.8 per cent, of her income. A married woman I know, aged 23, earns £13.75 a week and pays 12.4 per cent, of that in tax. If she earns overtime she pays 29 per cent, on that section of her earnings. I take these examples because I know them personally. It makes the subject much more interesting to personalise the figures rather than look at dry statistics. A married woman in the same kind of job earns only £5.52 and pays no tax. She refuses to work more than 20 hours a week because she then immediately has to pay income tax on the full week's pay at the rate of 8.9 per cent. of her earnings. A 26 years-old single girl who earns just over the average of £28 a week pays £5.99. In this case 21 per cent. of her income goes in tax, and if she works overtime for which she is paid £2.40 this increases to 30 per cent.

The tax cuts which the Chancellor has announced will help enormously in this sector. What will these people do with the extra £1 in their pocket, which is virtually what every taxpayer in the country will have? Again, I give my daughter as an example. She is a spender. All youngsters axe. Thanks to the Chancellor's purchase tax cuts, with the range of cosmetics, clothes and the kind of things that young girls buy, she will spend money on these things. She will buy goods and services with her extra money like all young unmarrieds and in this way the Budget will help production and job creation. I was delighted to hear the Chancellor say that yesterday's luxuries are today's items of normal consumption. I will not say what people should or should not buy. But the whole package from the reduction of direct income tax for the lower paid to the reduction in purchase tax on what were called luxuries to the rate of 25 per cent. is a real boost to the economy. I hope that we shall be able to go further along the road to reduce direct taxation, because this country has a perk-ridden society, where perks matter more than money. I want to see people with a high take-home pay deciding for themselves what to spend their money on. They will dictate to the market and they will choose the new growth industries of this country. Their tastes will be satisfied and from a European point of view that is exactly as it should be.

The young married people are purchasers not just of houses but of consumer durables, and this is important for employment. If they are able to buy more consumer durables, production will rise. The older element—the over-50s—whose children have left them, are the savers. It almost worries me to see the amount of saving that is done, because I feel that people should have spent their money to create jobs. But it is a juxta-position, because the saving has enabled the Chancellor to give bigger cuts in taxation. This new term which has sneaked into the language of economics—"leakage into savings"—is a comic expression.

Direct taxation is the barrier to an economic miracle. The Chancellor has stormed that barrier today, and I am delighted. He has paid attention to the low-paid workers and has given firms the ability to offer incentives by way of share options to management. People in management must stand up and be counted. They cannot blame anyone but themselves for poor performance, and they should not try to shuffle off the blame for poor performance on to unions or Government. There will be even more competition, and I hope that share options will encourage these men to do their best.

I am delighted—as I am sure is the rest of the Conservative Party—at the proposals for reverse tax. The social change and revolution that this will bring about will stagger us all. Many people talk about the scroungers on the National Health without knowing what they are talking about. The so-called scroungers are a minority. The ordinary man in the street has no conception of the incredibly complex and detailed way in which social security works. The more I sit in my surgery and meet people the more I realise that a tiny segment of "professionals" know more than any hon. Member about the way in which these systems work. I look forward to the day when everyone will fill in his own tax return and when the next-door neighbour will not know whether he is a recipient of tax credit or whether he is paying tax. That is as it should be. The system should help those who need it, and it must be absolutely correct.

I campaigned for free depreciation with the Chancellor, and I believe it is completely correct. A year ago I suggested that free depreciation could be at the rate of 150 per cent. in the regions, but I am sure that what my right hon. Friend has done and the way he has done it is absolutely correct for regional policy. The T.U.C. could do more to help the regions than any other organisation, but I doubt whether it ever will, because it would mean getting rid of that sacred cow—national wage negotiations. There are differentials between what a man will earn for an identical job in the South-East, in Scotland, and in the North-East. If this was spelled out in black and white at the start of any wage negotiations I am sure that industrialists with labour-intensive industry would look afresh to the regions. Life has much to offer the individual worker in the North-East—which I know best—Scotland and Wales. Traffic problems—for example the number of traffic lights that have to be crossed, and the quality of the roads—are not as bad as in other areas.

I would be horrified to be a worker in the South-East, and to have to face all the traffic confusion and the lower quality of life. I therefore make an appeal to the T.U.C, although I do not expect it to be taken up. By its action it could be one of the greatest elements of help for the regions, and, at the same time, it would be helping the economy and trade unionists and workers. I am convinced that the Bolton Committee report has a great deal to offer in this respect.

