§ Mr. Robert Carr (Carshalton)I beg to move Amendment No. 116, in page 6, line 38, leave out Clause 12.
§ Mr. SpeakerIt will be convenient to discuss at the same time Amendment No. 115, in page 6, line 41, leave out 'half' and insert 'quarter'.
§ Mr. CarrThis is an important amendment, so important that I would have thought, after what we heard from him last night, that the Chancellor of the Exchequer might have attended the debate if not contributed to it. But apparently he does not deign to grace the House with his presence—
§ Mr. Joel BarnettReally.
§ Mr. CarrThe Chief Secretary mutters "Really", but the Chancellor cannot "really" expect to descend upon the House as he did last night, make the sort of wildly exaggerated. inaccurate 514 and irresponsible speech that he made and then, when we discuss the amendment which is the guts of what he was talking about—if it had any guts—not turn up either to listen to the debate or to participate in it.
This is not the way to treat the House and it is not the way in which a responsible Chancellor should behave. But the sort of speech he made last night was not a responsible speech.
§ Mr. George Cunningham (Islington, South and Finsbury)Get on with it.
§ Mr. CarrI will get on with it at my own pace and in my own way, just as the Chancellor did last night—and I think that my way will be more acceptable.
It is important to consider what the Chancellor said in connection with this amendment because it involves a considerable sum. Because of this, although I shall express some strong views about the merits of the amendment, for reasons which I will explain, before I decide whether to advise my hon. Friends to support the amendment it is important that the House should hear the Government's views—and, I should have thought, the Chancellor's personal views—on my arguments. The amendment relates to the balance of the Budget and the demand in the economy and the needs of the economy in a way which our previous amendments have not done.
The Chancellor last night tried to say that we had passed amendments which in total would add £500 million to demand in the economy or, rather, to the Government's borrowing requirement. He made it clear that in coming to that figure he was taking this amendment into account although it had not been reached, let alone argued about.
It needs to be put on record that the cost of the amendments which we have so far succeeded in carrying, in terms of effect on expenditure in the current year and therefore on demand and the borrowing requirement in the current year, amount not to £500 million but to about £50 million. In other words, we have a decimal-point Chancellor, one who gets the decimal point in the wrong place.
The only amendments of substance which we have carried which affect the 515 expenditure and the borrowing requirement and, therefore, the balance of the Budget in this year are those which raised the threshold profit limit at which small businesses begin to move up to paying a full rate of corporation tax, which on the Chancellor's own figures will cost £14 million, and the restoration of £2,000 as the threshold limit at which the investment income surcharge becomes operative, which—again on the Chancellor's figures—will cost £40 million. Those two add up to £54 million.
In addition, there was the amendment which we carried to reduce the rate of duty on charity pools. We were told by the Financial Secretary that the cost of abolishing the duty altogether would be £7 million. In fact we moved not to abolish it but to reduce it from 40 per cent. to 33⅓ per cent. If abolishing the duty altogether would cost only £7 million, the reduction from 40 per cent. to 33⅓ per cent. must cost far less than £7 million. Let us be very generous and say that it would cost £4 million.
One is left, therefore, with a total sum not of £500 million, which the Chancellor was talking about last night, but of £58 million at the outside in terms of the effect on this year's expenditure and, therefore, this year's balance on this year's borrowing requirement. That needs to be stated clearly in view of the Chancellor's wildly inaccurate and irresponsible speech. It particularly needs to be brought out that the amendment that we passed refusing the Government retrospective powers on, value added tax cannot possibly come into this year's calculations. That is on the evidence presented by the Government themselves, first to the Standing Committee and then to the House.
This matter first came up in Committee a good many weeks ago and the Government were unable then to give any accurate information at all about what the total eventual costs might be in certain circumstances. It was very strange that right at the end of our series of debates on this subject the Chancellor was suddenly to give a long string of apparently precise amounts which would have to be repaid, if our amendment was carried, to various sectors of industry, all of which total £120 million if my calculations are right. I find that diffi- 516 cult to accept. I find it very strange that for all these weeks the Government have been unable to give a precise amount but suddenly, at the last moment, can be specific about it.
