HC Deb 26 March 1974 vol 871 cc326-8

I can now sum up the effect of my proposals. Leaving aside the increase in pensions, which is largely matched by higher contributions in the normal way, and the rise in nationalised industry prices, which is needed to offset the higher costs of the industries, the net increase in expenditure which I have announced amounts to a little under £700 million in 1974–75. The increase in taxation is, however, nearly £1,400 million, that is, twice as much. Thus the effect of my proposals is to reduce the public sector borrowing requirement by £700 million and to bring it down to a little over £2,700 million this year. I have thus achieved the target I set myself—a reduction of £1,500 million on the figure of over £4,250 million for 1973–74.

In terms of demand for resources, I expect my proposals to have a mildly restraining effect so that by the end of the year demand may be running at about £200 million lower than would otherwise have been the case. As this is a little less than one third of 1 per cent. of the likely GDP at that time, these Budget proposals are thus broadly neutral. I estimate that on this basis output in the final quarter of this year will have recovered to a level some 2½ per cent. higher than a year earlier. This should secure a rate of growth which will let us take full advantage of our export opportunities and foster the confidence necessary for industrial investment.

In social terms, my proposals will involve a significant redistribution of income. For a married man with two children under 11, the tax threshold is raised from about £21.50 a week to nearly £25 a week. If he is on £30 a week, his net take-home pay will rise by about 85p a week. Indeed, up to £54 a week, which is well above average earnings, all married men with two children will find that the burden of their income tax and national insurance contributions will be reduced to some extent. On the other hand, a man in similar circumstances earning £200 a week will pay nearly £4 a week more tax, and a man earning £1,000 a week with £10,000 investment income will pay just over £74 a week more.

In terms of retail prices, the action we are taking on food subsidies will lower the index by about 1½ per cent., and this will largely offset the increases in the excise duties and the changes in VAT. More important, however, than the net result is the fact that we shall be reducing the cost of the necessities of life, such as basic foods and rents, and finding the money by increasing the cost of things which are less essential and which, to a large extent, people can do without altogether if they choose. This transfer will bring great benefits to the housewife and to all who have to struggle to make ends meet. Together with the redistribution carried out by the changes in direct taxation, it sets Britain on a new course towards that just and fair society which in the long run is the only basis on which to build the national unity we need.

Yet though the burden is now more fairly shared, burden it is. In one way or another my Budget calls on the majority of the British people to make some sacrifice for the survival of their way of life. Few, I am confident, will reject that call. We in Britain have always taken pride in our ability to face reality when we are told the truth.

Britain today is face to face with a crisis which is no less challenging because it has come on us slowly—almost imperceptibly—over the years. A fundamental change of course is long overdue. I believe that the action which the Government have taken in the past few weeks can mark the turning point in our people's post-war history. A new spirit of confidence and co-operation is already abroad. I ask the House to accept the proposals in this Budget as a further step along the road to realism and a united nation.

Mr. Deputy Speaker

Perhaps at this point I may remind the House of the procedures to be followed. Under Standing Orders, the first motion entitled, "Provisional Collection of Taxes" must be decided without debate. When that matter has been disposed of, I shall call on the Chancellor to move the motion entitled, "Amendment of the Law" and it is on that motion that the Budget debate will take place today and on the succeeding days. The remaining motions will not be put until the end of the debate on Monday.