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 in connection with finance; but this Resolution does not extend to the making of amendments with respect to value added tax so as to provide—
§ 5.32 p.m.
§ Mr. Harold Wilson (Huyton)
The House will once again agree with me in the tribute that it is usual to pay to the Chancellor of the Exchequer on his presentation of the Budget. Over the past three years we have become accustomed to this regular pattern and the right hon. Gentleman's style of presentation. On Budget Day the right hon. Gentleman invariably presents his speech agreeably, fluently, clearly and—as far as the subject matter allows, as it did once or twice again today—entertainingly, what with his utility shoes and his nubility ratios of young ladies, however measured, and I have no hesitation in congratulating him on behalf of the House yet again.
It has not passed the notice of the House that what should have been and should always be a restful weekend of mental and physical preparation has for the right hon. Gentleman this year been a time of very heavy strain, not only physical but set by the gravity of the decisions and the policies that he has been forced with his colleagues to examine at home and in Brussels. It was a pity that this should happen on the very eve of the Budget presentation.
Just as the right hon. Gentleman's style of speech is part of a regular pattern, so we have seen other regularities. For example, as well as my own regular congratulations to the right hon. Gentleman there are usually the full-throated cheers of his right hon. and hon. Friends when 282 he sits down. I thought that they were a little muted today compared with last year—[Interruption.] If Government supporters want to make up for it now I do not mind. But another part of the pattern each year when this has happened has been my warning to those right hon. and hon. Members who have cheered him that the Budget which they cheer in April will not look the same in the late spring or early summer, by which time the Chancellor's Budget has become as though it had never been and we have the usual mini-Budget or new Budget about the middle of the year not quite so tastefully presented but usually heralding a major lurch or change of direction in Government policy.
The same will again prove to be true this year. That would have been the case even without this week's monetary crisis. The proposals in the right hon. Gentleman's speech were quite clearly drawn up before the crisis occurred. Whatever the decisions in Brussels, the right hon. Gentleman will have to reconsider the whole of his policy in the light of those decisions, whatever they are. If the outcome of the Brussels decisions is that no attempt is made to fix the parity, he will have the support of the Opposition. He knows that to fix it too high would make us vulnerable to a future orgy of speculation because the speculation would be spurred on rather than sated by the success of speculations against the dollar. On the other hand an attempt to insure against that by fixing a very low parity is simply a prescription for forcing up food and raw material prices, reinforcing inflation and increasing the already excessive payments that we have to make to Europe. So the Chancellor has the Opposition's support in all that we believe he is trying to do in his discussions in Brussels and elsewhere in Europe.
Even without the monetary crisis, the Budget—and we admire the right hon. Gentleman's ingenuity—is posited on a cruel dilemma created by the exuberance of the right hon. Gentleman's earlier actions and the expectations raised by the Prime Minister in the General Election and in his subsequent actions. The right hon. Gentleman has asserted again that the economic growth rate is on target, and, with the usual allowance for the deficiencies in the various figures, there is 283 strong evidence to support its continuing at the rate which he has been describing. The right hon. Gentleman knows that the reality underlying that growth rate is associated with—not only concomitant with but causally associated with—a prodigal dissipation of the balance of payments surplus of £650 million that we bequeathed to him in 1970 with a built-in momentum carrying it to over £1,000 Million in 1971—[An HON. MEMBER: "What about the debts?"] We did not get from the right hon. Gentleman today the extent to which during our period in office we built up a surplus in non-Government debts and, since this Government came to office, the extraordinary amount of borrowing by British industry and British finance which has been part of this whole transaction.
The £1,000 million which the right hon. Gentleman enjoyed in 1971 has gone. The estimates for this year by various competent authorities vary from a £500 million to a £1,000 million overall deficit. The trade balance has worsened by £1,000 million in a year—that is, over the last year. It is still deteriorating. The National Institute, in its on the whole friendly and optimistic review of the right hon. Gentleman's prospects, forecasts the visible trade balance for 1973 at £1,625 million. The Department of Applied Economics, Cambridge, warns of a £1,000 million balance of payments deficit unless the growth rate is cut. It seemed to me that what the Chancellor said about the prospects for trade was unusually complacent in the light of what has been happening recently.
The problem of the parity, whether under a free float or under some new fixed régime, is not the right hon. Gentleman's only dilemma. He and his colleagues have boasted—he did it again today—of the tax cuts of the past 2½ years. They are not due to the right hon. Gentleman's providence. They are not due to cuts in Government expenditure, which the Prime Minister told us in the last election would alone be the means of getting tax cuts. Government expenditure has increased more rapidly under this Government than under any previous Government. The tax cuts that have been made have been financed as a result of Government borrowing—in fact, by deficit financing at this time.
284 In the last fiscal year of the Labour Government the net borrowing requirement was negative. It was a debt repayment of £1,117 million. Taking the financial years for which this Government have been responsible, in 1971–72 there was net borrowing of £515 million. I do not know whether that has been varied with the figures that the Chancellor has examined today. I thought I heard the right hon. Gentleman say—he will correct me if I am wrong—that there will be about £2,800 million net borrowing, and next year, with all the qualifications that he made, he spoke of an even higher figure than I have seen estimated. The CBI speaks of a figure of £4,000 million, but the Chancellor spoke of £4,423 million before making certain qualifications on how it has been reached.
So expenditure has not fallen. Under this Government expenditure has risen more rapidly than at any time in our history. I sometimes read the suggestion that it is rising more rapidly than at any time in peace time. In fact, it is not only in peace time: but, on figures I saw today—I should like to check them further—it looks as though the Government's borrowing requirement now is greater even than in the years of the war.
§ Mr. Wilson
I did as far as I could, but I was waiting to hear the Chancellor's figure.
We have the unanimous report of the Select Committee on Public Expenditure. The December forward projection, compared with that of November 1971, showed an increase in expenditure over the coming year of £1,200 million. Some have estimated £1,500 million as the increase of expenditure over a single year compared with what was forecast for this year. According to the Select Committee, only £200 million was counter-cyclical in the form of measures to deal with developing unemployment on the Select Committee's two-year criteria.
