FINANCE BILL (Hansard, 17 July 1974)

§ Mr. Healey
I apologise to the House and the right hon. Member for Carshalton (Mr. Carr) for not having been here at the beginning of his speech although I made it clear that there were reasons why that was so; and I fear that after this intervention I shall have to return to my main duty which is to seek to make decisions more likely to have the most favourable effect on the economy in the current year. I intervene at this moment because the right hon. Gentleman very fairly pointed out that it would be of critical importance to him and his right hon. and hon. Friends, in deciding whether or not to press this amendment, to have some view of the effect of the kind of decisions I now face.
I do not wish to deal with the main argument he put as to the effect of the 525 amendment he proposes on business confidence and so on. My right hon. Friend the Paymaster-General will deal with that, but if he wishes me to do so, within the limits of the secrecy and privacy which all Chancellors have to preserve at times like this, I shall try to explain in the least partisan terms I can the possible impact of decisions taken by the House yesterday and sought by the Opposition today on the kind of decisions which I have to take in the next few days and communicate to the House next week. If that is the right hon. Gentleman's wish I shall deal with that specific point.
As the House knows, I plan to introduce a Budget, if the people of this country allow me to do so, in the autumn which will be followed by a Finance Bill. That Bill will include detailed legislation to implement some of the decisions which were taken in the major Budget this year. The question to which I have now to address myself is whether it is desirable for me to take any steps to modify the nature of the steps I took in March so as to affect the economy favourably during the current financial year. The right hon. Gentleman will well know that any decisions I take in November are unlikely to have a major effect on what happens in the current financial year. They will be directed more, if anything, to what happens in the financial year 1975–76.
In considering whether it is necessary, for example, to take immediate steps to stimulate demand or business confidence I have to consider several factors. One is the latest information I can obtain on the likely path of the economy over the next nine months. I now have the best information I shall ever be able to get, though it is not very good, nevertheless.
Secondly, I have to consider the possible reaction both of domestic opinion—industry, labour and consumer opinion—and foreign opinion on any measures I propose to introduce. In determining the likely reaction of opinions to my measures I have to think of the demand effect of any measures, of the effect on the balance of payments, the effect on employment, and also, to a very large degree, the effect of any possible measures I may take on the public sector borrowing requirement this year.
526 The decisions the House took yesterday, and which the right hon. Gentleman successfully pressed it to take, have the following effects so far as I am able to discover. The decision on the investment income surcharge is unlikely to affect the borrowing requirement this year, but it will increase it by £40 million in the next financial year. The decision to relieve small businesses from certain corporation tax obligations would increase the borrowing requirement by £15 million this year and £15 million next. The decision on VAT hiring agreements would increase the borrowing requirement this year by £120 million. This is the best advice I am able to give the House. Perhaps the right hon. Gentleman has better advice, but I concede to him that if there are a large number of legal actions in connection with the repayments some of the repayments might be pushed into the next financial year. The best advice that I can obtain, however, is that the £120 million refund which the House decided upon yesterday would affect the public sector borrowing requirement this year to the extent of £120 million. The decision on pools betting duty would increase the public sector borrowing requirement by £1 million this year and £1 million next.
The ACT decision which the right hon. Gentleman is now considering would increase the borrowing requirement by £300 million this year but reduce it, as he quite rightly says, by £300 million next year. The decision which he sought but failed to persuade the House to accept a moment ago to reduce the rate of corporation tax for small firms would have increased the borrowing requirement by £15 million this year and £15 million next year. So the total effect on the borrowing requirement of carrying all the amendments he seeks would this year be £451 million. I would have to take account of that sum in approaching any other decisions which might be desirable in a package next week.
I cannot tell the right hon. Gentleman now what those decisions might be, but he must understand that he is in effect asking for an increase in the public sector borrowing requirement this year of £300 million if he wants this amendment made. As he conceded, this would gravely restrict my freedom of manoeuvre. 527 He has a perfect right, if he believes that this proposal must have an absolute priority over all the other possible ways of dealing with the many problems facing men and women in this country and facing the economy, to press his amendment to a vote. He must understand, if he does so, that on top of the amendments he has already succeeded in pressing that will leave me with very little room for manoeuvre to do many of the desirable things which, if the economic situation permits me to do so. I and the House would much prefer.

§ Mr. Carr
The Chancellor has given us information which it is important we should get right. The information he has given us about the VAT refund contradicts the advice given by the Financial Secretary. The Financial Secretary went out of his way to say, among other things, that the appeals procedure could take at least a year. That was one of the Financial Secretary's main arguments with which he tried to dissuade the Committee and subsequently the House from making amendments. He said that to go to the Court of Appeal and perhaps beyond would take at least a year and probably longer. Thereafter, assuming that the case went the wrong way from the Exchequer's point of view, and the repayments had to be made, the actual procedure of repayment would be extremely tortuous, difficult and long drawn out. In other words, his argument was that whether the amount be £120 million or the tens of millions of pounds that he first spoke about, the money could not be paid out in this financial year.

§ Mr. Healey
I apologise if I misunderstood the point the right hon. Gentleman was making earlier. The Government have not yet decided whether to follow the recommendations of the right hon. Gentleman and encourage the Customs and Excise to appeal against the judgment of the tribunal. One of the reasons they are reluctant to do so, and this is what my hon. Friend made clear in Committee and on the Floor of the House yesterday, is that it would impose a long delay, and, if the appeal went against the Government, further delays would follow before the repayments were made.
If we chose to take that course, and we might be compelled to do so in the 528 light of the vote by the House yesterday, that £120 million might be pushed into next year. If we chose, for reasons which I would then explain to the House, not to appeal in that way, the procedure of repayments would probably take place during the current financial year. However, I assure the right hon. Gentleman—and I have made this point in public in the last 24 hours—that the decision that he and his Liberal and Unionist colleagues forced through the House yesterday has made me seriously consider whether to appeal against the decision of the tribunal, if only to ensure that no fiscal action followed from what I regard as a disastrous vote last week until an autumn Budget could be put before the House by a Government with a real majority.

§ Mr. Bruce-Gardyne
The Chancellor said that he would answer questions, so before he sits down will he clear up one point? He seemed to imply that any decisions he took in an autumn Budget could not have an effect on the economy during the current financial year—

§ Mr. Healey
indicated dissent—

§ Mr. Bruce-Gardyne
Will the right hon. Gentleman assure the House that he is not suggesting that any decisions he might take next week, although clearly they would have an effect on the borrowing requirement, could not conceivably have a genuine and significant effect on the course of the economy during the rest of the current financial year?

§ Mr. Healey
The simple answer is "No".