Let us not argue about that. Let us, however, look at the timing of this matter, because it was in relation to the timing of this year's borrowing requirement and this year's Budget balance that the Chancellor was adding up these great sums. We were told by the Financial Secretary that if we denied the Government—I am glad that the House did deny it to them—their demand for retrospective powers without going through any proper processes of law, the matter would first have to go to the Court of Appeal and then might have to go to the House of Lords.
If I remember correctly, the Financial Secretary told us that that was bound to take at least a year. It is quite clear, therefore that it will be at least a year before this matter can be settled one way or the other. It is at least likely that the court might in the end find that the original interpretation of the Bill was the right one, so that the repayment might not arise at all; but if it were to arise it might not arise for at least a year and probably longer.
Then, as the Financial Secretary told us, if the courts finally hold against the interpretation which we wish to put and which we thought the Act carried in the first place, the process of repayment, we were told, would be so tortuous, complicated and lengthy that it would take months and months. [Interruption.] The Chief Secretary says "Quite right." If that is the case, however, it is quite clear that by the time the legal processes and these great tortuous processes have been gone through, this money will not find its way into the economy or add one penny to the balance of demand in the economy or to the borrowing requirement in the current financial year.
Therefore, it was a wholly spurious claim by the Chancellor to throw that in, as he did last night, to make up his ridiculous, irresponsible and wholly untruthful addition.
6.45 p.m.
The total cost of the amendments that we have passed, therefore, in terms of their effect on this year's Budget judgment and borrowing requirement is about 517 £50 million to £60 million, obviously well within the normal margin of error of estimation and calculation. That degree of tax remission cannot possibly be said to upset the overall balance of the Chancellor's Budget or to affect the borrowing requirement in any meaningful way because it is so far within the normal, well-known errors of calculation and estimation in these matters.
When we come to this amendment, however, the position is indeed different. That is why it is more than usually important to hear and to consider the Government's full arguments about it. As I have said, I should have thought that it was important in any event, but particularly in view of what he said last night, that the Chancellor should himself have come to listen to the debate, if not to participate in it.
The House is put in an extremely difficult position in making up its mind about the amendment. We in the House of Commons have to take our decision today, but we already know that within a week the Chancellor will be coming to the House to tell us why and how he now believes his original Budget judgment to have been proved wrong, what his new judgment will be and how he proposes to implement that new judgment.
We have to take this very important decision today knowing that within a week the Chancellor will be telling us that his judgment, which he tries to say we must not upset by being irresponsible, was wrong. But we have to make our decision not knowing what his view is about the wrongness of his present judgment, which we are told it would be irresponsible in any way to upset.
I believe that it is wrong of the Chancellor to have allowed his new Budget and the passage of the Finance Bill to have so nearly coincided, as he has allowed them to do, and not to have made his interim Budget Statement in the House before we had finished with this Finance Bill. He is allowing—I cannot help suspecting that he is deliberately allowing—the House to complete the passage of the Finance Bill and then, if I understand the arrangements aright, literally on the following day, when we have had to make all our decisions, he will tell us that the overall economic judgment on which the House has to decide on the Bill clause by clause was in any case wrong, and he 518 will assure us that he now believes his different judgment to be the right one.
We all understand the need for interim statements and interim Budgets of varying degrees of "mini-ness" or "maxi-ness" at various times of the year, and it is not the prerogative of one party over another. We accept that. Sometimes it is impossible for a Chancellor who has to make an interim statement to do so at any time which coincides with the passage of the Finance Bill.
I am very glad to see that the Chancellor has now taken his seat on the Government Front Bench. Before his right hon. and hon. Friends tell him about it, I want to make clear to him that I have been criticising him very heavily for his absence.
§ Mr. Joel BarnettWe would not have told him.
§ The Chancellor of the Exchequer (Mr. Denis Healey)With respect, the right hon. Gentleman will be aware that the decisions which he and his Liberal and Ulster Unionist colleagues took yesterday to defeat the Government on major matters of public expenditure have inevitably made it necessary for me to make some revisions in plans that I was preparing for next week. I do not apologise to the right hon. Gentleman for taking account of the decisions that he forced through the House yesterday. But I shall be delighted to answer any questions he has to put to me if he has the courtesy to put them again in my presence.
§ Mr. John Nott (St. Ives)I am sorry to interrupt the debate, Mr. Speaker, but may I ask whether it is the normal practice for a Member of the House, however important and distinguished, to walk into the House and immediately make an interruption from the Dispatch Box without having heard a word of the debate?