Though the October 1970 expenditure programme, which we had soon after this Government came into office, cut Labour's forward projection by £942 million, all that survives of those cuts is the miserable saving from the denial of school milk. From November 1972 expenditure has 285 increased by £482 million compared with £1,213 million over the past year. The Select Committee reports that the increase over the Labour Government's spending proposals for this year has now increased net by £750 million. On top of this we have the increase in the money supply.
I asked the Prime Minister recently about interest rates. We have heard little about these today, except the big figures for national savings. Interest rates are rapidly becoming about the most cost-inflationary element in the business, to say nothing of the inevitable effect—I was surprised that the Chancellor did not deal with this today—on building society mortgages for young would-be owner-occupiers on whom the Prime Minister, as we all recall, lavished so many insincere Central Office glycerine tears during the election. What will be the effect of the new National Savings incentives—I agree that they reflect only the conditions in the market—on the volume of funds available to building societies and through building societies, at whatever rate they may have to be, for young would-be owner-occupiers?
I was surprised that the Chancellor did not deal with the effects of the so-called free market in the City. If it could ever have worked, if one felt that this particular notion of a free market in the City could have worked, it certainly cannot work against the background of a £4,000 million borrowing requirement. Many hon. Gentlemen opposite, as well as many people in the City and in industry, know that. It cannot function against the background of a totally demoralised gilt-edged market in a situation where on one day of the week the joint stock banks' base rates go up and, a few days later, bank clients' inter-bank dealings leapfrog over them until the base rates again join the leapfrog game.
The whole process is aggravated, as is the foreign balance, by the volatile Eurocurrency markets. I was surprised that the Chancellor did not deal with that to any extent today in his two-hours otherwise informative speech. How much he might have told us of his estimates—I hear different estimates—of the total volume of the Euro-currency market, but none of the authoritative estimates seems less than 100 billion or indeed 120 billion dollars or beyond. We had reason 286 last year to feel the effect on our balance of payments, but equally it is making utter nonsense of monetary management and therefore forcing up interest rates in the City.
I now come to the Chancellor's more important announcements. We heartily welcome his conversion on the subject of children's clothing. He has been a very slow learner, but we are happy that he got there in the end. I have no doubt that certain newspapers will claim the credit by their belated campaign. I am sure they will. They did not report us when we raised this matter last year. They did not report our vote and they did not report the vote of the right hon. Gentleman and all the specious arguments that he then employed about children's clothes, which we are glad to see he has forsworn today.
In one of his earliest points, the Chancellor referred to the payment of tax credits to mothers. So far as we understood his formal words, we welcome this. As some of us said in the debate on the Address, this should never have been in question. I am glad that the right hon. Gentleman put the position right today.
On oil in the North Seas—I presume that what the Chancellor was saying referred to the Celtic Seas as well—we welcome the decision about their liability to corporation tax and non-relief losses in the Middle East or elsewhere. We also welcome the provision to see that these measures are effectively backdated to prevent any of the bonanzas that they were hoping to get away with before he acted. As many of us have argued, it means having the equivalent of posted prices, which was inevitable in what the right hon. Gentleman said this afternoon.
However, we must ask him—we shall want to examine this—whether it goes far enough. Although it is not comparable with the Norwegian settlement in respect of the Egofisk field, or, unless the Chancellor or another Minister corrects this later, with the kind of domestic revenue enjoyed by Governments in the Middle East and, I believe, in substantial parts of Canada and the United States, it is a step in the right direction. It is a big change from the time when the Government, instead of auctioning off these things, were handing them over at a few hundred pounds each—each of which was capable of making hundreds 287 of thousands or millions of pounds of revenue.
I welcome what the Chancellor said on the dependent relative allowance and age exemption.
On building land, after all this thought, it is a bitter disappointment that the Chancellor has not more to propose to us. He must realise the relevance of this matter to the whole appeal that the Government are making for a prices and incomes policy. In a year when people have been tightly held down on incomes and are being hard hit by rising prices, it is offensive, indecent, obscene and a total breach in the Government's proclaimed policy that people can make fortunes literally in an afternoon and go on television and boast that they have made a quarter of a million pounds on a property deal in this way.
Although it looks as though the right hon. Gentleman is going to act, up to a point, I must warn him that he has left it far too late. The damage has been done. Vast amounts of public and private householders' money—it will probably run into several hundred million pounds—have poured over the dam while he dithered about and refused to act. Certainly he has not done anything now to ensure what I think would be the wish of everyone on this side of the House, and I hope some hon. Gentlemen opposite, that values created by the community should accrue to the community that created them.
I did not hear the right hon. Gentleman say very much about the empty offices. There was his proposal for a building withholding tax, or something to that effect—we can check his phrase later—but it seems to me that this is not the way to deal with the scandal of unused sites and of unused buildings, some of which have been standing empty for years. What the Chancellor should do, if he is not going to act himself, is give the local authorities full powers to rate those buildings, not merely on a permissive but on a mandatory basis. They should be mandatorily rated, and I see no reason why the rate percentage should be limited to 100 per cent. Again, it is offensive in this situation that these properties are not used, and the rates could well go up to 150 per cent. or 200 per cent. per annum.
288 On VAT, we consider that the Chancellor's 10 per cent. decision is deplorable and inflationary, however he tried to erode it by certain exemptions. I have referred to children's clothing. Some of his decisions on charities are very much welcome, although some of my right hon. and hon. Friends and the charities themselves will want to study how far they go. There are still some very important charities, I think, which have not benefited in a way which would have been right and reasonable. We welcome his decision, of course, on sweets and confectionery, but it is a bit of a mockery if that is his answer to the problem of rising food prices.
What was significant about this speech —agreeable though it was—was the long list of things with which the right hon. Gentleman failed to deal. He failed, over a large field, to deal with rates. What he said may help in some cases, but it will be very unjust, very arbitrary in how it affects different local authorities, very unequal in incidence, by relating it purely to revaluation.
The right hon. Gentleman did not provide, particularly, for some of our big cities, our older cities, our big urban areas, where the problem is not so much revaluation—in some cases not at all revaluation—as one of inflation in the fulfilment and operation of essential community services. With the cost of these services going up inevitably, with the services being required—I have not heard the Government say that the services should be cut—I am very disappointed, and I think that the local authorities and the ratepayers will be disappointed, at what seems to me a very limited, tinkering approach to this problem.
