HC Deb 11 July 1974 vol 876 cc1529-34
6. Mr. Skinner

asked the Chancellor of the Exchequer what immediate plans he has for adjusting the economy.

36. Mr. David Steel

asked the Chancellor of the Exchequer if he will now take urgent steps to reflate the economy.

20. Mr. McCrindle

asked the Chancellor of the Exchequer whether he now considers the time appropriate to stimulate the economy, and if he will make a statement.

28. Mr. Alison

asked the Chancellor of the Exchequer what proposals he has for reheating the economy.

Mr. Healey

I am now looking carefully at the latest indicators of demand and output to see what action, if any, might be necessary. If I decide to introduce new measures in advance of my autumn Budget I shall announce them in the normal way.

Mr. Skinner

When he gets down to his job in the course of the next few days, will my right hon. Friend bear in mind that, with the slightly reducing interest rates both here and in Western Europe generally, and with falling commodity prices, he should continue a policy of redistribution of income, should be prepared to spend more money on hospitals, housing and education, and should take steps to reduce value added tax with a view to abolishing it altogether, as a prelude to our coming out of the Common Market? Will he bear in mind that that will assist the social compact?

Mr. Healey

I note the mini-Budget representations of my hon. Friend.

Mr. Steel

Does the right hon. Gentleman accept that the statement, at the time, that his Budget was neutral has not proved to be the case, and that it was in fact deflationary? If this is so, what steps will he take to try to avert a rise in unemployment this winter?

Mr. Healey

I made it clear in my Budget Statement that the Budget judgment on which I acted and the measures I took were liable to be slightly deflationary. I made clear at the time that there was to be a £200 million reduction in overall demand. I am now considering whether that would appear to be excessive. I note the wide variety of views on the benches opposite. I would have been more impressed by the pleas of some Members opposite that I should adopt a deflationary stance if they had not repeatedly passed amendments to the Finance Bill upstairs which will lead to increases in the Government's borrowing requirement.

Mr. Alison

Since the rate of increase in money supply and the rate of inflation must both be relevant to the Chancellor's considerations, is he proposing to allow the rate of increase in the supply of money to keep up with the rate of increase of price inflation?

Mr. Healey

The hon. Gentleman will probably be aware that for the first time in many years we have the rate of increase in the money supply under control. I propose to keep it so. It is running at roughly half the rate at which it was running under the previous Government.

Mrs. Renée Short

Is my right hon. Friend aware that his predecessor, in his December cuts, inflicted cuts on many spending Departments—including the Department of Health and Social Security—which have had an absolutely disastrous affect on local authority services and hospital services'? Will he do everything he can to see that those cuts are restored at the earliest opportunity?

Mr. Healey

I shall see what I can do to restore the cuts at the earliest appropriate opportunity, but my hon. Friend will be aware that the previous Government found it necessary to impose these massive and Draconian cuts because the whole of their economic policy had fallen into ruins. It takes some time to reconstruct a healthy economy, particularly against a background in which, for two months, production was subject to three-day working.

Mr. Hordern

Will the right hon. Gentleman reject the advice he is getting about taking reflationary measures, as these can only add to the burden of inflation which is increasing so quickly at present? Does he accept that our rate of inflation is higher than the rates of inflation of almost all major countries in the world, and that our balance of pay ments position is almost the worst? Does he not accept the danger to sterling which would occur if we were to have a reflationary Budget?

Mr. Healey

I note that my French colleague, speaking to his Assembly last Friday, said that the French rate of inflation was higher than that of any of France's neighbours. Until last year our rate of inflation was very much higher than that of any other country, but now there are many other countries with rates of inflation comparable with Britain's.

I note the hon. Gentleman's views, but I should feel a little happier in facing the judgment that I have to make in the next week or so if his right hon. Friends on the Opposition Front Bench would say whether they want me to take reflationary or deflationary measures. There has been a deafening silence from the purported leaders of the Opposition.