I must admit to one disappointment, namely, that the tax on fuel oil has not been cut. I asked for this to be done last year. I am sure that if we are to achieve the rate of growth we need as we go into Europe we must have a fuel policy that recognises that oil and natural gas must have their rightful place. There is no excuse for keeping fuel tax for import-saving reasons. After the coal strike it is more necessary than ever to say that.

I do not believe that the Opposition should make too much play about the value-added tax. I see that President Nixon is now looking at V.A.T., and perhaps America will adopt it. In view of the tax system generally and the great barriers to incentive created by direct taxation, surely it is better to let people keep their earnings, and to take taxes to pay for the things that we need—suchas roads and hospitals—in the form of a percentage on the goods they buy. I am slightly amazed, with the amount of zero rating that the Chancellor has announced, that he still needs a rate of only 10 per cent. to achieve the necessary out-turn. It gives me great heart to think that the value-added tax is such a small percentage. It is the tax of the future, which will be the best for our country.

I congratulate my right hon. Friend most heartily. I must call him a revolutionary Chancellor. I am sure he has started the economic miracle today.

6.10 p.m.

Mr. Robert Woof (Blaydon)

In following the hon. Member for Brig house and Spenborough (Mr. Proud foot) I must stress that I have always realised what a great ordeal it must be for the Chancellor of the Exchequer to introduce his Budget and brace up his nerves to present the right side and the left side of the nation's balance sheet.

The presentation of the Budget is undoubtedly a time of great parliamentary activity. The care and administration of public funds and the control of expenditure are necessary elements in the life of government. The collection of revenue also forms a fundamental part. Governments have always had a hard task in meeting their financial obligations. It is also obvious that no phase of Government activity causes greater controversy, even though in the course of life the majority of people are profoundly affected by the Government under whom they live.

We always wish to recognise things in their true existence and in terms of the relative truths that we have to face, but it appears that the general mind is becoming more and more preoccupied with tremendous problems. However high or exemplary wishes or ideas may be, conditions of rivalry and strenuousness in economic and social issues have never before prevailed to the degree they have now reached. Even though the average political mind which is in favour of any- thing which it really believes to be for the improvement and uplifting of society and endeavouring to obtain a fundamental grasp of the problems which human society presents will probably find that there is one point at least at which its attention tends to become concentrated, it should be on where they stand—as it were, between man as a member of society, endowed with reason, or all the brute creation that exists or has gone before them. However much we may hesitate to acknowledge it, I am reminded of the late Lord Keynes, who described the men he saw in the corridors of power at the time of signing the Versailles Peace Treaty in 1919 as a lot of hard-faced businessmen who looked as if they had done well out of the war. I admit that nothing can be more out of place than comparisons which were instituted between society 50 years ago and at the present time.

Wealth may accumulate, and public and private magnificence for some may have reached a point never attained in the history of the world before. But by and large this Budget to me is a businessman's budget. We learn of the knights of capital of the Stock Exchange, who must really be delighted. Those who profit are the organisers who set the machine to work, those who pull the levers, those who study its pulses and know its wants and those who divide and govern—and the world works so that they may grow richer.

But as we come to consider the performance of the Government, Lord Keynes's description seems to fit the Government very aptly. They have conducted their economic policies as if they were fighting a war, not for the welfare of the people of Britain as a whole but against the wage-earning classes in general and organised labour in particular. In this war, they certainly think they have scored victories, and on this Budget day their troops have turned out in force to applaud their general, who has even been able to give away a few spoils of victory, with many ripe plums of every description for practically everybody.

But with many battle cries ringing in our ears there are many in this country who are wondering whether this sort of war is the right way to run the economy. Amongst other noteworthy aspects—and the Chancellor mentioned this time and time again this afternoon—there is the effect of the recent battle of the miners' strike. That cannot be regarded as a success by the Government. Company profits have been hit, and the direct cost to the Exchequer alone was enormous. Over £5 million, we were told, was paid out in supplementary benefits to miners' families, and this of course was only the most direct item in the cost, notwithstanding the loss of output and industrial working on short time.

The miners solidly demonstrated that modern industrial society cannot function without their labour. They had first claim on our society before the speculators who dominate society.