I was surprised that when he talked about the regions—I do not think that I missed what he said on this—the right hon. Gentleman did not tell us what his policy will be for REP. Surely that is one of the most essential things. He told us a bit about the regions but he should have made the announcement about REP this afternoon. It has been long delayed and the right hon. Gentleman is being pressed for a decision by many people who at one time were against it, including, I think, the CBI.
Also, I had hoped, when he talked about the regions and the community, that the right hon. Gentleman would 289 state firmly and clearly that the Government will not allow any of our development or intermediate areas to be scheduled as part of the central areas of the Community, as is being currently proposed by M. Borschette, the Commissioner for Competition.
Those are some of the things with which the Chancellor did not deal. Even when he referred to the threshold, he did not deal with the problem of fiscal drag over the past year. How many of those of whom he spoke, who last year were eased because of the effect of inflation and were therefore eased in taxation by his pound a week proposals, are now paying more tax as a result of inflation?
But, above all, the Chancellor has not dealt with food prices in the slightest, although that is the main item entering into most family budgets. He has not dealt with housing, he has not dealt with, or announced a suspension of, the increase in council house rents due to come in next month. He has not announced any suspension or stop in the process of decontrol in privately-rented houses.
On the other side—this is what makes the whole economic policy, taking into account the prices and incomes policy, such a totally unfair package—he has not said that he is going to halt the —300 million and more relief voted in the last Budget for the wealthiest taxpayers, many of whom will be automatically taking home, after deductions, a figure much bigger that the total amount that the richest person in the country can hope to get under the prices and incomes policy. They are limited to 5 per cent. The wealthiest taxpayers, including some who are dependent on unearned income, will have a lot more take-home or sent-home than that. This is a condemnation of a fundamentally unfair economic and social policy. It is because it is unfair that, increasingly, the Government will find that it is unworkable.
So, however agreeable his presentation, the Chancellor cannot get away from the economic background to the Budget—the biggest increase in the cost of living in our peacetime history, indeed, going up at a more rapid rate than even in the years of the last war; the fact of 18 months of unemployment of over 750,000—the figure that the Prime Minister repeatedly forecast in the last Parlia- 290 ment would happen under the Labour Government, although we never came within a long distance of it; a record trade deficit against a record inherited surplus two years ago; the virtual certainty of a record balance of payments deficit; record interest rates; record house prices; record land prices; the lowest house building figures since the Tories were last in office; the lowest public authority house building for over ten years; two devaluations in eight months, three in fourteen, now amounting—[HON. MEMBERS: "Rubbish."] Oh, yes. [HON. MEMBERS: "Hear, hear."] These devaluations are being paid for by the pensioners. They are being paid for by everyone who is paying high prices in consequence. We had to devalue, after inheriting an —800 million deficit. The Tories have three times devalued after a —1,000 million surplus.
Theirs has been a miserable record in industrial investment. Why did not the Chancellor mention the record of industrial investment announced this morning —manufacturing investment down by 18 per cent. last year when compared with the previous year? Was that the kind of glowing economy that he was trying to draw to our attention today? Is that why he said that industry is better prepared now to take advantage of rising world markets?
Finally, industrial relations. More man-days were lost through disputes last year than in nearly six years of a Labour Government—[An HON. MEMBER: "Whose fault was that?"] The fault of this Government and that Prime Minister—the man who was going to solve all the strike problems, who embittered them with the Industrial Relations Act and with his confrontations and with his arrest of the dockers and so on. No, Sir—that is the reality underlying this Budget. That is the reality that we shall see more clearly as these months go by.
Therefore, I end my compliments to the right hon. Gentleman as I began them —with a tribute to his agreeable presentation, though very unevenly to his content. It was, of course, anything but a maiden speech. The Chancellor lost his fiscal virginity a long time ago. Nevertheless, in terms familiar in this House, we shall expect to hear from him again in the very near future.
§ Mr. Gerald Kaufman (Manchester, Ardwick)
On a point of order. The Chancellor, in his Budget statement, said that the Secretary of State for the Environment would be making a statement on rents. Could the Leader of the House say whether this statement will be made to this House or outside the House?
§ 5.58 p.m.
§ Mr. Percy Grieve (Solihull)
I was very sorry that the obligations of political faction constrained the right hon. Gentleman the Leader of the Opposition to refuse to my right hon. Friend's Budget the credit and welcome it deserves. I do not believe for one moment that the right hon. Gentleman's reaction will be that of the country as a whole. In my right hon. Friend's Budget there appear to be concessions and advantages for the whole spectrum of our community.
I begin with a welcome to the increase which is provided for pensioners. As my right hon. Friend the Chancellor said, in the comparatively short time during which the present Government have been in office they have done more for the pensioner than has been done for years previously, and certainly during the whole period of office of the Government over which the present Leader of the Opposition presided.
The right hon. Gentleman made it a feature of his criticism that my right hon. Friend had not given way to pressures which have been brought upon him in a great many quarters to go back upon the tax concessions and tax reforms which he promised and has formulated in the last two Budgets. I am extremely happy that my right hon. Friend has had the courage of his convictions, which I profoundly believe are to the advantage and interest of our country.
The Leader of the Opposition referred to a fall off in industrial investment. But what greater cause has there been over the years for a decline in industrial investment than the penal taxation for which Chancellors of the right hon. Gentleman's Government were responsible year after year? The concessions which have been made, and have been so much criticised by the right hon. Gentleman, to the holders of investment income were no more than a small recompense for the 292 years in which they suffered completely penal taxation.
I represent a constituency in which a large number of retired people are living on investment incomes, the fruits of a lifetime of saving and of the sale of the businesses which they have built up. My constituents in that class year after year, found that their incomes were eroded by the Labour Government's penal taxation. I get letter after letter from constituents rightly telling me that their standard of living when they retire falls away completely.
The concession which my right hon. Friend has made with regard to the first —2,000 of investment income is a modest concession which will bring a great relief to many who have served the country well throughout their lives, who have not relied on pensions for their retirement but on savings, and who find that as a result of the highest rates of direct taxation in the western world they are very hard put to it to maintain a reasonable standard of living in their retirement.