§ Mr. SpeakerThat is not a matter for the Chair. If the right hon. Member for Carshalton (Mr. Carr) gives way, the Chancellor of the Exchequer is entitled to interrupt.
§ Mr. Tam Dalyell (West Lothian)On a point of order, Mr. Speaker. It will be within the recollection of the House that last year the right hon. Member for Altrincham and Sale (Mr. Barber) the then Chancellor, was an occasional visitor to our proceedings.
§ Mr. CarrI am sorry now that I gave way to the Chancellor. I think that what he said just now was spurious nonsense. It was highly discourteous, not to me—that does not matter at all—but to the House as a whole. Had he been here—I should have thought that after the intervention he made last night he had some duty, out of courtesy to the House, if not a responsibility, to be here—he would have heard the reply I made. I do not think that I should bore the House or take up its time by repeating it.
Let me say just this to the right hon. Gentleman. What I said, which is a fact, was that he got the costs wrong last night by a decimal point. He multiplied by no less than 10 the effect of the amendments which we carried on this year's expenditure and this year's borrowing requirement. He must know that very well. I cannot believe that he does not.
I was complaining that I think that, as it so happens, the Chancellor's need to introduce an interim Budget so closely coincides—this need has been known for several weeks; it has not been kept secret—with the last stages of the passage of our annual Finance Bill that it would have been not only for the convenience of the House but for the proper conduct of our parliamentary system of government for the Chancellor to have made his interim statement this week so that we could have taken his new judgment into account in deciding how we should vote on this and other amendments to the various clauses in the Finance Bill. That applies perhaps more strongly to this clause than to any other.
If I had to give one overriding priority in the cause of protecting jobs in the future, of ensuring our capacity as a nation to maintain and sustain full employment and to raise the efficiency and the capacity of the nation's productive effort, on which our ability to maintain full employment depends, I would say that that priority at this moment in our history would be to do all we could 520 to encourage a greater volume of high-quality investment in British manufacturing industry.
Our history over the post-war era—this is true if we go back considerably before the wartime era; it was true over most of this century—shows that there has been a noticeable tendency in Britain compared with other major industrial countries which are our chief competitors in world markets to invest on a smaller scale in modern productive equipment.
As every year has passed, the need to stimulate investment has become more and more urgent. This is not easy to do, as Governments of both parties have found since the war. Since the war Governments of both parties have tried various forms of tax incentive, both nationally and regionally. We have not found it at all easy to stimulate British industry into a level of investment comparable to that in other major industrial countries.
When we were in power from 1970 to the early part of this year we made renewed attempts to stimulate investment. We adopted various methods, chiefly by trying to put the need to expand the economy on a higher priority than any other post-war Government had done. It was difficult to start. It was much slower to start than we had hoped or indeed expected. However, finally by last summer there were very clear indications of a new investment surge in Britain. Then came the autumn, the oil crisis and the miners' dispute. It was, therefore, a very tender plant newly sprung up which needed most careful culturing. As I said in an earlier debate, instead of pouring fertiliser on the tender plant the Government in their Budget poured weed-killer on it.
If we are to have investment, although there may be all sorts of other conditions it is clear that two of the essential ones are that industry should have both cash and confidence. The Chancellor has taken away the cash and the Secretary of State for Industry is chief among Ministers in taking away industry's confidence.
In his Budget the Chancellor took no less than £1,100 million out of industry's cash flow in the current year. That was an enormous sum to remove from industry's liquidity in one year, in a year 521 when we want to encourage and nurture the new growing plant of a surge in investment. The amendment would put £300 million of that £1,100 million back into industry's current liquidity.
§ The Paymaster-General (Mr. Edmund Dell)It would be useful to know how the right hon. Gentleman arrives at the figure of £1,100 million, if he wishes me to comment.
§ Mr. CarrI shall be interested to hear it my sum is wrong. I did not think I would have to work it out again in the House. I have worked it out once. I shall try to work it out again. I shall seek to exercise my right of reply at the end of the debate. I shall say something about the figure then in the light of what the right hon. Gentleman says. If he says that I am wrong in saying that the figure is £1,100 million, I should like to know what his account of it is.