It is typical of the warlike attitude of this union—bashing Government. Some supporters of the Government reacted to the announcement of that cost with a call for more warlike measures still, a reduction or even a total stoppage of supplementary benefits to men and their families during a strike. As my hon. Friend the Member for Rotherham (Mr. O'Malley) pointed out, their policy is one of starving people into submission. But the miners certainly demonstrated how to bore holes in the Chancellor's statement on 9th November last year, when he emphasised: As the House knows, the Government decided that the most effective way to stop the runaway inflation was to impress on all those responsible the paramount need for a progressive reduction in the level of pay settlements, and the Government remain resolved to stand firm on reasonable pay offers where our own employees are concerned. Then he added these most significant words: We shall not be intimidated by threats of industrial action into buying peace by excessive settlements."—[OFFICIAL REPORT, 9th November, 1971; Vol. 825, c. 853.] On these facts one would have thought that the endeavours and concern of a much shrewder Conservative Minister of Labour, the late Sir Walter Monckton, might almost be said to belong to a different generation of Tories. In his day—and to a much greater extent under the Labour Government, labour relations and the management of the economy, even in spite of what was imposed on that Administration by the economic situation they inherited—it can be said that the economy was a matter for co-operation and not confrontation. When a major industrial dispute broke out, the Ministry of Labour was straightway concerned, and did its best to bring the parties together. The T.U.C. was encouraged to use its good offices. Conciliation officers at the Ministry would arrange a marathon series of meetings, and every effort was made to bring about an amicable settlement.

When the present day is contrasted with the past, perhaps one of the first things that arrests our attention is the Government's idea of managing the economy. Conciliation officers might just as well join the industrial reserve army—the unemployed—for all the scope that they are given. It was not until the loyal and devoted members of my union clearly demonstrated that they would not allow themselves to be crushed by this Government that the Secretary of State for Employment intervened and proposed a court of inquiry. We all know the outcome.

What also has been disastrous in Tory warfare in economic management is the most obvious result on the industrial battlefield covered by over 1 million unemployed. That is one of the most terrible aspects that alarms us so much when we think of the future for the unemployed, particularly youths whose disastrous start in life is consigned to idleness meaning that they are early enmeshed in its attendant evils. I have had plenty of this in my time. This is closer to the gates of Hell than anything else I know. It is a disgraceful result of the present Government's economic policy. It is a stern fact of life which we have to take into account and the operation of which we remain powerless to escape. Practically every hon. Member has been deeply concerned about rising unemployment. Even the Chancellor this afternoon admitted quite openly that it is something which no Government can tolerate. We may now be able to see a way out as the Chancellor's sundry booster measures, which are so badly needed, are applied in many regions of the country.

I confess that I was rather disappointed that the Chancellor did not announce the setting up of a high-powered new regional development authority to stimulate industry. However, we must be thankful for small mercies, and we accept the volte face over the investment grants system to provide investment funds for plant and machinery and to attract new industries to reduce the level of unemployment. In my area that will be greatly welcomed. For years on this side of the House and from the opposite benches I have advocated replacement industries for those which have been obliterated. If this Government had not come forward with a policy to attract new industry, they would have had to order about four million tons of grass seed and experts to sow it over coalfields. That is about all that we could have expected.

I accept that if the strategy is to succeed it will take time to resolve to tackle the unemployment problem. This is something which cannot happen overnight. I accept all that. It is something for which the Government must take responsibility in switching from the previous Government's policy of investment grants and thereby creating lack of business confidence and the unemployment which has arisen out of it. The conflict, which perhaps is the most ironic and bitter aspect of the Government's whole policy, is that caused by trying to combat inflation by holding down wages in the public sector, and that may be totally irrelevant.

Dr. Charles Levinson, in his recent extremely carefully documented book, "Capital, Inflation and the Multi-Nationals", has shown that wage increases have, for the most part, only a minute effect on price increases, which are mainly caused by the insatiable need of large and increasingly multi-national companies for more capital as labour continues to be displaced by automation, involving increasing amounts of capital invested. This process is bound to continue and intensify and the effect of wage increases on increasing prices will become even more marginal.