Regarding the provisions relating to taxation, I particularly welcome the concessions on death duties. As my right hon. Friend said, it has been grotesquely unfair that, certainly as far back as I can remember, estate duty has been payable on the values prevailing at the date of death. The position has frequently been reached, where a slump has followed the death of someone who has left a provision for his family, that the assets of the estate have sometimes not been sufficient to pay the duty. The reform proposed by my right hon. Friend, which we shall see incorporated in the Finance Bill, is that new rules are to be laid down for valuing assets at the date of sale. That is a welcome concession to a very large number of people, some of whom are of quite modest means, and to their dependants when they die.
I am sometimes horrified by the fact that when a breadwinner dies his widow and family not only lose their staple support but, by reason of death duties, find that their whole standard of living is completely cut away. The concessions which my right hon. Friend made in previous Finance Bills with regard to the first —15,000 of capital left, and then the —15,000 left to a spouse, have gone a long way to remedy this difficulty. The 293 concessions on valuation now made are an extremely important mitigation of the burden of estate duty.
I hope that my right hon. Friend the Chancellor and my hon. Friend the Financial Secretary will not refrain from further investigation of the whole problem and weight of estate duty. I have always thought that if we had much more moderate duties on death than those we have at present, people might well not feel compelled to take the measures of avoidance which they now take, often at very considerable sacrifice to themselves, by making over money to their children during their lifetime. The yield from estate duty, were it more moderate, might be greatly increased.
So far, so good. I congratulate my right hon. Friend upon the concessions made so far. There is another matter which I should have been happy to see dealt with in the Budget, and my hon. Friend the Financial Secretary knows what that is as I have written numerous letters to the Treasury about it. That is the problem of the taxation of the income of married women.
One of the first things done by the present Government, a laudable thing, was to give the option of separation of the incomes of husbands and wives when that income was earned income. I could do nothing but applaud that. But by concentrating on earned income the Government have committed yet a further act of discrimination against investment income. It is surely grossly unfair that a married woman with an estate of her own should find herself poorer on marriage and paying more tax on her income, through her husband, than she would have paid had she remained single.
At a time when Women's Lib is rightly a cause in respect of which many hon. Members have nailed their flag to the mast, it is surely a matter for comment that in many cases it would pay people, in respect of their taxation position, to live in sin rather than to get married. If we are to avoid discrimination against women it is vital—sooner or later we must come to it—that married women should be given the option of paying tax separately as single individuals upon their incomes and that these incomes should 294 not be aggregated with those of their husbands. I have taken up this matter with Treasury Ministers on numerous occasions over the years and I make no apology for raising it again today. It does not in any way detract from my congratulations to my right hon. Friend upon his Budget, which continues the right policy for the economy of this country, a policy of concentrating on growth while trying to beat inflation.
Every passage of the long, careful summary of my right hon. Friend as he introduced his Budget was redolent of the importance for the future of our country and its present prosperity of combining those two objectives and carrying them through to a successful conclusion.
I should like to welcome some other provisions in the Budget. I do not believe that any hon. Member would not congratulate my right hon. Friend on his decision with regard to children's shoes and children's clothing, a matter which has greatly disturbed the public and on which I have received numerous letters from constituents. No one will withhold congratulations to my right hon. Friend for the concessions he has (made with regard to value added tax and charities. To be particularly welcomed are those provisions dealing with goods which are sold in charity shops. I have on my desk at present a lengthy petition from supporters of Oxfam in my constituency. They will go to bed happier tonight in the knowledge that the work which they put into this noble cause is to have the support of the Chancellor through the tax concessions which have been made.
I end this short appreciation of the Budget, made, as such an appreciation must be, on the spur of the moment, just after the Chancelor has outlined his Budget to the House. I end where I began. This Budget as I see it contains something for every member of the community. The Leader of the Opposition, who indicated to me as he left the Chamber his regret at having to leave, said this was not a fair Budget. I believe that when it goes out to the country it will be seen to be extremely fair, carefully balanced to preserving growth and giving all the concessions that can be given to every person throughout the community. I congratulate my right hon. Friend.
§ 6.11 p.m.
§ Mr. Roy Hughes (Newport)
The hon. and learned Member for Solihull (Mr. Grieve) said that in his opinion this was essentially a fair Budget. I thought that the distribution was inequitable, but I agree with the concessions that have been made to the pensioners and I welcome the increase of —1.60 for married couples and —1 for single persons. I also welcome the improvements in the supplementary allowances, and the concessions on food are to be welcomed.
But not so welcome are the concessions on confectionery, ice cream, crips, chocolates, sweets and so on. I speak as a father of three young children and I feel that these concessions are too generous. Certainly, they will provoke a lot of dental troubles and my children already have too many of these commodities.
There are to be concessions to charities in respect of value added tax. I have written on numerous occasions to the Chancellor about the problem and I am glad that he is taking action and is granting the necessary concessions. My right hon. Friends have been engaging in considerable agitation for a long period on the vexed question of children's clothing, so again we welcome that the Chancellor has taken note of our representations.
The principal subject I want to deal with concerns rates. Certainly the Chancellor has recognised the problem by granting the concession—a sort of subsidy—for half the cost of increases above 10 per cent, for ratepayers for the period 1973–74. He has estimated the cost at some —10 million. The concession to confectionery will cost about —110 million and I would have preferred to see the figures the other way round.
The Chancellor admits that there is a problem but as I see it, and as the Leader of the Opposition has pointed out, he is tackling it only by dealing with revaluation whereas, of course, inflation has been an equally large problem in local government. Many local authorities are in a desperate position and I can only quote the position of my local authority. After all, charity begins at home. The Town Clerk of Newport wrote to the Prime Minister a few weeks ago pointing out that according to his authority's estimates it would need an increase in the rates of 296 36 per cent. After certain discussions had taken place with the Department of the Environment the figure was reduced to 31 per cent. but this will still be a colossal increase. In my constituency some domestic ratepayers would be faced with increases of no less than 90 per cent. in their rate demands, and this is a serious situation.
The Government, of course, for some time have been keen to take action against wages and this is what the Counter-Inflation Bill is all about. They have done little directly to control food prices in line with what the TUC has requested. They regard this as something approaching an impossible task apparently, yet two countries in Western Europe—Sweden and Austria—are adopting these practices.