What I am taking into account is the £300 million which is what we are now talking about. I am talking about the fact that corporation tax was fixed at 52 per cent. rather than the expected 50 per cent. I know that we could have an argument about that because the 50 per cent. was never finally settled. We are also taking into account that industry is to be expected—as I have said before, I would not necessarily quarrel with this if it was the only thing—to pay the major part of the cost of increased pensions in the employers' contributions to national insurance. These three imposts, which all spring directly from the Chancellor's Budget Statement, add up to a very large total, which I had thought was about £1,100 million. If the Paymaster-General would like to put further arithmetic before us in due course, I should like to have it. However, I do not think he can deny that it is a large sum.
7.0 p.m.
We are seeking to put back £300 million of that sum into industry because we believe that the priority in protecting jobs in the future and in raising the efficiency and capacity of our productive effort lies in doing all we can to raise the level of new, high-quality productive investment.
Therefore this amendment, if carried, would add £300 million to the Government's borrowing requirement this year. That cannot be disputed. It is important to say in passing that this would reduce 522 next year's borrowing requirement by the same amount, because I am sure there is no dispute that what we are talking about is not remission of tax but a delay in the time of paying that tax. Therefore, if the change is brought in this year it will add £300 million to this year's borrowing requirement but it will reduce next year's borrowing requirement.
§ Mr. HealeyAnd it reduces company liquidity next year.
§ Mr. CarrTherefore, to some extent we are making a judgment as to when it is most necessary both in real cash terms and also in terms of confidence to leave industry with the cash. Our judgment, arrived at after a great deal of discussion with many people in industry, is very strongly that the need is greater now than it will be next year. It is greater this year because we believe that the Chancellor seriously underestimated the liquidity problems of industry this year not only to carry on their business but in terms of investment programmes.
I believe too that in this we can easily underestimate the confidence factor which enters so largely into the investment decisions of companies, because, as capital equipment gets larger in scale and becomes more complicated, decisions are taken further and further ahead of the time when the money is actually spent and when machinery comes into the factory and is operated. Therefore, we are not so worried about the level of investment this year because that springs from decisions taken last year and even before last year. What we are worried about is the depression of new investment decisions being taken this year, to be followed up later. We believe that if companies felt less hard-pressed in liquidity this year, if they felt more confidence in their liquid position this year, they would be taking more progressive, larger-scale future investment decisions this year. I agree that that is a matter of judgment.
§ Sir John HallDoes not my right hon. Friend agree that one of the problems that also arises from this is that companies which tend to budget ahead, probably in September or October of the previous year, and also calculate their cash flow have to take into account the additional impost or forced loan that the Bill now intends to impose? The effect might well be to make them defer 523 investment decisions already taken in the previous year.
§ Mr. CarrI agree with my hon. Friend that it could cause the deferment of decisions already taken and I certainly believe that that is a further reason. While I accept it as another reason, I still believe that the climate of investment decision-taking this year for the future is the most serious thing we have to worry about. Meanwhile I would say to the Chancellor that although the Government's borrowing requirement would be increased this year by £300 million, it would be reduced next year, and that £300 million would be put back into the economy now in a way least likely to cause any immediate inflationary effect and in a way most likely to produce the changes in developments in our economy which we most need both to tackle inflation and solve the balance of payments and also to protect full employment in the long run.
Those are exactly the reasons why we believe this to be a most important amendment, but I accept that it is an amendment which, unlike all the others we have made, would affect the immediate balance of the Chancellor's budget judgment, his borrowing requirement and all the rest of it. That is why it is so difficult for us, particularly when we know that within a few days the right hon. Gentleman will be telling us what his new judgment is to be.
All I will say to the Chancellor at this stage is that I hope he will address himself most seriously to the need for an injection of liquidity into industry to protect jobs in the future. I hope he understands that if he advises us that the amendment should not be accepted because if the Opposition pressed it they would be exercising a major decision on current Budget judgment, and if I then decided to advise my right hon. and hon. Friends not to press it but then next week, after this Finance Bill is out of the way, the Chancellor came forward with a package which was reflationary on consumer demand and did nothing adequately to stimulate the essential needs of industry, on which the future protection of jobs depends, we should condemn him with all the power at our command.
I feel therefore that we should now listen to other arguments in this debate 524 and in due course, when we have heard what the Chancellor has to say—I hope without any lack of respect for his right hon. Friend that it will be the Chancellor himself—on these serious arguments, we shall wish to make up our minds how to respond.