This is not just a guess; it is supported by facts and figures. The Organisation for Economic Corporation and Development, for example, produces statistics for member countries each year showing movements in wages and prices which bear out this point. Perhaps the most dramatic are those for Japan where wages increased by no less than 72 per cent. between 1967 and 1970 but wholesale prices increased by only 7 per cent. The reason was that production per worker rose by 65 per cent., due to the increased capital investment put into Japanese industry, largely by the Government, who were concerned with managing the economy and not with sniping at "lame ducks".

It is not wages rates which are the prime factor in modern methods of production—it is capital. As the Wall Street Journal, which is anything but a Left-wing newspaper, put it: Labour costs aren't the Frankenstein monster they're cracked up to be,—it is a fact that pay to workers has been getting bigger, but also that labour costs increases have been getting smaller. In the last few years labour costs have been declining to a point that in the last three months of 1971 the index has barely budged, rising a miniscule one-fifth of 1 per cent. This trend seems conclusive, but of course the Government are apparently not interested in whether or not wage increases are the cause of inflation. They are concerned with stopping them in any event as part of their general policy of "union bashing". It is this approach which will mean that those who are restless in such a high-pitched life will have no desire to endure such policies. Throughout history the centre of power has moved gradually, where men have been trained for the rivalry of life in the strenuous conflicts in which they have acquired energy, courage, integrity and those characteristic qualities that contribute to a high state of industrial and social efficiency.

But how can one have confidence in a policy which is satisfied to see company profits rise by 24 per cent. as they did last year while insisting that wage increases should be restricted to a 7½ per cent. norm, or which abolishes free school milk while increasing the subsidies to fee-paying pupils at direct grant schools. Or is it any wonder, for what is in store for a great number of people having to meet the fearful housing shortage, and by drastically reducing the subsidies on council houses, which will to all intents and purposes, be an electric spark that will on average more than double the rent? The tenants, who are the wage-earners, will by then be spending a high proportion of their income on the higher rents, which in turn will impose further problems on wage demands, while at the same time the Government claim to be fighting and controlling inflation.

The Chancellor said something about vision. I could not catch his statement fully with the hubbub going on around me. I believe that there is nothing more real or more practical than vision, but I am very much afraid that there is nothing more unreal or unpractical than to fix one's eyes on the ground under one's feet and never lift those eyes and see what lies beyond and above them.

Therefore, as the National Institute for Economic and Social Research warned in its pre-Budget survey: The effect of both tax-cuts and increased investment is neutralised if there is a lack of public confidence in the development of the economy. It is as simple as that. Only time will tell whether this public confidence will be upheld—more particularly when the Government bulldoze their way into the Common Market, with all the consequences that will follow. But believe me, they will not do that with my support.

6.32 p.m.

Mr. Spencer Le Marchant (The High Peak)

When the Chancellor of the Exchequer presented his Budget last year, I felt that it was the most important Budget that I could remember. I felt it particularly important because it planned not only for the year ahead but for a Parliament; it planned for the several years which the Government had ahead of them. I regard this Budget as far more important because in its very conception it is planning not for this or the next Parliament but for many years ahead. It is progressive because it gives to industry and all of us a picture of where we are really going. We were told something about that last year, and I think we have been told a great deal more today.

I am sure that the Budget will be welcomed in the City and by the investment trusts. I am sure that it will be welcomed by industry. Some of the best aspects are the tax allowances. Free depreciation is not something that will come to a stop next year; it will go on until 1978. How much more helpful that is than to introduce something which might be changed next year.

We all want more production. We all know the fear of inflation—too much money chasing too few goods. We all know how hopeless it is to have wage rises which are immediately followed by increased prices in certain sectors. I believe that there is no sure way of making certain that the measures in one Budget are necessarily absolutely right for the country because there are so many international influences, but we do know when the measures are right, and I suggest that in the circumstances those put forward by my right hon. Friend today are absolutely right.

Until this last year we have had a poor performance in the international league. Our growth has not been very good. We are still suffering from the low rate of investment in our vital industries. However, this last year has shown an upturn; the rate of inflation has halved; we have repaid large sums of money abroad; we have a record surplus. But when one thinks of all these things which have been so good for the country in the last year, one also thinks of the terrifying effect on the country as a whole of the coal strike.