House prices last year rose by 47 per cent., and rents have been increasing at a similar rate. Much of this is due to the pernicious Housing Finance Act. One would have thought that the Government, who are allegedly going all out to combat inflation, would have been more generous in their assistance to the ratepayers in the difficult situation they now face.
Certainly, revaluation has twisted the balance from industrial and commercial properties to the domestic ratepayer. A fortnight ago an old-age pensioner from my constituency told me that the valuation of his flat had increased from —66 to —176, about a 250 per cent. increase. That is an indication of the berserk way in which valuations are acting upon owner-occupiers and tenants.
Of course, their position has been influenced by soaring inflation in property values, quite apart from increased rents. It is reckoned, certainly in Newport, that tenants in post-war council houses would face an increase of over 15 per cent. and that approximately 2,000 of them would have increases of 50 per cent. or more. There is evidence of disproportionate increases in rateable values of council houses. I can only repeat that local authorities are facing the combined effects of inflation and revaluation but the Chancellor this afternoon seemed only to have recognised the problem of revaluation.
Perhaps the most serious problem is that of inflation. The estimated expenditure in Newport for 1973–74 reflects the 297 increased cost of the existing services, quite apart from the growth of services, much of which is being encouraged by the Government. Certainly, the increase in the rate support grant has been insufficient to meet these increased financial costs. The Government originally requested that rates should be increased by only about 5 per cent. Again I can only illustrate what would happen in my own town. Such an increase would mean a severe cutback in services, but it could also mean redundancies. Already in recent months we have experienced a redundancy figure of over 2,000, and this therefore poses a serious problem.
The Government already have power under the Local Government Act 1966 to increase the rate support grant at any time if they find that an unforeseen increase has taken place in the level of prices, costs and remuneration. The implementation of this section of the Act is surely justified in present circumstances.
The Association of Municipal Corporations has called for differential domestic relief in defined individual circumstances, as it puts it—in other words, to restrict the total amount of increases to be paid by individual householders. The Chancellor has taken note of this point of view, I agree, by granting half of the 10 per cent. increase. But still more assistance is due to our local authorities. Again, I can give only the figures of my own town. If the increase were limited to 15 per cent. in Newport the cost to the Government would be —173,000. If the increase were limited to 10 per cent. the cost to the Government would be —230,000. The Chancellor should have second thoughts about this matter and grant these concessions to our local authorities which are at present having such a difficult time.
§ 6.21 p.m.
§ Mr. Wilfred Proudfoot (Brighouse and Spenborough)
This Budget has had the most peculiar run-up of any Budget ever. Floating the pound has left us almost insulated from the currency crisis. I am sure the remarks of the Leader of the Opposition have convinced the House this afternoon that, if he was not before, he is now a floater.
The newspapers have not known what to say, except that the Budget would be a neutral one and would slap on even 298 more taxation. In my opinion virtually all the newspapers have it wrong.
Listening to the Leader of the Opposition was like taking a stroll down memory lane. He has not found out that this country is in a new era. There is an entirely new ball game. The Government and the party to which I belong have entirely changed the parameters within which business and people work. Entry into Europe has also had something to do with this. The whole situation has changed.
What has delighted me today, as I am sure it will delight those outside the House, is that the Chancellor has, correctly, identified the total determination of the Government to go for growth. I urge my right hon. Friends and hon. Friends in the Government not to read too many of the sayings of the economists and economic journalists. They have to keep writing their articles and in so doing they flit from one theory to another. Recently they were saying we have been growing too fast and that we could not sustain this rate of growth. I for one do not believe that. To a certain degree economic growth is almost a habit. Once we have achieved that habit we can keep on growing.
It is foolish to pretend that everyone in this country likes growth. The environmental lobby says—and, incredibly enough, it has been saying it recently—that economic growth can destroy the environment. I believe that argument cannot be sustained and should be ignored.
When discussing economic growth we must recognise that it means change and, with a 5 per cent. growth rate, massive change. It means the centres of towns being torn out and the construction of motorways to give access to the residents of the towns involved and surrounding towns so that the whole place may become more efficient. It means that slum clearance can go ahead at a faster rate. It means that everything we look at is in process of change.
If our people do not want economic growth, the corollary is that they do not want change and they want to be left alone in the ways they know. It is impossible to opt out of the world in the way advocated by those who are fighting this change. This change is inevitably coming; the Government recognise it, and 299 they are working on the side of change. I am convinced it is right to do so.
In the last few weeks the words "fine tuning of the economy" have started to creep into the sayings of the economic journalists. I do not believe the economy can be fine-tuned. It is a lumbering great beast. It is 55 million people's effort, or lack of effort. It is all the companies, the nationalised industries and the sum total of the efforts of the country. It is the sum total of what people do—whether they stay in or whether they go out and spend frivolously, or on consumer durables. This is what has happened. I for one do not believe that we can fine tune to the degree we have kidded ourselves we could in the past.
Over the last two years when unemployment was rising, the Opposition shouted and howled at the Government about percentage increases, and so on. Then, when we started to turn the economy round—and it takes time to react—everybody agreed to changing the economy this way and to the expenditure of more Government money to trigger off growth.
The Government did exactly that. Yet those fickle chaps who write the economic articles were saying only last week, "Whoa! We should be careful; it might have been right then, but now it is wrong to have spent that money to get rid of unemployment." These chaps who write in the newspapers have one responsibility —to sell newspapers and to entertain us when we read them. Indeed, newspapers have an entertainment value and they should be read from that point of view more often than from any other. Being a Government is a sensible business-like operation. I am sure the Government have matters right on this score.
Let us consider for a moment how to run a country or an economy. Just as in any other business, there is a handful of figures. The chaps at the top look at that handful of figures and if one of the figures goes wrong, underneath each figure is another pyramid of figures to be looked at. We therefore look at the figures in our economy. One figure at which hon. Members on both sides of the House look is that of unemployment. If we look at the pyramid of figures below that figure, nobody, but nobody, believes them. The Opposition do not believe them, the Government do not believe 300 them and the businessmen in the country do not believe them.