Mr. James Johnson

Will my hon. Friend constantly bear in mind the acute financial difficulties which are now facing, and will continue to face in increasing measure, our colleagues in local government, following reorganisation? Is he aware, for instance, that colleagues in the Yorkshire-Humberside area tell us that they will have to think in terms of fewer jobs and increased fares in the local transport system? There are many examples of similar situations. Will my right hon. Friend look at this situation and do something about it?

Mr. Healey

I am deeply concerned at the present situation of many local authorities, including that of the great Yorkshire city which I represent, but on top of the economic situation which the previous Government described as the gravest since the war, Britain, like all oil-consuming countries, has been shuddering under the effects of the biggest increase in oil prices in recorded history. It is bound to take time before we can see our way clearly through this so as to be able to do everything we would wish to do for everyone in the country who deserves it.

Mr. David Howell

Will the right hon. Gentleman say, as a matter of fact, putting aside the histrionics, how much public expenditure has increased net since his increases in the Budget, as this would help the House to form a judgment on his problems?

Mr. Healey

I cannot answer that without notice—but the hon. Gentleman made a mistake. I was talking history, not histrionics.

9. Mr. Atkinson

asked the Chancellor of the Exchequer if he will make a statement on the out-turns of his March 1974 Budget predictions.

Mr. Healey

Preliminary estimates of the out-turn in the first half will not be available until mid-August. However, it is now clear that the three-day working week had a less depressing effect on output and demand than had been feared earlier, so that when the out-turn for the first half is known it will probably show a smaller drop in gross domestic product than was estimated in the Budget.

Mr. Atkinson

Will my right hon. Friend weigh that information against the strategy which he announced last March which was to design a Budget capable of improving our balance of payments situation? Faced with the present situation he can now regulate the economy in his mini-Budget to plus or minus 2 per cent. in VAT terms and plus or minus 10 per cent. in Customs and Excise duties; therefore he can only have a minimal influence on the balance of payments in future. Will he therefore join those of his hon. Friends who are now asking him and the rest of the Government to introduce selective import control so that we can make a direct contribution towards a better balance of payments in the future?

Mr. Healey

One of the most encouraging things since the last Budget is that the growth both in volume and value of exports has been greater than I then expected. It would be a disaster to take any steps which might lead to other countries restricting growth in our exports, since it is on export-led growth that we base our chances of breaking out of the stagnation from which our economy has suffered since the war.

Mr. Bruce-Gardyne

Is it not apparent that the Budget predictions are of somewhat limited value now, in view of the endless flood of additional public expenditure which is churned out week after week? Will the right hon. Gentleman at least get one thing clear for us? He said earlier that it was desirable that all countries should not try to close the gap in their balance of payments at once. Will he confirm that the countries with the biggest balance of payment gaps, such as ourselves, should give the lead in starting the process?

Mr. Healey

My view, like that of my colleagues in OECD and in the Community Committee of Finance Ministers, is that consumer countries should not seek to meet the exceptional problems created for their balance of payments by reducing demand overall. It is highly desirable that Germany and the United States, which have big balance of payments surpluses, should lead the way in maintaining effective demand in the world economy. I find it somewhat baffling that the hon. Member should talk of the Government increasing public expenditure when, a few days ago, he and his hon. Friends voted for a reduction of £100 million in the yield from value added tax.

Mrs. Winifred Ewing

Will the right hon. Gentleman give an assurance that there will be no about-turn on the promise he made to me in the Budget debate that the loop-holes in the tax arrangements for the oil companies, so badly messed up by the last Government, will be filled in before the Government go to the country? If the right hon. Gentleman intends to keep this promise, may I ask him when he will do so?

Mr. Healey

I am delighted to be able to tell the hon. Lady that if she has the patience to sit here for another three quarters of an hour her anxieties will be met by my right hon. Friend the Secretary of State for Energy.