The hon. Member for Blaydon (Mr. Woof) is a miner, and he is proud of that. I am a Member of the Stock Exchange, and I am proud of that. I believe that the Stock Exchange, with all it does for the country, does every bit as much as the miners. It does these things for industry, in finding money which provides employment. The hon. Gentleman and I both have the same sort of things to do and do things our own way. I do not accept that this is a bad Budget, that it is a Budget which does not help every single person in the country.

Mr. Woof

I did not say it was a bad Budget. I said that by and large it was a businessman's Budget, which is a different thing altogether.

Mr. Le Marchant

I suggest that it is a Budget which helps the regions a great deal; it helps the individual by the change in the personal allowances so speedily at the beginning of May, quicker than ever before; if helps them through the purchase tax reductions, and that is not only for businessmen; by exempting many millions of people from tax; it helps by increasing pensions. This is a Budget for the people. It is a Budget which the people of Britain wanted. It is a humane Budget, and I applaud it for its far-sightedness.

6.38 p.m.

Mr. Laurie Pavitt (Willesden, West)

It is perhaps a little surprising to me that I should be following the hon. Member for the High Peak (Mr. Le Marchant), because, like him, I, in my dark and mysterious past, was on the floor of the house—but not this one. I had the experience at a young age of being on the floor of the Stock Exchange for a short while but made my escape, for which I am thankful.

I am not as enthusiastic about the Budget as the hon. Gentleman is. Nor can I indulge in the excitement, enthusiasm and euphoria of the hon. Member for Brig house and Spenborough (Mr. Proud foot) about it. We have all seen Budgets received in this House with verying degrees of acclamation or praise, and in the long run we have learned to have some sympathy with Chancellors of the Exchequer who have to face this ritual dance every year, with all attention focused on it, and have to try to get some sense out of a complicated system.

Each Chancellor plays "put and take". What makes it more difficult for hon. Members as the years go by is that, whereas once upon a time it was "put and take" only at the time of the Budget and the Finance Bill, now many other factors have to be taken into consideration. So we rejoice that there has been a Father Christmas type of Budget this year, and that this is one of those years when there is more "put" than "take".

At the same time, as my right hon. and hon. Friends have reminded us, what is given in one area of financial policy is very often countermanded in another. We are all able to rejoice that personally we may have an extra £1 a week in our pay packets, but we are also aware that the family man finds himself paying increased prescription charges, more for school meals and other increased charges, and that under the Housing Finance Bill council tenants will rapidly see much more than their £1 swallowed up in highly increased rents.

We have seen a phenomenal rise in land and house prices. This has an effect upon the economy and the way people spend money. One of the mistakes we make is to think that the Tories are not flexible. They are amazingly so when it comes to self-preservation. We have witnessed a complete change in their policies. This afternoon they have not described them as "investment grants" but at least on regional policy they have returned to the system about which they were so rude when they came into office. We are pleased that they have seen the light, and congratulate them for following us and for now adopting a system which we pioneered.

I was concerned about the underlying philosophy of the Chancellor's speech. There are easy phrases which all politicians can use so well when we talk against taxation. No one likes to be taxed. The Chancellor said that we have been taxed too heavily and for too long. That is the kind of phrase that will have everyone in the saloon bar and the public bar nodding his head and saying, "Hear, hear." This is the wrong philosophy. The Chancellor has the responsibility of getting the economy on an even keel, but he has another responsibility. Individually we cannot afford to pay for education, to have more teachers and smaller classes, more general practitioners, more nurses, physiotherapists, more screening for cancer, more spent on medical research unless we have the Chancellor acting as the agent for the people.

The Chancellor's approach to the Budget was adolescent on the fiscal side. Taxpayers are grown-up people, and there is no reason why he should not have put fairly and squarely the point that if we want more schools and hospitals it is not possible on the one hand to have a £1,000 million bonanza and on the other hand to say that there will be increased spending on health and welfare activities and upon the chronic sick.

Mr. Nicholas Scott (Padding ton, South)

The hon. Gentleman is treating us as though we were naïve. Of course rates of taxation can be cut as long as by doing so growth in the economy is stimulated. The extra rate of growth produces extra revenue and more things can be paid for.

Mr. Pavitt

Many years ago my party made a great mistake about this. We said that all we had to do was to increase growth and everything would be all right. It is not just a question of increased growth; it is a question of what is done with the growth. I refer the hon. Gentleman to Tawney's "Acquisitive Society", chapter 1, where most of this is dealt with at great length.