§ Mr. Proudfoot
I live, and was born, in an area with 30 per cent. unemployment. When it comes to the emotional psychological impact of unemployment I have as much personal experience of this as any Opposition Member. But I do not think that that was the case. Indeed, on the local television channel I even got away with saying that the unemployment we experienced a year or 18 months ago was probably the healthiest we had ever had although that might have seemed a peculiar expression to use. I believe it was shake-out and that industry was being mobilised. I am convinced that is right.
If the hon. Member for Stirling and Falkirk Burghs (Mr. Ewing) examines carefully what has happened to regional policy and what is now happening in connection with the EEC regional policy, he will see the effort is more determined than ever before.
But let me caution the hon. Member not to be to excited by this, nor to think that Wales, Scotland and the North-East can be put right overnight. If the aim was to put matters right overnight, both parties must accept they have failed. I happen to believe the North-East will be the area to come right most quickly. The infrastructure has been put in and it looks across the North Sea to the Common Market.
But let us not pretend that Governments, no matter how big, can change the economic forces easily. Both parties have tried to help the regions massively.
In the North-East, which I know best, capital allowances and grants essential to businesses have created the most incredibly modern industry entirely capital-intensive and not labour-intensive. In that respect, therefore, they have failed in their purpose. Any hon. Member who does not know the North-East should go up there and see how it has changed. He would get a tremendous shock. It would entirely change his idea as to what development regions are really like.
The noise from the Opposition about unemployment was supported by what I believe was an unconscious pressure on 301 the Government caused by the cross-party voting last year on entry into the European Economic Community, which I strongly supported. I believe that the Government had to back away then, as the shake-out was going on, so that Opposition Members could vote with them for entry into Europe. Otherwise, those Labour Members who favoured entry would have been under such enormous political pressures that they would have had to go into the anti-Common Market Lobby against their best wishes. [Interruption.] That is what I observed in the past two years and I am sure that that observation is as good as the observations of the journalists who write about what goes on here.
My right hon. Friend the Prime Minister said that he wanted to be a radical, reforming Prime Minister, and he has succeeded beyond my wildest dreams, to such an extent that the man in the street does not know what has happened.
§ Mr. Speaker
Order. I want to call as many hon. Members as possible. The hon. Member who is talking from a sedentary position is simply lengthening the speech of the hon. Member for Brighouse and Spenborough (Mr. Proudfoot).
§ Mr. Proudfoot
I am sorry, Mr. Speaker. I shall try not to be provoked.
An incredible amount will happen on 1st April. We are starting a new system of company taxation; we are going on to a unified tax; and we are getting rid of SET and purchase tax, with the introduction of value added tax. There is to be a 20 per cent. cut in import tax, which is the beginning of competition from the Common Market. We also start a month of local government elections to create new local authorities. I believe that all those reforms will work. They put into effect our General Election programme, and I have no doubt that carrying out that programme will take us to victory at the next General Election.
I was amazed that the Leader of the Opposition had not taken on board what my right hon. Friend the Chancellor said about land. When I was previously a 302 Member I heard debates raging in the Chamber and in the back-bench committees of my own party about the price of land. In the 1930s the Tory Party tried to tax land development. A Bill introducing a betterment charge went through the House, but it was never operated. The Labour Party has had two goes since the war, ending in miserable failure. All that was achieved was to put up the price of land.
Wherever we go in the country we find the problem raised by many people who are frightened about the situation. But when we look into the logic of what is happening we find that it is virtually impossible to tax increases in the price of land. My right hon. Friend the Chancellor said today that once planning permission has been given it must he operated as quickly as possible, and that there will be a tax on a percentage of the increase in price. He did not name the percentage, though it can be pretty swingeing. That will increase the availability of land and speed up the building of houses. It is the most practical step that has been taken over the price of land.
§ Mr. William Edwards (Merioneth)
Does not the hon. Gentleman appreciate that the proposal has the same defect as our Land Commission provisions, because if there is a possibility of a levy on receipt of planning permission some people who have land ripe for development will not apply for planning permission? The levy in this case is uncertain; there are at least four variants in the provision that enables people to get out of paying it.
§ Mr. Proudfoot
I accept completely what the hon. Gentleman has said. I do not think that there is any foolproof way of taxing profits on land, except to tax up to 75 per cent. once a man has sold land.
I think that my right hon. Friend's proposal is a once-for-all adjustment for going into Europe. I learnt from the newspapers that even Spaniards came here and started to buy land. The hon. Gentleman shakes his head but he will find that in France and other European countries the savings institutions are not trusted as they are here. People do not put their money into banks, building societies, and so on. If a family saves 303 some money it buys land, and that forces up the price. I believe that the price of land here has risen to equal the prices on the Continent.
I also welcome my right hon. Friend's incentives for workers in certain enterprises to be shareholders in those enterprises. I hope that the new share savings scheme will succeed beyond his wildest dreams. It reminds me very much of Louis O'Kelso's two-income plan, except that the workers will not be lent the money to buy their shares: they will have to save it first. I welcome that. The Liberals will say that my right hon. Friend has stolen their clothes, but I welcome the scheme and wish it every success. I am sure that it will give people a completely new outlook on what the whole of business is about.
The tax credit system delights me. Like every hon. Member, I have had representations from all kinds of people about the family allowance going to the dads instead of the mums. I had thought that Andy Capp was dead, but many social workers believe that unisex, with people sharing everything, does not exist in some areas. I am surprised at that, but I am sure that my right hon. Friend was right to make the decision he did, in view of the political pressures.
The increased pensions will be enormously welcomed by the old people. The Labour Party must look at the facts behind the pensions. I know that young people are very worried about the old, but the fact is that although the young bride-to-be no longer has a bottom drawer, those who are about to retire do, with sufficient sheets and other linen. They do not want to part with their favourite furniture. When hon. Members, and young people in particular, consider the position of old-age pensioners they should remember that retired people are not establishing a home, and so their expenses are very different. I am delighted at what my right hon. Friend has done.
I am also delighted that value added tax is to be at the rate of 10 per cent. I must declare an interest here. Businessmen and everyone else will be able to work out the 10 per cent. rate. Everyone lost sight of the position with purchase tax; none of us knew how much he was paying.
304 Many prices will come down under VAT. If Labour Members think that customers do not go to weights and measures departments to complain they have another think coming. There is quite a number of barrack room lawyers among the customers. After the Trade Descriptions Act came into force I heard about a customer who took a 2s. collar stud to his weights and measures department because it was stated to be of mother-of-pearl and he did not believe that it was.
I come next to children's shoes. When my children arrived I was told that So-and-so's shoes were good for their little feet, and all three of my children had shoes of that make. By the time they had finished with them a consumers' organisation had found that they were the worst possible shoes for children's feet. Therefore, I am very pleased that in exempting children's shoes from VAT my right hon. Friend has made the proviso that they should be acknowledged to be healthy for the children. In view of what he has done about chocolates and sweets, I think that although we may have got rid of the lobby on tees we shall have a lobby on teeth.
I have noticed an incredible change in my constituency in the past three years. Going around some of the 440 factories there, I see different attitudes, new tools and new techniques—all because the people have been motivated by tax reductions. It is absolutely and completely right that that should be so, and I hope that we shall be able to carry on reducing direct taxation.
Lastly, in the words of the Leader of the Opposition, I should think that this Budget has left all the political options open if we have to have an election between now and Chirstmas.
§ 6.41 p.m.
§ Mr. Laurie Pavitt (Willesden, West)
I had the fear for a moment that the hon. Gentleman the Member for Brighouse and Spenborough (Mr. Proudfoot) was going to try to emulate the marathon effort of the right hon. Gentleman the Chancellor of the Exchequer. I shall not attempt to follow his wanderings down all the byways, but he spoke time and time again about change, and certainly this Govern- ment have changed. Almost all, the 305 policy with which they went to the electorate has changed. They have done a U-turn since then, and come back in the other direction.
The hon. Gentleman emphasised his adherence to, acceptance of and desire for, growth, but he probably failed to look at the small print. In his profession he always has to look at the small print, If he had done he would have seen that the Chancellor said "growth until and unless", so it may well be only a limited period before we have to retrench. He almost indicated a summer or autumn Budget.
I want to talk mainly about the blind, the disabled and the chronically sick, but first I want to touch on a number of points made by the right hon. Gentleman in his opening address on the Budget. This is my fourteenth Budget, and I must confess that I thought that the right hon. Gentleman did extremely well in speaking so nearly to the exact two hours. I welcomed the fact that when he got to his peroration, when I felt that perhaps it was going on for ever, his voice took on a bit of life and colour. I enjoyed the peroration very much indeed, as it presaged the end of a long speech.
I want to take up the right hon. Gentleman on a number of points. Like most hon. Members, I welcome the fact that the Government are going to give rate relief after 10 per cent. increases, but I should like the Treasury to address itself to the problem in constituencies such as mine. In my constituency there is an extremely good brewery called Guinness, which makes an excellent beverage. Mine is a working-class area, and two-thirds of my constituents live in shared accommodation, many of them sharing lavatories and bathrooms. What will happen is that Guinness, which makes a good profit as well as good beer, will find that its rates are reduced, while some of my poorer constituents living in railway cottages will find that their rates are increased? When the Financial Secretary to the Treasury prepares his arrangements with local authorities and his Finance Bill I hope that he will address himself to what can be done in cases where, because of the Government's wish to help industry, they have changed the ratio of rates in a way that will hit the hard-pressed people who live in rented property and have to pay rates through 306 rents and relieve profit-making concerns who can afford to pay.
I welcome very much the incentive to saving by raising the tax-free amount from —21 to —40 on Post Office and trustee savings banks, but I ask the Treasury why, if we are to have "Save As You Earn" we do not have "Save As You Spend". The hon. Gentleman knows that the Co-operative movement is a large repository for working-class savings. Unfortunately, the success of the movement has been due not to its high ideals and its social purpose—which remain important—but to the fact that in 1844 it was discovered that it was possible for working-class people to save as they spent by means of a dividend on their weekly food bills at the end of each half year. A large percentage of working-class savings accrued in that way, by the housewife spending money and having her nest-egg in the Co-operative Society. But I am afraid that no Chancellor of the Exchequer, even in the six years during which my party was in office, has seen fit to encourage people to leave their money in the Co-operative instead of spending it. The same kind of tax advantages should be given to people who have their money in a Co-operative Society as to those who save in Post Office Savings or trustee savings banks.
I welcome the action on children's shoes. I shall look with great interest at the report which the Chancellor announced. I only hope there will not be the same kind of institutional, workhouse approach, with the official shoes—the State shoes—being exempt from VAT but other kinds, for those who want a little variety, not being exempt. That is the kind of mistaken approach that was made in the case of children's spectacles. If children want to wear a smart, socially acceptable frame they cannot have it on NHS; they have to wear steel frames. I welcome the shoe concession very much, because there is no doubt that in terms of orthopaedic surgery one of the biggest problems, not only with the young but with the old, has been caused by bad shoes and by the fact that in the past mothers have been unable to change their children's shoes often enough when the feet were growing rapidly.
Moving from Guinness to biscuits, I have in my constituency United Biscuits, McVitie Price. For many years I have 307 been concerned not so much with the question of crisps and ice cream as with the purchase tax on chocolate biscuits. In my area there are nearly 13,000 old-age pensioners for whom a chocolate biscuit with a cup of tea is one of their luxuries. I am therefore very pleased that the Chancellor has been able to exempt chocolate biscuits from the 10 per cent. VAT.
I am concerned mainly with the effect of VAT on charities and the complete omission of any provision for our blind and disabled people. As a result of the change from purchase tax to VAT people will be subject to VAT who have never been subject to any other form of taxation. I take as an example the Wireless for the Blind Fund. Blind people are given radio or television sets on a permanent loan basis, for which they pay about —15. That means that under the new arrangement blind people will be paying a 10 per cent. tax on the —15 they pay for their radio. Talking-book machines are another example. About 9,000 talking-book machines a year are used by blind people, and VAT at 10 per cent. will apply to them. When the Treasury is preparing the Finance Bill I hope that some of these matters, on which I shall be moving amendments otherwise, will be taken up.
The Royal National Institute for the Blind has raised a number of points on the whole question of the provision of apparatus and also in connection with holiday accommodation. Many charitable bodies provide such accommodation for the disabled, the sick, the elderly and the blind at heavily subsidised rates. From now on all these holidays will attract 10 per cent. VAT. The same applies to blind people who live in hostels and homes. The running costs will inevitably rise by 10 per cent. on the whole of the provision of material goods, furniture and furnishings, all of which the hostels have to provide and renew. The right hon. Gentleman has exempted food, but a whole series of items and all services will attract the 10 per cent. tax.