I am a member of the Co-operative group in this House, and I welcome two points the Chancellor made. The Co-operative movement is a consumer movement, nearly one in four of the population being members. It is the largest grocery retail organisation in the country, owned by those who shop at it. I welcome the comments of the Chancellor about taxation changes for those non-profit making organisations registered not under the Companies Act but under the Industrial Provident Societies Act. I look forward to studying the Chancellor's statement more closely and in the ensuing debates to hearing more about the way that this will work.

The Financial Secretary to the Treasury (Mr. Patrick Jenkin) indicated assent.

Mr. Pavitt

I am glad to see the hon. Gentleman nodding. Obviously, in the allocation of duties this one has fallen to him. I always enjoy listening to him. I remember his lucid explanations on the occasion when the Finance Bill went upstairs into Committee. I enjoy listening to him on financial matters despite the fact that he is such a hidebound Tory in politics.

Both sides of the House will look forward to examining in greater detail the problem which the Chancellor has grasped through the institution of V.A.T.—an abhorrent tax meaning a shift from direct to indirect taxation. That is a bad thing. I prefer that those who can best afford to pay a tax should pay it—taxation of means and not of needs—rather than taxing that which people need to eat. I am glad to see that food has been exempted.

Mr. Patrick Jenkin

A moment ago the hon. Gentleman said that V.A.T. meant that we move from direct to indirect taxation. He must have forgotten that the Chancellor pointed out that with the exemptions and zero ratings and the ratings foreshadowed there will be less V.A.T. levied than is the position with purchase tax and S.E.T. now.

Mr. Pavitt

I noted that with care, but this tax is being introduced for the first time. It will become a permanent part of our taxation system, and I shall be surprised if future Chancellors do not see it as being something which can be extended. The Chancellor has naturally made it as palatable as possible at its inception.

The Chancellor has grasped the problems that will face retailers holding stocks upon which they have previously paid purchase tax. I welcome the statement that his mind is not fully made up on the matter of adjusting in some equitable fashion the double taxation which would arise. He has announced that he will consult those who have the know-how in dealing with stocks and distribution. If I may speak on behalf of the Co-operative movement, I can say that that body of consumers, retailers and wholesalers would welcome the opportunity for consultation. It has a 100-odd year experience of the business, and, although it has never had to face this tax, it had to meet purchase tax and many tax changes since which affected retail distribution. I urge the Chancellor to begin his consultations as soon as possible.

I regret that there has been no mention of tax relief for blind persons. In 1952 a Royal Commission recommended that there should be a tax disregard for part of the earnings of blind persons so that they could keep themselves when gainfully employed. Since then there has been a change in the way we treat blind persons. Whereas at one time nearly every blind person who worked was in a sheltered workshop, over the last six or seven years in this area, as in other disablement areas, there has been a move to encourage blind persons to go into the mainstream of the community and industry and seek employment in ordinary commercial or industrial concerns.

It was not until ten years after that Royal Commission that the Chancellor introduced a disregard of £100 on the earnings of blind persons. There has been no change in this since 1962. That £100 is now equivalent to £63. I think, therefore, that while the Chancellor is in a give-away mood this is one of the sections to which he should pay regard; it will cost little on his total revenue, an absolutely neglible amount, and if I do not find it included in some part of the Finance Bill I shall have great pleasure in trying to move an Amendment to give blind persons the justice they deserve.

The other point concerns another section of the community who are disabled; namely the partially deaf, the hard of hearing. Under the value-added tax one of the big problems will be that the person who needs a hearing aid in order to continue with his employment will find that unless zero rating is applied to purchase of a hearing aid will attract value-added tax all along the line, on production, wholesale and dispensing. This additional taxation would be very onerous for deaf people. I hope the Chancellor of the Exchequer will find it possible to give a zero rating to hearing aids.

In addition to that, if a person buys tools or other equpiment for his work he is very often allowed capital expenditure relief for taxation purposes, but a person who is deaf but can nevertheless continue his employment provided that he has one and sometimes two hearing aids has no such allowance on the capital he expends. The cost of a hearing aid can be between 25 and 110 guineas; so if a person wears two aids the capital expenditure may be £200. It is a small matter in terms of the total of hundreds of millions of pounds which the Chancellor is talking about, and this is an area in which perhaps some compassion should be shown and a tax allowance given.