I listened carefully to the charity exemptions, but I noted that these will not include convalescent homes. I hope that they will be given some consideration. Many charity convalescent homes are run at almost nominal charges. One of 308 these is the Mary Macarthur Homes. Opposition Members have a sentimental attachment to these, because Mary Macarthur was an extraordinary woman. She was a trades union pioneer who, in 1880, came from Ayrshire to England to do something for the working-class people here as well as in Scotland. The homes have done a tremendous job for ordinary working mothers who are tied by their family and need a holiday but cannot afford it. In spite of the fact that the mother pays only —8 a week, these homes are not exempt and the 10 per cent. VAT will have to be paid on that sum. The Co-operative movement, in which, as the House knows, I have an interest, also runs convalescent homes. There is one in Gilsland, near Newcastle-upon-Tyne, where the patients are elderly people. They have to have a recommendation form signed by a doctor, and the current charge is —18 for a two-weeks' holiday. That means that the old person has to find —18 plus —1.80, unless the Treasury can find some way of making him exempt from VAT.
My last point concerns the relief for earnings of blind and disabled persons. For a long time I have been urging the House—and there is a relevant motion before the House which has attracted a large number of signatures—that the facility given in 1962 to blind persons should be extended to those who are chronically sick or disabled. At present the relief for earnings of blind persons is —130 per annum, disregarded for tax, and this has not risen to any extent since 1962. I am urging that the amount of disregard should at least take account of current changes in the value of the pound and current prices.
The whole object of the exercise in which the Secretary of State for Employment is at present engaged—four experimental studies on how one can get chronically sick and disabled persons, blind persons and deaf persons into the community, not only working in sheltered workshops but taking the whole responsibility of working as an ordinary person within the community—rests on the fact that these people will be willing and will want to go out to work. But if, when they do go out to work, they find that taxation takes away a greater percentage of their earnings, the incentive to them to continue to work will not be so great.
309 In 1952 a Government committee recommended that there should be a disregard for such people, and it took 10 years to get it. I was not in the House at the time, but I express now my gratitude to the hon. Member for Plymouth, Devonport (Dame Joan Vickers) and a number of hon. Members opposite who managed to get it done in 1962. It was not until that year that the disregard of —100 was given. But it is now 1973, and that —100 should surely be raised to at least —200 or —250. That would not be raising the figure in real terms; it would merely be keeping pace with the change in the cost of living since 1962. I urge the Chancellor to give serious consideration to this point, which concerns very needy and worthy people.
This seems a very mixed Budget. It is rather like the curate's egg. We always welcome what we like in a Budget and object to the parts that we do not like. I welcome certain parts of this Budget but I feel that the right hon. Gentleman has basically failed to ensure that justice is seen to be done between those sections of the community which received the large concessions last year and those which are being asked to pull in their belts this year. I hope that we shall eventually achieve a greater amount of social justice in the fiscal arrangements which the Budgets puts before the country each year.
§ 6.52 p.m.
§ Mr. Edward Gardner (South Fylde)
I think that I had the pleasure of following the speech of the hon. Member for Willesden, West (Mr. Pavitt) in the Budget debate last year. On that occasion he spoke, as he has today, of the need to provide relief for the disabled and others who require State aid. I know that he holds that aim very dearly and strongly, and I share it with him. But, unhappily, I cannot agree with his view that this is an unjust Budget. I speak, as we all do today, off the cuff, as it were, because I have not read the Budget statement. I have only heard it. I regard it as a progressive Budget. I believe that it is most remarkable, in that it has been made against the background of a startling international crisis and an equally serious crisis at home.
My right hon. Friend described the Budget as "neutral". With respect, I disagree. I do not think that it is a neutral 310 Budget—certainly not wholly neutral. It has a positive quality for those who stand in need of help. I congratulate my right hon. Friend on the way in which he has framed it and on the priorities he has underlined in its contents. With each year that passes of his tenure of the great office of Chancellor of the Exchequer my right hon. Friend grows in stature, as I think the House will agree. Even when he makes the most provocative of proposals he is listened to with great respect by both sides of the House. I declare without embarrassment that I am one of his great admirers.
Like other hon. Members, I had many private hopes for the Budget. Some of them were, of course, inspired by correspondence from my constituency. For example, I was urged to give support for the relief of value added tax on charity shops, to see that it did not fall on children's clothing and footwear and, as far as one could do so, to see that everything was done to encourage the Government to increase pensions.
I find, to my pleasure—and, I am sure, to the pleasure of many hon. Members on both sides—that all these things have been done. I am particularly pleased about the relief of VAT on charity shops. Indeed, this morning I had four letters from my constituents containing pages and pages of signatures under the heading of "Oxfam". The signatures were organised by a local branch of that admirable organisation, and the letters asked for relief of VAT on the goods which come to these shops and on goods being sent out to distressed areas. I am very happy that my right hon. Friend has agreed to make these reliefs possible.
There is another matter, on which I should like a reply. It troubles the country greatly and is a matter of no small consequence. It will affect millions of mothers. What will happen about the payment of child credits? My right hon. Friend said, in effect, that mothers would not be paid less by way of allowances for their children than they are at the moment. A Select Committee of the House is considering how these payments should be made—whether they should be made to the father or to the mother.
I plead with the Government to adopt what I believe the majority of people consider to be the sensible solution—to make it possible for the mother to have 311 direct access to the payments so that she should not experience difficulties—which in some cases could be considerable—in having to recover them from her husband. If the Government could say now that they are prepared to ensure that in future these payments will be made directly to the mother there would be a great relief from the anxiety now felt by many people.
The Budget shows that the Government are out to help the weak, and those who need help. I can only hope—and I say it with all the feeling at my command, and with a genuine expression of anxiety —that this example will be followed by those who are making wage claims which, if pressed to the hilt, could have a disastrous effect on the economy and would greatly affect those whom the Government are seeking to assist in the Budget.
§ Debate adjourned.—[Mr. Gray.]
§ Debate to be resumed tomorrow.