The Chancellor of the Exchequer did not mention in connection with value-added tax that as a result of its collection we shall be giving 1 per cent. of the total collected each year to the European Economic Community, which will be another part of the great contribution from this country to swell the coffers of the Six, or the Ten as it may well be if we finally accede. It is quite wrong that when he talks about zero rating for food he should still persist in applying V.A.T. to chocolate, chocolate biscuits and things of that kind. I have a constituency interest here since one of the businesses in it is what used to be McVitie Price and is now United Biscuits. The firm has been writing to me and other hon. Members about this for many months past. Chocolate biscuits may be regarded as a luxury item, but I contend they are not for children and old people. For an elderly person a limited pension the chocolate biscuit with an afternoon cup of tea is a very real com- fort. I would have hoped that it would have been possible, instead of sticking to the very easy rule that where purchase tax has been charged in the past V.A.T. will be charged in the future, for the Chancellor to make that little concession.

The House has welcomed the way in which the Chancellor has introduced his Budget today. It is always a bit of a marathon for the Chancellor as he goes through each section and gradually reaches the crux at the end, because he has to wait until the Stock Exchange closes before he can put in the tidbits. We shall look with interest at the debate of the next four days and watch what happens. But I say that it is nonsense to imagine that by fiscal means and increased productivity the right hon. Gentleman will be able to solve the unemployment problem, because the better the productivity, the more competitive one is, the more one can produce by automated or mechanical means, the fewer people one needs to employ. That is the point which the Chancellor has not touched upon this afternoon; perhaps he will do so in later debates. We cannot be euphoric about the Budget while we still have 1 million people who are denied the means of earning their daily bread, which means that 1 million families at this present time—possibly 4 million persons—are affected. We shall watch with interest whether this Budget bites into this shameful and appalling state of affairs in the year ahead, instead of yielding to euphoria today.

6.56 p.m.

Mr. Edward Gardner (South Fylde)

I should have liked very much to follow the hon. Gentleman in what he has been saying but I have only four minutes left, so I will say generally that I add my voice to the chorus of congratulation which I believe will be heard in this land today as a result of my right hon. Friend the Chancellor of the Exchequer's Statement. This is an admirable Budget, because it looks to the future—to our future entry into Europe. It is a Budget which will bring the kind of confidence that is necessary for the prosperity of this country.

I am particularly happy at the effect that it will have on old-age pensioners. I have in my constituency in South Fylde—and particular in the area of St. Annes on Sea and Lytham, and just to the east of that area—a large number of old-age pensioners. I cannot help feeling that inflation as we have felt it over the past few years has been a disaster in many of their lives. I congratulate my right hon. Friend on deciding not only to increase old-age pensions and to review them annually but also to make it possible, as this Budget does, for those pensioners who are living on their savings to get the maximum benefit from the interest on those savings. As we have heard, they can now enjoy an investment income of up to £200 without any of the disability that formerly applied to that kind of earning. In addition, there is the absence of tax up to an income limit of £929.

It seems to me that these are benefits of the highest importance, which affect not only the old-age pensioners upon whom my attention focuses in my constituency but those throughout the land. It is right that the Government should encourage people who are coming to retirement to save as hard as they can and to aim at making themselves independent, and should give them the hope that when they have made themselves so independent they can enjoy that independence in the fullest measure. I can see nothing but merit in people who aim at coming to retirement age with sufficient savings to enable them to enjoy their retirement to the full. But there are those—hundreds and thousands of them—who, try as they will, cannot achieve this accumulation of capital. I am happy to note that for them social security benefits are going to be increased proportionately to old-age pensions.

I should like to refer now to a point that was dealt with by the hon. Member for Willesden, West (Mr. Pavitt). I, for one, support and sympathise with his plea for some kind of tax relief on the hearing equipment used by deaf people. I have two people in my family who, unhappily, were born deaf. However sympathetic people may be, the deaf do not get that degree of sympathy that is given so freely to the blind. I should very much like the Chancellor to consider the possibility of giving some kind of tax relief to people who have to buy this very necessary equipment.

Debate adjourned.—[Mr. Fortescue.]

Debate to be resumed tomorrow.

Mr. Speaker

As it is not yet time for Private Business, the sitting is suspended until Seven o'clock.

Sitting suspended till Seven o'clock.